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- 08821
Rydex Variable Trust
(Exact name of registrant as specified in charter)
702 King Farm Boulevard, Suite 200
Rockville, Maryland 20850
(Address of principal executive offices) (Zip code)
Amy J. Lee
Rydex Variable Trust
702 King Farm Boulevard, Suite 200
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: December 31
Date of reporting period: December 31, 2017
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.
Item 1. Reports to Stockholders.
The registrant’s annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940, as amended (the “Investment Company Act”), is as follows:
12.31.2017
Rydex Variable Trust Funds Annual Report
Alternatives Funds | ||
Guggenheim Long Short Equity Fund | ||
Guggenheim Global Managed Futures Strategy Fund | ||
Guggenheim Multi-Hedge Strategies Fund | ||
Rydex Commodities Fund | ||
Rydex Commodities Strategy Fund |
GuggenheimInvestments.com | RVALTS-ANN-2-1217x1218 |
TABLE OF CONTENTS |
DEAR SHAREHOLDER | 2 |
ECONOMIC AND MARKET OVERVIEW | 4 |
ABOUT SHAREHOLDERS’ FUND EXPENSES | 6 |
LONG SHORT EQUITY FUND | 8 |
GLOBAL MANAGED FUTURES STRATEGY FUND | 19 |
MULTI-HEDGE STRATEGIES FUND | 28 |
COMMODITIES STRATEGY FUND | 46 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | 53 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 69 |
OTHER INFORMATION | 70 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS | 71 |
GUGGENHEIM INVESTMENTS PRIVACY POLICIES | 74 |
THE RYDEX FUNDS ANNUAL REPORT | 1 |
December 31, 2017 |
Dear Shareholder:
Security Investors, LLC (the “Investment Adviser”) is pleased to present the annual shareholder report for four alternative strategies funds (the “Funds”) that are part of the Rydex Variable Trust (the “Funds”). This report covers performance of the Funds for the annual period ended December 31, 2017.
The Investment Adviser is a part of Guggenheim Investments, which represents the investment management businesses of Guggenheim Partners, LLC (“Guggenheim”), a global, diversified financial services firm.
Guggenheim Funds Distributors, LLC is the distributor of the Funds. Guggenheim Funds Distributors, LLC is affiliated with Guggenheim and the Investment Adviser.
We encourage you to read the Economic and Market Overview section of the report, which follows this letter, and then the Performance Report and Fund Profile for each Fund.
We are committed to providing innovative investment solutions and appreciate the trust you place in us.
Sincerely,
Security Investors, LLC
January 31, 2018
Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objectives, risks, charges, expenses and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at guggenheiminvestments.com or call 800.820.0888.
This material is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation.
The Long Short Equity Fund may not be suitable for all investors. ●The Fund is subject to the risk that the Investment Advisor’s use of a momentum-driven investment strategy may cause the Fund to underperform other types of mutual funds that use different investment strategies during periods when momentum investing is out of favor. ●It is possible that the stocks the Fund holds long will decline in value at the same time that the stocks or indices being shorted increase in value, thereby increasing potential losses to the Fund. ●The Fund’s loss on a short sale is potentially unlimited because there is no upper limit on the price a borrowed security could attain. ● The more the Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. ●The use of derivatives, such as futures, options and swap agreements, may expose the Fund to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. ●The Fund may invest in American Depositary Receipts (“ADRs”) therefore subjecting the value of the Fund’s portfolio to fluctuations in foreign exchange rates. ● This Fund is considered non-diversified and can invest a greater portion of its assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of Fund shares than would occur in a more diversified fund. See the prospectus for more information on these and additional risks.
The Global Managed Futures Strategy Fund may not be suitable for all investors. ●The Fund’s investments in securities and derivatives, in general, are subject to market risks that may cause their prices, and therefore the Fund’s value, to fluctuate over time. An investment in the Fund may lose money. ● The Fund’s investments in derivatives may pose risks in addition to those associated with investing directly in securities or other investments, including illiquidity of the derivatives, imperfect correlations with underlying investments or the Fund’s other portfolio holdings, lack of availability and counterparty risk. To the extent the Fund invests in derivatives to seek to hedge risk or limit leveraged exposure created by other investments, there is no guarantee that such hedging strategies will be effective at managing risk or limiting exposure to leveraged investments. ● The Fund’s use of leverage will exaggerate the effect on net asset value of any increase or decrease in the market value of the Fund’s portfolio. ●The Fund’s use of short selling involves increased risk and costs. The Fund risks paying more for a security than it received from its sale. Theoretically, securities sold short have the risk of unlimited losses. ●The Fund’s investments in fixed income securities will change in value in response to interest rate changes and other factors. In general, bond prices rise when interest rates fall and vice versa. ● The Fund‘s exposure to high yield, asset backed and mortgaged backed securities may subject the Fund to greater volatility. ●The Fund’s indirect and direct exposure to foreign currencies subjects the Fund to the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of short positions, that the U.S. dollar will decline in value relative to the currency being hedged. ●The Fund’s exposure to the commodity markets may subject the fund to greater volatility as commodity-linked investments may be affected by changes in overall market movements, commodity
2 | THE RYDEX FUNDS ANNUAL REPORT |
December 31, 2017 |
index volatility, changes in interest rates or factors affecting a particular industry or commodity such as droughts, floods, weather, embargos, tariffs and international economic, political and regulatory developments. ●The Fund may invest in securities of foreign companies directly, or indirectly through the use of other investment companies and financial instruments that are linked to the performance of foreign issuers. Foreign securities markets generally have less trading volume and less liquidity than U.S. markets, and prices in some foreign markets may fluctuate more than those of securities traded on U.S. markets. ●This 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 the prospectus for more information on these and other risks.
The Multi-Hedge Strategies Fund is subject to a number of risks and may not be suitable for all investors. ● The Fund’s use of derivatives such as futures, options and swap agreements may expose the Fund to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. ● The more the Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. ● The Fund’s use of short selling involves increased risks and costs. The Fund risks paying more for a security than it received from its sale. ● The Fund’s investments in high yield securities and unrated securities of similar credit quality (“junk bonds”) may be subject to greater levels of interest rate, credit and liquidity risk than funds that do not invest in such securities. ● The Fund’s fixed income investments will change in value in response to interest rate changes and other factors. ● The Fund’s exposure to the commodity and currency markets may subject the Fund to greater volatility as commodity- and currency-linked derivative investments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors affecting a particular industry, commodity or currency—such as droughts, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments. The Fund may also incur transaction costs with the conversion between various currencies. ● The Fund’s exposure to foreign currencies subjects the Fund to the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of short positions, that the U.S. dollar will decline in value relative to the currency being hedged. ● These risks may cause the Fund to experience higher losses and/or volatility than a fund that does not invest in derivatives, use leverage or short sales or have exposure to high yield/fixed income securities, foreign currencies and/or securities. ● This Fund is considered non-diversified and can invest a greater portion of its assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of Fund shares than would occur in a more diversified Fund. ● Please read the prospectus for more detailed information regarding these and other risks.
The Commodities Strategy Fund may not be suitable for all investors. ● The Fund’s exposure to the commodity markets may subject the Fund to greater volatility as commodity-linked investments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors affecting a particular industry or commodity—such as droughts, floods, weather, embargos, tariffs and international economic, political and regulatory developments. ● To the extent that the Fund’s investments are concentrated in energy-related commodities, the Fund is subject to the risk that this sector will underperform the market as a whole. ● The Fund’s use of derivatives, such as futures, options, structured notes and swap agreements, may expose the Fund to additional risks that it would not be subject to if it invested directly in the securities or investments underlying those derivatives. ● The more the Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. ● The Fund is subject to tracking error risks, which may cause the Fund’s performance not to match that of or be lower than the Fund’s underlying benchmark. ● The Fund’s investments in other investment companies subjects the Fund to those risks affecting the investment company, including the possibility that the value of the underlying securities held by the investment company could decrease. Moreover, the Fund will incur its pro rata share of the expenses of the underlying investment companies’ expenses. ●This Fund is considered non-diversified and can invest a greater portion of its assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of fund shares than would occur in a more diversified fund. ● See the prospectus for more information on these and additional risks.
THE RYDEX FUNDS ANNUAL REPORT | 3 |
ECONOMIC AND MARKET OVERVIEW (Unaudited) | December 31, 2017 |
The market story at the end of 2017 was one of positive economic momentum. Economic activity finished 2017 strongly, led by an acceleration in household spending, which was bolstered by consumer confidence near cyclical highs and healthier household balance sheets. Job growth and rebuilding activity resumed following the several hurricanes that hit the U.S., and elevated business optimism and tax changes could boost business capital expenditure plans in the coming quarters. The economy could also benefit from favorable financial conditions both in the U.S. and abroad, which could keep economic growth well above 2% in 2018.
While job growth continues at an unsustainable pace, wage growth has still been relatively unresponsive to declines in the unemployment rate. This could mean that the natural rate of unemployment is lower than the U.S. Federal Reserve’s (the “Fed”) current estimate of 4.6%, and it could also mean that there is still labor market slack left in the form of people not currently participating in the labor force. Even so, the tighter labor market and increasing worker shortages will put upward pressure on wage growth, which has been held back by meager productivity gains.
Core inflation has been below the Fed’s 2% target for some time now, which should continue for the next few months. However, by the middle of 2018 core inflation should approach the Fed’s target due to an accelerating economy, reduced labor market slack, and favorable base effects. Inflation closer to target and continued declines in the unemployment rate will give the Fed confidence to press on with tightening. Moreover, financial conditions remain highly accommodative, and fiscal stimulus will give the economy an additional boost, giving the Fed further room to raise rates. Thus, even as the fourth quarter of 2017 saw the commencement of the Fed’s balance sheet roll-off in October and another rate hike in December, we expect the Fed to move to increasingly tighter policy.
For the 12 months ended December 31, 2017, the Standard & Poor’s 500® (“S&P 500”) Index* returned 21.83%. The MSCI Europe-Australasia-Far East (“EAFE”) Index* returned 25.03%. The return of the MSCI Emerging Markets Index* was 37.28%.
In the bond market, the Bloomberg Barclays U.S. Aggregate Bond Index* posted a 3.54% return for the period, while the Bloomberg Barclays U.S. Corporate High Yield Index* returned 7.50%. The return of the ICE Bank of America (“BofA”) Merrill Lynch 3-Month U.S. Treasury Bill Index* was 0.86% for the 12-month period.
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.
Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, mortgage-backed securities or “MBS” (agency fixed-rate and hybrid adjustable-rate mortgage, or “ARM”, pass-throughs), asset-backed securities (“ABS”), and commercial mortgage-backed securities (“CMBS”) (agency and non-agency).
Bloomberg Barclays U.S. Corporate High Yield Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB +/BB + or below.
ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged market Index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income.
MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada.
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.
S&P 500® Index is a broad-based index, the performance of which is based on the performance of 500 widely held common stocks chosen for market size, liquidity, and industry group representation.
4 | THE RYDEX FUNDS ANNUAL REPORT |
ECONOMIC AND MARKET OVERVIEW (Unaudited)(concluded) | December 31, 2017 |
S&P Goldman Sachs Commodity Index (S&P GSCI®), a benchmark for investment performance in the commodity markets, measures investable commodity price movements and inflation in the world economy. The index is calculated primarily on a world production weighted basis and is comprised of the principal physical commodities that are the subject of active, liquid futures markets.
HFRX Global Hedge Fund Index is designed to be representative of the overall composition of the hedge fund universe. It is comprised of all eligible hedge fund strategies, including, but not limited to, convertible arbitrage, distressed securities, equity hedge, equity market neutral, event driven, macro, merger arbitrage and relative-value arbitrage. The strategies are asset weighted based on the distribution of assets in the hedge fund industry.
HFRX Equity Hedge Fund Index is designed to be representative of the overall composition of the equity hedge segment of the hedge fund universe. In an equity hedge strategy both long and short positions primarily in equities are maintained. Equities which are believed to be undervalued are bought and equities which are believed to be overvalued are sold.
Russell 3000® Index measures the performance of 3,000 publicly held U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market.
Morningstar Long/Short Equity Category Average is an average return of the funds in the Morningstar Long/Short Equity Category. The categories assist investors and investment professionals in making meaningful comparisons between funds, making it easier to build well-diversified portfolios, assess potential risk, and identify top-performing funds.
SG CTA Index provides the market with a reliable daily performance benchmark of major commodity trading advisors (CTAs). The SG CTA Index calculates the daily rate of return for a pool of CTAs selected from the larger managers that are open to new investment.
THE RYDEX FUNDS ANNUAL REPORT | 5 |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited) |
All mutual funds have operating expenses, and it is important for our shareholders to understand the impact of costs on their investments. Shareholders of a fund incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, other distributions, and exchange fees, and (ii) ongoing costs, including management fees, administrative services, and shareholder reports, among others. These ongoing costs, or operating expenses, are deducted from a fund’s gross income and reduce the investment return of the Fund.
A fund’s expenses are expressed as a percentage of its average net assets, which is known as the expense ratio. The following examples are intended to help investors understand the 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 examples are based on an investment of $1,000 made at the beginning of the period and held for the entire six-month period beginning June 30, 2017 and ending December 31, 2017.
The following tables illustrate the Funds’ costs in two ways:
Table 1. Based on actual Fund return: This section helps investors estimate the actual expenses paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, and the fifth column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. Investors may use the information here, together with the amount invested, to estimate the expenses paid over the period. Simply divide the Fund’s 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 provided under the heading “Expenses Paid During Period.”
Table 2. Based on hypothetical 5% return: This section is intended to help investors compare a Fund’s cost with those of other mutual funds. The table 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. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses paid during the period. The example is useful in making comparisons because the U.S. Securities and Exchange Commission (the “SEC”) requires all mutual funds to calculate expenses based on the 5% return. Investors can assess a Fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
The calculations illustrated above assume no shares were bought or sold during the period. Actual costs may have been higher or lower, depending on the amount of investment and the timing of any purchases or redemptions.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, and contingent deferred sales charges (“CDSC”) on redemptions, if any. 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 transactional costs were included, your costs would have been higher.
More information about the Funds’ expenses, including annual expense ratios for periods up to five years (subject to the Fund’s inception date), can be found in the Financial Highlights section of this report. For additional information on operating expenses and other shareholder costs, please refer to the appropriate Fund prospectus.
6 | THE RYDEX FUNDS ANNUAL REPORT |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(concluded) |
Expense Ratio1 | Fund Return | Beginning 2017 | Ending 2017 | Expenses Paid During Period2 | |
Table 1. Based on actual Fund return3 | |||||
Long Short Equity Fund | 1.61% | 11.02% | $ 1,000.00 | $ 1,110.20 | $ 8.58 |
Global Managed Futures Strategy Fund | 1.65% | 9.26% | 1,000.00 | 1,092.60 | 8.70 |
Multi-Hedge Strategies Fund | 1.65% | 3.50% | 1,000.00 | 1,035.00 | 8.46 |
Commodities Strategy Fund | 1.72% | 16.63% | 1,000.00 | 1,166.30 | 9.39 |
Table 2. Based on hypothetical 5% return (before expenses) | |||||
Long Short Equity Fund | 1.61% | 5.00% | $ 1,000.00 | $ 1,017.07 | $ 8.20 |
Global Managed Futures Strategy Fund | 1.65% | 5.00% | 1,000.00 | 1,016.89 | 8.39 |
Multi-Hedge Strategies Fund | 1.65% | 5.00% | 1,000.00 | 1,016.90 | 8.38 |
Commodities Strategy Fund | 1.72% | 5.00% | 1,000.00 | 1,016.53 | 8.74 |
1 | Annualized and excludes expenses of the underlying funds in which the Funds invest. This ratio represents net expenses, which includes dividends on short sales and prime broker interest expenses. Excluding these expenses, the operating expense ratios of the Long Short Equity Fund and the Multi-Hedge Strategies Fund would be 1.61% and 1.16%, respectively. |
2 | Expenses are equal to the Fund's annualized expense ratio, net of any applicable fee waivers, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses shown do not include fees charged by insurance companies. |
3 | Actual cumulative return at net asset value for the period June 30, 2017 to December 31, 2017. |
THE RYDEX FUNDS ANNUAL REPORT | 7 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
LONG SHORT EQUITY FUND
OBJECTIVE: Seeks long-term capital appreciation.
For the one-year period ended December 31, 2017, the Long Short Equity Fund returned 14.85%.
Effective June 1, 2017, the Fund’s Board of Trustees approved a change in the Fund’s principal investment strategy. The Fund transitioned from a momentum-based long/short equity investment strategy based on 3- and 12-month trends with respect to factors, to one that is more valuation-based and does not incorporate momentum as a key factor to explain expected returns.
The current strategy uses a proprietary evaluation process to generate an expected return for individual stocks that considers market risks generally and company-specific risks. The process uses fundamentally-based, forward-looking forecasts of equity cash flows to generate return expectations for individual stocks. Guggenheim Investments believes that such a forward-looking valuation approach is superior to the more common approach of assuming that past returns explain future risk premiums.
Both the previous and current strategy are U.S. long/short equity strategies that seek long-term capital appreciation as an investment objective, and follow a multi-factor quantitative framework to identify investment opportunities in a large universe of U.S. stocks. On average, both the new strategy and previous strategy are expected to have a similar equity beta profiles.
To accompany the different focus on the new strategy, the Fund changed its benchmark effective June 1, 2017, from the HFRX Equity Hedge Index to the Morningstar Long/Short Equity Category Average. Portfolio management also changed to a different quantitative strategy team within Guggenheim Investments.
For the five-month period from January 1, 2017 through May 31, 2017, the Long Short Equity Fund returned 1.70%. The Fund’s benchmark for that period, the HFRX Equity Hedge Index, returned 2.85%. For this period, derivatives were used to control the Fund’s equity exposure. Derivative positions were small and did not contribute materially to the Fund’s performance.
For the seven-month period from June 1, 2017 through December 31, 2017, the Long Short Equity Fund returned 12.95%. The Fund’s benchmark for that period, the Morningstar Long/Short Equity Category Average, returned 6.71%.
On average during the seven-month period, the Fund held about 175% of assets in long securities, and 106% short, for an average net-dollar exposure of 69%. The realized net beta (sensitivity of daily Fund returns to the S&P 500 index) averaged around 0.64 during the period. The long positions averaged a return of 13.4%, compared to the Russell 3000 index return of 12.2%. Short positions returned 8.0% on a stand-alone basis. So, while on an absolute basis the long returns were positive in the surging market environment, and shorts lost money, both sides added alpha from a market adjusted return basis with the short positions doing notably better for the period in underperforming the markets.
Derivatives are essential for the execution of the Fund’s strategy. Therefore, a significant amount of the Fund’s performance for the last seven months of the period were driven by derivatives.
Performance displayed represents past performance which is no guarantee of future results.
8 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments
Inception Date: May 1, 2002 |
Ten Largest Holdings (% of Total Net Assets) | |
Verizon Communications, Inc. | 1.9% |
Union Pacific Corp. | 1.8% |
Exxon Mobil Corp. | 1.8% |
Southwest Airlines Co. | 1.8% |
Cummins, Inc. | 1.6% |
Pfizer, Inc. | 1.6% |
Johnson & Johnson | 1.5% |
Valero Energy Corp. | 1.5% |
JM Smucker Co. | 1.5% |
CVS Health Corp. | 1.5% |
Top Ten Total | 16.5% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Effective May 31, 2017, the Fund changed its principal investment strategy. As a result of the investment strategy change, the Fund’s new benchmarks are the Morningstar Long/Short Equity Category Average and S&P 500® Index. Prior to May 31, 2017, the Fund’s benchmark was the HFRX Equity Hedge Index and Russell 3000 Index.
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Long Short Equity Fund | 14.85% | 7.16% | 1.47% |
HFRX Equity Hedge Index | 9.98% | 3.92% | (0.57%) |
S&P 500® Index | 21.83% | 15.79% | 8.5% |
Morningstar Long/Short Equity Category Average | 10.58% | 5.52% | 4.23% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The HFRX Equity Hedge Index, Rusell 3000 Index and S&P 500®Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The Morningstar Long/Short Equity Category Average is the equal-weighted, simple average daily return for all funds in the Morningstar Long/Short Equity Category. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 9 |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
LONG SHORT EQUITY FUND |
Shares | Value | |||||||
COMMON STOCKS† - 97.7% | ||||||||
Consumer, Non-cyclical - 31.7% | ||||||||
Pfizer, Inc.1 | 16,764 | $ | 607,192 | |||||
Johnson & Johnson1 | 4,338 | 606,105 | ||||||
JM Smucker Co.1 | 4,798 | 596,103 | ||||||
Archer-Daniels-Midland Co.1 | 14,534 | 582,523 | ||||||
Eli Lilly & Co.1 | 6,804 | 574,666 | ||||||
US Foods Holding Corp.* | 17,897 | 571,451 | ||||||
Conagra Brands, Inc.1 | 13,855 | 521,918 | ||||||
United Rentals, Inc.*,1 | 2,777 | 477,394 | ||||||
Cardinal Health, Inc.1 | 7,704 | 472,024 | ||||||
McKesson Corp.1 | 2,788 | 434,789 | ||||||
United Therapeutics Corp.* | 2,891 | 427,723 | ||||||
Zimmer Biomet Holdings, Inc.1 | 3,311 | 399,538 | ||||||
Mylan N.V.*,1 | 9,201 | 389,294 | ||||||
Merck & Company, Inc.1 | 6,001 | 337,676 | ||||||
Performance Food Group Co.* | 10,098 | 334,244 | ||||||
Medtronic plc1 | 3,579 | 289,004 | ||||||
Prestige Brands Holdings, Inc.* | 6,397 | 284,091 | ||||||
CoreLogic, Inc.* | 6,145 | 283,961 | ||||||
Bioverativ, Inc.* | 5,201 | 280,438 | ||||||
Travelport Worldwide Ltd. | 20,132 | 263,125 | ||||||
Horizon Pharma plc* | 16,104 | 235,119 | ||||||
USANA Health Sciences, Inc.* | 2,721 | 201,490 | ||||||
United Natural Foods, Inc.* | 3,922 | 193,237 | ||||||
Sysco Corp.1 | 3,161 | 191,967 | ||||||
SpartanNash Co. | 7,138 | 190,442 | ||||||
WellCare Health Plans, Inc.* | 907 | 182,407 | ||||||
Sanderson Farms, Inc. | 1,183 | 164,177 | ||||||
Darling Ingredients, Inc.* | 8,983 | 162,862 | ||||||
Baxter International, Inc.1 | 2,452 | 158,497 | ||||||
Spectrum Brands Holdings, Inc. | 1,405 | 157,922 | ||||||
Cardtronics plc — Class A* | 8,493 | 157,290 | ||||||
TreeHouse Foods, Inc.* | 3,010 | 148,875 | ||||||
Boston Beer Company, Inc. — Class A* | 771 | 147,338 | ||||||
DaVita, Inc.*,1 | 2,012 | 145,367 | ||||||
Pilgrim’s Pride Corp.* | 4,662 | 144,802 | ||||||
Humana, Inc.1 | 581 | 144,129 | ||||||
Sabre Corp. | 6,565 | 134,583 | ||||||
QIAGEN N.V.* | 4,293 | 132,783 | ||||||
Dean Foods Co. | 11,186 | 129,310 | ||||||
IQVIA Holdings, Inc.*,1 | 1,216 | 119,046 | ||||||
UnitedHealth Group, Inc.1 | 530 | 116,844 | ||||||
Thermo Fisher Scientific, Inc.1 | 599 | 113,738 | ||||||
Euronet Worldwide, Inc.* | 1,278 | 107,697 | ||||||
AMAG Pharmaceuticals, Inc.* | 7,929 | 105,059 | ||||||
Total Consumer, Non-cyclical | 12,418,240 | |||||||
Industrial - 19.2% | ||||||||
Union Pacific Corp.1 | 5,219 | 699,868 | ||||||
Cummins, Inc.1 | 3,569 | 630,428 | ||||||
Owens Corning | 6,354 | 584,187 | ||||||
Greenbrier Companies, Inc.2 | 7,687 | 409,717 | ||||||
Kirby Corp.* | 5,883 | 392,984 | ||||||
Snap-on, Inc. | 2,240 | 390,432 | ||||||
Regal Beloit Corp. | 4,972 | 380,855 | ||||||
Timken Co. | 7,675 | 377,226 | ||||||
Tech Data Corp.* | 3,705 | 362,979 | ||||||
Benchmark Electronics, Inc.* | 11,782 | 342,856 | ||||||
EnerSys | 3,199 | 222,746 | ||||||
Jabil, Inc. | 8,183 | 214,804 | ||||||
Crane Co. | 2,241 | 199,942 | ||||||
EMCOR Group, Inc. | 2,387 | 195,137 | ||||||
Belden, Inc. | 2,461 | 189,916 | ||||||
Crown Holdings, Inc.* | 2,927 | 164,644 | ||||||
Rexnord Corp.* | 6,093 | 158,540 | ||||||
Gibraltar Industries, Inc.* | 4,621 | 152,493 | ||||||
Trinity Industries, Inc. | 3,923 | 146,956 | ||||||
Sanmina Corp.* | 4,361 | 143,913 | ||||||
AECOM* | 3,754 | 139,461 | ||||||
Eaton Corporation plc1 | 1,649 | 130,287 | ||||||
Boeing Co.1 | 441 | 130,055 | ||||||
Applied Industrial Technologies, Inc. | 1,825 | 124,283 | ||||||
Tutor Perini Corp.* | 4,820 | 122,187 | ||||||
Vishay Intertechnology, Inc. | 5,595 | 116,096 | ||||||
Louisiana-Pacific Corp.* | 4,184 | 109,872 | ||||||
Owens-Illinois, Inc.* | 4,834 | 107,170 | ||||||
Caesarstone Ltd.* | 4,530 | 99,660 | ||||||
Applied Optoelectronics, Inc.*,2 | 2,520 | 95,307 | ||||||
Total Industrial | 7,535,001 | |||||||
Technology - 14.5% | ||||||||
International Business Machines Corp.1 | 3,663 | 561,977 | ||||||
Intel Corp.1 | 12,040 | 555,767 | ||||||
CA, Inc.1 | 15,191 | 505,556 | ||||||
Apple, Inc.1 | 2,638 | 446,429 | ||||||
HP, Inc.1 | 21,153 | 444,425 | ||||||
NetApp, Inc.1 | 6,389 | 353,439 | ||||||
CSRA, Inc. | 10,975 | 328,372 | ||||||
First Data Corp. — Class A*,1 | 18,951 | 316,671 | ||||||
Convergys Corp. | 13,146 | 308,931 | ||||||
j2 Global, Inc. | 3,826 | 287,065 | ||||||
KLA-Tencor Corp.1 | 2,253 | 236,723 | ||||||
NCR Corp.* | 6,317 | 214,715 | ||||||
Xerox Corp. | 7,002 | 204,108 | ||||||
Western Digital Corp.1 | 2,544 | 202,324 | ||||||
VeriFone Systems, Inc.* | 7,226 | 127,972 | ||||||
Science Applications International Corp. | 1,629 | 124,733 | ||||||
Nuance Communications, Inc.* | 7,610 | 124,424 | ||||||
Cirrus Logic, Inc.* | 2,355 | 122,130 | ||||||
CACI International, Inc. — Class A* | 888 | 117,527 | ||||||
ON Semiconductor Corp.* | 5,232 | 109,558 | ||||||
Total Technology | 5,692,846 | |||||||
Consumer, Cyclical - 10.9% | ||||||||
Southwest Airlines Co.1 | 10,465 | 684,934 | ||||||
CVS Health Corp.1 | 8,128 | 589,280 | ||||||
Alaska Air Group, Inc. | 5,664 | 416,361 | ||||||
Tailored Brands, Inc. | 18,963 | 413,962 | ||||||
Delta Air Lines, Inc.1 | 6,677 | 373,912 | ||||||
United Continental Holdings, Inc.*,1 | 4,849 | 326,823 | ||||||
JetBlue Airways Corp.* | 10,401 | 232,358 | ||||||
Walgreens Boots Alliance, Inc.1 | 3,027 | 219,821 |
10 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
LONG SHORT EQUITY FUND |
Shares | Value | |||||||
Lear Corp.1 | 1,047 | $ | 184,963 | |||||
Ralph Lauren Corp. — Class A | 1,572 | 163,000 | ||||||
Anixter International, Inc.* | 1,991 | 151,316 | ||||||
American Airlines Group, Inc.1 | 2,685 | 139,701 | ||||||
American Axle & Manufacturing Holdings, Inc.* | 8,084 | 137,671 | ||||||
Tenneco, Inc. | 2,008 | 117,548 | ||||||
Copa Holdings S.A. — Class A | 858 | 115,023 | ||||||
Total Consumer, Cyclical | 4,266,673 | |||||||
Financial - 6.9% | ||||||||
Principal Financial Group, Inc.1 | 8,293 | 585,154 | ||||||
Mack-Cali Realty Corp. REIT | 14,602 | 314,819 | ||||||
Summit Hotel Properties, Inc. REIT | 17,956 | 273,470 | ||||||
Interactive Brokers Group, Inc. — Class A | 3,957 | 234,294 | ||||||
LaSalle Hotel Properties REIT | 7,984 | 224,111 | ||||||
Brixmor Property Group, Inc. REIT | 10,439 | 194,792 | ||||||
Capital One Financial Corp.1 | 1,930 | 192,189 | ||||||
Kite Realty Group Trust REIT | 8,261 | 161,915 | ||||||
Northern Trust Corp.1 | 1,585 | 158,326 | ||||||
E*TRADE Financial Corp.*,1 | 2,778 | 137,705 | ||||||
Blackhawk Network Holdings, Inc.* | 3,150 | 112,298 | ||||||
OneMain Holdings, Inc.* | 3,789 | 98,476 | ||||||
Total Financial | 2,687,549 | |||||||
Communications - 6.5% | ||||||||
Verizon Communications, Inc.1 | 14,379 | 761,081 | ||||||
Juniper Networks, Inc.1 | 18,408 | 524,628 | ||||||
InterDigital, Inc. | 3,483 | 265,230 | ||||||
ARRIS International plc* | 8,793 | 225,892 | ||||||
ORBCOMM, Inc.* | 15,100 | 153,718 | ||||||
AT&T, Inc.1 | 3,593 | 139,696 | ||||||
Viacom, Inc. — Class B1 | 4,499 | 138,614 | ||||||
Liberty Ventures* | 2,290 | 124,210 | ||||||
Shenandoah Telecommunications Co. | 3,354 | 113,365 | ||||||
Viavi Solutions, Inc.* | 12,749 | 111,426 | ||||||
Total Communications | 2,557,860 | |||||||
Energy - 4.7% | ||||||||
Exxon Mobil Corp.1 | 8,224 | 687,855 | ||||||
Valero Energy Corp.1 | 6,571 | 603,941 | ||||||
PBF Energy, Inc. — Class A | 4,559 | 161,617 | ||||||
Williams Companies, Inc.1 | 4,262 | 129,948 | ||||||
First Solar, Inc.* | 1,867 | 126,060 | ||||||
REX American Resources Corp.*,2 | 1,395 | 115,492 | ||||||
Total Energy | 1,824,913 | |||||||
Utilities - 3.0% | ||||||||
AES Corp. | 32,656 | 353,664 | ||||||
Portland General Electric Co. | 7,579 | 345,451 | ||||||
PNM Resources, Inc. | 8,271 | 334,562 | ||||||
El Paso Electric Co. | 2,228 | 123,320 | ||||||
Total Utilities | 1,156,997 | |||||||
Basic Materials - 0.3% | ||||||||
Huntsman Corp. | 3,717 | 123,739 | ||||||
Total Common Stocks | ||||||||
(Cost $35,897,052) | 38,263,818 | |||||||
MONEY MARKET FUND† - 5.0% | ||||||||
Invesco-Treasury Obligations Portfolio 0.00%3 | 1,945,267 | 1,945,267 | ||||||
Total Money Market Fund | ||||||||
(Cost $1,945,267) | 1,945,267 | |||||||
SECURITIES LENDING COLLATERAL†,4 - 0.7% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%3 | 270,351 | 270,351 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $270,351) | 270,351 | |||||||
Total Investments - 103.4% | ||||||||
(Cost $38,112,670) | $ | 40,479,436 | ||||||
Other Assets & Liabilities, net - (3.4)% | (1,341,615 | ) | ||||||
Total Net Assets - 100.0% | $ | 39,137,821 |
Custom Basket Swap Agreements | ||||||||||||||||
Counterparty | Index | Financing Rate Pay (Receive) | Payment Frequency | Maturity Date | Notional Amount | Value and Unrealized Gain (Loss) | ||||||||||
OTC Custom Basket Swap Sold Short†† | ||||||||||||||||
Morgan Stanley | Long Short Equity Portfolio Short Custom Basket Swap5 | (1.03 | %) | At Maturity | 05/31/19 | $ | 37,993,398 | $ | (2,139,099 | ) | ||||||
OTC Custom Basket Swap†† | ||||||||||||||||
Morgan Stanley | Long Short Equity Portfolio Long Custom Basket Swap6 | 1.78 | % | At Maturity | 05/31/19 | 26,121,013 | 1,119,030 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 11 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
LONG SHORT EQUITY FUND |
Shares | Percentage Value | Unrealized Gain | ||||||||||
CUSTOM BASKET OF LONG SECURITIES6 | ||||||||||||
Cisco Systems, Inc. | 16,883 | 9.8 | % | $ | 109,755 | |||||||
FedEx Corp. | 2,194 | 6.9 | % | 77,584 | ||||||||
Aflac, Inc. | 6,875 | 6.6 | % | 74,080 | ||||||||
Fluor Corp. | 12,106 | 6.0 | % | 67,490 | ||||||||
Tyson Foods, Inc. — Class A | 3,274 | 5.5 | % | 61,687 | ||||||||
Norfolk Southern Corp. | 2,872 | 5.3 | % | 59,281 | ||||||||
Kroger Co. | 12,547 | 5.2 | % | 58,389 | ||||||||
Carlisle Companies, Inc. | 4,230 | 4.9 | % | 55,316 | ||||||||
General Mills, Inc. | 8,083 | 4.8 | % | 53,642 | ||||||||
Prudential Financial, Inc. | 4,549 | 4.7 | % | 52,215 | ||||||||
Discover Financial Services | 3,048 | 4.6 | % | 51,620 | ||||||||
Chevron Corp. | 5,202 | 4.4 | % | 49,121 | ||||||||
Allison Transmission Holdings, Inc. | 6,198 | 3.7 | % | 40,934 | ||||||||
Ingredion, Inc. | 1,584 | 3.5 | % | 39,574 | ||||||||
Dr Pepper Snapple Group, Inc. | 4,380 | 3.3 | % | 37,285 | ||||||||
Genesee & Wyoming, Inc. — Class A* | 6,186 | 3.3 | % | 37,263 | ||||||||
PACCAR, Inc. | 6,849 | 3.0 | % | 33,923 | ||||||||
Microsoft Corp. | 2,678 | 2.9 | % | 32,273 | ||||||||
Amgen, Inc. | 3,438 | 2.9 | % | 31,903 | ||||||||
Biogen, Inc.* | 940 | 2.7 | % | 30,035 | ||||||||
Marathon Petroleum Corp. | 7,087 | 2.4 | % | 27,190 | ||||||||
AGCO Corp. | 6,563 | 2.3 | % | 26,117 | ||||||||
Alphabet, Inc. — Class C* | 217 | 2.2 | % | 25,061 | ||||||||
Lowe's Companies, Inc. | 1,859 | 2.1 | % | 23,451 | ||||||||
Citigroup, Inc. | 2,087 | 2.0 | % | 22,907 | ||||||||
JPMorgan Chase & Co. | 1,899 | 2.0 | % | 22,686 | ||||||||
HollyFrontier Corp. | 3,283 | 2.0 | % | 22,433 | ||||||||
WestRock Co. | 6,016 | 2.0 | % | 22,344 | ||||||||
WW Grainger, Inc. | 617 | 2.0 | % | 22,110 | ||||||||
Gilead Sciences, Inc. | 7,873 | 1.8 | % | 20,566 | ||||||||
T-Mobile US, Inc.* | 4,696 | 1.7 | % | 18,818 | ||||||||
LyondellBasell Industries N.V. — Class A | 2,933 | 1.7 | % | 18,774 | ||||||||
Hubbell, Inc. | 929 | 1.7 | % | 18,631 | ||||||||
Travelers Companies, Inc. | 1,756 | 1.6 | % | 18,085 | ||||||||
FirstEnergy Corp. | 13,086 | 1.6 | % | 17,815 | ||||||||
TE Connectivity Ltd. | 1,159 | 1.6 | % | 17,699 | ||||||||
Ameren Corp. | 7,170 | 1.6 | % | 17,533 | ||||||||
Cigna Corp. | 561 | 1.5 | % | 17,187 | ||||||||
Lam Research Corp. | 531 | 1.5 | % | 16,845 | ||||||||
Textron, Inc. | 2,103 | 1.5 | % | 16,698 | ||||||||
Wells Fargo & Co. | 2,059 | 1.5 | % | 16,650 | ||||||||
Molson Coors Brewing Co. — Class B | 7,157 | 1.5 | % | 16,486 | ||||||||
L3 Technologies, Inc. | 1,339 | 1.4 | % | 16,223 | ||||||||
Anthem, Inc. | 504 | 1.4 | % | 15,994 | ||||||||
American Financial Group, Inc. | 2,993 | 1.1 | % | 12,673 | ||||||||
Arconic, Inc. | 6,250 | 1.0 | % | 11,636 | ||||||||
HRG Group, Inc.* | 7,626 | 1.0 | % | 11,588 | ||||||||
Lions Gate Entertainment Corp. — Class A* | 7,824 | 1.0 | % | 11,117 | ||||||||
Energizer Holdings, Inc. | 9,700 | 0.9 | % | 10,077 | ||||||||
Ingersoll-Rand plc | 3,130 | 0.9 | % | 9,563 | ||||||||
Abbott Laboratories | 6,000 | 0.8 | % | 9,082 | ||||||||
Bank of New York Mellon Corp. | 8,770 | 0.8 | % | 8,878 | ||||||||
eBay, Inc.* | 3,597 | 0.7 | % | 8,116 | ||||||||
AbbVie, Inc. | 3,054 | 0.7 | % | 7,905 | ||||||||
Kinder Morgan, Inc. | 6,597 | 0.7 | % | 7,799 | ||||||||
AmerisourceBergen Corp. — Class A | 2,016 | 0.7 | % | 7,660 | ||||||||
U.S. Bancorp | 3,597 | 0.6 | % | 6,173 | ||||||||
Bill Barrett Corp.* | 16,197 | 0.5 | % | 5,251 | ||||||||
Campbell Soup Co. | 10,851 | 0.4 | % | 4,976 | ||||||||
Procter & Gamble Co. | 1,259 | 0.4 | % | 4,891 | ||||||||
Amdocs Ltd. | 1,947 | 0.1 | % | 1,486 | ||||||||
Oracle Corp. | 3,581 | 0.1 | % | 1,482 | ||||||||
Fidelity National Information Services, Inc. | 1,255 | 0.1 | % | 1,131 | ||||||||
Celgene Corp.* | 3,152 | 0.1 | % | 744 | ||||||||
Charles River Laboratories International, Inc.* | 1,114 | 0.1 | % | 702 | ||||||||
Dell Technologies Incorporated Class V — Class V* | 3,114 | 0.0 | % | 319 | ||||||||
NextEra Energy, Inc. | 1,191 | 0.0 | % | (361 | ) | |||||||
CenterPoint Energy, Inc. | 19,499 | -0.2 | % | (2,252 | ) | |||||||
Kimberly-Clark Corp. | 1,394 | -0.2 | % | (2,291 | ) | |||||||
Facebook, Inc. — Class A* | 726 | -0.2 | % | (2,485 | ) | |||||||
Telephone & Data Systems, Inc. | 14,373 | -0.4 | % | (4,290 | ) | |||||||
Western Union Co. | 26,713 | -0.5 | % | (6,005 | ) | |||||||
DXC Technology Co. | 3,647 | -0.7 | % | (7,449 | ) | |||||||
Allergan plc | 980 | -0.9 | % | (10,353 | ) | |||||||
Premier, Inc. — Class A* | 4,058 | -1.2 | % | (13,046 | ) | |||||||
VEREIT, Inc. | 54,712 | -1.3 | % | (14,902 | ) | |||||||
National Fuel Gas Co. | 9,695 | -1.8 | % | (19,930 | ) | |||||||
Edgewell Personal Care Co.* | 6,123 | -1.8 | % | (19,951 | ) | |||||||
Micron Technology, Inc.* | 4,358 | -2.0 | % | (22,257 | ) | |||||||
Versartis, Inc.* | 65,144 | -2.2 | % | (24,275 | ) | |||||||
Omnicom Group, Inc. | 4,064 | -3.6 | % | (40,182 | ) | |||||||
Owens & Minor, Inc. | 5,953 | -4.2 | % | (47,186 | ) | |||||||
Edison International | 4,950 | -4.3 | % | (47,679 | ) | |||||||
ATN International, Inc. | 6,849 | -6.5 | % | (73,287 | ) | |||||||
PG&E Corp. | 10,433 | -17.7 | % | (197,711 | ) | |||||||
Total Custom Basket of Long Securities | 1,119,030 | |||||||||||
CUSTOM BASKET OF SHORT SECURITIES5 | ||||||||||||
NewMarket Corp. | (547 | ) | -1.6 | % | 35,017 | |||||||
Sensient Technologies Corp. | (5,160 | ) | -1.6 | % | 34,689 | |||||||
Essex Property Trust, Inc. | (1,261 | ) | -0.9 | % | 19,157 | |||||||
Capitol Federal Financial, Inc. | (13,418 | ) | -0.9 | % | 18,961 | |||||||
FireEye, Inc.* | (8,170 | ) | -0.8 | % | 17,512 | |||||||
First Republic Bank | (1,623 | ) | -0.8 | % | 17,021 | |||||||
CareTrust REIT, Inc. | (5,995 | ) | -0.7 | % | 15,664 | |||||||
Terreno Realty Corp. | (12,042 | ) | -0.7 | % | 15,520 | |||||||
Autodesk, Inc.* | (1,492 | ) | -0.7 | % | 14,340 |
12 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
LONG SHORT EQUITY FUND |
Shares | Percentage Value | Unrealized Gain (Loss) | ||||||||||
Hudson Pacific Properties, Inc. | (10,273 | ) | -0.6 | % | $ | 11,864 | ||||||
Royal Gold, Inc. | (5,677 | ) | -0.5 | % | 11,441 | |||||||
Semtech Corp.* | (3,996 | ) | -0.5 | % | 11,021 | |||||||
Education Realty Trust, Inc. | (3,545 | ) | -0.5 | % | 10,829 | |||||||
Chesapeake Energy Corp.* | (32,072 | ) | -0.5 | % | 10,234 | |||||||
Veeva Systems, Inc. — Class A* | (1,838 | ) | -0.5 | % | 10,151 | |||||||
NVIDIA Corp. | (435 | ) | -0.4 | % | 8,870 | |||||||
White Mountains Insurance Group Ltd. | (429 | ) | -0.3 | % | 7,046 | |||||||
Extraction Oil & Gas, Inc.* | (7,838 | ) | -0.3 | % | 6,662 | |||||||
Camden Property Trust | (4,771 | ) | -0.3 | % | 6,268 | |||||||
NorthStar Realty Europe Corp. | (7,834 | ) | -0.3 | % | 6,106 | |||||||
Red Hat, Inc.* | (1,189 | ) | -0.3 | % | 6,055 | |||||||
Exponent, Inc. | (2,054 | ) | -0.2 | % | 4,643 | |||||||
Vail Resorts, Inc. | (488 | ) | -0.2 | % | 4,588 | |||||||
ProAssurance Corp. | (1,901 | ) | -0.2 | % | 4,061 | |||||||
Healthcare Trust of America, Inc. — Class A | (7,543 | ) | -0.1 | % | 2,827 | |||||||
Public Storage | (527 | ) | -0.1 | % | 2,447 | |||||||
Cannae Holdings, Inc.* | (6,448 | ) | -0.1 | % | 1,874 | |||||||
CubeSmart | (4,462 | ) | -0.1 | % | 1,828 | |||||||
TransUnion* | (10,127 | ) | -0.1 | % | 1,803 | |||||||
Realty Income Corp. | (1,977 | ) | -0.1 | % | 1,656 | |||||||
NiSource, Inc. | (4,109 | ) | -0.1 | % | 1,151 | |||||||
Ultimate Software Group, Inc.* | (631 | ) | 0.0 | % | 983 | |||||||
Aspen Insurance Holdings Ltd. | (2,770 | ) | 0.0 | % | 953 | |||||||
Cabot Oil & Gas Corp. — Class A | (3,864 | ) | 0.0 | % | 924 | |||||||
Healthcare Realty Trust, Inc. | (4,787 | ) | 0.0 | % | 864 | |||||||
Balchem Corp. | (4,443 | ) | 0.0 | % | 753 | |||||||
Equity LifeStyle Properties, Inc. | (4,999 | ) | 0.0 | % | 750 | |||||||
Physicians Realty Trust | (6,550 | ) | 0.0 | % | 684 | |||||||
American International Group, Inc. | (1,940 | ) | 0.0 | % | 526 | |||||||
CoStar Group, Inc.* | (1,463 | ) | 0.0 | % | 461 | |||||||
Rexford Industrial Realty, Inc. | (7,669 | ) | 0.0 | % | (73 | ) | ||||||
Extra Space Storage, Inc. | (1,283 | ) | 0.0 | % | (313 | ) | ||||||
Equinix, Inc. | (374 | ) | 0.0 | % | (764 | ) | ||||||
Tetra Tech, Inc. | (2,242 | ) | 0.1 | % | (1,153 | ) | ||||||
MSCI, Inc. — Class A | (3,545 | ) | 0.1 | % | (1,349 | ) | ||||||
Insperity, Inc. | (1,967 | ) | 0.1 | % | (1,587 | ) | ||||||
Dominion Energy, Inc. | (1,370 | ) | 0.1 | % | (1,637 | ) | ||||||
Jack in the Box, Inc. | (1,383 | ) | 0.1 | % | (1,857 | ) | ||||||
Ashland Global Holdings, Inc. | (2,469 | ) | 0.1 | % | (1,862 | ) | ||||||
Celanese Corp. — Class A | (1,246 | ) | 0.1 | % | (1,976 | ) | ||||||
Bio-Rad Laboratories, Inc. — Class A* | (731 | ) | 0.1 | % | (2,571 | ) | ||||||
GCP Applied Technologies, Inc.* | (3,787 | ) | 0.1 | % | (2,672 | ) | ||||||
American Homes 4 Rent — Class A | (11,129 | ) | 0.1 | % | (2,703 | ) | ||||||
Neogen Corp.* | (1,399 | ) | 0.1 | % | (2,753 | ) | ||||||
Kilroy Realty Corp. | (1,512 | ) | 0.1 | % | (2,764 | ) | ||||||
Macerich Co. | (2,235 | ) | 0.1 | % | (2,885 | ) | ||||||
RLI Corp. | (1,920 | ) | 0.1 | % | (2,970 | ) | ||||||
Weyerhaeuser Co. | (3,026 | ) | 0.2 | % | (3,235 | ) | ||||||
PTC, Inc.* | (3,973 | ) | 0.2 | % | (3,485 | ) | ||||||
Guidewire Software, Inc.* | (1,695 | ) | 0.2 | % | (4,482 | ) | ||||||
Tyler Technologies, Inc.* | (771 | ) | 0.2 | % | (4,669 | ) | ||||||
Universal Health Realty Income Trust | (2,529 | ) | 0.2 | % | (4,686 | ) | ||||||
CyrusOne, Inc. | (2,514 | ) | 0.2 | % | (4,775 | ) | ||||||
Flagstar Bancorp, Inc.* | (3,122 | ) | 0.2 | % | (4,780 | ) | ||||||
Martin Marietta Materials, Inc. | (1,375 | ) | 0.2 | % | (4,812 | ) | ||||||
IMAX Corp.* | (7,866 | ) | 0.2 | % | (4,830 | ) | ||||||
On Assignment, Inc.* | (2,497 | ) | 0.2 | % | (5,176 | ) | ||||||
Federal Realty Investment Trust | (843 | ) | 0.2 | % | (5,326 | ) | ||||||
National Instruments Corp. | (4,287 | ) | 0.3 | % | (5,572 | ) | ||||||
Jack Henry & Associates, Inc. | (1,160 | ) | 0.3 | % | (5,638 | ) | ||||||
EastGroup Properties, Inc. | (2,709 | ) | 0.3 | % | (5,820 | ) | ||||||
Interface, Inc. — Class A | (6,186 | ) | 0.3 | % | (5,834 | ) | ||||||
athenahealth, Inc.* | (1,463 | ) | 0.3 | % | (6,410 | ) | ||||||
WR Grace & Co. | (4,896 | ) | 0.3 | % | (6,858 | ) | ||||||
Ferro Corp.* | (6,980 | ) | 0.3 | % | (6,963 | ) | ||||||
Ecolab, Inc. | (3,778 | ) | 0.3 | % | (6,976 | ) | ||||||
Air Products & Chemicals, Inc. | (3,350 | ) | 0.3 | % | (7,409 | ) | ||||||
PennyMac Mortgage Investment Trust | (9,911 | ) | 0.4 | % | (7,629 | ) | ||||||
Sun Communities, Inc. | (4,810 | ) | 0.4 | % | (7,917 | ) | ||||||
PriceSmart, Inc. | (1,833 | ) | 0.4 | % | (7,988 | ) | ||||||
Douglas Emmett, Inc. | (2,756 | ) | 0.4 | % | (8,224 | ) | ||||||
Aspen Technology, Inc.* | (1,705 | ) | 0.4 | % | (9,174 | ) | ||||||
DexCom, Inc.* | (2,122 | ) | 0.4 | % | (9,315 | ) | ||||||
Albemarle Corp. | (3,557 | ) | 0.5 | % | (9,870 | ) | ||||||
Regency Centers Corp. | (1,655 | ) | 0.5 | % | (11,486 | ) | ||||||
CoreSite Realty Corp. | (1,689 | ) | 0.5 | % | (11,560 | ) | ||||||
salesforce.com, Inc.* | (1,082 | ) | 0.6 | % | (11,793 | ) | ||||||
American Tower Corp. — Class A | (1,226 | ) | 0.6 | % | (12,017 | ) | ||||||
Yum! Brands, Inc. | (2,285 | ) | 0.6 | % | (12,049 | ) | ||||||
MarketAxess Holdings, Inc. | (1,098 | ) | 0.6 | % | (12,096 | ) | ||||||
Vulcan Materials Co. | (2,915 | ) | 0.6 | % | (12,098 | ) | ||||||
Alliant Energy Corp. | (10,916 | ) | 0.6 | % | (12,158 | ) | ||||||
Nike, Inc. — Class B | (3,384 | ) | 0.6 | % | (12,372 | ) | ||||||
Dril-Quip, Inc.* | (3,566 | ) | 0.6 | % | (12,517 | ) | ||||||
WD-40 Co. | (1,064 | ) | 0.6 | % | (12,900 | ) | ||||||
Atmos Energy Corp. | (6,019 | ) | 0.6 | % | (12,952 | ) | ||||||
Blackbaud, Inc. | (1,125 | ) | 0.6 | % | (13,125 | ) | ||||||
Rayonier, Inc. | (3,650 | ) | 0.6 | % | (13,235 | ) | ||||||
Crown Castle International Corp. | (1,920 | ) | 0.6 | % | (13,394 | ) | ||||||
SEI Investments Co. | (2,645 | ) | 0.7 | % | (14,077 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 13 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
LONG SHORT EQUITY FUND |
Shares | Percentage Value | Unrealized Loss | ||||||||||
Bio-Techne Corp. | (1,464 | ) | 0.7 | % | $ | (15,431 | ) | |||||
First Industrial Realty Trust, Inc. | (7,617 | ) | 0.7 | % | (15,795 | ) | ||||||
First Midwest Bancorp, Inc. | (8,448 | ) | 0.8 | % | (16,251 | ) | ||||||
PolyOne Corp. | (3,191 | ) | 0.8 | % | (16,847 | ) | ||||||
Investors Bancorp, Inc. | (20,289 | ) | 0.8 | % | (17,428 | ) | ||||||
People's United Financial, Inc. | (20,491 | ) | 0.8 | % | (17,844 | ) | ||||||
Boston Properties, Inc. | (2,569 | ) | 0.8 | % | (17,938 | ) | ||||||
Cadence Design Systems, Inc.* | (2,679 | ) | 0.8 | % | (17,952 | ) | ||||||
Ally Financial, Inc. | (7,144 | ) | 0.9 | % | (18,555 | ) | ||||||
Spire, Inc. | (4,304 | ) | 0.9 | % | (19,350 | ) | ||||||
Team, Inc.* | (12,327 | ) | 0.9 | % | (19,442 | ) | ||||||
Alexandria Real Estate Equities, Inc. | (1,425 | ) | 0.9 | % | (19,621 | ) | ||||||
Ingevity Corp.* | (1,813 | ) | 0.9 | % | (19,742 | ) | ||||||
Nabors Industries Ltd. | (19,478 | ) | 0.9 | % | (19,933 | ) | ||||||
Howard Hughes Corp.* | (1,600 | ) | 0.9 | % | (20,222 | ) | ||||||
Five Below, Inc.* | (1,876 | ) | 1.0 | % | (20,804 | ) | ||||||
LendingTree, Inc.* | (394 | ) | 1.0 | % | (21,102 | ) | ||||||
Pool Corp. | (2,051 | ) | 1.0 | % | (21,786 | ) | ||||||
RSP Permian, Inc.* | (4,911 | ) | 1.0 | % | (22,162 | ) | ||||||
McDonald's Corp. | (2,295 | ) | 1.1 | % | (23,582 | ) | ||||||
Cintas Corp. | (3,694 | ) | 1.1 | % | (24,443 | ) | ||||||
Weatherford International plc* | (33,078 | ) | 1.2 | % | (25,354 | ) | ||||||
Adobe Systems, Inc.* | (866 | ) | 1.2 | % | (25,608 | ) | ||||||
John Bean Technologies Corp. | (1,053 | ) | 1.2 | % | (26,067 | ) | ||||||
Rollins, Inc. | (12,346 | ) | 1.3 | % | (26,890 | ) | ||||||
FactSet Research Systems, Inc. | (2,660 | ) | 1.3 | % | (27,319 | ) | ||||||
Atlassian Corporation plc — Class A* | (2,855 | ) | 1.3 | % | (27,513 | ) | ||||||
Parsley Energy, Inc. — Class A* | (6,928 | ) | 1.3 | % | (27,770 | ) | ||||||
Verisk Analytics, Inc. — Class A* | (6,015 | ) | 1.3 | % | (27,931 | ) | ||||||
Aqua America, Inc. | (4,506 | ) | 1.3 | % | (27,995 | ) | ||||||
Tanger Factory Outlet Centers, Inc. | (16,128 | ) | 1.3 | % | (28,194 | ) | ||||||
SBA Communications Corp.* | (1,854 | ) | 1.4 | % | (30,117 | ) | ||||||
Carpenter Technology Corp. | (5,882 | ) | 1.4 | % | (30,819 | ) | ||||||
Callon Petroleum Co.* | (15,192 | ) | 1.5 | % | (31,061 | ) | ||||||
WisdomTree Investments, Inc. | (21,414 | ) | 1.5 | % | (31,538 | ) | ||||||
DCT Industrial Trust, Inc. | (6,236 | ) | 1.5 | % | (31,578 | ) | ||||||
Bottomline Technologies de, Inc.* | (3,345 | ) | 1.5 | % | (31,630 | ) | ||||||
Take-Two Interactive Software, Inc.* | (1,158 | ) | 1.7 | % | (36,284 | ) | ||||||
Matador Resources Co.* | (4,986 | ) | 1.7 | % | (36,617 | ) | ||||||
TopBuild Corp.* | (1,765 | ) | 1.8 | % | (38,842 | ) | ||||||
Covanta Holding Corp. | (19,017 | ) | 1.8 | % | (39,358 | ) | ||||||
Moody's Corp. | (2,150 | ) | 1.8 | % | (39,472 | ) | ||||||
Ollie's Bargain Outlet Holdings, Inc.* | (3,234 | ) | 1.9 | % | (40,215 | ) | ||||||
Commercial Metals Co. | (13,163 | ) | 1.9 | % | (40,946 | ) | ||||||
Scotts Miracle-Gro Co. — Class A | (2,782 | ) | 1.9 | % | (41,172 | ) | ||||||
Healthcare Services Group, Inc. | (11,321 | ) | 2.0 | % | (41,778 | ) | ||||||
Cognex Corp. | (2,873 | ) | 2.0 | % | (42,654 | ) | ||||||
CME Group, Inc. — Class A | (1,566 | ) | 2.0 | % | (42,675 | ) | ||||||
S&P Global, Inc. | (2,648 | ) | 2.1 | % | (43,862 | ) | ||||||
Trex Company, Inc.* | (1,283 | ) | 2.1 | % | (43,946 | ) | ||||||
Eaton Vance Corp. | (5,020 | ) | 2.1 | % | (44,349 | ) | ||||||
International Flavors & Fragrances, Inc. | (3,331 | ) | 2.4 | % | (50,463 | ) | ||||||
Monolithic Power Systems, Inc. | (3,679 | ) | 2.4 | % | (52,125 | ) | ||||||
Goldman Sachs Group, Inc. | (1,616 | ) | 2.5 | % | (52,600 | ) | ||||||
FMC Corp. | (2,894 | ) | 2.5 | % | (53,992 | ) | ||||||
Allegheny Technologies, Inc.* | (7,619 | ) | 2.7 | % | (57,093 | ) | ||||||
Compass Minerals International, Inc. | (7,368 | ) | 2.7 | % | (58,381 | ) | ||||||
Southern Copper Corp. | (11,379 | ) | 2.8 | % | (58,830 | ) | ||||||
Cboe Global Markets, Inc. | (4,760 | ) | 2.8 | % | (59,650 | ) | ||||||
Diamondback Energy, Inc.* | (2,459 | ) | 3.3 | % | (71,146 | ) | ||||||
Copart, Inc.* | (15,703 | ) | 5.5 | % | (117,668 | ) | ||||||
Total Custom Basket of Short Securities | (2,139,099 | ) |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is pledged as equity swap collateral at December 31, 2017. |
2 | All or portion of this security is on loan at December 31, 2017 — See Note 7. |
3 | Rate indicated is the 7 day yield as of December 31, 2017. |
4 | Securities lending collateral — See Note 7. |
5 | Total Return based on the return of the custom short basket of securities +/- financing at a variable rate. Rate indicated is rate effective at December 31, 2017. |
6 | Total Return based on the return of the custom long basket of securities +/- financing at a variable rate. Rate indicated is rate effective at December 31, 2017. |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
14 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
LONG SHORT EQUITY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | |||||||||||||||
Common Stocks | $ | 38,263,818 | $ | — | $ | — | $ | — | $ | 38,263,818 | ||||||||||
Money Market Fund | 1,945,267 | — | — | — | 1,945,267 | |||||||||||||||
Custom Basket Swap Agreements | — | — | 1,119,030 | — | 1,119,030 | |||||||||||||||
Securities Lending Collateral | 270,351 | — | — | — | 270,351 | |||||||||||||||
Total Assets | $ | 40,479,436 | $ | — | $ | 1,119,030 | $ | — | $ | 41,598,466 | ||||||||||
Investments in Securities (Liabilities) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | |||||||||||||||
Custom Basket Swap Agreements | $ | — | $ | — | $ | 2,139,099 | $ | — | $ | 2,139,099 |
* | Other financial instruments include swaps, which are reported as unrealized gain/loss at period end. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a portfolio company of a fund, or control of or by, or common control under Guggenheim Investments (“GI”), result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act.
The Fund may invest in the underlying series of the Guggenheim Strategy Funds Trust consisting of Guggenheim Strategy Fund I, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III (collectively, the “Cash Management Funds”), open-end management investment companies managed by GI. The Cash Management Funds, which launched on March 11, 2014, are offered as cash management options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Cash Management Funds pay no investment management fees. The Cash Management Funds’ annual report on Form N-CSR dated September 30, 2017, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180417000715/gug72218.htm.
Transactions during the year ended December 31, 2017, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value 12/31/16 | Additions | Reductions | Realized Gain (Loss) | Change in Unrealized | Value 12/31/17 | Shares 12/31/17 | Investment Income | ||||||||||||||||||||||||
Exchange-Traded Fund | ||||||||||||||||||||||||||||||||
Guggenheim S&P 500 Equal Weight ETF | $ | — | $ | 1,552,909 | $ | (1,565,020 | ) | $ | 12,111 | $ | — | $ | — | — | $ | — | ||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund I | 815,870 | 5,613 | (823,445 | ) | 3,126 | (1,164 | ) | — | — | 5,677 | ||||||||||||||||||||||
Guggenheim Strategy Fund II | 11,306 | 102 | (11,431 | ) | 35 | (12 | ) | — | — | 104 | ||||||||||||||||||||||
$ | 827,176 | $ | 1,558,624 | $ | (2,399,896 | ) | $ | 15,272 | $ | (1,176 | ) | $ | — | $ | 5,781 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 15 |
LONG SHORT EQUITY FUND |
STATEMENT OF ASSETS AND LIABILITIES | |
December 31, 2017 |
Assets: | ||||
Investments, at value - including $256,749 of securities loaned (cost $38,112,670) | $ | 40,479,436 | ||
Unrealized appreciation on swap agreements | 1,119,030 | |||
Receivables: | ||||
Fund shares sold | 64,920 | |||
Dividends | 30,138 | |||
Securities lending income | 1,667 | |||
Total assets | 41,695,191 | |||
Liabilities: | ||||
Overdraft due to custodian bank | 3,032 | |||
Unrealized depreciation on swap agreements | 2,139,099 | |||
Payable for: | ||||
Return of securities loaned | 270,351 | |||
Swap settlement | 44,186 | |||
Management fees | 29,190 | |||
Investor service fees | 8,127 | |||
Fund shares redeemed | 7,147 | |||
Transfer agent and administrative fees | 3,251 | |||
Portfolio accounting fees | 3,251 | |||
Miscellaneous | 49,736 | |||
Total liabilities | 2,557,370 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 39,137,821 | ||
Net assets consist of: | ||||
Paid in capital | $ | 33,516,069 | ||
Undistributed net investment income | 3,933 | |||
Accumulated net realized gain on investments | 4,271,122 | |||
Net unrealized appreciation on investments | 1,346,697 | |||
Net assets | $ | 39,137,821 | ||
Capital shares outstanding | 2,224,692 | |||
Net asset value per share | $ | 17.59 |
STATEMENT OF OPERATIONS | |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers after Dividends (net of foreign withholding tax of $576) | $ | 468,876 | ||
Dividends from securities of affiliated issuers | 5,781 | |||
Interest | 11,688 | |||
Income from securities lending, net | 7,226 | |||
Total investment income | 493,571 | |||
Expenses: | ||||
Management fees | 304,714 | |||
Investor service fees | 84,643 | |||
Transfer agent and administrative fees | 33,857 | |||
Short sales dividend expense | 58,194 | |||
Professional fees | 46,377 | |||
Portfolio accounting fees | 33,857 | |||
Custodian fees | 5,786 | |||
Trustees’ fees* | 4,212 | |||
Miscellaneous | 30,976 | |||
Total expenses | 602,616 | |||
Less: | ||||
Expenses waived by Adviser | (68 | ) | ||
Net expenses | 602,548 | |||
Net investment income | (108,977 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 4,952,659 | |||
Investments in affiliated issuers | 15,272 | |||
Swap agreements | 1,183,416 | |||
Futures contracts | 209 | |||
Securities sold short | (487,633 | ) | ||
Net realized gain | 5,663,923 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 450,314 | |||
Investments in affiliated issuers | (1,176 | ) | ||
Securities sold short | (90,982 | ) | ||
Swap agreements | (1,020,069 | ) | ||
Futures contracts | (1,842 | ) | ||
Net change in unrealized appreciation (depreciation) | (663,755 | ) | ||
Net realized and unrealized gain | 5,000,168 | |||
Net increase in net assets resulting from operations | $ | 4,891,191 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a) (19) of the 1940 Act. |
16 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
LONG SHORT EQUITY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | (108,977 | ) | $ | 13,980 | |||
Net realized gain (loss) on investments | 5,663,923 | (682,532 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | (663,755 | ) | 512,878 | |||||
Net increase (decrease) in net assets resulting from operations | 4,891,191 | (155,674 | ) | |||||
Distributions to shareholders from: | ||||||||
Net investment income | (126,120 | ) | — | |||||
Total distributions to shareholders | (126,120 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 10,449,559 | 12,618,096 | ||||||
Distributions reinvested | 126,120 | — | ||||||
Cost of shares redeemed | (8,089,622 | ) | (19,695,322 | ) | ||||
Net increase (decrease) from capital share transactions | 2,486,057 | (7,077,226 | ) | |||||
Net increase (decrease) in net assets | 7,251,128 | (7,232,900 | ) | |||||
Net assets: | ||||||||
Beginning of year | 31,886,693 | 39,119,593 | ||||||
End of year | $ | 39,137,821 | $ | 31,886,693 | ||||
Undistributed net investment income at end of year | $ | 3,933 | $ | 35,125 | ||||
Capital share activity: | ||||||||
Shares sold | 649,140 | 841,745 | ||||||
Shares issued from reinvestment of distributions | 7,922 | — | ||||||
Shares redeemed | (506,416 | ) | (1,329,016 | ) | ||||
Net increase (decrease) in shares | 150,646 | (487,271 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 17 |
LONG SHORT EQUITY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 15.37 | $ | 15.27 | $ | 15.08 | $ | 14.67 | $ | 12.49 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.05 | ) | .01 | (.11 | ) | (.09 | ) | (.14 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | 2.33 | .09 | .30 | .50 | 2.32 | |||||||||||||||
Total from investment operations | 2.28 | .10 | .19 | .41 | 2.18 | |||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.06 | ) | — | — | — | (— | )b | |||||||||||||
Total distributions | (.06 | ) | — | — | — | (— | )b | |||||||||||||
Net asset value, end of period | $ | 17.59 | $ | 15.37 | $ | 15.27 | $ | 15.08 | $ | 14.67 | ||||||||||
Total Returnc | 14.85 | % | 0.65 | % | 1.26 | % | 2.79 | % | 17.46 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 39,138 | $ | 31,887 | $ | 39,120 | $ | 30,041 | $ | 45,295 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.32 | %) | 0.04 | % | (0.71 | %) | (0.63 | %) | (1.05 | %) | ||||||||||
Total expensesd,f | 1.78 | % | 2.22 | % | 2.28 | % | 2.12 | % | 2.28 | % | ||||||||||
Net expenses | 1.78 | %e | 2.22 | % | 2.28 | % | 2.12 | % | 2.28 | % | ||||||||||
Portfolio turnover rate | 258 | % | 239 | % | 244 | % | 316 | % | 292 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Distributions from net investment income are less than $0.01 per share. |
c | Total return does not reflect the impact of any additional fees charged by insurance companies. |
d | Does not include expenses of the underlying funds in which the Fund invests. |
e | Net expense information reflects the expense ratios after expense waivers. |
f | Total expenses may include interest and dividend expense. Excluding interest and dividend expense related to short sales, net expense ratios for the years ended December 31 would be: |
2017 | 2016 | 2015 | 2014 | 2013 |
1.61% | 1.56% | 1.51% | 1.57% | 1.62% |
18 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
GLOBAL MANAGED FUTURES STRATEGY FUND
OBJECTIVE: Seeks to generate positive total returns over time.
For the one-year period ended December 31, 2017, the Global Managed Futures Strategy Fund returned 8.71%. The ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index, the Fund’s benchmark, returned 0.86%.
The Fund is comprised of multiple proprietary strategies designed to systematically exploit market inefficiencies in futures markets around the globe.
The Fund takes advantage of Guggenheim’s fixed income expertise in managing the Fund’s cash positions primarily through the use of the Guggenheim Strategy Funds.
In addition to its benchmark, the Fund outperformed the SG CTA Index for the year, which posted a return of 2.48%. Compared to traditional markets, the Fund outperformed investment grade bonds but underperformed U.S. equities. The Bloomberg Barclays U.S. Aggregate Bond Index rallied 3.54% while the S&P 500 Index jumped 21.83%.
Year-to-date, equities were the sole positive contributor to the Fund’s performance, while positions in currencies, commodities, and fixed income detracted from returns. Positions in the Dow Jones Industrial Average, the Hang Seng, and the TOPIX all contributed to the Fund’s strong returns, as equity markets rallied in 2017, supported by synchronized global economic growth, strong employment data, and cyclical industries continuing to post strong earnings. The Fund’s positions in Australian short-term government debt and the Japanese yen detracted from returns, along with energy-related positions. The Reserve Bank of Australia chose not to raise its cash-reserve rate in 2017, citing poor wage growth and high household debt, and the Japanese yen appreciated vs. the U.S. dollar due uncertainty with the Trump administration’s fiscal policies, as well as escalating tensions with North Korea.
Entering the first quarter of 2018, the Fund is net long equities, currencies and commodities, while being net short fixed income. Within equities, the Fund’s largest geographical exposure is to the U.S. The Fund’s net short exposure to fixed income is largely due to positions in the U.S., specifically short-term U.S. Treasurys, due to the recent uptick in yields and the Federal Reserve’s anticipated rate hikes in 2018. In terms of commodities, the Fund is generally net short grains and softs, and net long industrial metals, precious metals, energy, and livestock. The Fund is generally short the U.S. dollar with regard to its currency holdings.
The Fund held derivatives for a number of reasons, including liquidity, leverage, speculation, and hedging. Derivatives were liquid and allowed the Fund to gain leveraged access to markets in order to express investment views and to hedge exposures. Futures are an integral part of a managed futures strategy, and therefore derivatives performance was the primary driver of Fund performance for the period.
Performance displayed represents past performance which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 19 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Consolidated Holdings Diversification (Market Exposure as % of Net Assets)
“Consolidated Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments or investments in Guggenheim Strategy Funds Trust mutual funds. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: November 7, 2008 |
The Fund invests principally in derivative investments such as futures contracts.
Largest Holdings (% of Total Net Assets) | |
Guggenheim Variable Insurance Strategy Fund III | 39.9% |
Guggenheim Strategy Fund II | 22.6% |
Guggenheim Strategy Fund I | 12.1% |
Guggenheim Strategy Fund III | 11.0% |
Total | 85.6% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | Since Inception (11/07/08) | |
Global Managed Futures Strategy Fund | 8.71% | 0.96% | (2.93%) |
ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index | 0.86% | 0.27% | 0.21% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
20 | THE RYDEX FUNDS ANNUAL REPORT |
CONSOLIDATED SCHEDULE OF INVESTMENTS | December 31, 2017 |
GLOBAL MANAGED FUTURES STRATEGY FUND |
Shares | Value | |||||||
MUTUAL FUNDS† - 85.6% | ||||||||
Guggenheim Variable Insurance Strategy Fund III1 | 234,870 | $ | 5,897,587 | |||||
Guggenheim Strategy Fund II1 | 133,942 | 3,349,880 | ||||||
Guggenheim Strategy Fund I1 | 71,271 | 1,786,058 | ||||||
Guggenheim Strategy Fund III1 | 65,033 | 1,627,129 | ||||||
Total Mutual Funds | ||||||||
(Cost $12,563,717) | 12,660,654 |
Face Amount | ||||||||
U.S. TREASURY BILLS†† - 8.4% | ||||||||
U.S. Treasury Bill | ||||||||
1.31% due 04/19/182,3,4 | $ | 1,250,000 | 1,244,817 | |||||
Total U.S. Treasury Bills | ||||||||
(Cost $1,245,032) | 1,244,817 | |||||||
REPURCHASE AGREEMENTS††,5 - 4.2% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | 402,839 | 402,839 | ||||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 214,997 | 214,997 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $617,836) | 617,836 | |||||||
Total Investments - 98.2% | ||||||||
(Cost $14,426,585) | $ | 14,523,307 | ||||||
Other Assets & Liabilities, net - 1.8% | 268,162 | |||||||
Total Net Assets - 100.0% | $ | 14,791,469 |
Futures Contracts | ||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Value and Unrealized Gain (Loss) | ||||||||||
Commodity Futures Contracts Purchased† | ||||||||||||||
Low Sulphur Gas Oil Futures Contracts | 9 | Feb 2018 | $ | 541,575 | $ | 32,366 | ||||||||
Brent Crude Futures Contracts | 8 | Mar 2018 | 532,960 | 25,978 | ||||||||||
NY Harbor ULSD Futures Contracts | 3 | Feb 2018 | 260,014 | 19,238 | ||||||||||
WTI Crude Futures Contracts | 4 | Feb 2018 | 240,520 | 14,045 | ||||||||||
LME Zinc Futures Contracts | 4 | Feb 2018 | 332,850 | 11,241 | ||||||||||
Copper Futures Contracts | 3 | Mar 2018 | 246,862 | 9,441 | ||||||||||
Cotton #2 Futures Contracts | 7 | Mar 2018 | 274,750 | 8,219 | ||||||||||
Gold 100 oz. Futures Contracts | 7 | Feb 2018 | 913,850 | 4,511 | ||||||||||
LME Primary Aluminum Futures Contracts | 2 | Feb 2018 | 113,337 | 3,746 | ||||||||||
Lean Hogs Futures Contracts | 2 | Feb 2018 | 57,280 | (177 | ) | |||||||||
LME Lead Futures Contracts | 3 | Feb 2018 | 186,379 | (3,059 | ) | |||||||||
Live Cattle Futures Contracts | 4 | Feb 2018 | 194,600 | (8,654 | ) | |||||||||
$ | 3,894,977 | $ | 116,895 | |||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||
Dow Jones Industrial Average Index Mini Futures Contracts | 17 | Mar 2018 | $ | 2,103,155 | $ | 32,930 | ||||||||
MSCI EAFE Index Mini Futures Contracts | 6 | Mar 2018 | 613,830 | 16,220 | ||||||||||
Hang Seng Index Futures Contracts†† | 4 | Jan 2018 | 765,802 | 15,836 | ||||||||||
Tokyo Stock Price Index Futures Contracts | 5 | Mar 2018 | 808,226 | 15,790 | ||||||||||
MSCI EAFE Index Mini Futures Contracts | 4 | Mar 2018 | 232,740 | 12,254 | ||||||||||
S&P MidCap 400 Index Mini Futures Contracts | 3 | Mar 2018 | 570,720 | 5,786 | ||||||||||
NASDAQ-100 Index Mini Futures Contracts | 14 | Mar 2018 | 1,794,870 | 4,139 | ||||||||||
S&P/TSX 60 IX Index Futures Contracts | 8 | Mar 2018 | 1,218,845 | 3,680 | ||||||||||
S&P 500 Index Mini Futures Contracts | 7 | Mar 2018 | 937,213 | 3,127 | ||||||||||
MSCI Taiwan Stock Index Futures Contracts | 4 | Jan 2018 | 156,760 | 1,986 | ||||||||||
Nikkei 225 (OSE) Index Futures Contracts | 1 | Mar 2018 | 202,156 | 1,920 | ||||||||||
FTSE/JSE TOP 40 Index Futures Contracts†† | 5 | Mar 2018 | 212,256 | 1,789 | ||||||||||
Russell 2000 Index Mini Futures Contracts | 2 | Mar 2018 | 153,710 | 1,777 | ||||||||||
OMX Stockholm 30 Index Futures Contracts†† | 2 | Jan 2018 | 38,341 | (520 | ) | |||||||||
SPI 200 Index Futures Contracts†† | 10 | Mar 2018 | 1,174,060 | (1,908 | ) | |||||||||
CAC 40 10 Euro Index Futures Contracts | 8 | Jan 2018 | 508,602 | (7,850 | ) | |||||||||
Amsterdam Index Futures Contracts | 7 | Jan 2018 | 913,149 | (11,536 | ) | |||||||||
Euro STOXX 50 Index Futures Contracts | 25 | Mar 2018 | 1,044,391 | (31,604 | ) | |||||||||
$ | 13,448,826 | $ | 63,816 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 21 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
GLOBAL MANAGED FUTURES STRATEGY FUND |
Futures Contracts | ||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Value and Unrealized Gain (Loss) | ||||||||||
Currency Futures Contracts Purchased† | ||||||||||||||
Euro Futures Contracts | 13 | Mar 2018 | $ | 1,958,531 | $ | 26,280 | ||||||||
British Pound Futures Contracts | 33 | Mar 2018 | 2,791,182 | 21,607 | ||||||||||
Canadian Dollar Futures Contracts | 7 | Mar 2018 | 557,410 | 2,894 | ||||||||||
$ | 5,307,123 | $ | 50,781 | |||||||||||
Interest Rate Futures Contracts Purchased† | ||||||||||||||
U.S. Treasury Ultra Long Bond Futures Contracts | 4 | Mar 2018 | $ | 669,875 | $ | 10,196 | ||||||||
U.S. Treasury Long Bond Futures Contracts | 5 | Mar 2018 | 764,531 | 3,778 | ||||||||||
Long Gilt Futures Contracts†† | 5 | Mar 2018 | 845,405 | 3,638 | ||||||||||
Australian Government 10 Year Bond Futures Contracts†† | 8 | Mar 2018 | 804,869 | 1,053 | ||||||||||
Euro - Bund Futures Contracts | 13 | Mar 2018 | 2,523,575 | 785 | ||||||||||
Euro - BTP Italian Government Bond Futures Contracts†† | 11 | Mar 2018 | 1,798,272 | (6,855 | ) | |||||||||
Euro - OATS Futures Contracts†† | 25 | Mar 2018 | 4,660,768 | (10,760 | ) | |||||||||
Euro - Schatz Futures Contracts | 105 | Mar 2018 | 14,106,659 | (13,271 | ) | |||||||||
$ | 26,173,954 | $ | (11,436 | ) | ||||||||||
Interest Rate Futures Contracts Sold Short† | ||||||||||||||
U.S. Treasury 2 Year Note Futures Contracts | 51 | Mar 2018 | $ | 10,918,781 | $ | 23,703 | ||||||||
U.S. Treasury 5 Year Note Futures Contracts | 54 | Mar 2018 | 6,271,594 | 18,030 | ||||||||||
Australian Government 3 Year Bond Futures Contracts†† | 46 | Mar 2018 | 3,984,752 | 9,046 | ||||||||||
Canadian Government 10 Year Bond Futures Contracts†† | 39 | Mar 2018 | 4,180,776 | 8,937 | ||||||||||
U.S. Treasury 10 Year Note Futures Contracts | 45 | Mar 2018 | 5,580,000 | 2,516 | ||||||||||
Euro - Bobl Futures Contracts | 13 | Mar 2018 | 2,052,705 | 663 | ||||||||||
$ | 32,988,608 | $ | 62,895 | |||||||||||
Commodity Futures Contracts Sold Short† | ||||||||||||||
Hard Red Winter Wheat Futures Contracts | 22 | Mar 2018 | $ | 470,250 | $ | 11,942 | ||||||||
Corn Futures Contracts | 36 | Mar 2018 | 631,800 | 11,816 | ||||||||||
Wheat Futures Contracts | 16 | Mar 2018 | 341,800 | 8,436 | ||||||||||
Soybean Futures Contracts | 8 | Mar 2018 | 385,000 | 7,369 | ||||||||||
Coffee 'C' Futures Contracts | 9 | Mar 2018 | 425,925 | 7,156 | ||||||||||
Soybean Meal Futures Contracts | 5 | Mar 2018 | 158,600 | 3,987 | ||||||||||
Soybean Oil Futures Contracts | 14 | Mar 2018 | 278,880 | 1,051 | ||||||||||
Cocoa Futures Contracts | 7 | Mar 2018 | 132,160 | 242 | ||||||||||
Platinum Futures Contracts | 1 | Apr 2018 | 46,705 | (2,730 | ) | |||||||||
Sugar #11 Futures Contracts | 9 | Mar 2018 | 152,712 | (9,521 | ) | |||||||||
Silver Futures Contracts | 4 | Mar 2018 | 340,100 | (15,806 | ) | |||||||||
Natural Gas Futures Contracts | 8 | Feb 2018 | 236,080 | (17,412 | ) | |||||||||
$ | 3,600,012 | $ | 6,530 | |||||||||||
Currency Futures Contracts Sold Short† | ||||||||||||||
Mexican Peso Futures Contracts | 26 | Mar 2018 | $ | 651,950 | $ | 4,876 | ||||||||
Japanese Yen Futures Contracts | 7 | Mar 2018 | 779,319 | (1,399 | ) | |||||||||
New Zealand Dollar Futures Contracts | 3 | Mar 2018 | 212,430 | (3,127 | ) | |||||||||
$ | 1,643,699 | $ | 350 | |||||||||||
Equity Futures Contracts Sold Short† | ||||||||||||||
H-Shares Index Futures Contracts†† | 2 | Jan 2018 | $ | 149,750 | $ | (258 | ) | |||||||
FTSE 100 Index Futures Contracts†† | 1 | Mar 2018 | 101,854 | (920 | ) | |||||||||
$ | 251,604 | $ | (1,178 | ) |
22 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
GLOBAL MANAGED FUTURES STRATEGY FUND |
† | Value determined based on Level 1 inputs, unless otherwise noted — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | All or a portion of this security is pledged as futures collateral at December 31, 2017. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | Zero coupon rate security. |
5 | Repurchase Agreements — See Note 6. |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Commodity Futures Contracts | $ | — | $ | 180,784 | $ | — | $ | — | $ | — | $ | 180,784 | ||||||||||||
Currency Futures Contracts | — | 55,657 | — | — | — | 55,657 | ||||||||||||||||||
Equity Futures Contracts | — | 99,609 | — | 17,625 | — | 117,234 | ||||||||||||||||||
Interest Rate Futures Contracts | — | 59,671 | — | 22,674 | — | 82,345 | ||||||||||||||||||
Mutual Funds | 12,660,654 | — | — | — | — | 12,660,654 | ||||||||||||||||||
Repurchase Agreement | — | — | 617,836 | — | — | 617,836 | ||||||||||||||||||
U.S. Treasury Bills | — | — | 1,244,817 | — | — | 1,244,817 | ||||||||||||||||||
Total Assets | $ | 12,660,654 | $ | 395,721 | $ | 1,862,653 | $ | 40,299 | $ | — | $ | 14,959,327 | ||||||||||||
Investments in Securities (Liabilities) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Commodity Futures Contracts | $ | — | $ | 57,359 | $ | — | $ | — | $ | — | $ | 57,359 | ||||||||||||
Currency Futures Contracts | — | 4,526 | — | — | — | 4,526 | ||||||||||||||||||
Equity Futures Contracts | — | 50,990 | — | 3,606 | — | 54,596 | ||||||||||||||||||
Interest Rate Futures Contracts | — | 13,271 | — | 17,615 | — | 30,886 | ||||||||||||||||||
Total Liabilities | $ | — | $ | 126,146 | $ | — | $ | 21,221 | $ | — | $ | 147,367 |
* | Other financial instruments include futures contracts, which are reported as unrealized gain/loss at period end. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 23 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
GLOBAL MANAGED FUTURES STRATEGY FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a portfolio company of a fund, or control of or by, or common control under Guggenheim Investments (“GI”), result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act.
The Fund may invest in the underlying series of the Guggenheim Strategy Funds Trust consisting of Guggenheim Strategy Fund I, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III (collectively, the “Cash Management Funds”), open-end management investment companies managed by GI. The Cash Management Funds, which launched on March 11, 2014, are offered as cash management options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Cash Management Funds pay no investment management fees. The Cash Management Funds’ annual report on Form N-CSR dated September 30, 2017, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180417000715/gug72218.htm.
Transactions during the year ended December 31, 2017, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value 12/31/16 | Additions | Reductions | Realized Gain | Change in Unrealized | Value 12/31/17 | Shares 12/31/17 | Investment Income | Capital Gain Distributions | |||||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund I | $ | 1,844,999 | $ | 36,729 | $ | (100,000 | ) | $ | 157 | $ | 4,173 | $ | 1,786,058 | 71,271 | $ | 36,114 | $ | 675 | ||||||||||||||||||
Guggenheim Strategy Fund II | 3,259,746 | 82,326 | — | — | 7,808 | 3,349,880 | 133,942 | 80,719 | 1,782 | |||||||||||||||||||||||||||
Guggenheim Strategy Fund III | 1,579,470 | 44,493 | — | — | 3,166 | 1,627,129 | 65,033 | 44,236 | 396 | |||||||||||||||||||||||||||
Guggenheim Variable Insurance Strategy Fund III | 5,720,965 | 158,123 | — | — | 18,499 | 5,897,587 | 234,870 | 158,582 | ||||||||||||||||||||||||||||
$ | 12,405,180 | $ | 321,671 | $ | (100,000 | ) | $ | 157 | $ | 33,646 | $ | 12,660,654 | $ | 319,651 | $ | 2,853 |
24 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
GLOBAL MANAGED FUTURES STRATEGY FUND |
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES | |
December 31, 2017 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $1,245,032) | $ | 1,244,817 | ||
Investments in affiliated issuers, at value (cost $12,563,717) | 12,660,654 | |||
Repurchase agreements, at value (cost $617,836) | 617,836 | |||
Cash | 1,832 | |||
Segregated cash with broker | 379,269 | |||
Receivables: | ||||
Dividends | 21,871 | |||
Fund shares sold | 2,815 | |||
Interest | 73 | |||
Total assets | 14,929,167 | |||
Liabilities: | ||||
Payable for: | ||||
Variation margin | 64,945 | |||
Securities purchased | 22,523 | |||
Management fees | 11,450 | |||
Fund shares redeemed | 6,573 | |||
Investor service fees | 3,186 | |||
Portfolio accounting fees | 1,274 | |||
Transfer agent and administrative fees | 1,274 | |||
Miscellaneous | 26,473 | |||
Total liabilities | 137,698 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 14,791,469 | ||
Net assets consist of: | ||||
Paid in capital | $ | 15,193,790 | ||
Distributions in excess of net investment income | (508,263 | ) | ||
Accumulated net realized loss on investments and foreign currency | (279,197 | ) | ||
Net unrealized appreciation on investments and foreign currency | 385,139 | |||
Net assets | $ | 14,791,469 | ||
Capital shares outstanding | 867,086 | |||
Net asset value per share | $ | 17.06 |
CONSOLIDATED STATEMENT OF OPERATIONS | |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 319,651 | ||
Interest | 19,421 | |||
Total investment income | 339,072 | |||
Expenses: | ||||
Management fees | 143,409 | |||
Investor service fees | 37,890 | |||
Transfer agent and administrative fees | 15,156 | |||
Professional fees | 20,325 | |||
Portfolio accounting fees | 15,156 | |||
Custodian fees | 2,671 | |||
Trustees’ fees* | 1,866 | |||
Miscellaneous | 19,545 | |||
Total expenses | 256,018 | |||
Less: | ||||
Expenses waived by Adviser | (7,030 | ) | ||
Net expenses | 248,988 | |||
Net investment income | 90,084 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 4 | |||
Investments in affiliated issuers | 157 | |||
Futures contracts | 1,163,585 | |||
Foreign currency transactions | 3,270 | |||
Distributions received from affiliated investment company shares | 2,853 | |||
Net realized gain | 1,169,869 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (258 | ) | ||
Investments in affiliated issuers | 33,646 | |||
Futures contracts | (51,406 | ) | ||
Foreign currency translations | (526 | ) | ||
Net change in unrealized appreciation (depreciation) | (18,544 | ) | ||
Net realized and unrealized gain | 1,151,325 | |||
Net increase in net assets resulting from operations | $ | 1,241,409 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a) (19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 25 |
GLOBAL MANAGED FUTURES STRATEGY FUND |
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 90,084 | $ | 49,533 | ||||
Net realized gain (loss) on investments | 1,169,869 | (2,714,289 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | (18,544 | ) | 162,737 | |||||
Net increase (decrease) in net assets resulting from operations | 1,241,409 | (2,502,019 | ) | |||||
Distributions to shareholders from: | ||||||||
Net investment income | (224,098 | ) | (581,108 | ) | ||||
Total distributions to shareholders | (224,098 | ) | (581,108 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 3,928,863 | 6,476,564 | ||||||
Distributions reinvested | 224,098 | 581,108 | ||||||
Cost of shares redeemed | (5,160,335 | ) | (6,728,763 | ) | ||||
Net increase (decrease) from capital share transactions | (1,007,374 | ) | 328,909 | |||||
Net increase (decrease) in net assets | 9,937 | (2,754,218 | ) | |||||
Net assets: | ||||||||
Beginning of year | 14,781,532 | 17,535,750 | ||||||
End of year | $ | 14,791,469 | $ | 14,781,532 | ||||
Distributions in excess of net investment income at end of year | $ | (508,263 | ) | $ | (284,165 | ) | ||
Capital share activity: | ||||||||
Shares sold | 241,110 | 367,879 | ||||||
Shares issued from reinvestment of distributions | 14,192 | 33,844 | ||||||
Shares redeemed | (316,195 | ) | (376,902 | ) | ||||
Net increase (decrease) in shares | (60,893 | ) | 24,821 |
26 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
GLOBAL MANAGED FUTURES STRATEGY FUND |
CONSOLIDATED FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 15.93 | $ | 19.42 | $ | 20.89 | $ | 18.60 | $ | 18.15 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .10 | .06 | (.07 | ) | (.12 | ) | (.29 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | 1.27 | (2.88 | ) | (.25 | ) | 2.41 | .74 | |||||||||||||
Total from investment operations | 1.37 | (2.82 | ) | (.32 | ) | 2.29 | .45 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.24 | ) | (.67 | ) | (.48 | ) | — | — | ||||||||||||
Net realized gains | — | — | (.67 | ) | — | — | ||||||||||||||
Total distributions | (.24 | ) | (.67 | ) | (1.15 | ) | — | — | ||||||||||||
Net asset value, end of period | $ | 17.06 | $ | 15.93 | $ | 19.42 | $ | 20.89 | $ | 18.60 | ||||||||||
Total Returnb | 8.71 | % | (14.77 | %) | (1.55 | %) | 12.08 | % | 2.59 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 14,791 | $ | 14,782 | $ | 17,536 | $ | 11,433 | $ | 9,231 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.59 | % | 0.32 | % | (0.35 | %) | (0.67 | %) | (1.60 | %) | ||||||||||
Total expensesc | 1.69 | % | 1.69 | % | 1.65 | % | 1.67 | % | 1.76 | % | ||||||||||
Net expensesd | 1.64 | % | 1.62 | % | 1.57 | % | 1.60 | % | 1.64 | % | ||||||||||
Portfolio turnover rate | 1 | % | 39 | % | 33 | % | 43 | % | — |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 27 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
MULTI-HEDGE STRATEGIES FUND
OBJECTIVE: Seeks to provide long-term capital appreciation with less risk than traditional equity funds.
2017 was the eighth full fiscal year of performance since the Fund’s objective was changed from hedge fund replication to capital appreciation. The Fund seeks capital appreciation with low correlation to equity and fixed income markets, while doing so with low risk*–typically in the 5% to 8% range. Risk is calculated as the annualized daily standard deviation of the NAV per share of the Fund.
The Fund produced a return of 3.67% with annualized risk* of 2.7%. The Fund still succeeded in maintaining low correlation with stock and bond indices, as its correlation with the S&P 500 Index and the Bloomberg Barclays U.S. Aggregate Bond Index came in at 62% and -27%, respectively.
While no longer a hedge fund replication product, the Fund still maintains the HFRX Global Hedge Fund Index as one of its benchmarks. This benchmark returned 5.99% for the year. In contrast to the diversification benefits provided by the Multi-Hedge Strategies Fund, the HFRX Global Hedge Fund Index had a correlation of 68% with the S&P 500 Index in 2017. Since the Fund changed its investment objective (starting August 1, 2009) it has outperformed the HFRX Global Hedge Fund Index by more than 10% (roughly 1.0% annualized), net of fees, while doing so with lower correlation to equity markets.
Four of the five hedge fund strategies used within the Fund contributed positively to gross Fund returns in 2017. The final strategy did not receive an allocation throughout the year, so it did not contribute. During the year, derivatives were used within the Global Macro strategy and for the equity market hedge. Overall the use of derivatives contributed positively to Fund performance for the year.
The Equity Market Neutral (MNRE)strategies contributed 0.39% to gross Fund returns. The Market Neutral models detracted -0.14% while the Closed-end Fund Arbitrage model contributed 0.53%.
The Fixed Income strategies did not contribute during 2017; both the U.S. Treasury Flattener and the High Yield Credit Spread strategies are tactical and neither was attractive throughout the year.
The Global Macro strategies contributed 1.45%. Within Global Macro, the Managed Futures models contributed 0.74%. The Volatility Arbitrage model contributed 0.31%.
The Merger Arbitrage (MRGR) strategy contributed 1.51%.
The Long/Short Equity (SMQLS) strategies contributed 2.60% to gross Fund returns. Long/Short Equity strategies contributed 2.62%, while the Tactical Size model detracted -0.01% in 2017.
For the first eight months of the year, an equity market hedge was used explicitly to bring the Fund’s forecast risk characteristics in-line with its objectives, which resulted in a -0.69% contribution to gross Fund returns.
Strategy funds were utilized within the Fund to achieve higher yields than what would otherwise be achieved through overnight repurchase agreements or short term investments.
Performance displayed represents past performance which is no guarantee of future results.
* | Risk is measured by standard deviation, a statistic of the historical volatility of an investment, usually computed using the most recent 36-monthly returns and then annualized. More generally, it is a measure of the extent to which numbers are spread around their average. The higher the number, the more volatility is to be expected. |
28 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments or investments in Guggenheim Strategy Funds Trust mutual funds. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: November 29, 2005 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Variable Insurance Strategy Fund III | 9.2% |
Guggenheim Strategy Fund III | 9.2% |
Guggenheim Strategy Fund II | 8.6% |
Guggenheim Strategy Fund I | 4.6% |
NXP Semiconductor N.V. | 2.8% |
General Cable Corp. | 1.3% |
Sigma Designs, Inc. | 1.3% |
Cavium, Inc. | 1.3% |
Silver Spring Networks, Inc. | 1.2% |
Clifton Bancorp, Inc. | 1.1% |
Top Ten Total | 40.6% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Multi-Hedge Strategies Fund | 3.67% | 2.25% | (0.14%) |
S&P 500 Index | 21.83% | 15.79% | 8.50% |
Bank of America Merrill Lynch 3-Month U.S. Treasury Bill Index | 0.86% | 0.27% | 0.39% |
HFRX Global Hedge Fund Index | 5.99% | 2.12% | (0.41%) |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The HFRX Global Hedge Fund Index and the S&P 500 Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 29 |
CONSOLIDATED SCHEDULE OF INVESTMENTS | December 31, 2017 |
MULTI-HEDGE STRATEGIES FUND |
Shares | Value | |||||||
COMMON STOCKS† - 26.0% | ||||||||
Technology - 8.1% | ||||||||
NXP Semiconductor N.V.* | 10,504 | $ | 1,229,913 | |||||
Sigma Designs, Inc.*,9 | 80,584 | 560,059 | ||||||
Cavium, Inc.*,9 | 6,618 | 554,787 | ||||||
Silver Spring Networks, Inc.*,9 | 32,511 | 527,979 | ||||||
Xcerra Corp.*,9 | 25,285 | 247,540 | ||||||
IXYS Corp.*,9 | 10,085 | 241,536 | ||||||
Dell Technologies Incorporated Class V — Class V*,9 | 2,190 | 178,003 | ||||||
Total Technology | 3,539,817 | |||||||
Consumer, Non-cyclical - 4.5% | ||||||||
Capella Education Co.9 | 5,504 | 426,009 | ||||||
Almost Family, Inc.* | 7,000 | 387,450 | ||||||
Becton Dickinson and Co. | 1,255 | 268,652 | ||||||
Akorn, Inc.*,9 | 7,811 | 251,749 | ||||||
Entellus Medical, Inc.*,1 | 9,598 | 234,095 | ||||||
MoneyGram International, Inc.*,9 | 10,733 | 141,461 | ||||||
Bob Evans Farms, Inc.9 | 1,625 | 128,082 | ||||||
NxStage Medical, Inc.*,9 | 4,860 | 117,758 | ||||||
Total Consumer, Non-cyclical | 1,955,256 | |||||||
Industrial - 2.9% | ||||||||
General Cable Corp.9 | 18,993 | 562,193 | ||||||
Orbital ATK, Inc.9 | 2,974 | 391,081 | ||||||
Rockwell Collins, Inc.9 | 1,247 | 169,118 | ||||||
Sparton Corp.*,9 | 5,287 | 121,918 | ||||||
Colfax Corp.* | 1,144 | 45,325 | ||||||
Total Industrial | 1,289,635 | |||||||
Consumer, Cyclical - 2.3% | ||||||||
HSN, Inc.9 | 9,947 | 401,361 | ||||||
Pinnacle Entertainment, Inc.*,9 | 11,483 | 375,839 | ||||||
Buffalo Wild Wings, Inc.*,9 | 1,516 | 237,027 | ||||||
Total Consumer, Cyclical | 1,014,227 | |||||||
Communications - 2.1% | ||||||||
Time Warner, Inc.9 | 3,318 | 303,497 | ||||||
Hawaiian Telcom Holdco, Inc.*,9 | 6,191 | 191,054 | ||||||
Scripps Networks Interactive, Inc. — Class A9 | 1,960 | 167,345 | ||||||
Tribune Media Co. — Class A9 | 3,131 | 132,974 | ||||||
General Communication, Inc. — Class A*,9 | 2,843 | 110,934 | ||||||
Symantec Corp. | 1,687 | 47,337 | ||||||
Total Communications | 953,141 | |||||||
Utilities - 2.2% | ||||||||
Dynegy, Inc.*,9 | 36,162 | 428,520 | ||||||
WGL Holdings, Inc.9 | 3,198 | 274,516 | ||||||
Avista Corp.9 | 2,407 | 123,936 | ||||||
Calpine Corp.*,9 | 8,038 | 121,615 | ||||||
Total Utilities | 948,587 | |||||||
Financial - 2.2% | ||||||||
Clifton Bancorp, Inc.9 | 27,074 | 462,965 | ||||||
Xenith Bankshares, Inc.*,9 | 4,768 | 161,301 | ||||||
Bear State Financial, Inc.9 | 11,710 | 119,793 | ||||||
Atlantic Coast Financial Corp.*,9 | 7,697 | 72,583 | ||||||
Hartford Financial Services Group, Inc.9 | 813 | 45,756 | ||||||
Genworth Financial, Inc. — Class A* | 13,429 | 41,764 | ||||||
Paragon Commercial Corp.* | 620 | 32,990 | ||||||
MainSource Financial Group, Inc. | 138 | 5,011 | ||||||
Total Financial | 942,163 | |||||||
Basic Materials - 1.7% | ||||||||
Monsanto Co.9 | 3,815 | 445,516 | ||||||
Calgon Carbon Corp.9 | 12,332 | 262,671 | ||||||
Deltic Timber Corp. | 340 | 31,127 | ||||||
Total Basic Materials | 739,314 | |||||||
Total Common Stocks | ||||||||
(Cost $11,054,568) | 11,382,140 | |||||||
RIGHTS†† - 0.0% | ||||||||
Dividend and Income Fund | ||||||||
Expires 01/31/18* | 13,152 | — | ||||||
Total Rights | ||||||||
(Cost $—) | — | |||||||
MUTUAL FUNDS† - 31.6% | ||||||||
Guggenheim Variable Insurance Strategy Fund III2 | 160,607 | 4,032,835 | ||||||
Guggenheim Strategy Fund III2 | 161,102 | 4,030,761 | ||||||
Guggenheim Strategy Fund II2 | 149,629 | 3,742,223 | ||||||
Guggenheim Strategy Fund I2 | 80,838 | 2,025,802 | ||||||
Total Mutual Funds | ||||||||
(Cost $13,836,594) | 13,831,621 | |||||||
CLOSED-END FUNDS† - 9.1% | ||||||||
Dividend and Income Fund | 14,074 | 189,014 | ||||||
RMR Real Estate Income Fund | 9,747 | 186,070 | ||||||
Central Securities Corp. | 6,675 | 182,895 | ||||||
General American Investors Company, Inc. | 5,171 | 177,882 | ||||||
Boulder Growth & Income Fund, Inc. | 13,964 | 154,861 | ||||||
Eagle Growth & Income Opportunities Fund | 3,556 | 58,852 | ||||||
Adams Natural Resources Fund, Inc. | 2,078 | 41,228 | ||||||
Herzfeld Caribbean Basin Fund, Inc. | 4,698 | 33,591 | ||||||
GDL Fund | 3,253 | 31,652 | ||||||
Adams Diversified Equity Fund, Inc. | 2,063 | 31,007 | ||||||
Nuveen Connecticut Quality Municipal Income Fund | 2,418 | 28,823 | ||||||
Templeton Dragon Fund, Inc. | 1,267 | 27,253 | ||||||
Gabelli Healthcare & WellnessRx Trust | 2,613 | 26,992 | ||||||
Cushing Energy Income Fund | 2,846 | 26,638 | ||||||
Mexico Fund, Inc. | 1,670 | 26,303 | ||||||
Nuveen New Jersey Quality Municipal Income Fund | 1,916 | 26,230 | ||||||
CBRE Clarion Global Real Estate Income Fund | 3,238 | 25,645 |
��
30 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
MULTI-HEDGE STRATEGIES FUND |
Shares | Value | |||||||
Latin American Discovery Fund, Inc. | 2,220 | $ | 25,574 | |||||
Western Asset Emerging Markets Debt Fund, Inc. | 1,632 | 25,378 | ||||||
Morgan Stanley Asia-Pacific Fund, Inc. | 1,375 | 25,300 | ||||||
BlackRock Resources & Commodities Strategy Trust | 2,575 | 25,158 | ||||||
Morgan Stanley Emerging Markets Domestic Debt Fund, Inc. | 3,242 | 24,963 | ||||||
Principal Real Estate Income Fund | 1,443 | 24,805 | ||||||
Morgan Stanley Emerging Markets Fund, Inc. | 1,382 | 24,724 | ||||||
Sprott Focus Trust, Inc. | 3,098 | 24,536 | ||||||
Macquarie Global Infrastructure Total Return Fund, Inc. | 939 | 24,207 | ||||||
Franklin Universal Trust | 3,366 | 24,134 | ||||||
Mexico Equity & Income Fund, Inc. | 2,346 | 24,070 | ||||||
Brookfield Global Listed Infrastructure Income Fund, Inc. | 1,852 | 23,946 | ||||||
Alpine Global Premier Properties Fund | 3,546 | 23,900 | ||||||
Lazard Global Total Return and Income Fund, Inc. | 1,320 | 23,760 | ||||||
First Trust Aberdeen Global Opportunity Income Fund | 2,037 | 23,751 | ||||||
Western Asset/Claymore Inflation-Linked Securities & Income Fund2 | 2,000 | 23,580 | ||||||
Templeton Emerging Markets Fund/United States | 1,434 | 23,532 | ||||||
BlackRock Energy and Resources Trust | 1,654 | 23,454 | ||||||
Western Asset/Claymore Inflation-Linked Opportunities & Income Fund2 | 2,049 | 23,400 | ||||||
Western Asset Global High Income Fund, Inc.1 | 2,285 | 23,353 | ||||||
Prudential Global Short Duration High Yield Fund, Inc. | 1,618 | 23,315 | ||||||
Eaton Vance Michigan Municipal Bond Fund | 1,729 | 23,272 | ||||||
Duff & Phelps Global Utility Income Fund, Inc. | 1,493 | 23,171 | ||||||
Neuberger Berman High Yield Strategies Fund, Inc. | 1,964 | 23,097 | ||||||
Clough Global Opportunities Fund | 2,116 | 23,022 | ||||||
Voya Asia Pacific High Dividend Equity Income Fund | 2,195 | 23,004 | ||||||
Royce Micro-Capital Trust, Inc. | 2,431 | 22,961 | ||||||
Taiwan Fund, Inc. | 1,100 | 22,957 | ||||||
Nuveen Real Asset Income and Growth Fund | 1,286 | 22,891 | ||||||
Morgan Stanley Emerging Markets Debt Fund, Inc. | 2,292 | 22,874 | ||||||
Bancroft Fund Ltd.9 | 1,051 | 22,870 | ||||||
India Fund, Inc.1 | 875 | 22,855 | ||||||
Central and Eastern Europe Fund, Inc. | 937 | 22,853 | ||||||
Tri-Continental Corp.9 | 848 | 22,845 | ||||||
Aberdeen Latin America Equity Fund, Inc. | 852 | 22,765 | ||||||
European Equity Fund, Inc. | 2,289 | 22,753 | ||||||
Eaton Vance Limited Duration Income Fund | 1,663 | 22,700 | ||||||
Invesco High Income Trust II | 1,540 | 22,653 | ||||||
Liberty All Star Equity Fund | 3,595 | 22,649 | ||||||
Cohen & Steers REIT and Preferred Income Fund, Inc. | 1,064 | 22,631 | ||||||
First Trust Aberdeen Emerging Opportunity Fund | 1,386 | 22,620 | ||||||
Alpine Total Dynamic Dividend Fund | 2,388 | 22,614 | ||||||
Lazard World Dividend & Income Fund, Inc. | 1,944 | 22,609 | ||||||
Prudential Short Duration High Yield Fund, Inc. | 1,524 | 22,510 | ||||||
Asia Tigers Fund, Inc. | 1,816 | 22,464 | ||||||
Swiss Helvetia Fund, Inc. | 1,760 | 22,458 | ||||||
Western Asset High Income Opportunity Fund, Inc. | 4,425 | 22,435 | ||||||
Source Capital, Inc. | 550 | 22,418 | ||||||
Alpine Global Dynamic Dividend Fund | 2,068 | 22,417 | ||||||
Clough Global Dividend and Income Fund | 1,678 | 22,385 | ||||||
Templeton Emerging Markets Income Fund | 2,001 | 22,351 | ||||||
LMP Capital and Income Fund, Inc. | 1,602 | 22,348 | ||||||
China Fund, Inc. | 1,032 | 22,343 | ||||||
First Trust High Income Long/Short Fund | 1,348 | 22,323 | ||||||
Nuveen Global High Income Fund | 1,320 | 22,321 | ||||||
Cohen & Steers Global Income Builder, Inc. | 2,258 | 22,309 | ||||||
Clough Global Equity Fund | 1,668 | 22,301 | ||||||
Gabelli Global Utility & Income Trust1 | 1,045 | 22,258 | ||||||
BlackRock Enhanced Equity Dividend Trust | 2,411 | 22,254 | ||||||
Aberdeen Greater China Fund, Inc. | 1,787 | 22,248 | ||||||
Advent Claymore Convertible Securities and Income Fund2 | 1,399 | 22,216 | ||||||
Wells Fargo Income Opportunities Fund | 2,639 | 22,168 | ||||||
Nuveen AMT-Free Quality Municipal Income Fund | 1,612 | 22,165 | ||||||
Korea Fund, Inc. | 536 | 22,121 | ||||||
Delaware Investments Dividend & Income Fund, Inc. | 2,052 | 22,100 | ||||||
Gabelli Dividend & Income Trust | 944 | 22,099 | ||||||
Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. | 1,519 | 22,086 | ||||||
Advent Claymore Convertible Securities and Income Fund II2 | 3,686 | 22,079 | ||||||
Aberdeen Japan Equity Fund, Inc. | 2,442 | 22,076 | ||||||
Ellsworth Growth and Income Fund Ltd. | 2,345 | 22,066 | ||||||
Tekla Healthcare Opportunities Fund | 1,257 | 22,023 | ||||||
New Germany Fund, Inc. | 1,130 | 21,979 | ||||||
Voya Emerging Markets High Income Dividend Equity Fund | 2,468 | 21,965 | ||||||
Advent/Claymore Enhanced Growth & Income Fund2 | 2,633 | 21,959 | ||||||
Nuveen Multi-Market Income Fund, Inc. | 2,881 | 21,953 | ||||||
Western Asset High Yield Defined Opportunity Fund, Inc. | 1,449 | 21,909 | ||||||
MFS Multimarket Income Trust | 3,596 | 21,828 | ||||||
MFS Charter Income Trust | 2,574 | 21,827 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 31 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
MULTI-HEDGE STRATEGIES FUND |
Shares | Value | |||||||
BlackRock Enhanced Global Dividend Trust | 1,743 | $ | 21,805 | |||||
ClearBridge American Energy MLP Fund, Inc. | 2,633 | 21,801 | ||||||
BlackRock Enhanced International Dividend Trust | 3,340 | 21,777 | ||||||
Delaware Enhanced Global Dividend & Income Fund | 1,795 | 21,773 | ||||||
Nuveen Tax-Advantaged Dividend Growth Fund | 1,238 | 21,764 | ||||||
Cohen & Steers MLP Income and Energy Opportunity Fund, Inc.1 | 2,121 | 21,740 | ||||||
BlackRock Debt Strategies Fund, Inc. | 1,858 | 21,739 | ||||||
Wells Fargo Multi-Sector Income Fund | 1,663 | 21,719 | ||||||
Ares Dynamic Credit Allocation Fund, Inc. | 1,322 | 21,707 | ||||||
AllianzGI Equity & Convertible Income Fund | 1,026 | 21,679 | ||||||
Nuveen Tax-Advantaged Total Return Strategy Fund | 1,552 | 21,650 | ||||||
Aberdeen Chile Fund, Inc. | 2,418 | 21,593 | ||||||
Franklin Limited Duration Income Trust | 1,821 | 21,542 | ||||||
Neuberger Berman Real Estate Securities Income Fund, Inc.1 | 3,892 | 21,523 | ||||||
Cohen & Steers Closed-End Opportunity Fund, Inc. | 1,616 | 21,509 | ||||||
Japan Smaller Capitalization Fund, Inc. | 1,821 | 21,506 | ||||||
AllianzGI NFJ Dividend Interest & Premium Strategy Fund | 1,647 | 21,493 | ||||||
Guggenheim Enhanced Equity Income Fund2 | 2,403 | 21,387 | ||||||
Aberdeen Singapore Fund, Inc. | 1,718 | 21,338 | ||||||
Putnam High Income Securities Fund | 2,363 | 21,314 | ||||||
Wells Fargo Global Dividend Opportunity Fund | 3,584 | 21,253 | ||||||
First Trust Enhanced Equity Income Fund | 1,309 | 21,193 | ||||||
Nuveen Dow 30sm Dynamic Overwrite Fund | 1,121 | 21,120 | ||||||
First Trust Dynamic Europe Equity Income Fund | 1,121 | 21,108 | ||||||
Blackrock Science & Technology Trust | 786 | 20,978 | ||||||
Morgan Stanley India Investment Fund, Inc. | 627 | 20,785 | ||||||
Asia Pacific Fund, Inc. | 1,469 | 20,728 | ||||||
Legg Mason BW Global Income Opportunities Fund, Inc. | 2,055 | 26,243 | ||||||
First Trust Strategic High Income Fund II | 1,858 | 23,912 | ||||||
Cohen & Steers Infrastructure Fund, Inc.1 | 981 | 23,544 | ||||||
Royce Value Trust, Inc. | 1,388 | 22,444 | ||||||
BlackRock Credit Allocation Income Trust | 1,683 | 22,418 | ||||||
BlackRock Multi-Sector Income Trust | 1,218 | 22,107 | ||||||
Western Asset High Income Fund II, Inc. | 3,162 | 22,039 | ||||||
BlackRock Corporate High Yield Fund, Inc. | 2,011 | 22,000 | ||||||
Voya Global Advantage and Premium Opportunity Fund | 1,903 | 21,751 | ||||||
Virtus Total Return Fund, Inc. | 1,673 | 21,582 | ||||||
BlackRock Enhanced Capital and Income Fund, Inc. | 1,305 | 21,376 | ||||||
Aberdeen Income Credit Strategies Fund | 1,520 | 21,326 | ||||||
Western Asset Global Corporate Defined Opportunity Fund, Inc. | 1,172 | 21,096 | ||||||
Eaton Vance Tax-Advantaged Global Dividend Income Fund | 1,210 | 20,969 | ||||||
Total Closed-End Funds | ||||||||
(Cost $3,616,447) | 3,955,535 |
Face Amount | ||||||||
U.S. TREASURY BILLS†† - 21.3% | ||||||||
U.S. Treasury Bills | ||||||||
1.03% due 01/02/184,5,15 | $ | 4,000,000 | 4,000,000 | |||||
1.04% due 01/02/184,5,15 | 3,500,000 | 3,500,000 | ||||||
1.31% due 04/19/183,4,5 | 1,300,000 | 1,294,610 | ||||||
1.44% due 06/14/184,5 | 500,000 | 496,694 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $9,291,311) | 9,291,304 | |||||||
REPURCHASE AGREEMENTS††,6 - 1.4% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | 404,033 | 404,033 | ||||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 215,633 | 215,633 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $619,666) | 619,666 |
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,7 - 0.5% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%8 | 208,329 | 208,329 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $208,329) | 208,329 | |||||||
Total Investments - 89.9% | ||||||||
(Cost $38,626,915) | $ | 39,288,595 | ||||||
COMMON STOCKS SOLD SHORT† - (9.1)% | ||||||||
Industrial - (0.4)% | ||||||||
United Technologies Corp. | 359 | (45,797 | ) | |||||
Littelfuse, Inc. | 638 | (126,209 | ) | |||||
Total Industrial | (172,006 | ) | ||||||
Communications - (0.8)% | ||||||||
Discovery Communications, Inc. — Class C* | 1,192 | (25,235 | ) | |||||
Sinclair Broadcast Group, Inc. — Class A | 720 | (27,252 | ) | |||||
Cincinnati Bell, Inc.* | 4,038 | (84,192 | ) | |||||
Liberty Ventures* | 1,791 | (97,144 | ) | |||||
AT&T, Inc. | 3,815 | (148,327 | ) | |||||
Total Communications | (382,150 | ) |
32 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
MULTI-HEDGE STRATEGIES FUND |
Shares | Value | |||||||
Utilities - (1.0)% | ||||||||
Vistra Energy Corp.* | 23,578 | $ | (431,949 | ) | ||||
Consumer, Cyclical - (1.3)% | ||||||||
Penn National Gaming, Inc.* | 4,823 | (151,105 | ) | |||||
Liberty Interactive Corporation QVC Group — Class A* | 16,413 | (400,805 | ) | |||||
Total Consumer, Cyclical | (551,910 | ) | ||||||
Technology - (1.3)% | ||||||||
VMware, Inc. — Class A* | 2,182 | (273,448 | ) | |||||
Marvell Technology Group Ltd. | 14,399 | (309,147 | ) | |||||
Total Technology | (582,595 | ) | ||||||
Financial - (1.8)% | ||||||||
South State Corp. | 1 | (87 | ) | |||||
First Financial Bancorp | 191 | (5,033 | ) | |||||
Potlatch Corp. | 612 | (30,539 | ) | |||||
TowneBank | 1,070 | (32,902 | ) | |||||
Ameris Bancorp | 1,308 | (63,046 | ) | |||||
Union Bankshares Corp. | 4,460 | (161,318 | ) | |||||
Kearny Financial Corp. | 32,245 | (465,940 | ) | |||||
Total Financial | (758,865 | ) | ||||||
Consumer, Non-cyclical - (2.5)% | ||||||||
Becton Dickinson and Co. | 1,255 | (268,645 | ) | |||||
LHC Group, Inc.* | 6,405 | (392,306 | ) | |||||
Strayer Education, Inc. | 4,816 | (431,417 | ) | |||||
Total Consumer, Non-cyclical | (1,092,368 | ) | ||||||
Total Common Stocks Sold Short | ||||||||
(Proceeds $3,831,118) | (3,971,843 | ) | ||||||
EXCHANGE-TRADED FUNDS SOLD SHORT† - (10.8)% | ||||||||
SPDR S&P 500 ETF Trust | 85 | (22,683 | ) | |||||
iShares Russell 1000 Growth ETF | 171 | (23,030 | ) | |||||
VanEck Vectors Russia ETF | 2,138 | (45,347 | ) | |||||
iShares 20+ Year Treasury Bond ETF | 461 | (58,482 | ) | |||||
iShares MSCI Japan ETF | 1,056 | (63,286 | ) | |||||
iShares MSCI Taiwan ETF | 1,907 | (69,053 | ) | |||||
iShares China Large-Capital ETF | 1,741 | (80,382 | ) | |||||
iShares MSCI United Kingdom ETF | 2,283 | (81,777 | ) | |||||
Technology Select Sector SPDR Fund | 1,344 | (85,949 | ) | |||||
iShares MSCI South Korea ETF | 1,199 | (89,841 | ) | |||||
VanEck Vectors Gold Miners ETF | 4,019 | (93,402 | ) | |||||
iShares MSCI Australia ETF | 4,802 | (111,262 | ) | |||||
Utilities Select Sector SPDR Fund | 2,137 | (112,577 | ) | |||||
Consumer Discretionary Select Sector SPDR Fund | 1,216 | (120,007 | ) | |||||
Materials Select Sector SPDR Fund | 1,985 | (120,152 | ) | |||||
iShares MSCI Emerging Markets ETF | 2,598 | (122,418 | ) | |||||
PowerShares QQQ Trust Series 1 | 806 | (125,543 | ) | |||||
Industrial Select Sector SPDR Fund | 1,688 | (127,731 | ) | |||||
iShares iBoxx $ Investment Grade Corporate Bond ETF | 1,062 | (129,097 | ) | |||||
iShares Russell 1000 Value ETF | 1,119 | (139,136 | ) | |||||
iShares Core U.S. Aggregate Bond ETF | 1,296 | (141,692 | ) | |||||
iShares 7-10 Year Treasury Bond ETF | 1,643 | (173,451 | ) | |||||
Health Care Select Sector SPDR Fund | 2,150 | (177,762 | ) | |||||
iShares MSCI Mexico ETF | 3,753 | (184,985 | ) | |||||
Consumer Staples Select Sector SPDR Fund | 3,609 | (205,316 | ) | |||||
iShares TIPS Bond ETF | 1,899 | (216,638 | ) | |||||
iShares Russell 2000 Index ETF | 1,465 | (223,354 | ) | |||||
Financial Select Sector SPDR Fund | 9,254 | (258,279 | ) | |||||
Energy Select Sector SPDR Fund | 3,933 | (284,199 | ) | |||||
iShares U.S. Real Estate ETF | 3,526 | (285,641 | ) | |||||
iShares MSCI EAFE ETF | 4,370 | (307,255 | ) | |||||
SPDR Bloomberg Barclays High Yield Bond ETF | 11,685 | (429,073 | ) | |||||
Total Exchange-Traded Funds Sold Short | ||||||||
(Proceeds $4,577,483) | (4,708,800 | ) | ||||||
Total Securities Sold Short - (19.9)% | ||||||||
(Proceeds $8,408,601) | $ | (8,680,643 | ) | |||||
Other Assets & Liabilities, net - 30.0% | 13,087,245 | |||||||
Total Net Assets - 100.0% | $ | 43,695,197 |
Futures Contracts | ||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Value and Unrealized Gain (Loss) | ||||||||||
Commodity Futures Contracts Purchased† | ||||||||||||||
NY Harbor ULSD Futures Contracts | 4 | Feb 2018 | $ | 346,685 | $ | 26,258 | ||||||||
Brent Crude Futures Contracts | 5 | Mar 2018 | 333,100 | 20,560 | ||||||||||
Low Sulphur Gas Oil Futures Contracts | 5 | Feb 2018 | 300,875 | 16,682 | ||||||||||
WTI Crude Futures Contracts | 5 | Feb 2018 | 300,650 | 15,923 | ||||||||||
Copper Futures Contracts | 2 | Mar 2018 | 164,575 | 12,173 | ||||||||||
LME Primary Aluminum Futures Contracts | 3 | Feb 2018 | 170,006 | 11,618 | ||||||||||
LME Nickel Futures Contracts | 1 | Feb 2018 | 76,428 | 7,031 | ||||||||||
LME Zinc Futures Contracts | 2 | Feb 2018 | 166,425 | 6,158 | ||||||||||
Cotton #2 Futures Contracts | 3 | Mar 2018 | 117,750 | 3,858 | ||||||||||
Gold 100 oz. Futures Contracts | 1 | Feb 2018 | 130,550 | 1,716 | ||||||||||
LME Lead Futures Contracts | 3 | Feb 2018 | 186,379 | (3,059 | ) | |||||||||
Live Cattle Futures Contracts | 7 | Feb 2018 | 340,550 | (9,594 | ) | |||||||||
$ | 2,633,973 | $ | 109,324 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 33 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
MULTI-HEDGE STRATEGIES FUND |
Futures Contracts | ||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Value and Unrealized Gain (Loss) | ||||||||||
Currency Futures Contracts Purchased† | ||||||||||||||
British Pound Futures Contracts | 27 | Mar 2018 | $ | 2,283,694 | $ | 19,652 | ||||||||
Canadian Dollar Futures Contracts | 14 | Mar 2018 | 1,114,820 | 16,541 | ||||||||||
Euro Futures Contracts | 4 | Mar 2018 | 602,625 | 7,420 | ||||||||||
$ | 4,001,139 | $ | 43,613 | |||||||||||
Interest Rate Futures Contracts Purchased† | ||||||||||||||
U.S. Treasury Ultra Long Bond Futures Contracts | 2 | Mar 2018 | $ | 334,937 | $ | 6,122 | ||||||||
U.S. Treasury Long Bond Futures Contracts | 3 | Mar 2018 | 458,719 | 2,193 | ||||||||||
Australian Government 10 Year Bond Futures Contracts†† | 6 | Mar 2018 | 603,652 | 820 | ||||||||||
Euro - Bund Futures Contracts | 8 | Mar 2018 | 1,552,969 | 490 | ||||||||||
Long Gilt Futures Contracts†† | 1 | Mar 2018 | 169,081 | 230 | ||||||||||
Euro - 30 year Bond Futures Contracts | 1 | Mar 2018 | 196,689 | (823 | ) | |||||||||
Euro - BTP Italian Government Bond Futures Contracts†† | 21 | Mar 2018 | 3,433,065 | (13,212 | ) | |||||||||
Euro - OATS Futures Contracts†† | 47 | Mar 2018 | 8,762,244 | (22,989 | ) | |||||||||
$ | 15,511,356 | $ | (27,169 | ) | ||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||
Hang Seng Index Futures Contracts†† | 1 | Jan 2018 | $ | 191,450 | $ | 3,959 | ||||||||
Tokyo Stock Price Index Futures Contracts | 2 | Mar 2018 | 323,291 | 3,871 | ||||||||||
S&P/TSX 60 IX Index Futures Contracts | 4 | Mar 2018 | 609,423 | 3,447 | ||||||||||
Russell 2000 Index Mini Futures Contracts | 3 | Mar 2018 | 230,565 | 3,071 | ||||||||||
Nikkei 225 (OSE) Index Futures Contracts | 1 | Mar 2018 | 202,156 | 875 | ||||||||||
S&P 500 Index Mini Futures Contracts | 3 | Mar 2018 | 401,662 | 388 | ||||||||||
NASDAQ-100 Index Mini Futures Contracts | 2 | Mar 2018 | 256,410 | 101 | ||||||||||
CBOE Volatility Index Futures Contracts | 1 | Jun 2018 | 14,750 | (303 | ) | |||||||||
SPI 200 Index Futures Contracts†† | 5 | Mar 2018 | 587,030 | (954 | ) | |||||||||
OMX Stockholm 30 Index Futures Contracts†† | 4 | Jan 2018 | 76,681 | (1,040 | ) | |||||||||
Amsterdam Index Futures Contracts | 1 | Jan 2018 | 130,450 | (1,273 | ) | |||||||||
FTSE MIB Index Futures Contracts†† | 1 | Mar 2018 | 130,514 | (1,724 | ) | |||||||||
CAC 40 10 Euro Index Futures Contracts | 3 | Jan 2018 | 190,726 | (1,895 | ) | |||||||||
CBOE Volatility Index Futures Contracts | 18 | Apr 2018 | 247,500 | (25,298 | ) | |||||||||
CBOE Volatility Index Futures Contracts | 47 | Mar 2018 | 617,110 | (43,624 | ) | |||||||||
Euro STOXX 50 Index Futures Contracts | 33 | Mar 2018 | 1,378,596 | (44,482 | ) | |||||||||
CBOE Volatility Index Futures Contracts | 126 | May 2018 | 1,795,500 | (138,724 | ) | |||||||||
CBOE Volatility Index Futures Contracts | 490 | Feb 2018 | 6,061,300 | (498,358 | ) | |||||||||
$ | 13,445,114 | $ | (741,963 | ) | ||||||||||
Equity Futures Contracts Sold Short† | ||||||||||||||
CBOE Volatility Index Futures Contracts | 581 | Jan 2018 | $ | 6,623,400 | $ | 2,061,969 | ||||||||
FTSE 100 Index Futures Contracts†† | 10 | Mar 2018 | 1,018,543 | (9,199 | ) | |||||||||
$ | 7,641,943 | $ | 2,052,770 | |||||||||||
Commodity Futures Contracts Sold Short† | ||||||||||||||
Coffee 'C' Futures Contracts | 8 | Mar 2018 | $ | 378,600 | $ | 12,944 | ||||||||
Soybean Meal Futures Contracts | 12 | Mar 2018 | 380,640 | 11,992 | ||||||||||
Soybean Futures Contracts | 10 | Mar 2018 | 481,250 | 11,545 | ||||||||||
Corn Futures Contracts | 27 | Mar 2018 | 473,850 | 6,978 | ||||||||||
Wheat Futures Contracts | 16 | Mar 2018 | 341,800 | 5,977 | ||||||||||
Hard Red Winter Wheat Futures Contracts | 17 | Mar 2018 | 363,375 | 5,231 | ||||||||||
Cocoa Futures Contracts | 10 | Mar 2018 | 188,800 | 2,112 | ||||||||||
Soybean Oil Futures Contracts | 18 | Mar 2018 | 358,560 | 374 | ||||||||||
Cattle Feeder Futures Contracts | 1 | Mar 2018 | 71,437 | (304 | ) | |||||||||
Silver Futures Contracts | 2 | Mar 2018 | 170,050 | (1,551 | ) | |||||||||
Lean Hogs Futures Contracts | 1 | Feb 2018 | 28,640 | (1,924 | ) | |||||||||
Gasoline RBOB Futures Contracts | 1 | Feb 2018 | 75,029 | (3,691 | ) | |||||||||
Sugar #11 Futures Contracts | 7 | Mar 2018 | 118,776 | (7,990 | ) | |||||||||
Natural Gas Futures Contracts | 8 | Feb 2018 | 236,080 | (17,443 | ) | |||||||||
$ | 3,666,887 | $ | 24,250 |
34 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
MULTI-HEDGE STRATEGIES FUND |
Futures Contracts | ||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Value and Unrealized Gain (Loss) | ||||||||||
Interest Rate Futures Contracts Sold Short† | ||||||||||||||
Canadian Government 10 Year Bond Futures Contracts†† | 59 | Mar 2018 | $ | 6,324,764 | $ | 7,605 | ||||||||
U.S. Treasury 10 Year Note Futures Contracts | 61 | Mar 2018 | 7,564,000 | 2,584 | ||||||||||
$ | 13,888,764 | $ | 10,189 | |||||||||||
Currency Futures Contracts Sold Short† | ||||||||||||||
Japanese Yen Futures Contracts | 3 | Mar 2018 | $ | 333,994 | $ | (1,096 | ) | |||||||
New Zealand Dollar Futures Contracts | 5 | Mar 2018 | 354,050 | (4,693 | ) | |||||||||
Australian Dollar Futures Contracts | 3 | Mar 2018 | 234,060 | (5,737 | ) | |||||||||
$ | 922,104 | $ | (11,526 | ) |
Custom Basket Swap Agreements | ||||||||||||||||
Counterparty | Index | Financing Rate Pay (Receive) | Payment Frequency | Maturity Date | Notional Amount | Value and Unrealized Gain (Loss) | ||||||||||
OTC Custom Basket Swap Sold Short†† | ||||||||||||||||
Morgan Stanley | Multi-Hedge Portfolio Short Custom Basket Swap10 | (1.03 | %) | At Maturity | 08/31/18 | $ | 12,897,083 | $ | (649,049 | ) | ||||||
Morgan Stanley | Multi-Hedge Portfolio Short Custom Basket Swap11 | (0.91 | %) | At Maturity | 08/31/18 | 17,401,953 | (91,430 | ) | ||||||||
$ | 30,299,036 | $ | (740,479 | ) | ||||||||||||
OTC Custom Basket Swap†† | ||||||||||||||||
Morgan Stanley | Multi-Hedge Portfolio Long Custom Basket Swap12 | 1.77 | % | At Maturity | 08/31/18 | $ | 18,022,247 | $ | 956,414 | |||||||
Morgan Stanley | Multi-Hedge Portfolio Long Custom Basket Swap13 | 1.77 | % | At Maturity | 08/31/18 | 17,790,771 | 358,488 | |||||||||
Morgan Stanley | Multi-Hedge Portfolio Long Custom Basket Swap14 | 1.81 | % | At Maturity | 09/06/19 | 2,034,017 | 8,740 | |||||||||
$ | 37,847,035 | $ | 1,323,642 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 35 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
MULTI-HEDGE STRATEGIES FUND |
Shares | Percentage Value | Unrealized Gain | ||||||||||
CUSTOM BASKET OF LONG SECURITIES12 | ||||||||||||
Tailored Brands, Inc. | 6,749 | 6.9 | % | $ | 65,561 | |||||||
NetApp, Inc. | 2,571 | 4.5 | % | 42,580 | ||||||||
United Rentals, Inc.* | 1,089 | 3.9 | % | 36,883 | ||||||||
Southwest Airlines Co. | 3,385 | 3.8 | % | 36,514 | ||||||||
Union Pacific Corp. | 1,610 | 3.7 | % | 35,453 | ||||||||
Fluor Corp. | 4,072 | 3.7 | % | 35,229 | ||||||||
Intel Corp. | 3,183 | 3.6 | % | 34,106 | ||||||||
Mylan N.V.* | 3,579 | 3.2 | % | 30,789 | ||||||||
Cisco Systems, Inc. | 4,811 | 3.0 | % | 28,628 | ||||||||
US Foods Holding Corp.* | 6,053 | 2.9 | % | 27,518 | ||||||||
United Therapeutics Corp.* | 1,153 | 2.7 | % | 25,976 | ||||||||
Carlisle Companies, Inc. | 1,364 | 2.6 | % | 25,116 | ||||||||
Kroger Co. | 4,277 | 2.4 | % | 22,918 | ||||||||
FedEx Corp. | 679 | 2.4 | % | 22,709 | ||||||||
Principal Financial Group, Inc. | 2,715 | 2.2 | % | 21,197 | ||||||||
Tyson Foods, Inc. — Class A | 1,213 | 2.2 | % | 21,021 | ||||||||
Owens Corning | 2,230 | 2.2 | % | 20,945 | ||||||||
Valero Energy Corp. | 2,130 | 2.1 | % | 20,528 | ||||||||
JM Smucker Co. | 1,627 | 2.1 | % | 20,321 | ||||||||
Delta Air Lines, Inc. | 2,449 | 2.0 | % | 19,527 | ||||||||
Verizon Communications, Inc. | 4,219 | 2.0 | % | 18,991 | ||||||||
United Natural Foods, Inc.* | 1,320 | 2.0 | % | 18,756 | ||||||||
Greenbrier Companies, Inc. | 2,746 | 1.9 | % | 18,109 | ||||||||
Snap-on, Inc. | 664 | 1.8 | % | 17,251 | ||||||||
Conagra Brands, Inc. | 5,250 | 1.8 | % | 17,185 | ||||||||
EMCOR Group, Inc. | 1,084 | 1.8 | % | 16,827 | ||||||||
Cummins, Inc. | 1,123 | 1.7 | % | 16,728 | ||||||||
Performance Food Group Co.* | 3,446 | 1.7 | % | 16,389 | ||||||||
Norfolk Southern Corp. | 772 | 1.7 | % | 16,103 | ||||||||
Prudential Financial, Inc. | 1,231 | 1.6 | % | 15,090 | ||||||||
Chevron Corp. | 1,412 | 1.5 | % | 14,597 | ||||||||
Energizer Holdings, Inc. | 3,633 | 1.4 | % | 13,123 | ||||||||
General Mills, Inc. | 1,912 | 1.4 | % | 13,093 | ||||||||
Trinity Industries, Inc. | 1,550 | 1.4 | % | 12,950 | ||||||||
Genesee & Wyoming, Inc. — Class A* | 2,083 | 1.3 | % | 12,712 | ||||||||
WellCare Health Plans, Inc.* | 460 | 1.3 | % | 12,606 | ||||||||
HP, Inc. | 6,937 | 1.2 | % | 11,854 | ||||||||
USANA Health Sciences, Inc.* | 836 | 1.2 | % | 11,474 | ||||||||
Crane Co. | 726 | 1.1 | % | 10,850 | ||||||||
International Business Machines Corp. | 1,089 | 1.1 | % | 10,492 | ||||||||
Aflac, Inc. | 1,962 | 1.1 | % | 10,351 | ||||||||
Discover Financial Services | 574 | 1.0 | % | 9,898 | ||||||||
Allison Transmission Holdings, Inc. | 1,718 | 1.0 | % | 9,820 | ||||||||
United Continental Holdings, Inc.* | 1,753 | 1.0 | % | 9,808 | ||||||||
JetBlue Airways Corp.* | 3,689 | 1.0 | % | 9,597 | ||||||||
DaVita, Inc.* | 681 | 1.0 | % | 9,553 | ||||||||
Tech Data Corp.* | 1,473 | 1.0 | % | 9,511 | ||||||||
Boston Beer Company, Inc. — Class A* | 226 | 0.9 | % | 8,645 | ||||||||
Timken Co. | 2,197 | 0.9 | % | 8,556 | ||||||||
ON Semiconductor Corp.* | 2,278 | 0.9 | % | 8,537 | ||||||||
Marathon Petroleum Corp. | 2,459 | 0.9 | % | 8,514 | ||||||||
Ralph Lauren Corp. — Class A | 530 | 0.9 | % | 8,363 | ||||||||
Juniper Networks, Inc. | 6,662 | 0.9 | % | 8,279 | ||||||||
Pfizer, Inc. | 4,586 | 0.8 | % | 8,089 | ||||||||
Applied Industrial Technologies, Inc. | 704 | 0.8 | % | 7,917 | ||||||||
Zimmer Biomet Holdings, Inc. | 1,084 | 0.8 | % | 7,788 | ||||||||
McKesson Corp. | 897 | 0.8 | % | 7,704 | ||||||||
AmerisourceBergen Corp. — Class A | 629 | 0.8 | % | 7,605 | ||||||||
AGCO Corp. | 2,058 | 0.8 | % | 7,544 | ||||||||
Johnson & Johnson | 997 | 0.8 | % | 7,420 | ||||||||
Kirby Corp.* | 1,993 | 0.8 | % | 7,390 | ||||||||
Lear Corp. | 267 | 0.7 | % | 7,145 | ||||||||
Horizon Pharma plc* | 6,448 | 0.7 | % | 7,142 | ||||||||
HollyFrontier Corp. | 995 | 0.7 | % | 7,115 | ||||||||
LyondellBasell Industries N.V. — Class A | 1,023 | 0.7 | % | 7,036 | ||||||||
WW Grainger, Inc. | 196 | 0.7 | % | 6,997 | ||||||||
Ingredion, Inc. | 423 | 0.7 | % | 6,792 | ||||||||
Lions Gate Entertainment Corp. — Class A* | 2,721 | 0.7 | % | 6,751 | ||||||||
Lowe's Companies, Inc. | 474 | 0.7 | % | 6,496 | ||||||||
Exxon Mobil Corp. | 2,016 | 0.7 | % | 6,467 | ||||||||
T-Mobile US, Inc.* | 1,592 | 0.7 | % | 6,442 | ||||||||
InterDigital, Inc. | 1,148 | 0.6 | % | 6,170 | ||||||||
WestRock Co. | 1,591 | 0.6 | % | 5,997 | ||||||||
Interactive Brokers Group, Inc. — Class A | 1,233 | 0.6 | % | 5,834 | ||||||||
Campbell Soup Co. | 3,928 | 0.6 | % | 5,699 | ||||||||
PACCAR, Inc. | 2,377 | 0.6 | % | 5,623 | ||||||||
Capital One Financial Corp. | 428 | 0.6 | % | 5,601 | ||||||||
American Airlines Group, Inc. | 816 | 0.6 | % | 5,507 | ||||||||
Dr Pepper Snapple Group, Inc. | 582 | 0.6 | % | 5,455 | ||||||||
Molson Coors Brewing Co. — Class B | 2,343 | 0.6 | % | 5,398 | ||||||||
Arconic, Inc. | 2,721 | 0.6 | % | 5,366 | ||||||||
Vishay Intertechnology, Inc. | 1,835 | 0.6 | % | 5,280 | ||||||||
SpartanNash Co. | 2,419 | 0.5 | % | 5,232 | ||||||||
AECOM* | 1,366 | 0.5 | % | 4,910 | ||||||||
PBF Energy, Inc. — Class A | 1,629 | 0.5 | % | 4,884 | ||||||||
Cardtronics plc — Class A* | 2,932 | 0.5 | % | 4,864 | ||||||||
E*TRADE Financial Corp.* | 851 | 0.5 | % | 4,699 | ||||||||
Sabre Corp. | 2,214 | 0.5 | % | 4,526 | ||||||||
Rexnord Corp.* | 2,025 | 0.5 | % | 4,483 | ||||||||
Northern Trust Corp. | 399 | 0.5 | % | 4,458 | ||||||||
KLA-Tencor Corp. | 395 | 0.5 | % | 4,419 | ||||||||
Prestige Brands Holdings, Inc.* | 1,462 | 0.4 | % | 4,177 | ||||||||
Huntsman Corp. | 1,247 | 0.4 | % | 4,027 |
36 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
MULTI-HEDGE STRATEGIES FUND |
Shares | Percentage Value | Unrealized Gain (loss) | ||||||||||
EnerSys | 1,268 | 0.4 | % | $ | 4,006 | |||||||
Travelers Companies, Inc. | 285 | 0.4 | % | 3,695 | ||||||||
JPMorgan Chase & Co. | 379 | 0.4 | % | 3,680 | ||||||||
First Solar, Inc.* | 612 | 0.4 | % | 3,639 | ||||||||
Bank of New York Mellon Corp. | 2,328 | 0.4 | % | 3,387 | ||||||||
L3 Technologies, Inc. | 239 | 0.3 | % | 3,099 | ||||||||
Darling Ingredients, Inc.* | 4,140 | 0.3 | % | 3,097 | ||||||||
Eli Lilly & Co. | 2,114 | 0.3 | % | 2,886 | ||||||||
American Financial Group, Inc. | 801 | 0.3 | % | 2,783 | ||||||||
Dean Foods Co. | 3,800 | 0.3 | % | 2,650 | ||||||||
j2 Global, Inc. | 1,292 | 0.3 | % | 2,592 | ||||||||
Regal Beloit Corp. | 1,668 | 0.2 | % | 2,353 | ||||||||
Abbott Laboratories | 1,535 | 0.2 | % | 2,316 | ||||||||
Pilgrim's Pride Corp.* | 1,386 | 0.2 | % | 2,283 | ||||||||
Tenneco, Inc. | 673 | 0.2 | % | 1,767 | ||||||||
Bill Barrett Corp.* | 5,429 | 0.2 | % | 1,760 | ||||||||
Gibraltar Industries, Inc.* | 1,384 | 0.2 | % | 1,702 | ||||||||
Medtronic plc | 823 | 0.2 | % | 1,634 | ||||||||
CA, Inc. | 5,627 | 0.2 | % | 1,617 | ||||||||
CACI International, Inc. — Class A* | 424 | 0.2 | % | 1,602 | ||||||||
U.S. Bancorp | 960 | 0.2 | % | 1,567 | ||||||||
Baxter International, Inc. | 599 | 0.2 | % | 1,510 | ||||||||
OneMain Holdings, Inc.* | 1,020 | 0.2 | % | 1,441 | ||||||||
Biogen, Inc.* | 237 | 0.1 | % | 1,409 | ||||||||
Amgen, Inc. | 1,026 | 0.1 | % | 1,367 | ||||||||
CoreLogic, Inc.* | 1,380 | 0.1 | % | 1,295 | ||||||||
Celgene Corp.* | 964 | 0.1 | % | 1,241 | ||||||||
Spectrum Brands Holdings, Inc. | 346 | 0.1 | % | 940 | ||||||||
Brixmor Property Group, Inc. | 2,484 | 0.1 | % | 838 | ||||||||
Blackhawk Network Holdings, Inc.* | 1,070 | 0.1 | % | 791 | ||||||||
AbbVie, Inc. | 460 | 0.1 | % | 767 | ||||||||
Belden, Inc. | 508 | 0.0 | % | 413 | ||||||||
ORBCOMM, Inc.* | 3,683 | 0.0 | % | 11 | ||||||||
Edgewell Personal Care Co.* | 2,196 | 0.0 | % | (17 | ) | |||||||
Summit Hotel Properties, Inc. | 3,203 | 0.0 | % | (35 | ) | |||||||
Omnicom Group, Inc. | 1,301 | 0.0 | % | (116 | ) | |||||||
Dell Technologies Incorporated Class V — Class V* | 621 | 0.0 | % | (117 | ) | |||||||
Ingersoll-Rand plc | 442 | 0.0 | % | (232 | ) | |||||||
Convergys Corp. | 4,504 | 0.0 | % | (404 | ) | |||||||
LaSalle Hotel Properties | 1,643 | 0.0 | % | (412 | ) | |||||||
Humana, Inc. | 241 | 0.0 | % | (466 | ) | |||||||
Louisiana-Pacific Corp.* | 1,408 | -0.1 | % | (521 | ) | |||||||
Blackline, Inc.* | 472 | -0.1 | % | (652 | ) | |||||||
AES Corp. | 10,241 | -0.1 | % | (794 | ) | |||||||
First Data Corp. — Class A* | 6,034 | -0.1 | % | (1,169 | ) | |||||||
CSRA, Inc. | 2,620 | -0.1 | % | (1,397 | ) | |||||||
Western Union Co. | 8,859 | -0.2 | % | (1,939 | ) | |||||||
Icad, Inc.* | 5,848 | -0.2 | % | (2,011 | ) | |||||||
Travelport Worldwide Ltd. | 6,386 | -0.2 | % | (2,023 | ) | |||||||
Ameren Corp. | 2,344 | -0.2 | % | (2,367 | ) | |||||||
Archer-Daniels-Midland Co. | 4,791 | -0.3 | % | (2,527 | ) | |||||||
Micron Technology, Inc.* | 1,661 | -0.3 | % | (2,583 | ) | |||||||
Allergan plc | 260 | -0.3 | % | (2,660 | ) | |||||||
DXC Technology Co. | 1,175 | -0.3 | % | (2,755 | ) | |||||||
Owens-Illinois, Inc.* | 1,603 | -0.4 | % | (4,041 | ) | |||||||
Portland General Electric Co. | 2,525 | -0.4 | % | (4,095 | ) | |||||||
VEREIT, Inc. | 20,318 | -0.5 | % | (4,304 | ) | |||||||
NCR Corp.* | 2,191 | -0.5 | % | (4,739 | ) | |||||||
Alaska Air Group, Inc. | 1,899 | -0.5 | % | (4,891 | ) | |||||||
Viavi Solutions, Inc.* | 4,148 | -0.6 | % | (5,335 | ) | |||||||
Cirrus Logic, Inc.* | 931 | -0.6 | % | (5,490 | ) | |||||||
ARRIS International plc* | 3,061 | -0.6 | % | (5,742 | ) | |||||||
Bioverativ, Inc.* | 1,617 | -0.6 | % | (5,775 | ) | |||||||
Sanmina Corp.* | 1,372 | -0.6 | % | (5,965 | ) | |||||||
Mack-Cali Realty Corp. | 3,803 | -0.6 | % | (6,003 | ) | |||||||
Cardinal Health, Inc. | 2,465 | -0.6 | % | (6,110 | ) | |||||||
Telephone & Data Systems, Inc. | 4,907 | -0.7 | % | (6,977 | ) | |||||||
Walgreens Boots Alliance, Inc. | 880 | -0.8 | % | (7,220 | ) | |||||||
CenterPoint Energy, Inc. | 6,435 | -0.8 | % | (7,390 | ) | |||||||
FirstEnergy Corp. | 4,302 | -0.9 | % | (8,236 | ) | |||||||
Edison International | 1,100 | -0.9 | % | (8,465 | ) | |||||||
Sanderson Farms, Inc. | 354 | -0.9 | % | (8,701 | ) | |||||||
Xerox Corp. | 3,014 | -1.0 | % | (9,464 | ) | |||||||
Versartis, Inc.* | 22,314 | -1.0 | % | (9,512 | ) | |||||||
TreeHouse Foods, Inc.* | 924 | -1.0 | % | (9,574 | ) | |||||||
CVS Health Corp. | 2,544 | -1.0 | % | (9,796 | ) | |||||||
National Fuel Gas Co. | 3,246 | -1.0 | % | (9,815 | ) | |||||||
Western Digital Corp. | 1,121 | -1.0 | % | (9,898 | ) | |||||||
ATN International, Inc. | 2,324 | -1.1 | % | (10,632 | ) | |||||||
Merck & Company, Inc. | 1,488 | -1.1 | % | (10,730 | ) | |||||||
Benchmark Electronics, Inc.* | 3,373 | -1.2 | % | (11,093 | ) | |||||||
PNM Resources, Inc. | 2,785 | -1.3 | % | (12,572 | ) | |||||||
Jabil, Inc. | 3,709 | -1.6 | % | (15,537 | ) | |||||||
Gilead Sciences, Inc. | 2,433 | -1.9 | % | (18,602 | ) | |||||||
Owens & Minor, Inc. | 1,968 | -2.0 | % | (18,893 | ) | |||||||
PG&E Corp. | 3,382 | -7.3 | % | (69,510 | ) | |||||||
Total Custom Basket of Long Securities | 956,414 | |||||||||||
CUSTOM BASKET OF SHORT SECURITIES10 | ||||||||||||
Royal Gold, Inc. | (2,176 | ) | -2.2 | % | 13,969 | |||||||
SPS Commerce, Inc.* | (818 | ) | -1.3 | % | 8,190 | |||||||
First Republic Bank | (795 | ) | -1.3 | % | 8,142 | |||||||
Education Realty Trust, Inc. | (2,031 | ) | -1.2 | % | 7,492 | |||||||
Essex Property Trust, Inc. | (399 | ) | -1.1 | % | 7,347 | |||||||
FireEye, Inc.* | (2,746 | ) | -1.1 | % | 7,340 | |||||||
Terreno Realty Corp. | (4,006 | ) | -1.1 | % | 6,893 | |||||||
CareTrust REIT, Inc. | (2,008 | ) | -0.8 | % | 5,331 | |||||||
Autodesk, Inc.* | (587 | ) | -0.8 | % | 4,885 | |||||||
NVIDIA Corp. | (244 | ) | -0.7 | % | 4,669 | |||||||
Atmos Energy Corp. | (2,075 | ) | -0.7 | % | 4,648 | |||||||
CyrusOne, Inc. | (1,183 | ) | -0.7 | % | 4,609 | |||||||
CoreSite Realty Corp. | (715 | ) | -0.6 | % | 4,188 | |||||||
Hudson Pacific Properties, Inc. | (3,354 | ) | -0.6 | % | 4,015 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 37 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
MULTI-HEDGE STRATEGIES FUND |
Shares | Percentage Value | Unrealized Gain (loss) | ||||||||||
Capitol Federal Financial, Inc. | (5,600 | ) | -0.6 | % | $ | 3,787 | ||||||
Semtech Corp.* | (1,269 | ) | -0.6 | % | 3,762 | |||||||
NewMarket Corp. | (182 | ) | -0.6 | % | 3,735 | |||||||
Camden Property Trust | (1,594 | ) | -0.5 | % | 3,336 | |||||||
Chesapeake Energy Corp.* | (10,444 | ) | -0.5 | % | 3,273 | |||||||
Rexford Industrial Realty, Inc. | (2,812 | ) | -0.4 | % | 2,880 | |||||||
CoStar Group, Inc.* | (493 | ) | -0.4 | % | 2,810 | |||||||
White Mountains Insurance Group Ltd. | (142 | ) | -0.4 | % | 2,388 | |||||||
American Tower Corp. — Class A | (478 | ) | -0.4 | % | 2,382 | |||||||
Vail Resorts, Inc. | (165 | ) | -0.4 | % | 2,337 | |||||||
Healthcare Trust of America, Inc. — Class A | (2,744 | ) | -0.3 | % | 2,271 | |||||||
Workday, Inc. — Class A* | (343 | ) | -0.3 | % | 1,990 | |||||||
Spire, Inc. | (1,239 | ) | -0.3 | % | 1,802 | |||||||
Extraction Oil & Gas, Inc.* | (2,665 | ) | -0.3 | % | 1,764 | |||||||
WR Grace & Co. | (1,604 | ) | -0.3 | % | 1,626 | |||||||
Equinix, Inc. | (113 | ) | -0.2 | % | 1,605 | |||||||
NiSource, Inc. | (1,374 | ) | -0.2 | % | 1,564 | |||||||
Exponent, Inc. | (681 | ) | -0.2 | % | 1,525 | |||||||
Healthcare Realty Trust, Inc. | (1,285 | ) | -0.2 | % | 1,181 | |||||||
Cannae Holdings, Inc.* | (2,828 | ) | -0.2 | % | 1,053 | |||||||
Equity LifeStyle Properties, Inc. | (1,675 | ) | -0.1 | % | 914 | |||||||
American International Group, Inc. | (746 | ) | -0.1 | % | 788 | |||||||
Alliant Energy Corp. | (3,316 | ) | -0.1 | % | 746 | |||||||
Realty Income Corp. | (662 | ) | -0.1 | % | 334 | |||||||
Physicians Realty Trust | (2,071 | ) | 0.0 | % | 323 | |||||||
Aspen Insurance Holdings Ltd. | (905 | ) | 0.0 | % | 281 | |||||||
Public Storage | (176 | ) | 0.0 | % | 120 | |||||||
IMAX Corp.* | (2,595 | ) | 0.0 | % | (35 | ) | ||||||
American Homes 4 Rent — Class A | (3,708 | ) | 0.1 | % | (469 | ) | ||||||
Intuit, Inc. | (240 | ) | 0.1 | % | (479 | ) | ||||||
Macerich Co. | (581 | ) | 0.1 | % | (661 | ) | ||||||
GCP Applied Technologies, Inc.* | (1,266 | ) | 0.1 | % | (664 | ) | ||||||
EastGroup Properties, Inc. | (840 | ) | 0.1 | % | (822 | ) | ||||||
MSCI, Inc. — Class A | (1,192 | ) | 0.1 | % | (841 | ) | ||||||
Dominion Energy, Inc. | (456 | ) | 0.1 | % | (951 | ) | ||||||
Tyler Technologies, Inc.* | (251 | ) | 0.2 | % | (1,319 | ) | ||||||
First Industrial Realty Trust, Inc. | (2,555 | ) | 0.2 | % | (1,367 | ) | ||||||
DCT Industrial Trust, Inc. | (2,028 | ) | 0.2 | % | (1,387 | ) | ||||||
On Assignment, Inc.* | (609 | ) | 0.2 | % | (1,523 | ) | ||||||
Bio-Rad Laboratories, Inc. — Class A* | (243 | ) | 0.2 | % | (1,553 | ) | ||||||
Sensient Technologies Corp. | (1,691 | ) | 0.2 | % | (1,571 | ) | ||||||
Jack Henry & Associates, Inc. | (387 | ) | 0.3 | % | (1,685 | ) | ||||||
Federal Realty Investment Trust | (284 | ) | 0.3 | % | (1,712 | ) | ||||||
Starbucks Corp. | (657 | ) | 0.3 | % | (1,714 | ) | ||||||
Ferro Corp.* | (1,688 | ) | 0.3 | % | (1,906 | ) | ||||||
Douglas Emmett, Inc. | (924 | ) | 0.3 | % | (1,980 | ) | ||||||
National Instruments Corp. | (1,251 | ) | 0.3 | % | (1,981 | ) | ||||||
athenahealth, Inc.* | (486 | ) | 0.3 | % | (2,057 | ) | ||||||
TransUnion* | (3,437 | ) | 0.3 | % | (2,066 | ) | ||||||
Crown Castle International Corp. | (699 | ) | 0.3 | % | (2,099 | ) | ||||||
Bio-Techne Corp. | (300 | ) | 0.4 | % | (2,296 | ) | ||||||
Trustmark Corp. | (1,163 | ) | 0.4 | % | (2,308 | ) | ||||||
PennyMac Mortgage Investment Trust | (3,245 | ) | 0.4 | % | (2,433 | ) | ||||||
Jack in the Box, Inc. | (576 | ) | 0.4 | % | (2,477 | ) | ||||||
Commerce Bancshares, Inc. | (743 | ) | 0.4 | % | (2,562 | ) | ||||||
Boston Properties, Inc. | (555 | ) | 0.4 | % | (2,574 | ) | ||||||
Sun Communities, Inc. | (1,613 | ) | 0.4 | % | (2,662 | ) | ||||||
Kilroy Realty Corp. | (510 | ) | 0.4 | % | (2,910 | ) | ||||||
PriceSmart, Inc. | (615 | ) | 0.5 | % | (2,973 | ) | ||||||
SEI Investments Co. | (563 | ) | 0.5 | % | (2,990 | ) | ||||||
Ecolab, Inc. | (1,425 | ) | 0.5 | % | (3,015 | ) | ||||||
salesforce.com, Inc.* | (440 | ) | 0.5 | % | (3,020 | ) | ||||||
WD-40 Co. | (348 | ) | 0.5 | % | (3,039 | ) | ||||||
Air Products & Chemicals, Inc. | (1,159 | ) | 0.5 | % | (3,155 | ) | ||||||
Albemarle Corp. | (1,385 | ) | 0.5 | % | (3,169 | ) | ||||||
Intercontinental Exchange, Inc. | (561 | ) | 0.5 | % | (3,226 | ) | ||||||
DexCom, Inc.* | (708 | ) | 0.5 | % | (3,325 | ) | ||||||
Regency Centers Corp. | (561 | ) | 0.6 | % | (3,719 | ) | ||||||
Washington Federal, Inc. | (1,360 | ) | 0.6 | % | (3,766 | ) | ||||||
GrubHub, Inc.* | (579 | ) | 0.6 | % | (4,079 | ) | ||||||
First Midwest Bancorp, Inc. | (1,628 | ) | 0.7 | % | (4,384 | ) | ||||||
Ultimate Software Group, Inc.* | (227 | ) | 0.7 | % | (4,507 | ) | ||||||
Yum! Brands, Inc. | (826 | ) | 0.7 | % | (4,541 | ) | ||||||
Cabot Oil & Gas Corp. — Class A | (1,401 | ) | 0.7 | % | (4,587 | ) | ||||||
Extra Space Storage, Inc. | (488 | ) | 0.7 | % | (4,649 | ) | ||||||
Ingevity Corp.* | (621 | ) | 0.7 | % | (4,859 | ) | ||||||
Alexandria Real Estate Equities, Inc. | (498 | ) | 0.7 | % | (4,861 | ) | ||||||
Dril-Quip, Inc.* | (1,294 | ) | 0.8 | % | (4,940 | ) | ||||||
Balchem Corp. | (1,485 | ) | 0.8 | % | (5,341 | ) | ||||||
Ally Financial, Inc. | (2,121 | ) | 0.8 | % | (5,500 | ) | ||||||
Take-Two Interactive Software, Inc.* | (455 | ) | 0.8 | % | (5,501 | ) | ||||||
PTC, Inc.* | (1,367 | ) | 0.9 | % | (5,520 | ) | ||||||
Red Hat, Inc.* | (434 | ) | 0.9 | % | (5,688 | ) | ||||||
Investors Bancorp, Inc. | (6,943 | ) | 0.9 | % | (5,810 | ) | ||||||
Martin Marietta Materials, Inc. | (569 | ) | 0.9 | % | (5,964 | ) | ||||||
Carpenter Technology Corp. | (1,239 | ) | 1.0 | % | (6,534 | ) | ||||||
Nabors Industries Ltd. | (6,350 | ) | 1.0 | % | (6,586 | ) | ||||||
Howard Hughes Corp.* | (501 | ) | 1.0 | % | (6,711 | ) | ||||||
Glacier Bancorp, Inc. | (1,142 | ) | 1.0 | % | (6,787 | ) | ||||||
Cintas Corp. | (1,250 | ) | 1.0 | % | (6,806 | ) | ||||||
SBA Communications Corp.* | (633 | ) | 1.1 | % | (6,832 | ) | ||||||
Team, Inc.* | (3,781 | ) | 1.1 | % | (6,956 | ) |
38 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
MULTI-HEDGE STRATEGIES FUND |
Shares | Percentage Value | Unrealized Loss | ||||||||||
Lululemon Athletica, Inc.* | (570 | ) | 1.1 | % | $ | (7,146 | ) | |||||
McDonald's Corp. | (938 | ) | 1.1 | % | (7,250 | ) | ||||||
John Bean Technologies Corp. | (336 | ) | 1.1 | % | (7,398 | ) | ||||||
CME Group, Inc. — Class A | (468 | ) | 1.1 | % | (7,403 | ) | ||||||
Rollins, Inc. | (4,129 | ) | 1.2 | % | (7,541 | ) | ||||||
Moody's Corp. | (908 | ) | 1.2 | % | (7,614 | ) | ||||||
Cognex Corp. | (1,125 | ) | 1.2 | % | (7,808 | ) | ||||||
Dunkin' Brands Group, Inc. | (650 | ) | 1.2 | % | (7,882 | ) | ||||||
Weatherford International plc* | (10,726 | ) | 1.2 | % | (8,093 | ) | ||||||
Matador Resources Co.* | (1,743 | ) | 1.2 | % | (8,109 | ) | ||||||
Healthcare Services Group, Inc. | (3,752 | ) | 1.3 | % | (8,115 | ) | ||||||
FactSet Research Systems, Inc. | (879 | ) | 1.3 | % | (8,308 | ) | ||||||
Allegheny Technologies, Inc.* | (3,129 | ) | 1.3 | % | (8,414 | ) | ||||||
Aqua America, Inc. | (1,491 | ) | 1.3 | % | (8,552 | ) | ||||||
MarketAxess Holdings, Inc. | (627 | ) | 1.4 | % | (8,895 | ) | ||||||
RSP Permian, Inc.* | (1,712 | ) | 1.4 | % | (8,906 | ) | ||||||
LendingTree, Inc.* | (151 | ) | 1.4 | % | (9,073 | ) | ||||||
Tanger Factory Outlet Centers, Inc. | (5,553 | ) | 1.4 | % | (9,105 | ) | ||||||
FMC Corp. | (1,087 | ) | 1.4 | % | (9,151 | ) | ||||||
People's United Financial, Inc. | (5,092 | ) | 1.5 | % | (9,437 | ) | ||||||
Vulcan Materials Co. | (1,233 | ) | 1.5 | % | (9,516 | ) | ||||||
Atlassian Corporation plc — Class A* | (952 | ) | 1.5 | % | (9,572 | ) | ||||||
Marriott International, Inc. — Class A | (304 | ) | 1.5 | % | (9,616 | ) | ||||||
Monolithic Power Systems, Inc. | (1,234 | ) | 1.5 | % | (9,848 | ) | ||||||
Verisk Analytics, Inc. — Class A* | (2,056 | ) | 1.6 | % | (10,261 | ) | ||||||
S&P Global, Inc. | (930 | ) | 1.6 | % | (10,442 | ) | ||||||
Adobe Systems, Inc.* | (529 | ) | 1.6 | % | (10,609 | ) | ||||||
WisdomTree Investments, Inc. | (8,204 | ) | 1.7 | % | (10,822 | ) | ||||||
Ollie's Bargain Outlet Holdings, Inc.* | (1,025 | ) | 1.8 | % | (11,507 | ) | ||||||
Covanta Holding Corp. | (6,208 | ) | 1.9 | % | (12,010 | ) | ||||||
Callon Petroleum Co.* | (5,431 | ) | 1.9 | % | (12,036 | ) | ||||||
Trex Company, Inc.* | (425 | ) | 2.0 | % | (12,762 | ) | ||||||
Nike, Inc. — Class B | (1,771 | ) | 2.0 | % | (13,013 | ) | ||||||
Shake Shack, Inc. — Class A* | (1,082 | ) | 2.0 | % | (13,126 | ) | ||||||
Scotts Miracle-Gro Co. — Class A | (1,112 | ) | 2.0 | % | (13,188 | ) | ||||||
Commercial Metals Co. | (4,293 | ) | 2.1 | % | (13,678 | ) | ||||||
Goldman Sachs Group, Inc. | (597 | ) | 2.1 | % | (13,710 | ) | ||||||
Crocs, Inc.* | (3,711 | ) | 2.1 | % | (13,713 | ) | ||||||
Five Below, Inc.* | (744 | ) | 2.2 | % | (14,470 | ) | ||||||
Eaton Vance Corp. | (1,687 | ) | 2.3 | % | (14,870 | ) | ||||||
Compass Minerals International, Inc. | (2,732 | ) | 2.5 | % | (15,996 | ) | ||||||
Diamondback Energy, Inc.* | (851 | ) | 2.6 | % | (16,565 | ) | ||||||
Southern Copper Corp. | (3,772 | ) | 2.8 | % | (18,025 | ) | ||||||
International Flavors & Fragrances, Inc. | (1,256 | ) | 3.0 | % | (19,718 | ) | ||||||
Cboe Global Markets, Inc. | (1,615 | ) | 3.3 | % | (21,409 | ) | ||||||
Pool Corp. | (733 | ) | 3.4 | % | (22,077 | ) | ||||||
Parsley Energy, Inc. — Class A* | (5,249 | ) | 3.5 | % | (22,633 | ) | ||||||
Copart, Inc.* | (5,212 | ) | 5.8 | % | (37,548 | ) | ||||||
Total Custom Basket of Short Securities | (649,049 | ) |
CUSTOM BASKET OF LONG SECURITIES13 | ||||||||||||
Boyd Gaming Corp. | 15,186 | 38.5 | % | 137,876 | ||||||||
National Storage Affiliates Trust | 28,546 | 26.9 | % | 96,350 | ||||||||
Tier REIT, Inc. | 28,854 | 14.3 | % | 51,214 | ||||||||
Alexandria Real Estate Equities, Inc. | 5,131 | 12.2 | % | 43,885 | ||||||||
GGP, Inc. | 26,214 | 11.9 | % | 42,556 | ||||||||
RLJ Lodging Trust | 28,735 | 10.1 | % | 36,247 | ||||||||
Caesars Entertainment Corp.* | 46,215 | 10.0 | % | 35,947 | ||||||||
Rayonier, Inc. | 13,538 | 8.6 | % | 30,858 | ||||||||
Regency Centers Corp. | 6,030 | 7.3 | % | 26,159 | ||||||||
Weyerhaeuser Co. | 12,086 | 6.8 | % | 24,388 | ||||||||
Pennsylvania Real Estate Investment Trust | 23,739 | 4.6 | % | 16,316 | ||||||||
Federal Realty Investment Trust | 3,019 | 4.1 | % | 14,744 | ||||||||
Invitation Homes, Inc. | 27,719 | 3.6 | % | 12,967 | ||||||||
Crown Castle International Corp. | 5,932 | 3.6 | % | 12,750 | ||||||||
Blackstone Mortgage Trust, Inc. — Class A | 18,510 | 3.5 | % | 12,649 | ||||||||
Sun Communities, Inc. | 6,467 | 3.5 | % | 12,459 | ||||||||
Prologis, Inc. | 9,664 | 1.8 | % | 6,290 | ||||||||
American Homes 4 Rent — Class A | 26,506 | 1.5 | % | 5,214 | ||||||||
Cousins Properties, Inc. | 41,712 | -0.3 | % | (938 | ) | |||||||
Extended Stay America, Inc. | 18,911 | -0.3 | % | (949 | ) | |||||||
Equity LifeStyle Properties, Inc. | 5,308 | -0.4 | % | (1,431 | ) | |||||||
EastGroup Properties, Inc. | 7,052 | -1.1 | % | (4,039 | ) | |||||||
Iron Mountain, Inc. | 10,056 | -1.4 | % | (4,846 | ) | |||||||
Spirit Realty Capital, Inc. | 61,407 | -1.4 | % | (5,066 | ) | |||||||
Jernigan Capital, Inc. | 7,040 | -2.1 | % | (7,608 | ) | |||||||
Healthcare Trust of America, Inc. — Class A | 12,300 | -2.8 | % | (10,176 | ) | |||||||
Physicians Realty Trust | 21,086 | -3.2 | % | (11,577 | ) | |||||||
MGM Growth Properties LLC — Class A | 12,979 | -3.7 | % | (13,183 | ) | |||||||
Gaming and Leisure Properties, Inc. | 10,550 | -4.0 | % | (14,280 | ) | |||||||
Summit Hotel Properties, Inc. | 23,952 | -4.1 | % | (14,721 | ) | |||||||
Equinix, Inc. | 1,328 | -5.9 | % | (21,215 | ) | |||||||
American Tower Corp. — Class A | 4,268 | -6.3 | % | (22,463 | ) | |||||||
Rexford Industrial Realty, Inc. | 23,700 | -6.4 | % | (22,855 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 39 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
MULTI-HEDGE STRATEGIES FUND |
Shares | Percentage Value | Unrealized Gain (Loss) | ||||||||||
CyrusOne, Inc. | 9,679 | -7.5 | % | $ | (26,863 | ) | ||||||
Sabra Health Care REIT, Inc. | 25,941 | -21.8 | % | (78,171 | ) | |||||||
Total Custom Basket of Long Securities | 358,488 | |||||||||||
CUSTOM BASKET OF SHORT SECURITIES11 | ||||||||||||
Colony NorthStar, Inc. — Class A | (39,302 | ) | -68.2 | % | 62,314 | |||||||
Omega Healthcare Investors, Inc. | (17,058 | ) | -63.9 | % | 58,461 | |||||||
CareTrust REIT, Inc. | (24,442 | ) | -63.7 | % | 58,277 | |||||||
VEREIT, Inc. | (79,070 | ) | -45.7 | % | 41,769 | |||||||
CoreCivic, Inc. | (10,012 | ) | -39.3 | % | 35,961 | |||||||
GEO Group, Inc. | (9,275 | ) | -36.4 | % | 33,309 | |||||||
PS Business Parks, Inc. | (2,994 | ) | -31.8 | % | 29,044 | |||||||
Apartment Investment & Management Co. — Class A | (16,754 | ) | -27.9 | % | 25,521 | |||||||
Lexington Realty Trust | (62,472 | ) | -26.3 | % | 24,037 | |||||||
iShares U.S. Real Estate ETF | (48,158 | ) | -20.5 | % | 18,782 | |||||||
Piedmont Office Realty Trust, Inc. — Class A | (26,828 | ) | -17.4 | % | 15,869 | |||||||
Senior Housing Properties Trust | (34,976 | ) | -13.0 | % | 11,912 | |||||||
Mid-America Apartment Communities, Inc. | (5,557 | ) | -11.7 | % | 10,713 | |||||||
LaSalle Hotel Properties | (19,656 | ) | -5.8 | % | 5,332 | |||||||
Brixmor Property Group, Inc. | (23,299 | ) | -0.6 | % | 526 | |||||||
Liberty Property Trust | (13,453 | ) | 2.6 | % | (2,418 | ) | ||||||
Public Storage | (2,040 | ) | 3.4 | % | (3,078 | ) | ||||||
Weingarten Realty Investors | (14,448 | ) | 11.0 | % | (10,100 | ) | ||||||
Chesapeake Lodging Trust | (16,412 | ) | 15.3 | % | (14,001 | ) | ||||||
SL Green Realty Corp. | (5,454 | ) | 20.6 | % | (18,794 | ) | ||||||
National Retail Properties, Inc. | (15,670 | ) | 21.9 | % | (19,978 | ) | ||||||
Jones Lang LaSalle, Inc. | (2,053 | ) | 42.9 | % | (39,256 | ) | ||||||
Macerich Co. | (4,776 | ) | 44.2 | % | (40,456 | ) | ||||||
CBRE Group, Inc. — Class A* | (9,762 | ) | 65.1 | % | (59,520 | ) | ||||||
Chatham Lodging Trust | (28,541 | ) | 66.7 | % | (61,005 | ) | ||||||
Wynn Resorts Ltd. | (2,659 | ) | 79.3 | % | (72,459 | ) | ||||||
Tanger Factory Outlet Centers, Inc. | (25,025 | ) | 89.4 | % | (81,730 | ) | ||||||
Life Storage, Inc. | (7,943 | ) | 109.9 | % | (100,462 | ) | ||||||
Total Custom Basket of Short Securities | (91,430 | ) | ||||||||||
CUSTOM BASKET OF LONG SECURITIES14 | ||||||||||||
Regal Entertainment Group — Class A | 21,135 | 103.4 | % | 9,040 | ||||||||
Calpine Corp.* | 8,861 | 31.7 | % | 2,770 | ||||||||
magicJack VocalTec Ltd.* | 28,057 | 22.6 | % | 1,974 | ||||||||
Straight Path Communications, Inc. — Class B* | 1,459 | 20.8 | % | 1,818 | ||||||||
Avista Corp. | 5,152 | 6.6 | % | 576 | ||||||||
Sparton Corp.* | 5,631 | -7.9 | % | (687 | ) | |||||||
Calgon Carbon Corp. | 12,332 | -7.9 | % | (691 | ) | |||||||
Akorn, Inc.* | 7,866 | -69.3 | % | (6,060 | ) | |||||||
Total Custom Basket of Long Securities | 8,740 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs, unless otherwise noted— See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 7. |
2 | Affiliated issuer. |
3 | All or a portion of this security is pledged as futures collateral at December 31, 2017. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | Zero coupon rate security. |
6 | Repurchase Agreements — See Note 6. |
7 | Securities lending collateral — See Note 7. |
8 | Rate indicated is the 7 day yield as of December 31, 2017. |
9 | All or a portion of this security is pledged as short security collateral at December 31, 2017. |
10 | Total Return based on the return of the custom SMQLS short basket of securities +/- financing at a variable rate. Rate indicated is rate effective at December 31, 2017. |
11 | Total Return based on the return of the custom MNRE short basket of securities +/- financing at a variable rate. Rate indicated is rate effective at December 31, 2017. |
12 | Total Return based on the return of the custom SMQLS long basket of securities +/- financing at a variable rate. Rate indicated is rate effective at December 31, 2017. |
13 | Total Return based on the return of the custom MNRE long basket of securities +/- financing at a variable rate. Rate indicated is rate effective at December 31, 2017. |
14 | Total Return based on the return of the custom MRGR long basket of securities +/- financing at a variable rate. Rate indicated is rate effective at December 31, 2017. |
15 | All or portion of this security is pledged as swap collateral at December 31, 2017. |
ADR — American Depository Receipt | |
plc — Public Limited Corporation | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
40 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
MULTI-HEDGE STRATEGIES FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Closed-End Funds | $ | 3,955,535 | $ | — | $ | — | $ | — | $ | — | $ | 3,955,535 | ||||||||||||
Commodity Futures Contracts | — | 179,130 | — | — | — | 179,130 | ||||||||||||||||||
Common Stocks | 11,382,140 | — | — | — | — | 11,382,140 | ||||||||||||||||||
Currency Futures Contracts | — | 43,613 | — | — | — | 43,613 | ||||||||||||||||||
Equity Futures Contracts | — | 2,073,722 | — | 3,959 | — | 2,077,681 | ||||||||||||||||||
Interest Rate Futures Contracts | — | 11,389 | — | 8,655 | — | 20,044 | ||||||||||||||||||
Mutual Funds | 13,831,621 | — | — | — | — | 13,831,621 | ||||||||||||||||||
Custom Basket Swap Agreements | — | — | — | 1,323,642 | — | 1,323,642 | ||||||||||||||||||
Repurchase Agreement | — | — | 619,666 | — | — | 619,666 | ||||||||||||||||||
Rights | — | — | — | ** | — | — | — | ** | ||||||||||||||||
Securities Lending Collateral | 208,329 | — | — | — | — | 208,329 | ||||||||||||||||||
U.S. Treasury Bills | — | — | 9,291,304 | — | — | 9,291,304 | ||||||||||||||||||
Total Assets | $ | 29,377,625 | $ | 2,307,854 | $ | 9,910,970 | $ | 1,336,256 | $ | — | $ | 42,932,705 | ||||||||||||
Investments in Securities (Liabilities) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Commodity Futures Contracts | $ | — | $ | 45,556 | $ | — | $ | — | $ | — | $ | 45,556 | ||||||||||||
Common Stocks | 3,971,843 | — | — | — | — | 3,971,843 | ||||||||||||||||||
Currency Futures Contracts | — | 11,526 | — | — | — | 11,526 | ||||||||||||||||||
Equity Futures Contracts | — | 753,957 | — | 12,917 | — | 766,874 | ||||||||||||||||||
Exchange-Traded Funds | 4,708,800 | — | — | — | — | 4,708,800 | ||||||||||||||||||
Interest Rate Futures Contracts | — | 823 | — | 36,201 | — | 37,024 | ||||||||||||||||||
Custom Basket Swap Agreements | — | — | — | 740,479 | — | 740,479 | ||||||||||||||||||
Total Liabilities | $ | 8,680,643 | $ | 811,862 | $ | — | $ | 789,597 | $ | — | $ | 10,282,102 |
* | Other financial instruments include futures contracts and swaps, which are reported as unrealized gain/loss at period end. |
** | Security has a market value of $0. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 41 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
MULTI-HEDGE STRATEGIES FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a portfolio company of a fund, or control of or by, or common control under Guggenheim Investments (“GI”), result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act.
The Fund may invest in the underlying series of the Guggenheim Strategy Funds Trust consisting of Guggenheim Strategy Fund I, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III (collectively, the “Cash Management Funds”), open-end management investment companies managed by GI. The Cash Management Funds, which launched on March 11, 2014, are offered as cash management options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Cash Management Funds pay no investment management fees. The Cash Management Funds’ annual report on Form N-CSR dated September 30, 2017, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180417000715/gug72218.htm.
Transactions during the year ended December 31, 2017, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value 12/31/16 | Additions | Reductions | Corporate Actions | Realized Gain (Loss) | Change in Unrealized | Value 12/31/17 | Shares 12/31/17 | Investment Income | Capital Gain Distributions | ||||||||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund I | $ | 11,308 | $ | 2,016,878 | $ | — | $ | — | $ | — | $ | (2,384 | ) | $ | 2,025,802 | 80,838 | $ | 16,018 | $ | 766 | ||||||||||||||||||||
Guggenheim Strategy Fund II | 11,898 | 4,036,723 | (300,000 | ) | — | (493 | ) | (5,905 | ) | 3,742,223 | 149,629 | 34,382 | 2,150 | |||||||||||||||||||||||||||
Guggenheim Strategy Fund III | — | 4,032,379 | — | — | — | (1,618 | ) | 4,030,761 | 161,102 | 31,202 | 981 | |||||||||||||||||||||||||||||
Guggenheim Variable Insurance Strategy Fund III | — | 4,028,048 | — | — | — | 4,787 | 4,032,835 | 160,607 | 27,831 | — | ||||||||||||||||||||||||||||||
Closed-End Funds | ||||||||||||||||||||||||||||||||||||||||
Advent Claymore Convertible Securities and Income Fund | 3,934 | 26,878 | (8,770 | ) | — | 103 | 71 | 22,216 | 1,399 | 765 | — | |||||||||||||||||||||||||||||
Advent Claymore Convertible Securities and Income Fund II | 88,994 | 20,351 | (91,745 | ) | — | (7,593 | ) | 12,072 | 22,079 | 3,686 | 4,949 | — | ||||||||||||||||||||||||||||
Advent/Claymore Enhanced Growth & Income Fund | 26,658 | 22,514 | (28,185 | ) | — | (1,519 | ) | 2,491 | 21,959 | 2,633 | 2,098 | — | ||||||||||||||||||||||||||||
Guggenheim Enhanced Equity Income Fund | — | 17,129 | (7 | ) | 3,481 | — | 784 | 21,387 | 2,403 | 326 | — | |||||||||||||||||||||||||||||
Guggenheim Enhanced Equity Strategy Fund | 3,731 | — | (4,053 | ) | — | 297 | 25 | — | — | — | — | |||||||||||||||||||||||||||||
Guggenheim Equal Weight Enhanced Equity Income Fund | 3,552 | — | — | (3,481 | ) | — | (71 | ) | — | — | 95 | — | ||||||||||||||||||||||||||||
Western Asset/Claymore Inflation-Linked Opportunities & Income Fund | 185,358 | — | (161,129 | ) | — | (19,537 | ) | 18,708 | 23,400 | 2,049 | 4,037 | — | ||||||||||||||||||||||||||||
Western Asset/Claymore Inflation-Linked Securities & Income Fund | 168,205 | 873 | (143,580 | ) | — | (14,398 | ) | 12,480 | 23,580 | 2,000 | 3,418 | — | ||||||||||||||||||||||||||||
$ | 503,638 | $ | 14,201,773 | $ | (737,469 | ) | $ | — | $ | (43,140 | ) | $ | 41,440 | $ | 13,966,242 | $ | 125,121 | $ | 3,897 |
42 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
MULTI-HEDGE STRATEGIES FUND |
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES | |
December 31, 2017 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $200,111 of securities loaned (cost $24,038,495) | $ | 24,702,687 | ||
Investments in affiliated issuers, at value (cost $13,968,754) | 13,966,242 | |||
Repurchase agreements, at value (cost $619,666) | 619,666 | |||
Cash | 11,057,936 | |||
Segregated cash with broker | 1,388,934 | |||
Unrealized appreciation on swap agreements | 1,323,642 | |||
Receivables: | ||||
Securities sold | 551,083 | |||
Dividends | 48,303 | |||
Fund shares sold | 26,063 | |||
Securities lending income | 202 | |||
Interest | 73 | |||
Total assets | 53,684,831 | |||
Liabilities: | ||||
Securities sold short, at value (proceeds $8,408,601) | 8,680,643 | |||
Unrealized depreciation on swap agreements | 740,479 | |||
Payable for: | ||||
Securities purchased | 24,606 | |||
Return of securities loaned | 208,329 | |||
Swap settlement | 139,784 | |||
Variation margin | 90,158 | |||
Management fees | 42,346 | |||
Fund shares redeemed | 41,160 | |||
Miscellaneous | 22,129 | |||
Total liabilities | 9,989,634 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 43,695,197 | ||
Net assets consist of: | ||||
Paid in capital | $ | 44,271,088 | ||
Accumulated net investment loss | (1,160,922 | ) | ||
Accumulated net realized loss on investments | (1,847,024 | ) | ||
Net unrealized appreciation on investments | 2,432,055 | |||
Net assets | $ | 43,695,197 | ||
Capital shares outstanding | 1,759,561 | |||
Net asset value per share | $ | 24.83 |
CONSOLIDATED STATEMENT OF OPERATIONS | |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $336) | $ | 387,475 | ||
Dividends from securities of affiliated issuers | 125,121 | |||
Interest | 130,175 | |||
Income from securities lending, net | 3,687 | |||
Total investment income | 646,458 | |||
Expenses: | ||||
Management fees | 516,665 | |||
Short sales dividend expense | 306,250 | |||
Trustees’ fees* | 4,630 | |||
Line of credit fees | 67 | |||
Miscellaneous | 145 | |||
Total expenses | 827,757 | |||
Less: | ||||
Expenses waived by Adviser | (9,214 | ) | ||
Net expenses | 818,543 | |||
Net investment income | (172,085 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 3,927,371 | |||
Investments in affiliated issuers | (43,140 | ) | ||
Swap agreements | 467,061 | |||
Futures contracts | (1,160,998 | ) | ||
Foreign currency transactions | 148 | |||
Securities sold short | (1,983,055 | ) | ||
Options written | 763 | |||
Distributions received from affiliated investment company shares | 3,897 | |||
Net realized gain | 1,212,047 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (1,345,664 | ) | ||
Investments in affiliated issuers | 41,440 | |||
Securities sold short | (17,709 | ) | ||
Swap agreements | 640,728 | |||
Futures contracts | 1,185,989 | |||
Options written | 9,638 | |||
Foreign currency translations | (239 | ) | ||
Net change in unrealized appreciation (depreciation) | 514,183 | |||
Net realized and unrealized gain | 1,726,230 | |||
Net increase in net assets resulting from operations | $ | 1,554,145 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a) (19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 43 |
MULTI-HEDGE STRATEGIES FUND |
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (172,085 | ) | $ | (332,953 | ) | ||
Net realized gain (loss) on investments | 1,212,047 | (112,401 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 514,183 | 196,136 | ||||||
Net increase (decrease) in net assets resulting from operations | 1,554,145 | (249,218 | ) | |||||
Distributions to shareholders from: | ||||||||
Net investment income | — | (48,562 | ) | |||||
Total distributions to shareholders | — | (48,562 | ) | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 5,817,462 | 14,011,461 | ||||||
Distributions reinvested | — | 48,562 | ||||||
Cost of shares redeemed | (11,629,769 | ) | (18,090,321 | ) | ||||
Net decrease from capital share transactions | (5,812,307 | ) | (4,030,298 | ) | ||||
Net decrease in net assets | (4,258,162 | ) | (4,328,078 | ) | ||||
Net assets: | ||||||||
Beginning of year | 47,953,359 | 52,281,437 | ||||||
End of year | $ | 43,695,197 | $ | 47,953,359 | ||||
Accumulated net investment loss at end of year | $ | (1,160,923 | ) | $ | (1,160,922 | ) | ||
Capital share activity: | ||||||||
Shares sold | 240,735 | 585,211 | ||||||
Shares issued from reinvestment of distributions | — | 2,031 | ||||||
Shares redeemed | (483,666 | ) | (755,036 | ) | ||||
Net decrease in shares | (242,931 | ) | (167,794 | ) |
44 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
MULTI-HEDGE STRATEGIES FUND |
CONSOLIDATED FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 23.95 | $ | 24.09 | $ | 23.82 | $ | 22.75 | $ | 22.38 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.09 | ) | (.16 | ) | (.15 | ) | (.18 | ) | (.15 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | .97 | .04 | .58 | 1.25 | .52 | |||||||||||||||
Total from investment operations | .88 | (.12 | ) | .43 | 1.07 | .37 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | — | (.02 | ) | (.16 | ) | — | — | |||||||||||||
Total distributions | — | (.02 | ) | (.16 | ) | — | — | |||||||||||||
Net asset value, end of period | $ | 24.83 | $ | 23.95 | $ | 24.09 | $ | 23.82 | $ | 22.75 | ||||||||||
Total Returnb | 3.67 | % | (0.48 | %) | 1.85 | % | 4.66 | % | 1.65 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 43,695 | $ | 47,953 | $ | 52,281 | $ | 42,725 | $ | 22,809 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.39 | %) | (0.66 | %) | (0.62 | %) | (0.79 | %) | (0.65 | %) | ||||||||||
Total expensec | 1.88 | % | 2.27 | % | 2.38 | % | 2.50 | % | 2.51 | % | ||||||||||
Net expensesd | 1.85 | % | 2.23 | % | 2.34 | % | 2.45 | % | 2.44 | % | ||||||||||
Portfolio turnover rate | 158 | % | 119 | % | 160 | % | 245 | % | 324 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers, and may include interest and dividend expense. Excluding interest and dividend expense related to short sales, net expense ratios for the year ended December 31 would be: |
2017 | 2016 | 2015 | 2014 | 2013 |
1.16% | 1.17% | 1.18% | 1.17% | 1.15% |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 45 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
COMMODITIES STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that correlate, before fees and expenses, to the performance of a benchmark for commodities. The Fund’s current benchmark is the S&P Goldman Sachs Commodity Index (“GSCI” or “Index”).
For the one-year period ended December 31, 2017, the Fund returned 4.43%, compared with a return of 5.77% for the GSCI.
The GSCI continued its positive momentum throughout 2017 as the global economy continues to expand at a healthy pace. 16 of the 24 components in the Index had positive returns during the period. The best-performing component was aluminum, with a return topping 30%. Other industrial metals, such as zinc, copper, nickel and lead, all had positive returns between 20% and 30%.
Natural gas, sugar, coffee, Kansas wheat, wheat, cocoa, and corn each had double-digit declines during the period.
Commodities were up in 2017 due to continued global economic expansion, which helped drive base metal prices higher. China continued to limit industrial overcapacity. Oil was flat to down for most of the year, but had a strong rally in December as OPEC-led production limits took hold. Gold maintained its safe haven status and ended the year just above $1,300 an ounce.
The strongest GSCI sectors were Industrial Metals (up almost 30%) and Precious Metals (up 12%). Livestock and Energy sectors were also up for the year. Agriculture was the only sector that had negative performance for the year.
Derivatives in the Fund are used to help provide exposure to the composition of the benchmark in the most efficient manner, as well as to provide liquidity.
Derivatives are the primary way in which the Fund gains exposure to commodities, and therefore most of the Fund’s performance was due to derivatives.
Guggenheim Strategy Funds were utilized within the Fund to achieve higher yields than what would otherwise be achieved through overnight repurchase agreements or short term investments.
Performance displayed represents past performance which is no guarantee of future results.
46 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Consolidated Holdings Diversification (Market Exposure as % of Net Assets)
“Consolidated Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments or investments in Guggenheim Strategy Funds Trust mutual funds. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: September 30, 2005 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 30.0% |
Guggenheim Strategy Fund I | 29.8% |
Total | 59.8% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Commodities Strategy Fund | 4.43% | (13.38%) | (12.09%) |
S&P Goldman Sachs Commodity Index | 5.77% | (12.16%) | (10.16%) |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P Goldman Sachs Commodity Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 47 |
CONSOLIDATED SCHEDULE OF INVESTMENTS | December 31, 2017 |
COMMODITIES STRATEGY FUND |
Shares | Value | |||||||
MUTUAL FUNDS† - 59.8% | ||||||||
Guggenheim Strategy Fund II1 | 56,767 | $ | 1,419,739 | |||||
Guggenheim Strategy Fund I1 | 56,288 | 1,410,574 | ||||||
Total Mutual Funds | ||||||||
(Cost $2,819,826) | 2,830,313 |
Face Amount | ||||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 14.8% | ||||||||
Federal Home Loan Bank2 | ||||||||
1.26% due 01/05/183,4 | $ | 300,000 | 299,958 | |||||
Fannie Mae5 | ||||||||
1.26% due 01/12/183,4 | 300,000 | 299,885 | ||||||
Federal Farm Credit Bank2 | ||||||||
1.28% due 01/24/183,4 | 100,000 | 99,918 | ||||||
Total Federal Agency Discount Notes | ||||||||
(Cost $699,761) | 699,761 | |||||||
FEDERAL AGENCY NOTES†† - 2.1% | ||||||||
Federal Farm Credit Bank2 | ||||||||
1.43% (1 Month USD LIBOR + 0.02%) due 01/08/186 | 100,000 | 100,003 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $100,003) | 100,003 | |||||||
REPURCHASE AGREEMENTS††,7 - 19.8% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | 611,024 | 611,024 | ||||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 326,105 | 326,105 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $937,129) | 937,129 | |||||||
Total Investments - 96.5% | ||||||||
(Cost $4,556,719) | $ | 4,567,206 | ||||||
Other Assets & Liabilities, net - 3.5% | 164,067 | |||||||
Total Net Assets - 100.0% | $ | 4,731,273 |
Futures Contracts | ||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Value and Unrealized Gain | ||||||||||
Commodity Futures Contracts Purchased† | ||||||||||||||
Goldman Sachs Commodity Index Futures Contracts | 44 | Jan 2018 | $ | 4,857,050 | $ | 241,301 |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | The issuer operates under a Congressional charter; its securities are neither issued nor guaranteed by the U.S. Government. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | Zero coupon rate security. |
5 | On September 7, 2008, the issuer was placed in conservatorship by the Federal Housing Finance Agency (FHFA). As conservator, the FHFA has full powers to control the assets and operations of the firm. |
6 | Variable rate security. Rate indicated is rate effective at December 31, 2017. In some instances, the underlying reference rate shown was below the minimum rate earned by the security or has been adjusted by a predetermined factor. The settlement status of a position may also impact the effective rate indicated. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
7 | Repurchase Agreements — See Note 6. |
LIBOR — London Interbank Offered Rate | |
See Sector Classification in Other Information section. |
48 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
COMMODITIES STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | |||||||||||||||
Commodity Futures Contracts | $ | — | $ | 241,301 | $ | — | $ | — | $ | 241,301 | ||||||||||
Federal Agency Discount Notes | — | — | 699,761 | — | 699,761 | |||||||||||||||
Federal Agency Notes | — | — | 100,003 | — | 100,003 | |||||||||||||||
Mutual Funds | 2,830,313 | — | — | — | 2,830,313 | |||||||||||||||
Repurchase Agreements | — | — | 937,129 | — | 937,129 | |||||||||||||||
Total Assets | $ | 2,830,313 | $ | 241,301 | $ | 1,736,893 | $ | — | $ | 4,808,507 |
* | Other financial instruments include futures contracts, which are reported as unrealized gain/loss at period end. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a portfolio company of a fund, or control of or by, or common control under Guggenheim Investments (“GI”), result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act.
The Fund may invest in the underlying series of the Guggenheim Strategy Funds Trust consisting of Guggenheim Strategy Fund I, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III (collectively, the “Cash Management Funds”), open-end management investment companies managed by GI. The Cash Management Funds, which launched on March 11, 2014, are offered as cash management options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Cash Management Funds pay no investment management fees. The Cash Management Funds’ annual report on Form N-CSR dated September 30, 2017, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180417000715/gug72218.htm.
Transactions during the year ended December 31, 2017, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value 12/31/16 | Additions | Reductions | Realized Gain | Change in Unrealized | Value 12/31/17 | Shares 12/31/17 | Investment Income | Capital Gain Distributions | |||||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund I | $ | 1,310,849 | $ | 1,582,742 | $ | (1,485,000 | ) | $ | 2,666 | $ | (683 | ) | $ | 1,410,574 | 56,288 | $ | 22,266 | $ | 514 | |||||||||||||||||
Guggenheim Strategy Fund II | 1,314,879 | 887,840 | (785,000 | ) | 2,023 | (3 | ) | 1,419,739 | 56,767 | 27,179 | 729 | |||||||||||||||||||||||||
$ | 2,625,728 | $ | 2,470,582 | $ | (2,270,000 | ) | $ | 4,689 | $ | (686 | ) | $ | 2,830,313 | $ | 49,445 | $ | 1,243 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 49 |
COMMODITIES STRATEGY FUND |
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES | |
December 31, 2017 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $799,764) | $ | 799,764 | ||
Investments in affiliated issuers, at value (cost $2,819,826) | 2,830,313 | |||
Repurchase agreements, at value (cost $937,129) | 937,129 | |||
Cash | 3 | |||
Segregated cash with broker | 264,000 | |||
Receivables: | ||||
Fund shares sold | 51,407 | |||
Variation margin | 22,550 | |||
Dividends | 4,435 | |||
Interest | 205 | |||
Total assets | 4,909,806 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 162,341 | |||
Securities purchased | 4,575 | |||
Management fees | 3,105 | |||
Transfer agent and administrative fees | 968 | |||
Investor service fees | 968 | |||
Portfolio accounting fees | 387 | |||
Miscellaneous | 6,189 | |||
Total liabilities | 178,533 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 4,731,273 | ||
Net assets consist of: | ||||
Paid in capital | $ | 6,216,324 | ||
Accumulated net investment loss | (1,730,156 | ) | ||
Accumulated net realized loss on investments | (6,683 | ) | ||
Net unrealized appreciation on investments | 251,788 | |||
Net assets | $ | 4,731,273 | ||
Capital shares outstanding | 54,109 | |||
Net asset value per share | $ | 87.44 |
CONSOLIDATED STATEMENT OF OPERATIONS | |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 49,445 | ||
Interest | 10,362 | |||
Total investment income | 59,807 | |||
Expenses: | ||||
Management fees | 29,742 | |||
Investor service fees | 8,648 | |||
Transfer agent and administrative fees | 8,648 | |||
Professional fees | 5,265 | |||
Portfolio accounting fees | 3,459 | |||
Custodian fees | 642 | |||
Trustees’ fees* | 459 | |||
Miscellaneous | 6,176 | |||
Total expenses | 63,039 | |||
Less: | ||||
Expenses waived by Adviser | (3,392 | ) | ||
Net expenses | 59,647 | |||
Net investment income | 160 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in affiliated issuers | 4,689 | |||
Distributions received from affiliated investment company shares | 1,243 | |||
Futures contracts | 68,699 | |||
Net realized gain | 74,631 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (6 | ) | ||
Investments in affiliated issuers | (686 | ) | ||
Futures contracts | 141,665 | |||
Net change in unrealized appreciation (depreciation) | 140,973 | |||
Net realized and unrealized gain | 215,604 | |||
Net increase in net assets resulting from operations | $ | 215,764 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a) (19) of the 1940 Act. |
50 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
COMMODITIES STRATEGY FUND |
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | 160 | $ | (18,635 | ) | |||
Net realized gain (loss) on investments | 74,631 | (168,231 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 140,973 | 219,384 | ||||||
Net increase in net assets resulting from operations | 215,764 | 32,518 | ||||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 22,269,307 | 17,190,095 | ||||||
Cost of shares redeemed | (22,252,087 | ) | (15,395,358 | ) | ||||
Net increase from capital share transactions | 17,220 | 1,794,737 | ||||||
Net increase in net assets | 232,984 | 1,827,255 | ||||||
Net assets: | ||||||||
Beginning of year | 4,498,289 | 2,671,034 | ||||||
End of year | $ | 4,731,273 | $ | 4,498,289 | ||||
Accumulated net investment loss at end of year | $ | (1,730,156 | ) | $ | (1,734,738 | ) | ||
Capital share activity: | ||||||||
Shares sold | 284,878 | 215,903 | * | |||||
Shares redeemed | (284,484 | ) | (197,414 | )* | ||||
Net increase in shares | 394 | 18,489 | * |
* | Capital share activity for the year ended December 31, 2016 have been restated to reflect a 1:16 reverse share split effective December 1, 2016 — See Note 11. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 51 |
COMMODITIES STRATEGY FUND |
CONSOLIDATED FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016g | Year Ended December 31, 2015g | Year Ended December 31, 2014g | Year Ended December 31, 2013g | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 83.74 | $ | 75.82 | $ | 114.64 | $ | 173.54 | $ | 179.38 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | — | b | (.03 | ) | (1.12 | ) | (1.76 | ) | (2.56 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 3.70 | 7.95 | (37.70 | ) | (57.14 | ) | (3.28 | ) | ||||||||||||
Total from investment operations | 3.70 | 7.92 | (38.82 | ) | (58.90 | ) | (5.84 | ) | ||||||||||||
Net asset value, end of period | $ | 87.44 | $ | 83.74 | $ | 75.82 | $ | 114.64 | $ | 173.54 | ||||||||||
Total Returnc | 4.43 | % | 10.40 | % | (33.80 | %) | (34.01 | %) | (3.21 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 4,731 | $ | 4,498 | $ | 2,671 | $ | 4,662 | $ | 6,170 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | — | d | (0.48 | %) | (1.16 | %) | (1.04 | %) | (1.50 | %) | ||||||||||
Total expensese | 1.82 | % | 1.80 | % | 1.75 | % | 1.71 | % | 1.65 | % | ||||||||||
Net expensesf | 1.72 | % | 1.67 | % | 1.63 | % | 1.62 | % | 1.55 | % | ||||||||||
Portfolio turnover rate | 107 | % | 231 | % | 198 | % | 202 | % | — |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Net investment income is less than $0.01 per share. |
c | Total return does not reflect the impact of any additional fees charged by insurance companies. |
d | Less than 0.01%. |
e | Does not include expenses of the underlying funds in which the Fund invests. |
f | Net expense information reflects the expense ratios after expense waivers. |
g | Reverse Share Split — Per share amounts for the periods presented through December 31, 2016 have been restated to reflect a 1:16 reverse share split effective December 1, 2016 — See Note 11. |
52 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Note 1 – Organization, Consolidation of Subsidiary and Significant Accounting Policies
Organization
The Rydex Variable Trust (the “Trust”), a Delaware statutory trust, is registered with the SEC under the Investment Company Act of 1940 (“1940 Act”), as an open-ended investment company of the series type. Each series, in effect, is representing a separate Fund. The Trust is authorized to issue an unlimited number of no par value shares. At December 31, 2017, the Trust consisted of forty-nine funds. The Trust offers shares of the Funds to insurance companies for their variable annuity and variable life insurance contracts.
This report covers the Long Short Equity Fund, Global Managed Futures Strategy Fund, Multi-Hedge Strategies Fund, and Commodities Strategy Fund (the “Funds”), each a non-diversified investment company.
Security Investors, LLC, which operates under the name Guggenheim Investments (“GI”), provides advisory services. Guggenheim Funds Distributors, LLC (“GFD”) acts as principal underwriter for the Trust. GI and GFD are affiliated entities.
Consolidation of Subsidiary
Each of the consolidated financial statements of the Funds includes the accounts of a wholly-owned and controlled Cayman Islands subsidiary (the “Subsidiary”). Significant inter-company accounts and transactions have been eliminated in consolidation for the Funds.
Each Fund may invest up to 25% of its total assets in its Subsidiary which acts as an investment vehicle in order to effect certain investments consistent with the Fund’s investment objectives and policies.
A summary of each Fund’s investment in its respective Subsidiary is as follows:
Fund | Inception Date of Subsidiary | Subsidiary Net Assets at December 31, 2017 | % of Net Assets of the Fund at December 31, 2017 | |||||||
Global Managed Futures Strategy Fund | 11/07/08 | $ | 686,293 | 4.6 | % | |||||
Multi-Hedge Strategies Fund | 04/15/09 | 780,412 | 1.8 | % | ||||||
Commodities Strategy Fund | 07/21/09 | 566,800 | 12.0 | % |
Significant Accounting Policies
The Funds operate as investment companies and, accordingly, follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
The following significant accounting policies are in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and are consistently followed by the Trust. This requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. All time references are based on Eastern Time.
The net asset value per share (“NAV”) of a fund is calculated by dividing the market value of the fund’s securities and other assets, less all liabilities, by the number of outstanding shares of the fund.
(a) Valuation of Investments
The Board of Trustees of the Funds (the “Board”) has adopted policies and procedures for the valuation of the Funds’ investments (the “Valuation Procedures”). Pursuant to the Valuation Procedures, the Board has delegated to a valuation committee, consisting of representatives from Guggenheim’s investment management, fund administration, legal and compliance departments (the “Valuation Committee”), the day-to-day responsibility for implementing the Valuation Procedures, including, under most circumstances, the responsibility for determining the fair value of the Funds’ securities and/or other assets.
Valuations of the Funds’ securities are supplied primarily by pricing services appointed pursuant to the processes set forth in the Valuation Procedures. The Valuation Committee convenes monthly, or more frequently as needed, to review the valuation of all assets which have been fair valued for reasonableness. The Funds’ officers, through the Valuation Committee and consistent with the monitoring and review responsibilities set forth in the Valuation Procedures, regularly review procedures used and valuations provided by the pricing services.
If the pricing service cannot or does not provide a valuation for a particular investment or such valuation is deemed unreliable, such investment is fair valued by the Valuation Committee.
Equity securities listed on an exchange (New York Stock Exchange (“NYSE”) or American Stock Exchange) are valued at the last quoted sales price as of the close of business on the NYSE, usually 4:00 p.m. on the valuation date. Equity securities listed on
THE RYDEX FUNDS ANNUAL REPORT | 53 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
the NASDAQ market system are valued at the NASDAQ Official Closing Price on the valuation date, which may not necessarily represent the last sale price. If there has been no sale on such exchange or NASDAQ on a given day, the security is valued at the closing bid price on that day.
Open-end investment companies (“mutual funds”) are valued at their NAV as of the close of business, on the valuation date. Exchange-traded funds (“ETFs”) and closed-end investment companies (“CEFs”) are valued at the last quoted sale price.
U.S. government securities are valued by either independent pricing services, the last traded fill price, or at the reported bid price at the close of business.
Debt securities with a maturity of greater than 60 days at acquisition are valued at prices that reflect broker-dealer supplied valuations or are obtained from independent pricing services, which may consider the trade activity, treasury spreads, yields or price of bonds of comparable quality, coupon, maturity, and type, as well as prices quoted by dealers who make markets in such securities. Short-term debt securities with a maturity of 60 days or less at acquisition are valued at amortized cost, provided such amount approximates market value. Money market funds are valued at net asset value.
Repurchase agreements are valued at amortized cost, provided such amounts approximate market value.
Listed options are valued at the Official Settlement Price listed by the exchange, usually as of 4:00 p.m. Long options are valued using the bid price and short options are valued using the ask price. In the event that a settlement price is not available, fair valuation is enacted. Over-the-counter (“OTC”) options are valued using the average bid price (for long options) or average ask price (for short options) obtained from one or more security dealers.
The value of futures contracts is accounted for using the unrealized gain or loss on the contracts that is determined by marking the contracts to their current realized settlement prices. Financial futures contracts are valued at the 4:00 p.m. price on the valuation date. In the event that the exchange for a specific futures contract closes earlier than 4:00 p.m., the futures contract is valued at the Official Settlement Price of the exchange. However, the underlying securities from which the futures contract value is derived are monitored until 4:00 p.m. to determine if fair valuation would provide a more accurate valuation.
The values of over-the-counter (“OTC”) swap agreements entered into by a Fund are accounted for using the unrealized gains or losses on the agreements that are determined by marking the agreements to the last quoted value of the index that the swaps pertain to at the close of the NYSE. The swaps’ values are then adjusted to include dividends accrued, financing charges and/or interest associated with the swap agreements.
Investments for which market quotations are not readily available are fair-valued as determined in good faith by GI, under the direction of the Board using methods established or ratified by the Board. Valuations in accordance with these methods are intended to reflect each security’s (or asset’s) “fair value”. Each such determination is based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples of such factors may include, but are not limited to market prices; sale prices; broker quotes; and models which derive prices based on inputs such as prices of securities with comparable maturities and characteristics, or based on inputs such as anticipated cash flows or collateral, spread over Treasuries, and other information analysis.
In connection with futures contracts and other derivative investments, such factors may include obtaining information as to how (a) these contracts and other derivative investments trade in the futures or other derivative markets, respectively, and (b) the securities underlying these contracts and other derivative investments trade in the cash market.
(b) U.S. Government and Agency Obligations
Certain U.S. Government and Agency Obligations are traded on a discount basis; the interest rates shown on the Schedules of Investments reflect the effective rates paid at the time of purchase by the Funds. Other securities bear interest at the rates shown, payable at fixed dates through maturity.
(c) Short Sales
When a Fund engages in a short sale of a security, an amount equal to the proceeds is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the market value of the short sale. The Fund maintains a segregated account of cash and/or securities as collateral for short sales.
Fees, if any, paid to brokers to borrow securities in connection with short sales are recorded as interest expense. In addition, the Fund must pay out the dividend rate of the equity or coupon rate of the obligation to the lender and record this as an expense. Short dividend or interest expense is a cost associated with the investment objective of short sales transactions, rather than an operational cost associated with the day-to-day management of any mutual fund. The Fund may also receive rebate income from the broker resulting from the investment of the proceeds from securities sold short.
54 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
(d) Options
Upon the purchase of an option, the premium paid is recorded as an investment, the value of which is marked-to-market daily. If a purchased option expires, the Fund realizes a loss in the amount of the cost of the option. When the Fund enters into a closing sale transaction, it realizes a gain or loss depending on whether the proceeds from the closing sale transaction are greater or less than the cost of the option. If the Fund exercises a put option, it realizes a gain or loss from the sale of the underlying security and the proceeds from such sale will be decreased by the premium originally paid. When the Fund exercises a call option, the cost of the security purchased by the Fund upon exercise increases by the premium originally paid.
When the Fund writes (sells) an option, an amount equal to the premium received is entered in that Fund’s accounting records as an asset and equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current value of the option written. When a written option expires, or if the Fund enters into a closing purchase transaction, it realizes a gain (or loss if the cost of a closing purchase transaction exceeds the premium received when the option was sold).
(e) Futures Contracts
Upon entering into a futures contract, a Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is affected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
(f) Swap Agreements
Swap agreements are marked-to-market daily and the change, if any, is recorded as unrealized gain or loss. Payments received or made as a result of an agreement or termination of an agreement are recognized as realized gains or losses.
(g) Foreign Taxes
The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are paid by the Funds and reflected in their Statement of Operations as follows: foreign taxes withheld at source are presented as a reduction of income and foreign taxes on capital gains from sales of investments are included with the net realized gain (loss) on investments. Foreign taxes payable or deferred as of December 31, 2017, if any, are disclosed in the Funds’ Statements of Assets and Liabilities.
(h) Security Transactions
Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from securities transactions are recorded using the identified cost basis. Proceeds from lawsuits related to investment holdings are recorded as realized gains in the respective Fund. Taxable non-cash dividends are recorded as dividend income. Interest income, including amortization of premiums and accretion of discounts, is accrued on a daily basis. Dividend income is recorded on the ex-dividend date, net of applicable taxes withheld by foreign countries. Dividend income from Real Estate Investment Trusts (“REITs”) is recorded based on the income included in the distributions received from the REIT investments using published REIT classifications, including some management estimates when actual amounts are not available. Distributions received in excess of this estimated amount are recorded as a reduction of the cost of investments or reclassified to capital gains. The actual amounts of income, return of capital, and capital gains are only determined by each REIT after its fiscal year-end, and may differ from the estimated amounts.
(i) Distributions
Distributions of net investment income and net realized gains, if any, are declared and paid at least annually. Normally, all such distributions of a Fund will automatically be reinvested without charge in additional shares of the same Fund. 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) Cash
The Funds may leave cash overnight in their cash account with the custodian. Periodically, a Fund may have cash due to the custodian bank as an overdraft balance. A fee is incurred on this overdraft, calculated by multiplying the overdraft by a rate based on the federal funds rate, which was 1.33% at December 31, 2017.
(k)Currency Translations
The accounting records of the Funds are maintained in U.S. dollars. All assets and liabilities initially expressed in foreign currencies are converted into U.S. dollars at prevailing exchange rates. Purchases and sales of investment securities, dividend and interest income, and certain expenses are translated at the rates of exchange prevailing on the respective dates of such transactions.
THE RYDEX FUNDS ANNUAL REPORT | 55 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Changes in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Funds. Foreign investments may also subject the Funds to foreign government exchange restrictions, expropriation, taxation or other political, social or economic developments, all of which could affect the market and/or credit risk of the investments.
The Funds do not isolate that portion of the results of operations resulting from changes in the foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Reported net realized foreign exchange gains and losses arise from sales of foreign currencies and currency gains or losses realized between the trade and settlement dates on investment transactions. Net unrealized exchange gains and losses arise from changes in the fair values of assets and liabilities other than investments in securities at the fiscal period end, resulting from changes in exchange rates.
(l) Indemnifications
Under the Funds’ organizational documents, the Trustees and Officers are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, 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.
Note 2 – Financial Instruments and Derivatives
As part of their investment strategy, the Funds utilize short sales and a variety of derivative instruments. These investments involve, to varying degrees, elements of market risk and risks in excess of the amounts recognized in the Statements of Assets and Liabilities. Valuation and accounting treatment of these instruments can be found under Significant Accounting Policies in Note 1 of these Notes to Consolidated Financial Statements.
Short Sales
A short sale is a transaction in which a Fund sells a security it does not own. If the security sold short decreases in price between the time the Fund sells the security and closes its short position, the Fund will realize a gain on the transaction. Conversely, if the security increases in price during the period, the Fund will realize a loss on the transaction. The risk of such price increases is the principal risk of engaging in short sales.
Derivatives
Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more other assets, such as securities, currencies, commodities or indices. Derivative instruments may be used to increase investment flexibility (including to maintain cash reserves while maintaining exposure to certain other assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. Derivative instruments may also be used to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. U.S. GAAP requires disclosures to enable investors to better understand how and why a Fund uses derivative instruments, how these derivative instruments are accounted for and their effects on the Fund’s financial position and results of operations.
The Funds utilized derivatives for the following purposes:
Duration: the use of an instrument to manage the interest rate risk of a portfolio.
Hedge: an investment made in order to reduce the risk of adverse price movements in a security, by taking an offsetting position to protect against broad market moves.
Income: the use of any instrument that distributes cash flows typically based upon some rate of interest.
Index Exposure: the use of an instrument to obtain exposure to a listed or other type of index.
Leverage: gaining total exposure to equities or other assets on the long and short sides at greater than 100% of invested capital.
Liquidity: the ability to buy or sell exposure with little price/market impact.
Speculation: the use of an instrument to express macro-economic and other investment views.
For any Fund whose investment strategy consistently involves applying leverage, the value of the Fund’s shares will tend to increase or decrease more than the value of any increase or decrease in the underlying index or other asset. In addition, because an investment in derivative instruments generally requires a small investment relative to the amount of investment exposure assumed, an opportunity for increased net income is created; but, at the same time, leverage risk will increase. The Fund’s use of leverage, through borrowings or instruments such as derivatives, may cause the Fund to be more volatile and riskier than if they had not been leveraged.
56 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Options Purchased and Written
A call option on a security gives the purchaser of the option the right to buy, and the writer of a call option the obligation to sell, the underlying security. The purchaser of a put option has the right to sell, and the writer of the put option the obligation to buy, the underlying security at any time during the option period. The risk associated with purchasing options is limited to the premium originally paid.
The risk in writing a call option is that a Fund may incur a loss if the market price of the underlying security increases and the option is exercised. The risk in writing a put option is that a Fund may incur a loss if the market price of the underlying security decreases and the option is exercised. In addition, there may be an imperfect correlation between the movement in prices of options and the underlying securities where a Fund may not be able to enter into a closing transaction because of an illiquid secondary market; or, for OTC options, a Fund may be at risk because of the counterparty’s inability to perform.
The following table represents the Fund’s use and volume of call options written on a quarterly basis for the year ended December 31, 2017:
Fund | Use | Average Number of Contracts |
Multi-Hedge Strategies Fund | Hedge, Income | 9 |
Fund | Use | Average Notional Amount | |||
Multi-Hedge Strategies Fund | Hedge, Income | $ | 53,725 |
Futures
A futures contract is an agreement to purchase (long) or sell (short) an agreed amount of securities or other instruments at a set price for delivery at a future date. There are significant risks associated with a Fund’s use of futures contracts, including (i) there may be an imperfect or no correlation between the changes in market value of the underlying asset and the prices of futures contracts; (ii) there may not be a liquid secondary market for a futures contract; (iii) trading restrictions or limitations may be imposed by an exchange; and (iv) government regulations may restrict trading in futures contracts. When investing in futures, there is minimal counterparty credit risk to a Fund because futures are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees against default. Cash deposits are shown as segregated cash with broker on the Statements of Assets and Liabilities; securities held as collateral are noted on the Schedules of Investments.
The following table represents the Funds’ use and volume of futures on a quarterly basis for the year ended December 31, 2017:
Average Notional Amount | |||||||||
Fund | Use | Long | Short | ||||||
Long Short Equity Fund | Index exposure, Liquidity | $ | — | $ | 29,475 | ||||
Global Managed Futures Strategy Fund | Hedge, Leverage, Liquidity, Speculation | 45,673,329 | 27,035,489 | ||||||
Multi-Hedge Strategies Fund | Duration, Hedge, Index exposure, Leverage, Liquidity, Speculation | 25,148,235 | 16,859,205 | ||||||
Commodities Strategy Fund | Index exposure, Liquidity | 3,544,094 | — |
Swaps
A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. A Fund utilizing OTC swaps bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty or if the underlying asset declines in value. Certain standardized swaps are subject to mandatory central clearing. Central clearing generally reduces counterparty credit risk and increases liquidity, but central clearing does not make swap transactions risk-free. Additionally, there is no guarantee that a Fund or an underlying fund could eliminate its exposure under an outstanding swap agreement by entering into an offsetting swap agreement with the same or another party.
THE RYDEX FUNDS ANNUAL REPORT | 57 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Total return swaps involve commitments where single or multiple cash flows are exchanged based on the price of an underlying reference asset (such as index or basket) or a fixed or variable interest rate. Index swaps will usually be computed based on the current index value as of the close of regular trading on the NYSE or other exchange, with the swap value being adjusted to include dividends accrued, financing charges and/or interest associated with the swap agreement. A fund utilizing a total return index swap bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty or if the underlying index declines in value.
The following table represents the Funds’ use and volume of total return swaps on a quarterly basis for the year ended December 31, 2017:
Average Notional Amount | |||||||||
Fund | Use | Long | Short | ||||||
Long Short Equity Fund | Index exposure, Liquidity | $ | 20,229,430 | $ | 28,128,540 | ||||
Multi-Hedge Strategies Fund | Hedge, Index exposure, Leverage, Liquidity, Speculation | 20,692,143 | 15,547,588 |
Derivative Investment Holdings Categorized by Risk Exposure
The following is a summary of the location of derivative investments on the Funds’ Statements of Assets and Liabilities as of December 31, 2017:
Derivative Investment Type | Asset Derivatives | Liability Derivatives |
Equity/Currency/Interest Rate/Commodity contracts | Variation margin | Variation margin |
Equity contracts | Unrealized appreciation on swap agreements | Unrealized depreciation on swap agreements |
The following table sets forth the fair value of the Funds’ derivative investments categorized by primary risk exposure at December 31, 2017:
Asset Derivative Investments Value | ||||||||||||||||||||||||
Fund | Futures Equity Risk* | Futures Currency Risk* | Futures Interest Rate Risk* | Futures Commodity Risk* | Portfolio Swaps Risk | Total Value at December 31, 2017 | ||||||||||||||||||
Long Short Equity Fund | $ | — | $ | — | $ | — | $ | — | $ | 1,119,030 | $ | 1,119,030 | ||||||||||||
Global Managed Futures Strategy Fund | 117,234 | 55,657 | 82,345 | 180,784 | — | 436,020 | ||||||||||||||||||
Multi-Hedge Strategies Fund | 2,077,681 | 43,613 | 20,044 | 179,130 | 1,323,642 | 3,644,110 | ||||||||||||||||||
Commodities Strategy Fund | — | — | — | 241,301 | — | 241,301 |
Liability Derivative Investments Value | ||||||||||||||||||||||||
Fund | Futures Equity Risk* | Futures Currency Risk* | Futures Interest Rate Risk* | Futures Commodity Risk* | Portfolio Swaps Risk | Total Value at December 31, 2017 | ||||||||||||||||||
Long Short Equity Fund | $ | — | $ | — | $ | — | $ | — | $ | 2,139,099 | $ | 2,139,099 | ||||||||||||
Global Managed Futures Strategy Fund | 54,596 | 4,526 | 30,886 | 57,359 | — | 147,367 | ||||||||||||||||||
Multi-Hedge Strategies Fund | 766,874 | 11,526 | 37,024 | 45,556 | 740,479 | 1,601,459 |
* | Includes cumulative appreciation (depreciation) of futures contracts as reported on the Schedules of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities. |
58 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
The following is a summary of the location of derivative investments on the Funds’ Statements of Operations for the year ended December 31, 2017:
Derivative Investment Type | Location of Gain (Loss) on Derivatives |
Equity/Currency/Interest Rate/Commodity contracts | Net realized gain (loss) on futures contracts |
Net change in unrealized appreciation (depreciation) on futures contracts | |
Equity Contracts | Net realized gain (loss) on swap agreements |
Net change in unrealized appreciation (depreciation) on swap agreements | |
Equity Contracts | Net realized gain (loss) on options written |
Net change in unrealized appreciation (depreciation) on options written |
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 December 31, 2017:
Realized Gain (Loss) on Derivative Investments Recognized on the Statements of Operations | ||||||||||||||||||||||||||||
Fund | Futures Equity Risk | Swaps Equity Risk | Futures Currency Risk | Futures Interest Rate Risk | Futures Commodity Risk | Options Written Equity Risk | Total | |||||||||||||||||||||
Long Short Equity Fund | $ | 209 | $ | 1,183,416 | $ | — | $ | — | $ | — | $ | — | $ | 1,183,625 | ||||||||||||||
Global Managed Futures Strategy Fund | 2,204,707 | — | (141,676 | ) | (203,773 | ) | (695,673 | ) | — | 1,163,585 | ||||||||||||||||||
Multi-Hedge Strategies Fund | (748,255 | ) | 467,061 | (90,756 | ) | 31,417 | (353,404 | ) | 763 | (693,174 | ) | |||||||||||||||||
Commodities Strategy Fund | — | — | — | — | 68,699 | — | 68,699 |
Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized on the Statements of Operations | ||||||||||||||||||||||||||||
Fund | Futures Equity Risk | Swaps Equity Risk | Futures Currency Risk | Futures Interest Rate Risk | Futures Commodity Risk | Options Written Equity Risk | Total | |||||||||||||||||||||
Long Short Equity Fund | $ | (1,842 | ) | $ | (1,020,069 | ) | $ | — | $ | — | $ | — | $ | — | $ | (1,021,911 | ) | |||||||||||
Global Managed Futures Strategy Fund | (14,595 | ) | — | (12,525 | ) | (142,072 | ) | 117,786 | — | (51,406 | ) | |||||||||||||||||
Multi-Hedge Strategies Fund | 1,125,034 | 640,728 | (5,780 | ) | (51,147 | ) | 117,882 | 9,638 | 1,836,355 | |||||||||||||||||||
Commodities Strategy Fund | — | — | — | — | 141,665 | — | 141,665 |
In conjunction with the use of short sales and derivative instruments, the Funds are required to maintain collateral in various forms. The Funds use, where appropriate, depending on the financial instrument utilized and the broker involved, margin deposits at the broker, cash and/or securities segregated at the custodian bank, discount notes or the repurchase agreements allocated to the Funds.
The Trust has established counterparty credit guidelines and enters into transactions only with financial institutions of investment grade or better. The Trust monitors the counterparty credit risk.
Note 3 – Offsetting
In the normal course of business, the Funds enter into transactions subject to enforceable master netting arrangements or other similar arrangements. Generally, the right to offset in those agreements allows the Funds to counteract the exposure to a specific counterparty with collateral received from or delivered to that counterparty based on the terms of the arrangements. These arrangements provide for the right to liquidate upon the occurrence of an event of default, credit event upon merger or additional termination event.
In order to better define their contractual rights and to secure rights that will help the Funds mitigate their counterparty risk, the Funds may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with their derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between a fund and a counterparty that governs OTC derivatives, including foreign exchange contracts, and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of a default (close-out netting) or similar event, including the bankruptcy or insolvency of the counterparty.
THE RYDEX FUNDS ANNUAL REPORT | 59 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Funds and the counterparty. For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Funds and cash collateral received from the counterparty, if any, are reported separately on the Statements of Assets and Liabilities as segregated cash with broker/receivable for variation margin, or payable for swap settlement/variation margin. Generally, the amount of collateral due from or to a counterparty must exceed a minimum transfer amount threshold (e.g., $300,000) before a transfer is required to be made. To the extent amounts due to the Funds from their counterparties are not fully collateralized, contractually or otherwise, the Funds bear the risk of loss from counterparty nonperformance. The Funds attempt to mitigate counterparty risk by only entering into agreements with counterparties that they believe to be of good standing and by monitoring the financial stability of those counterparties.
For financial reporting purposes, the Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statements of Assets and Liabilities.
The following tables present derivative financial instruments and secured financing transactions that are subject to enforceable netting arrangements and offset in the Statements of Assets and Liabilities in conformity with U.S. GAAP:
Gross Amounts Not Offset in the Statements of Assets and Liabilities | |||||||||||||||||||||||||
Fund | Instrument | Gross Amounts of Recognized Assets1 | Gross Amounts Offset In the Statements of Assets and Liabilities | Net Amount of Assets Presented on the Statements of Assets and Liabilities | Financial Instruments | Cash Collateral Received | Net Amount | ||||||||||||||||||
Long Short Equity Fund | Swap equity contracts | $ | 1,119,030 | $ | — | $ | 1,119,030 | $ | (1,119,030 | ) | $ | — | $ | — | |||||||||||
Multi-Hedge Strategies Fund | Swap equity contracts | 1,323,642 | — | 1,323,642 | (740,479 | ) | — | 583,163 |
Gross Amounts Not Offset in the Statements of Assets and Liabilities | |||||||||||||||||||||||||
Fund | Instrument | Gross Amounts of Recognized Liabilities1 | Gross Amounts Offset In the Statements of Assets and Liabilities | Net Amount of Liabilities Presented on the Statements of Assets and Liabilities | Financial Instruments | Cash Collateral Pledged | Net Amount | ||||||||||||||||||
Long Short Equity Fund | Swap equity contracts | $ | 2,139,099 | $ | — | $ | 2,139,099 | $ | (2,139,099 | ) | $ | — | $ | — | |||||||||||
Multi-Hedge Strategies Fund | Swap equity contracts | 740,479 | — | 740,479 | (740,479 | ) | — | — |
1 | Exchange-traded futures are excluded from these reported amounts. |
The following table presents deposits held by others in connection with derivative investments as of December 31, 2017. The derivatives tables following the Schedule of Investments list each counterparty for which cash collateral may have been pledged or received at period end. The Funds have the right to offset these deposits against any related liabilities outstanding with each counterparty.
Fund | Counterparty/Clearing Agent | Asset Type | Cash Pledged | Cash Received | ||||||||
Global Managed Futures Strategy Fund | Goldman Sachs Group | Futures contracts | $ | 379,269 | $ | — | ||||||
Global Managed Futures Strategy Fund Total | 379,269 | — | ||||||||||
Multi-Hedge Strategies Fund | Goldman Sachs Group | Futures contracts | 1,388,934 | — | ||||||||
Multi-Hedge Strategies Fund Total | 1,388,934 | — | ||||||||||
Commodities Strategy Fund | Goldman Sachs Group | Futures contracts | 264,000 | — | ||||||||
Commodities Strategy Fund Total | 264,000 | — |
60 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Note 4 – Fair Value Measurement
In accordance with U.S. GAAP, fair value is defined as the price that the Funds 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. U.S. GAAP establishes a three-tier fair value hierarchy based on the types of inputs used to value assets and liabilities and requires corresponding disclosure. The hierarchy and the corresponding inputs are summarized below:
Level 1 — | quoted prices in active markets for identical assets or liabilities. |
Level 2 — | significant other observable inputs (for example quoted prices for securities that are similar based on characteristics such as interest rates, prepayment speeds, credit risk, etc.). |
Level 3 — | significant unobservable inputs based on the best information available under the circumstances, to the extent observable inputs are not available, which may include assumptions. |
The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly, fair value determinations for Level 3 securities require the greatest amount of judgment.
The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The suitability of the techniques and sources employed to determine fair valuation are regularly monitored and subject to change.
Note 5 – Investment Advisory Agreement and Other Agreements
Under the terms of an investment advisory contract, the Funds pay GI investment advisory fees calculated at the annualized rates below, based on the average daily net assets of the Funds:
Fund | Management Fees (as a % of Net Assets) |
Long Short Equity Fund | 0.90% |
Global Managed Futures Strategy Fund | 0.90% |
Multi-Hedge Strategies Fund | 1.15% |
Commodities Strategy Fund | 0.75% |
GI has contractually agreed to waive the management fee it receives from each Subsidiary in an amount equal to the management fee paid to GI by the Subsidiary. This undertaking will continue in effect for so long as the Funds invest in the Subsidiary, and may not be terminated by GI unless GI obtains the prior approval of the Funds’ Board of Trustees for such termination. For the year ended December 31, 2017, the Global Managed Futures Strategy Fund, Multi-Hedge Strategies Fund, and Commodities Strategy Fund waived $7,030, $9,169 and $3,392 respectively, related to investments in the Subsidiary.
As part of its agreement with the Trust, GI will pay all expenses of the Multi-Hedge Strategies Fund, including the cost of transfer agency, custody, fund administration, legal, audit and other services, except interest expense, taxes (expected to be de minimis), brokerage commissions and other expenses connected with execution of portfolio transactions, short dividend expenses, subsidiary expenses and extraordinary expenses.
GI engages external service providers to perform other necessary services for the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, etc., on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.
The Trust has adopted an Investor Services Plan for which GFD and other firms that provide investor services (“Service Providers”) may receive compensation. The Funds will pay investor service fees to GFD at an annual rate not to exceed 0.25% of average daily net assets. GFD, in turn, will compensate Service Providers for providing such services, while retaining a portion of such payments to compensate itself for investor services it performs. Fees related to Multi-Hedge Strategies Fund are paid by GI, as previously stated.
THE RYDEX FUNDS ANNUAL REPORT | 61 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
If a Fund invests in an affiliated fund, the investing Fund’s adviser has agreed to waive fees at the investing fund level. Fee waivers will be calculated at the investing Fund level without regard to any expense cap, if any, in effect for the investing Fund. Fees waived under this arrangement are not subject to reimbursement to GI. For the year ended December 31, 2017, the Long Short Equity Fund and Multi-Hedge Strategies Fund waived $68 and $45, respectively, related to investments in affiliated funds.
Certain officers of the Trust are also officers of GI and GFD.
MUFG Investor Services (US), LLC (“MUIS”) acts as the Funds’ administrator, transfer agent and accounting agent. As administrator, transfer agent and accounting agent, MUIS is responsible for maintaining the books and records of the Funds’ securities and cash. The U.S Bank, N.A. (“U.S. Bank”) acts as the Funds’ custodian. As custodian, U.S. Bank is responsible for the custody of the Funds’ assets. For providing the aforementioned services, MUIS and U.S. Bank are entitled to receive a monthly fee equal to an annual percentage of the Fund’s average daily managed assets subject to certain minimum monthly fees and out of pocket expenses.
Note 6 – Repurchase Agreements
The Funds transfer uninvested cash balances into a single joint account, the daily aggregate balance of which is invested in one or more repurchase agreements collateralized by obligations of the U.S. Treasury and U.S. government agencies. The joint account includes other Funds in the Guggenheim complex not covered in this report. The collateral is in the possession of the Funds’ custodian and is evaluated to ensure that its market value exceeds, at a minimum, 102% of the original face amount of the repurchase agreements. Each Fund holds a pro rata share of the collateral based on the dollar amount of the repurchase agreement entered into by each Fund.
At December 31, 2017, the repurchase agreements in the joint account were as follows:
Counterparty and Terms of Agreement | Face Value | Repurchase Price | Collateral | Par Value | Fair Value | ||||||||||||
JP Morgan Chase & Co. | U.S. Treasury Notes | ||||||||||||||||
1.41% | 1.50% - 2.50% | ||||||||||||||||
Due 01/02/18 | $ | 28,652,652 | $ | 28,656,019 | 05/15/24 - 08/15/26 | $ | 31,210,500 | $ | 29,225,798 | ||||||||
Bank of America Merrill Lynch | U.S. Treasury Bond | ||||||||||||||||
1.40% | 3.88% | ||||||||||||||||
Due 01/02/18 | 15,292,005 | 15,293,789 | 04/15/29 | 7,605,000 | 15,597,858 |
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. The Funds’ investment adviser, acting under the supervision of the Board, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the Funds enter into repurchase agreements to evaluate potential risks.
Note 7 – Portfolio Securities Loaned
The Funds may lend their securities to approved brokers to earn additional income. Security lending income shown on the Statements 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, U.S. Bank 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 U.S. Bank, cash collateral and proceeds are invested in the First American Government Obligations Fund - Class Z. 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. Securities lending transactions are accounted for as secured borrowings. The remaining contractual maturity of the securities lending agreement is overnight and continuous.
62 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
At December 31, 2017, the Funds participated in securities lending transactions, which are subject to enforceable netting arrangements, as follows:
Gross Amounts Not Offset in the Statements of Assets and Liabilities | Securities Lending Collateral | |||||||||||||||||||||||
Fund | Value of Securities Loaned | Collateral Receiveda | Net Amount | Cash Collateral Invested | Cash Collateral Uninvested | Total Collateral | ||||||||||||||||||
Long Short Equity Fund | $ | 256,749 | $ | (256,749 | ) | $ | — | $ | 270,351 | $ | — | $ | 270,351 | |||||||||||
Multi-Hedge Strategies Fund | 200,111 | (200,111 | ) | — | 208,329 | — | 208,329 |
a | Actual collateral received by the Fund is greater than the amount shown due to overcollateralization. |
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. GI, acting under the supervision of the Board, reviews the value of the collateral and the creditworthiness of those banks and dealers to evaluate potential risks.
Note 8 – Federal Income Tax Information
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 or federal excise 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, and has concluded that no provision for income tax is required in the Funds’ financial statements. The Funds’ federal tax returns are subject to examination by the Internal Revenue Service for a period of three years after they are filed.
The Global Managed Futures Strategy Fund, Multi-Hedge Strategies Fund, and Commodities Strategy Fund intend to invest up to 25% of their assets in the respective Subsidiary which is expected to provide the Funds with exposure to the commodities markets within the limitations of the federal tax requirements under Subchapter M of the Internal Revenue Code. The Funds have received a private letter ruling from the Internal Revenue Service that concludes that the income the Funds receive from the Subsidiary will constitute qualifying income for purposes of Subchapter M of the Internal Revenue Code. The Subsidiary will be classified as a corporation for U.S. federal income tax purposes. A foreign corporation, such as the Subsidiary, will generally not be subject to U.S. federal income taxation unless it is deemed to be engaged in a U.S. trade or business.
The tax character of distributions paid during the year ended December 31, 2017 was as follows:
Fund | Ordinary Income | Long-Term Capital Gain | Total Distributions | |||||||||
Long Short Equity Fund | $ | 126,120 | $ | — | $ | 126,120 | ||||||
Global Managed Futures Strategy Fund | 224,098 | — | 224,098 |
The tax character of distributions paid during the year ended December 31, 2016 was as follows:
Fund | Ordinary Income | Long-Term Capital Gain | Total Distributions | |||||||||
Global Managed Futures Strategy Fund | $ | 581,108 | $ | — | $ | 581,108 | ||||||
Multi-Hedge Strategies Fund | 48,562 | — | 48,562 |
THE RYDEX FUNDS ANNUAL REPORT | 63 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Note: For federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
The tax components of accumulated earnings/(deficit) as of December 31, 2017 were as follows:
Fund | Undistributed Ordinary Income | Undistributed Long-Term Capital Gain | Net Unrealized Appreciation (Depreciation) | Accumulated Capital and Other Losses | Total | |||||||||||||||
Long Short Equity Fund | $ | 3,995,564 | $ | 362,853 | $ | 1,263,335 | $ | — | $ | 5,621,752 | ||||||||||
Global Managed Futures Strategy Fund | — | — | (530,115 | ) | (155,274 | ) | (685,389 | ) | ||||||||||||
Multi-Hedge Strategies Fund | — | — | (1,086,348 | ) | (218,949 | ) | (1,305,297 | ) | ||||||||||||
Commodities Strategy Fund | 242,391 | — | (1,449,027 | ) | (2,684 | ) | (1,209,320 | ) |
For Federal income tax purposes, capital loss carryforwards represent realized losses of the Funds that may be carried forward and applied against future capital gains. For taxable years beginning on or before December 22, 2010, such capital losses may be carried forward for a maximum of eight years. Under the RIC Modernization Act of 2010, the 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 taxable years must be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to 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. As of December 31, 2017, capital loss carryforwards for the Funds were as follows:
Unlimited | ||||||||||||||||
Fund | Expires in 2018 | Short-Term | Long-Term | Total Capital Loss Carryforward | ||||||||||||
Global Managed Futures Strategy Fund | $ | — | $ | — | $ | (155,274 | ) | $ | (155,274 | ) | ||||||
Multi-Hedge Strategies Fund | (218,949 | ) | — | — | (218,949 | )* | ||||||||||
Commodities Strategy Fund | — | (1,331 | ) | (1,353 | ) | (2,684 | ) |
* | In accordance with Section 382 of the Internal Revenue Code, a portion of certain Fund losses are subject to an annual limitation. This annual limitation is generally applicable to all of the capital loss carryforwards shown with respect to each Fund. |
For the year ended December 31, 2017, the following capital loss carryforward amounts expired or were utilized:
Fund | Expired | Utilized | Total | |||||||||
Long Short Equity Fund | $ | — | $ | 815,042 | $ | 815,042 | ||||||
Global Managed Futures Strategy Fund | — | 1,845,464 | 1,845,464 | |||||||||
Multi-Hedge Strategies Fund | 659,753 | 2,891,285 | 3,551,038 | |||||||||
Commodities Strategy Fund | 9,377,788 | 5,668 | 9,383,456 |
Net investment income and net realized gains (losses) may differ for financial statement and tax purposes because of temporary or permanent book/tax differences. These differences are primarily due to investment in the subsidiaries, the “mark-to-market” of certain derivatives, investment in partnerships, losses deferred due to wash sales, investment in real estate investment trusts, special dividends, investment in securities sold short, foreign currency gains and losses, investment in swaps and distributions in connection with redemption of fund shares. Additional differences may result from the tax treatment of net investment losses and the expiration of capital loss carryforward amounts. To the extent these differences are permanent, reclassifications are made to the appropriate capital accounts in the period that the differences arise. These reclassifications have no effect on net assets or NAV per share.
64 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
The following adjustments were made on the Statements of Assets and Liabilities as of December 31, 2017 for permanent book/tax differences:
Fund | Paid in Capital | Undistributed Net Investment Income/(Loss) | Accumulated Net Realized Gain/(Loss) | |||||||||
Long Short Equity Fund | $ | 293,581 | $ | 203,905 | $ | (497,486 | ) | |||||
Global Managed Futures Strategy Fund | (747,860 | ) | (90,084 | ) | 837,944 | |||||||
Multi-Hedge Strategies Fund | (961,860 | ) | 172,085 | 789,775 | ||||||||
Commodities Strategy Fund | (9,313,511 | ) | 4,422 | 9,309,089 |
At December 31, 2017, the cost of securities for Federal income tax purposes, the aggregate gross unrealized gain for all securities for which there was an excess of value over tax cost and the aggregate gross unrealized loss for all securities for which there was an excess of tax cost over value, were as follows:
Fund | Tax Cost | Tax Unrealized Gain | Tax Unrealized (Loss) | Net Unrealized Gain/(Loss) | ||||||||||||
Long Short Equity Fund | $ | 38,117,905 | $ | 4,055,893 | $ | (2,792,558 | ) | $ | 1,263,335 | |||||||
Global Managed Futures Strategy Fund | 15,266,159 | — | (529,879 | ) | (529,879 | ) | ||||||||||
Multi-Hedge Strategies Fund | 32,272,724 | 2,287,332 | (3,373,446 | ) | (1,086,114 | ) | ||||||||||
Commodities Strategy Fund | 6,724,367 | — | (1,449,027 | ) | (1,449,027 | ) |
Note 9 – Securities Transactions
For the year ended December 31, 2017, the cost of purchases and proceeds from sales of investment securities, excluding government securities, short-term investments and derivatives, were as follows:
Fund | Purchases | Sales | ||||||
Long Short Equity Fund | $ | 109,771,133 | $ | 94,013,164 | ||||
Global Managed Futures Strategy Fund | 321,671 | 100,000 | ||||||
Multi-Hedge Strategies Fund | 82,703,822 | 74,070,871 | ||||||
Commodities Strategy Fund | 2,470,585 | 2,270,000 |
The Funds are permitted to purchase or sell securities from or to certain affiliated funds under specified conditions outlined in procedures adopted by the Board of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by a Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under these procedures, each transaction is effected at the current market price to save costs, where permissible. For the year ended December 31, 2017, the Funds engaged in purchases and sales of securities, pursuant to Rule 17a-7 of the 1940 Act, as follows:
Fund | Purchases | Sales | Realized Gain (Loss) | ||||||||||
Multi-Hedge Strategies Fund | $ | 374,662 | $ | — | $ | — |
Note 10 – Line of Credit
The Trust, along with other affiliated trusts, secured an uncommitted $75,000,000 line of credit from U.S. Bank, N.A., which expires June 11, 2018. This line of credit is reserved for emergency or temporary purposes. Borrowings, if any, under this arrangement bear interest equal to the Prime Rate, minus 2%, which shall be paid monthly, averaging 2.09% for the year ended December 31, 2017. The Funds did not have any borrowings outstanding under this agreement at December 31, 2017.
THE RYDEX FUNDS ANNUAL REPORT | 65 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
The average daily balances borrowed for the year ended December 31, 2017, were as follows:
Fund | Average Daily Balance | |||||
Multi-Hedge Strategies Fund | $ | 3,324 |
Note 11 – Reverse Share Split
Effective December 1, 2016, a reverse share split occurred for the following fund:
Fund | Split Type |
Commodities Strategy Fund | One-for-Sixteen Reverse Split |
The effect of this transactions was to divide the number of outstanding shares of the Fund by the respective split ratio, resulting in a corresponding increase in the net asset value per share. The share transactions presented in the Consolidated Statements of Changes in Net Assets and the Per Share Data in the Consolidated Financial Highlights for each of the periods presented prior to the effective date have been restated to reflect these reverse share splits. There were no changes in net assets, results of operations or total return as a result of these transactions.
Note 12 – Legal Proceedings
Tribune Company
Rydex Variable Trust has been named as a defendant and a putative member of the proposed defendant class of shareholders in the case entitled Kirschner v. FitzSimons, No. 12-2652 (S.D.N.Y.) (formerly Official Committee of Unsecured Creditors of Tribune Co. v. FitzSimons, Adv. Pro. No. 10-54010 (Bankr. D. Del.)) (the “FitzSimons action”), as a result of ownership by certain series of the Rydex Variable Trust of shares in the Tribune Company (“Tribune”) in 2007, when Tribune effected a leveraged buyout transaction (“LBO”) by which Tribune converted to a privately-held company. In his complaint, the plaintiff has alleged that, in connection with the LBO, Tribune insiders and shareholders were overpaid for their Tribune stock using financing that the insiders knew would, and ultimately did, leave Tribune insolvent. The plaintiff has asserted claims against certain insiders, major shareholders, professional advisers, and others involved in the LBO. The plaintiff is also attempting to obtain from former Tribune shareholders, including the Rydex Variable Trust, the proceeds they received in connection with the LBO.
In June 2011, a group of Tribune creditors filed multiple actions against former Tribune shareholders involving state law constructive fraudulent conveyance claims arising out of the 2007 LBO (the “SLCFC actions”). Rydex Variable Trust has been named as a defendant in one or more of these suits. In those actions, the creditors seek to recover from Tribune’s former shareholders the proceeds received in connection with the 2007 LBO.
The FitzSimons action and the SLCFC actions have been consolidated with the majority of the other Tribune LBO-related lawsuits in a multidistrict litigation proceeding captioned In re Tribune Company Fraudulent Conveyance Litig., No. 11-md-2696 (S.D.N.Y.) (the “MDL Proceeding”).
On September 23, 2013, the District Court granted the defendants’ omnibus motion to dismiss the SLCFC actions, on the basis that the creditors lacked standing. On September 30, 2013, the creditors filed a notice of appeal of the September 23 order. On October 28, 2013, the defendants filed a joint notice of cross-appeal of that same order. On March 29, 2016, the U.S. Court of Appeals for the Second Circuit issued its opinion on the appeal of the SLCFC actions. The appeals court affirmed the district court’s dismissal of those lawsuits, but on different grounds than the district court. The appeals court held that while the plaintiffs have standing under the U.S. Bankruptcy Code, their claims were preempted by Section 546(e) of the Bankruptcy Code—the statutory safe harbor for settlement payments. On April 12, 2016, the Plaintiffs in the SLCFC actions filed a petition seeking rehearing en banc before the appeals court. On July 22, 2016, the appeals court denied the petition. On September 9, 2016, the plaintiffs filed a petition for writ of certiorari in the U.S. Supreme Court challenging the Second Circuit’s decision that the safe harbor of Section 546(e) applied to their claims. The shareholder defendants, including the Funds, filed a joint brief in opposition to the petition for certiorari on October 24, 2016. The Supreme Court has not yet granted or denied the petition for certiorari.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
On May 23, 2014, the defendants filed motions to dismiss the FitzSimons action, including a global motion to dismiss Count I, which is the claim brought against former Tribune shareholders for intentional fraudulent conveyance under U.S. federal law. On January 6, 2017, the United States District Court for the Southern District of New York granted the shareholder defendants’ motion to dismiss the intentional fraudulent conveyance claim in the FitzSimons action. The Court concluded that the plaintiff had failed to allege that Tribune entered the LBO with actual intent to hinder, delay, or defraud its creditors, and therefore the complaint failed to state a claim. In dismissing the intentional fraudulent conveyance claim, the Court denied the plaintiff’s request to amend the complaint. On February 23, 2017, the Court issued an order stating that it intends to permit an interlocutory appeal of the dismissal order, but will wait to do so until it has resolved outstanding motions to dismiss filed by other defendants. Accordingly, the timing of the appeal is uncertain.
On July 18, 2017, the plaintiff submitted a letter to the District Court seeking leave to amend its complaint to add a constructive fraudulent transfer claim. The shareholder defendants opposed that request. On August 24, 2017, the Court denied the plaintiff’s request without prejudice to renewal of the request in the event of an intervening change in the law.
None of these lawsuits alleges any wrongdoing on the part of Rydex Variable Trust. The following series of Rydex Variable Trust held shares of Tribune and tendered these shares as part of Tribune’s LBO: Nova Fund, S&P 500 2x Strategy Fund, Multi-Cap Core Equity Fund, S&P 500 Pure Value Fund, Hedged Equity Fund and Multi-Hedge Strategies Fund (the “Funds”). The value of the proceeds received by the foregoing Funds was $12,580, $2,380, $1,360, $148,376, $2,720, and $119,034, respectively. At this stage of the proceedings, Rydex Variable Trust is not able to make a reliable predication as to the outcome of these lawsuits or the effect, if any, on a Fund’s net asset value.
Lyondell Chemical Company
In December 2011, Rydex Variable Trust was named as a defendant in Weisfelner, as Trustee of the LB Creditor Trust, v. Fund 1 (In re Lyondell Chemical Co.), Adv. Pro. No. 10-4609 (Bankr. S.D.N.Y.) (the “Creditor Trust Action”). Its funds may also be putative members of the proposed defendant classes in Weisfelner, as Trustee of the LB Litigation Trust v. A. Holmes & H. Holmes TTEE (In re Lyondell Co.), Adv. Pro. No. 10-5525 (Bankr. S.D.N.Y.) (the “Litigation Trust Action”) and Weisfelner, as Trustee of the LB Creditor Trust, v. Reichman (In re Lyondell Chemical Co.), Adv. Pro. No. 12-1570 (Bankr. S.D.N.Y.).
Similar to the claims made in the Tribune matter, the Weisfelner complaints seek to have set aside and recovered as fraudulent transfers from former Lyondell Chemical Company (“Lyondell”) shareholders the consideration paid to them pursuant to the cash out merger of Lyondell shareholders in connection with the combination of Lyondell and Basell AF in 2007. Lyondell filed for bankruptcy in 2008. The Creditor Trust Action and Reichman allege claims against the former Lyondell shareholders under state law for both constructive fraudulent transfer and intentional fraudulent transfer. The Litigation Trust Action alleges a claim against the former Lyondell shareholders under federal law for intentional fraudulent transfer.
On April 7, 2014, the plaintiff filed a Third Amended Complaint in the Creditor Trust Action, a Second Amended Complaint in the Litigation Trust Action, and an Amended Complaint in Reichman.
On May 8, 2014, the plaintiff in the Litigation Trust Action filed a motion to certify a defendant class generally comprised of all former Lyondell shareholders that received proceeds in exchange for their shares in the 2007 merger transaction.
On July 30, 2014, the defendants filed a motion to dismiss these lawsuits. The Bankruptcy Court held oral argument on the motion to dismiss and on the motion for class certification on January 14 and January 15, 2015. On September 15, 2015, the Bankruptcy Court denied the motion for class certification without prejudice to the plaintiff’s right to file a renewed motion. On November 18, 2015, the Bankruptcy Court granted the defendants’ motion to dismiss the intentional fraudulent transfer claims in the Creditor Trust Action, the Litigation Trust Action, and in Reichman, but denied the motion to dismiss the constructive fraudulent transfer claims in the Creditor Trust Action and in Reichman. The Bankruptcy Court entered final judgment dismissing the Litigation Trust Action, but the plaintiff appealed the dismissal to the U.S. District Court for the Southern District of New York.
On July 27, 2016, the District Court reversed the Bankruptcy Court and reinstated the federal law intentional fraudulent transfer claim in the Litigation Trust Action and remanded to the Bankruptcy Court for further proceedings. The District Court found that the fraudulent intent that mattered was that of Lyondell’s CEO, not its board, because the CEO’s intent could be imputed to Lyondell under Delaware law agency principles. The District Court did note, however, that plaintiff faces a high standard for proving “actual intent” to harm creditors, and that it remains to be seen whether plaintiff will be able to make this showing. On August 11, 2016, the shareholder defendants filed a motion for reconsideration and/
THE RYDEX FUNDS ANNUAL REPORT | 67 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (concluded) |
or to certify an interlocutory appeal of the District Court’s opinion. On October 5, 2016, the District Court denied the motion for reconsideration and/or to certify an interlocutory appeal. On April 21, 2017, the Bankruptcy Court issued an Opinion and Order After Trial in a related Lyondell litigation (the “Blavatnik Action”) rejecting claims for intentional fraudulent transfer and constructive fraudulent transfer in connection with the 2007 LBO. Based on this related ruling in the Blavatnik Action, the shareholder defendants filed a motion to dismiss the Litigation Trust Action on the grounds of collateral estoppel on May 30, 2017. Although the Bankruptcy Court had not yet ruled on the motion to dismiss, on August 15, 2017, the plaintiff in the Litigation Trust action filed a notice of dismissal of all claims against the defendants who joined the motion to dismiss. On August 18, 2017, the Litigation Trust plaintiff also withdrew his request for class certification of a defendant class in the Litigation Trust action. On September 5, 2017, the Court entered an order dismissing the Litigation Trust action with prejudice. The Court’s order dismissed the action as to all defendants as well as to unnamed members of the putative defendant class.
On May 4, 2016, the defendants filed a motion to dismiss, or in the alternative, for a stay of, the Creditor Trust Action and Reichman in light of the U.S. Court of Appeals for the Second Circuit’s opinion in the appeal of the Tribune SLCFC actions. On July 20, 2016, the Bankruptcy Court issued a report and recommendation granting the defendants’ motion to dismiss. On May 30, 2017, the shareholder defendants filed a motion to remand the proceedings in the Creditor Trust and Reichman Actions to the Bankruptcy Court, for consideration of the collateral estoppel ground for dismissal raised by the Bankruptcy Court’s ruling in the Blavatnik Action. On August 18, 2017, the plaintiff in the Creditor Trust action filed a notice of dismissal of claims brought against defendants who had not answered the Third Amended Complaint. The same day, the plaintiff in the Reichman action filed a notice of dismissal of all claims against named defendants who had not filed an answer and withdrew his request for class certification of a defendant class. On September 5, 2017, the Court entered an order dismissing the Creditor Trust and Reichman actions with prejudice. The Court’s order dismissed the actions as to all defendants as well as to unnamed members of the putative defendant class in the Reichman action.
As a result of the dismissals above, there are no longer claims pending against the Rydex Variable Trust related to the Lyondell merger.
These lawsuits do not allege any wrongdoing on the part of Rydex Variable Trust. The following series of Rydex Variable Trust received cash proceeds from the cash out merger in the following amounts: Basic Materials Fund - $1,235,952; Long Short Equity Fund f/k/a U.S. Long Short Momentum Fund - $523,200; Multi-Cap Core Equity Fund - $5,760; Hedged Equity Fund - $480; and Multi-Hedge Strategies Fund - $112,848.
Note 13 – Fund Changes
At a meeting held on May 25, 2017, the Board of Trustees and the Advisor determined to revise the principal investment strategies of the Long Short Equity Fund (the “Fund”) effective on May 31, 2017. For periods after May 31, 2017, the Fund will compare its performance to two new performance benchmarks: the Morningstar Long/Short Equity Category Average and the S&P 500® Index. The new comparative performance benchmarks will accompany the existing comparative performance benchmarks for the next year.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Shareholders of Guggenheim Long Short Equity Fund, Guggenheim Global Managed Futures Strategy Fund, Guggenheim Multi-Hedge Strategies Fund, and Rydex Commodities Strategy Fund and the Board of Trustees of Rydex Variable Trust
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Guggenheim Long Short Equity Fund, Guggenheim Global Managed Futures Strategy Fund (consolidated), Guggenheim Multi-Hedge Strategies Fund (consolidated), and Rydex Commodities Strategy Fund (consolidated) (collectively referred to as the “Funds”), (four of the funds constituting Rydex Variable Trust (the “Trust”)), including the schedules of investments, as of December 31, 2017, 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, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated, where applicable, financial position of each of the Funds (four of the funds constituting Rydex Variable Trust) at December 31, 2017, the consolidated, where applicable, results of their operations for the year then ended, the consolidated, where applicable, changes in their net assets for each of the two years in the period then ended and their consolidated, where applicable, financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian, transfer agent, paying agents, and brokers or by other appropriate auditing procedures where replies from paying agents or brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Guggenheim investment companies since 1979.
Tysons, Virginia
February 27, 2018
THE RYDEX FUNDS ANNUAL REPORT | 69 |
OTHER INFORMATION (Unaudited) |
Federal Income Tax Information
This information is being provided as required by the Internal Revenue Code. Amounts shown may differ from those elsewhere in the report because of differences in tax and financial reporting practice.
In January 2018, shareholders will be advised on IRS Form 1099 DIV or substitute 1099 DIV as to the federal tax status of the distributions received by shareholders in the calendar year 2017.
Of the taxable ordinary income distributions paid during the fiscal year ending December 31, 2017, the following fund had the corresponding percentages qualify for the dividends received deduction for corporations:
Fund | Dividend Received Deduction |
Long Short Equity Fund | 100.00% |
Global Managed Futures Strategy Fund | 0.00% |
With respect to the taxable year ended December 31, 2017, the Fund hereby designates as capital gain dividends the amounts listed below, or, if subsequently determined to be different, the net capital gain of such year:
Fund | From long-term capital gain: | From long-term capital gain, using proceeds from shareholder redemptions: | ||||||
Long Short Equity Fund | $ | — | $ | 293,581 |
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 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
Sector Classification
Information in the Schedule of Investments is categorized by sectors using sector-level Classifications defined by the Bloomberg Industry Classification System, a widely recognized industry classification system provider. Each Fund’s registration statement has investment policies relating to concentration in specific sectors/industries. For purposes of these investment policies, the Funds usually classify sectors/industries based on industry-level Classifications used by widely recognized industry classification system providers such as Bloomberg Industry Classification System, Global Industry Classification Standards and Barclays Global Classification Scheme.
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 https://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 800-SEC-0330. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 800.820.0888.
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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 visiting guggenheiminvestments.com or by calling 800.820.0888.
Name, Address* and Year of Birth of Trustees | Position(s) Held with the Trust | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee |
INDEPENDENT TRUSTEES | ||||
Angela Brock-Kyle (1959) | Trustee, Member of the Audit Committee, Chairwoman and Member of the Compliance and Risk Oversight Committee, and Member of the Nominating and Governance Committee. | Current: Founder and Chief Executive Officer, B.O.A.R.D.S (consulting firm).
Former: Senior Leader, TIAA (financial services firm) (1987-2012). | 133 | Current: Infinity Property & Casualty Corporation (2014-present). |
Corey A. Colehour (1945) | Trustee, Member of the Audit Committee, Member of the Nominating and Governance Committee, and Member of the Investment and Performance Committee. | Current: Retired. | 133 | None. |
J. Kenneth Dalton (1941) | Trustee, Member and Chairman of the Audit Committee, and Member of the Compliance and Risk Oversight Committee. | Current: Retired. | 133 | Epiphany Funds (3) (2009-present). |
John O. Demaret (1940) | Trustee, Member of the Audit Committee, and Member of the Compliance and Risk Oversight Committee. | Current: Retired. | 133 | None. |
Werner E. Keller (1940) | Chairman and Trustee of the Board, and Member of the Audit Committee. | Current: Founder and President, Keller Partners, LLC (investment research firm) (2005-present). | 133 | None. |
Thomas F. Lydon, Jr. (1960) | Trustee, Member of the Audit Committee, Chairman and Member of the Nominating and Governance Committee, and Member of the Investment and Performance Committee. | Current: President, Global Trends Investments (registered investment adviser) (1996-present). | 133 | US Global Investors (GROW) (1995-present). |
Patrick T. McCarville (1942) | Trustee, Member of the Audit Committee, and Member of the Nominating and Governance Committee. | Current: Retired.
Former: Chief Executive Officer, Par Industries, Inc., d/b/a Par Leasing (1977-2010). | 133 | None. |
Sandra G. Sponem (1958)
| Trustee, Member of the Audit Committee, Member of the Nominating and Governance Committee, and Chairwoman and Member of the Investment and Performance Committee, | Current: Retired
Former: Senior Vice President and Chief Financial Officer, M.A. Mortenson Companies, Inc. (general contracting firm) (2007-2017). | 133 | None. |
THE RYDEX FUNDS ANNUAL REPORT | 71 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* and Year of Birth of Trustees | Position(s) Held with the Trust | Principal Occupation(s) During Past 5 Years |
OFFICERS | ||
Michael P. Byrum (1970) | Vice President | Current: Senior Vice President, Security Investors, LLC (2010-present); President and Chief Investment Officer, Rydex Holdings, LLC (2008-present); Director and Chairman, Advisory Research Center, Inc. (2006-present); Manager, Guggenheim Specialized Products, LLC (2005-present).
Former: Vice President, Guggenheim Distributors, LLC (2009); Director (2009-2010) and Secretary (2002-2010), Rydex Fund Services, LLC; Director (2008-2010), Chief Investment Officer (2006-2010), President (2004-2010) and Secretary (2002-2010), Rydex Advisors, LLC; Director (2008-2010), Chief Investment Officer (2006-2010), President (2004-2010) and Secretary (2002-2010), Rydex Advisors II, LLC. |
James M. Howley (1972) | Assistant Treasurer | Current: Managing Director, Guggenheim Investments (2004-present); Assistant Treasurer, certain other funds in the Fund Complex (2006-present).
Former: Manager, Mutual Fund Administration of Van Kampen Investments, Inc. (1996-2004). |
Keith D. Kemp (1960) | Assistant Treasurer | Current: Treasurer and Assistant Treasurer, certain other funds in the Fund Complex (2010-present); Managing Director, Guggenheim Investments (2015-present); Chief Financial Officer, Guggenheim Specialized Products, LLC (2016-present).
Former: Managing Director and Director, Transparent Value, LLC (2010-2016); Director, Guggenheim Partners Investment Management, LLC (2010-2015); Chief Operating Officer, Macquarie Capital Investment Management (2007-2009). |
Amy J. Lee (1961)
| President | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2017-present); Chief Legal Officer, certain other funds in the Fund Complex (2014- present); Senior Managing Director, Guggenheim Investments (2012-present).
Former: Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004-2012). |
Mark E. Mathiasen (1978) | Secretary | Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present). |
Glenn McWhinnie (1969) | Assistant Treasurer | Current: Vice President, Guggenheim Investments (2009-present); Assistant Treasurer, certain other funds in the Fund Complex (2016-present). |
Elisabeth Miller (1968) | Chief Compliance Officer | Current: CCO, certain other funds in the Fund Complex (2012-present); CCO, Security Investors, LLC (2012- present); CCO, Guggenheim Funds Investment Advisors, LLC (2012-present); Managing Director, Guggenheim Investments (2012-present). Vice President, Guggenheim Funds Distributors, LLC (2014-present).
Former: CCO, Guggenheim Distributors, LLC (2009-2014); Senior Manager, Security Investors, LLC (2004-2009); Senior Manager, Guggenheim Distributors, LLC (2004-2009). |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(concluded) |
Name, Address* and Year of Birth of Trustees | Position(s) Held with the Trust | Principal Occupation(s) During Past 5 Years |
OFFICERS - concluded | ||
Adam J. Nelson (1979) | Assistant Treasurer | Current: Vice President, Guggenheim Investments (2015-present); Assistant Treasurer, certain other funds in the Fund Complex (2015-present).
Former: Assistant Vice President and Fund Administration Director, State Street Corporation (2013-2015); Fund Administration Assistant Director, State Street (2011-2013); Fund Administration Manager, State Street (2009-2011). |
Kimberly J. Scott (1974) | Assistant Treasurer | Current: Director, Guggenheim Investments (2012-present); Assistant Treasurer, certain other funds in the Fund Complex (2012-present).
Former: Financial Reporting Manager, Invesco, Ltd. (2010-2011); Vice President/Assistant Treasurer, Mutual Fund Administration for Van Kampen Investments, Inc./Morgan Stanley Investment Management (2009-2010); Manager of Mutual Fund Administration, Van Kampen Investments, Inc./Morgan Stanley Investment Management (2005-2009). |
John L. Sullivan (1955)
| Chief Financial Officer and Treasurer | Current: CFO, Chief Accounting Officer and Treasurer, certain other funds in the Fund Complex (2010-present); Senior Managing Director, Guggenheim Investments (2010-present).
Former: Managing Director and CCO, each of the funds in the Van Kampen Investments fund complex (2004-2010); Managing Director and Head of Fund Accounting and Administration, Morgan Stanley Investment Management (2002-2004); CFO and Treasurer, Van Kampen Funds (1996-2004). |
Jon Szafran (1989) | Assistant Treasurer | Current: Vice President, Guggenheim Investments (2017-present); Assistant Treasurer, certain other funds in the Fund Complex (2017-present).
Former: Assistant Treasurer of Henderson Global Funds and Manager of US Fund Administration, Henderson Global Investors (North America) Inc. (“HGINA”), (2017); Senior Analyst of US Fund Administration, HGINA (2014-2017); Senior Associate of Fund Administration, Cortland Capital Market Services, LLC (2013-2014); Experienced Associate, PricewaterhouseCoopers LLP (2012-2013). |
* | All Trustees and Officers may be reached c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
THE RYDEX FUNDS ANNUAL REPORT | 73 |
GUGGENHEIM INVESTMENTS PRIVACY POLICIES (Unaudited) |
Guggenheim Investments as used herein refers to Guggenheim Partners, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC and Security Investors, LLC as well as the funds in the Guggenheim Funds complex (the “funds”).
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 personal information about you, we hold ourselves to high standards in its safekeeping and use. This means, most importantly, that we do not sell client or account information to anyone—whether you are a current or former Guggenheim Investments client.
The Information We Collect About You and How We Collect It
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 Funds or one of the Guggenheim affiliated companies. “Nonpublic personal information” is personally identifiable information about you. For example it includes 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 Share Your Personal Information
As a matter of policy, we do not disclose your nonpublic personal information to nonaffiliated third parties except as required or permitted by law. 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 your personal 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. In connection with servicing your accounts or 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 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 personal 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 share personal information about you if we are compelled by law to do so, if you direct us to do so with your consent, or in other circumstances as permitted by law.
How We Safeguard Your Personal Information
We maintain physical, electronic and procedural safeguards to protect your personal information. Within Guggenheim Investments, access to such information is limited to those who need it to perform their jobs such as servicing your account, resolving problems or informing you of new products and services.
74 | THE RYDEX FUNDS ANNUAL REPORT |
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12.31.2017
Rydex Variable Trust Funds Annual Report
Domestic Equity Funds |
Nova Fund |
Inverse S&P 500® Strategy Fund |
NASDAQ-100® Fund |
Inverse NASDAQ-100® Strategy Fund |
S&P 500® 2x Strategy Fund |
NASDAQ-100® 2x Strategy Fund |
Mid-Cap 1.5x Strategy Fund |
Inverse Mid-Cap Strategy Fund |
Russell 2000® 2x Strategy Fund |
Russell 2000® 1.5x Strategy Fund |
Inverse Russell 2000® Strategy Fund |
Dow 2x Strategy Fund |
Inverse Dow 2x Strategy Fund |
Fixed Income Funds |
Government Long Bond 1.2x Strategy Fund |
Inverse Government Long Bond Strategy Fund |
High Yield Strategy Fund |
Money Market Fund |
U.S. Government Money Market Fund |
GuggenheimInvestments.com | RVATB1-ANN-2-1217x1218 |
TABLE OF CONTENTS |
DEAR SHAREHOLDER | 2 |
ECONOMIC AND MARKET OVERVIEW | 4 |
A BRIEF NOTE ON THE COMPOUNDING OF RETURNS | 6 |
ABOUT SHAREHOLDERS’ FUND EXPENSES | 7 |
NOVA FUND | 9 |
INVERSE S&P 500® STRATEGY FUND | 21 |
NASDAQ-100® FUND | 28 |
INVERSE NASDAQ-100® STRATEGY FUND | 37 |
S&P 500® 2x STRATEGY FUND | 44 |
NASDAQ-100® 2x STRATEGY FUND | 56 |
MID-CAP 1.5x STRATEGY FUND | 65 |
INVERSE MID-CAP STRATEGY FUND | 76 |
RUSSELL 2000® 2x STRATEGY FUND | 83 |
RUSSELL 2000® 1.5x STRATEGY FUND | 109 |
INVERSE RUSSELL 2000® STRATEGY FUND | 135 |
DOW 2x STRATEGY FUND | 142 |
INVERSE DOW 2x STRATEGY FUND | 150 |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND | 157 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND | 164 |
HIGH YIELD STRATEGY FUND | 172 |
U.S. GOVERNMENT MONEY MARKET FUND | 180 |
NOTES TO FINANCIAL STATEMENTS | 186 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 206 |
OTHER INFORMATION | 208 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS | 210 |
GUGGENHEIM INVESTMENTS PRIVACY POLICIES | 213 |
THE RYDEX FUNDS ANNUAL REPORT | 1 |
December 31, 2017 |
Dear Shareholder:
Security Investors, LLC (the “Investment Adviser”) is pleased to present the annual shareholder report for 17 of our Funds (the “Funds”) that are part of the Rydex Variable Trust. This report covers performance of the Funds for the annual period ended December 31, 2017.
The Investment Adviser is a part of Guggenheim Investments (“GI”), which represents the investment management businesses of Guggenheim Partners, LLC (“Guggenheim”), a global, diversified financial services firm.
Guggenheim Funds Distributors, LLC is the distributor of the Funds. Guggenheim Funds Distributors, LLC is affiliated with Guggenheim and the Investment Adviser.
We encourage you to read the Economic and Market Overview section of the report, which follows this letter, and then the Performance Report and Fund Profile for each Fund.
We are committed to providing innovative investment solutions and appreciate the trust you place in us.
Sincerely,
Security Investors, LLC
January 31, 2018
Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objectives, risks, charges, expenses and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at guggenheiminvestments.com or call 800.820.0888.
This material is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation.
Inverse and leveraged Funds are not suitable for all investors. ● These Funds 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 a Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. ● Inverse Funds involve certain risks, which include increased volatility due to the Funds’ possible use of short sales of securities and derivatives, such as options and futures. ● The Funds’ use of derivatives, such as futures, options and swap agreements, may expose the Funds’ 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 Funds seek to provide investment results that match the performance of a specific benchmark, before fees and expenses, on a daily basis. Because the 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. 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. The Funds 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 a fund’s performance if the benchmark experiences volatility. Investors should monitor their leveraged and inverse Funds’ holdings consistent with their strategies, as frequently as daily. ● For more on these and other risks, please read the prospectus.
2 | THE RYDEX FUNDS ANNUAL REPORT |
December 31, 2017 |
The Nasdaq-100® Fund may not be suitable for all investors. ● Investing in Rydex NASDAQ-100® Fund involves certain risks, which may include increased volatility due to the use of futures and the possibility that companies in which the Fund invests may not be commercially successful or may become obsolete more quickly. ● There are no assurances that any Rydex Fund will achieve its objective and/or strategy. This Fund is subject to active trading and tracking error risks, which may increase volatility, impact the Fund’s ability to achieve its investment objective and may decrease the Fund’s performance. ● This Fund is considered non-diversified and can invest a greater portion of its assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of Fund shares than would occur in a more diversified fund. ● For more on these and other risks, please read the prospectus.
The Government Long Bond 1.2x Strategy and Inverse Government Long Bond Strategy funds are not suitable for all investors. ● These Funds 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, and (c) intend to actively monitor and manage their investments. ● The more a Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. ● The Funds’ use of derivatives, such as futures, options and swap agreements, may expose the Funds’ shareholders to additional risks that they would not be subject to if they invested directly in the securities underlying those derivatives. ● Leveraged and inverse Funds seek to provide investment results that match the performance of a specific benchmark, before fees and expenses, on a daily basis. Because the 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 Funds’ 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 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. The Funds 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 a fund’s performance if the benchmark experiences volatility. Investors should monitor their leveraged Funds’ holdings consistent with their strategies, as frequently as daily. ● In general, bond prices rise when interest rates fall, and vice versa. Moreover, while securities with longer maturities tend to produce higher yields, the price of longer maturity securities is also subject to greater fluctuations as a result of changes in interest rates. ● It is important to note that the Funds are not guaranteed by the U.S. government. ● There are no assurances that any Guggenheim fund will achieve its objective and/or strategy. These Funds are subject to active trading and tracking error risks, which may increase volatility, impact the fund’s ability to achieve its investment objective, and may decrease the Fund’s performance. ● For more on these and other risks, please read the prospectus.
The U.S. Government Money Market Fund may not be suitable for all investors. ● You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
The High Yield Strategy Fund may not be suitable for all investors. ● The Fund’s use of derivatives such as futures, options, and swap agreements will expose the Fund to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. ● A highly liquid secondary market may not exist for the credit default swaps the Fund invests in, and there can be no assurance that a highly liquid secondary market will develop. ● The Fund’s market value will change in response to interest rate changes and market conditions among other factors. ● You may have a gain or loss when you sell your shares. ● In general, bond prices rise when interest rates fall, and vice versa. ● The Fund’s exposure to the high yield bond market may subject the Fund to greater volatility because (i) it will be affected by the ability of high yield security issuers’ ability to make principal and interest payments and (ii) the prices of derivatives linked to high yield bonds may fluctuate unpredictably and not necessarily in relation to interest rates. ● It is important to note that the Fund is not guaranteed by the U.S. government. ● The Fund is subject to active trading risks that may increase volatility and impact its ability to achieve its investment objective.
THE RYDEX FUNDS ANNUAL REPORT | 3 |
ECONOMIC AND MARKET OVERVIEW (Unaudited) | December 31, 2017 |
The market story at the end of 2017 was one of positive economic momentum. Economic activity finished 2017 strongly, led by an acceleration in household spending, which was bolstered by consumer confidence near cyclical highs and healthier household balance sheets. Job growth and rebuilding activity resumed following the several hurricanes that hit the U.S., and elevated business optimism and tax changes could boost business capital expenditure plans in the coming quarters. The economy could also benefit from favorable financial conditions both in the U.S. and abroad, which could keep economic growth well above 2% in 2018.
While job growth continues at an unsustainable pace, wage growth has still been relatively unresponsive to declines in the unemployment rate. This could mean that the natural rate of unemployment is lower than the U.S. Federal Reserve’s (the “Fed”) current estimate of 4.6%, and it could also mean that there is still labor market slack left in the form of people not currently participating in the labor force. Even so, the tighter labor market and increasing worker shortages will put upward pressure on wage growth, which has been held back by meager productivity gains.
Core inflation has been below the Fed’s 2% target for some time now, which should continue for the next few months. However, by the middle of 2018 core inflation should approach the Fed’s target due to an accelerating economy, reduced labor market slack, and favorable base effects. Inflation closer to target and continued declines in the unemployment rate will give the Fed confidence to press on with tightening. Moreover, financial conditions remain highly accommodative, and fiscal stimulus will give the economy an additional boost, giving the Fed further room to raise rates. Thus, even as the fourth quarter of 2017 saw the commencement of the Fed’s balance sheet roll-off in October and another rate hike in December, we expect the Fed to move to increasingly tighter policy.
For the 12 months ended December 31, 2017, the Standard & Poor’s 500® (“S&P 500”) Index* returned 21.83%. The MSCI Europe-Australasia-Far East (“EAFE”) Index* returned 25.03%. The return of the MSCI Emerging Markets Index* was 37.28%.
In the bond market, the Bloomberg Barclays U.S. Aggregate Bond Index* posted a 3.54% return for the period, while the Bloomberg Barclays U.S. Corporate High Yield Index* returned 7.50%. The return of the ICE Bank of America (“BofA”) Merrill Lynch 3-Month U.S. Treasury Bill Index* was 0.86% for the 12-month period.
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.
Bloomberg Barclays Long U.S. Treasury Index includes all publicly issued, U.S. Treasury securities that have a remaining maturity of 10 or more years, are rated investment grade, and have $250 million or more of outstanding face value. In addition, the securities must be denominated in U.S. dollars and must be fixed rate and nonconvertible. The Long U.S. Treasury Index is market capitalization weighted and the securities in the index are updated on the last business day of each month.
Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, mortgage-backed securities or “MBS” (agency fixed-rate and hybrid adjustable-rate mortgage, or “ARM”, pass-throughs), asset-backed securities (“ABS”), and commercial mortgage-backed securities (“CMBS”) (agency and non-agency).
Bloomberg Barclays U.S. Corporate High Yield Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB +/BB + or below.
Dow Jones Industrial Average® is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The DJIA was invented by Charles Dow in 1896.
ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged market Index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income.
MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada.
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.
4 | THE RYDEX FUNDS ANNUAL REPORT |
ECONOMIC AND MARKET OVERVIEW (Unaudited)(concluded) | December 31, 2017 |
NASDAQ-100® Index includes 100 of the largest domestic and international non-financial securities listed on The Nasdaq Stock Market based on market capitalization. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain securities of financial companies including investment companies.
Russell 2000® Index measures the performance of the small-cap value segment of the U.S. equity universe.
S&P 500® is a broad-based index, the performance of which is based on the performance of 500 widely held common stocks chosen for market size, liquidity, and industry group representation.
S&P MidCap 400® Index provides investors with a benchmark for mid-sized companies. The index covers approximately 7% of the U.S. equity market, and seeks to remain an accurate measure of mid-sized companies, reflecting the risk and return characteristics of the broader mid-cap universe on an on-going basis.
THE RYDEX FUNDS ANNUAL REPORT | 5 |
A BRIEF NOTE ON THE COMPOUNDING OF RETURNS (Unaudited) |
Many of the Funds described in this report are benchmarked daily to leveraged and/or inverse leveraged 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 on a cumulative basis. 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 6.0% gain and an expectation that the fund will rise by 9.0%. 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 | 6.0% | 9.0% | $ 10.90 | 9.0% | In line |
Day 2 | 99 | -6.6% | -9.9% | $ 9.82 | -9.9% | In line |
Cumulative | -1.0% | -1.5% | -1.8% | -0.3% |
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.
6 | THE RYDEX FUNDS ANNUAL REPORT |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited) |
All mutual funds have operating expenses, and it is important for our shareholders to understand the impact of costs on their investments. Shareholders of a fund incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, other distributions, and exchange fees, and (ii) ongoing costs, including management fees, administrative services, and shareholder reports, among others. These ongoing costs, or operating expenses, are deducted from a fund’s gross income and reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets, which is known as the expense ratio. The following examples are intended to help investors understand the 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 examples are based on an investment of $1,000 made at the beginning of the period and held for the entire six-month period beginning June 30, 2017 and ending December 31, 2017.
The following tables illustrate the Funds’ costs in two ways:
Table 1. Based on actual Fund return: This section helps investors estimate the actual expenses paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, and the fifth column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. Investors may use the information here, together with the amount invested, to estimate the expenses paid over the period. Simply divide the Fund’s 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 provided under the heading “Expenses Paid During Period.”
Table 2. Based on hypothetical 5% return: This section is intended to help investors compare a Fund’s cost with those of other mutual funds. The table 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. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses paid during the period. The example is useful in making comparisons because the U.S. Securities and Exchange Commission (the “SEC”) requires all mutual funds to calculate expenses based on the 5% return. Investors can assess a Fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
The calculations illustrated above assume no shares were bought or sold during the period. Actual costs may have been higher or lower, depending on the amount of investment and the timing of any purchases or redemptions.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, and contingent deferred sales charges (“CDSC”) on redemptions, if any. 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 transactional costs were included, your costs would have been higher.
More information about the Funds’ expenses, including annual expense ratios for periods up to five years (subject to the Fund’s inception date), can be found in the Financial Highlights section of this report. For additional information on operating expenses and other shareholder costs, please refer to the appropriate Fund prospectus.
THE RYDEX FUNDS ANNUAL REPORT | 7 |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(concluded) |
Expense Ratio1 | Fund Return | Beginning Account Value June 30, 2017 | Ending Account Value December 31, 2017 | Expenses Paid During Period2 | |
Table 1. Based on actual Fund return3 | |||||
Nova Fund | 1.61% | 16.34% | $ 1,000.00 | $ 1,163.40 | $ 8.78 |
Inverse S&P 500® Strategy Fund | 1.76% | (9.75%) | 1,000.00 | 902.50 | 8.44 |
NASDAQ-100® Fund | 1.65% | 13.10% | 1,000.00 | 1,131.00 | 8.86 |
Inverse NASDAQ-100® Strategy Fund | 1.80% | (12.22%) | 1,000.00 | 877.80 | 8.52 |
S&P 500® 2x Strategy Fund | 1.76% | 21.98% | 1,000.00 | 1,219.80 | 9.85 |
NASDAQ-100® 2x Strategy Fund | 1.80% | 26.81% | 1,000.00 | 1,268.10 | 10.29 |
Mid-Cap 1.5x Strategy Fund | 1.76% | 13.44% | 1,000.00 | 1,134.40 | 9.47 |
Inverse Mid-Cap Strategy Fund | 1.76% | (8.44%) | 1,000.00 | 915.60 | 8.50 |
Russell 2000® 2x Strategy Fund | 1.81% | 16.90% | 1,000.00 | 1,169.00 | 9.90 |
Russell 2000® 1.5x Strategy Fund | 1.81% | 12.76% | 1,000.00 | 1,127.60 | 9.71 |
Inverse Russell 2000® Strategy Fund | 1.81% | (8.45%) | 1,000.00 | 915.50 | 8.74 |
Dow 2x Strategy Fund | 1.81% | 34.72% | 1,000.00 | 1,347.20 | 10.71 |
Inverse Dow 2x Strategy Fund | 1.80% | (26.85%) | 1,000.00 | 731.50 | 7.86 |
Government Long Bond 1.2x Strategy Fund | 1.31% | 3.09% | 1,000.00 | 1,030.90 | 6.71 |
Inverse Government Long Bond Strategy Fund | 3.87% | (3.24%) | 1,000.00 | 967.60 | 19.19 |
High Yield Strategy Fund | 1.61% | 2.73% | 1,000.00 | 1,027.30 | 8.23 |
U.S. Government Money Market Fund | 1.12% | 0.01% | 1,000.00 | 1,000.10 | 5.65 |
Table 2. Based on hypothetical 5% return (before expenses) | �� | ||||
Nova Fund | 1.61% | 5.00% | $ 1,000.00 | $ 1,017.09 | $ 8.19 |
Inverse S&P 500® Strategy Fund | 1.76% | 5.00% | 1,000.00 | 1,016.33 | 8.94 |
NASDAQ-100® Fund | 1.65% | 5.00% | 1,000.00 | 1,016.89 | 8.39 |
Inverse NASDAQ-100® Strategy Fund | 1.80% | 5.00% | 1,000.00 | 1,016.13 | 9.15 |
S&P 500® 2x Strategy Fund | 1.76% | 5.00% | 1,000.00 | 1,016.33 | 8.94 |
NASDAQ-100® 2x Strategy Fund | 1.80% | 5.00% | 1,000.00 | 1,016.13 | 9.15 |
Mid-Cap 1.5x Strategy Fund | 1.76% | 5.00% | 1,000.00 | 1,016.33 | 8.94 |
Inverse Mid-Cap Strategy Fund | 1.76% | 5.00% | 1,000.00 | 1,016.33 | 8.94 |
Russell 2000® 2x Strategy Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
Russell 2000® 1.5x Strategy Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
Inverse Russell 2000® Strategy Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
Dow 2x Strategy Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
Inverse Dow 2x Strategy Fund | 1.80% | 5.00% | 1,000.00 | 1,016.13 | 9.15 |
Government Long Bond 1.2x Strategy Fund | 1.31% | 5.00% | 1,000.00 | 1,018.60 | 6.67 |
Inverse Government Long Bond Strategy Fund | 3.87% | 5.00% | 1,000.00 | 1,005.70 | 19.56 |
High Yield Strategy Fund | 1.61% | 5.00% | 1,000.00 | 1,017.09 | 8.19 |
U.S. Government Money Market Fund | 1.12% | 5.00% | 1,000.00 | 1,019.56 | 5.70 |
1 | This ratio represents annualized Net Expenses, which include interest expense related to securities sold short. Excluding short interest expense, the operating expense ratio of the Inverse Government Long Bond Strategy Fund would be 1.75%. Excludes expenses of the underlying funds in which the Funds invest. |
2 | Expenses are equal to the Fund's annualized expense ratio, net of any applicable fee waivers, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses shown do not include fees charged by insurance companies. |
3 | Actual cumulative return at net asset value for the period June 30, 2017 to December 31, 2017. |
8 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
NOVA FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is 150% of the performance of the S&P 500® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2017, Nova Fund maintained a daily correlation of over 99% to its benchmark of 150% of the daily price movement of the S&P 500 Index. Nova Fund returned 31.78%, while the S&P 500 Index returned 21.83% over the same time period.
The sectors contributing the most to the performance of the underlying index for the period were Information Technology and Financials. The Energy sector detracted the most from return of the underlying index for the period, followed by the Telecommunications Services sector.
Apple, Inc., Microsoft Corp., and Amazon.com, Inc. contributed the most to performance of the underlying index for 2017. General Electric Co., Schlumberger NV, and Exxon Mobil Corp. detracted the most from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes.
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 6 of this report.
Performance displayed represents past performance, which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 9 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments or investments in Guggenheim Strategy Funds Trust mutual funds. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: May 7, 1997
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 32.0% |
Guggenheim Strategy Fund I | 19.6% |
Apple, Inc. | 1.3% |
Microsoft Corp. | 1.0% |
Amazon.com, Inc. | 0.7% |
Facebook, Inc. — Class A | 0.7% |
Berkshire Hathaway, Inc. — Class B | 0.6% |
Johnson & Johnson | 0.6% |
JPMorgan Chase & Co. | 0.6% |
Exxon Mobil Corp. | 0.5% |
Top Ten Total | 57.6% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments.
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Nova Fund | 31.78% | 21.75% | 9.11% |
S&P 500 Index | 21.83% | 15.79% | 8.50% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
10 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
NOVA FUND |
Shares | Value | |||||||
COMMON STOCKS† - 34.6% | ||||||||
Consumer, Non-cyclical - 7.5% | ||||||||
Johnson & Johnson | 2,106 | $ | 294,251 | |||||
Procter & Gamble Co. | 1,997 | 183,484 | ||||||
Pfizer, Inc. | 4,672 | 169,220 | ||||||
UnitedHealth Group, Inc. | 760 | 167,550 | ||||||
Coca-Cola Co. | 3,006 | 137,915 | ||||||
PepsiCo, Inc. | 1,115 | 133,711 | ||||||
Philip Morris International, Inc. | 1,217 | 128,576 | ||||||
AbbVie, Inc. | 1,250 | 120,888 | ||||||
Merck & Company, Inc. | 2,144 | 120,643 | ||||||
Altria Group, Inc. | 1,496 | 106,829 | ||||||
Amgen, Inc. | 569 | 98,949 | ||||||
Medtronic plc | 1,061 | 85,676 | ||||||
Bristol-Myers Squibb Co. | 1,283 | 78,622 | ||||||
Abbott Laboratories | 1,364 | 77,843 | ||||||
Gilead Sciences, Inc. | 1,024 | 73,359 | ||||||
PayPal Holdings, Inc.* | 886 | 65,227 | ||||||
Celgene Corp.* | 617 | 64,390 | ||||||
Eli Lilly & Co. | 759 | 64,105 | ||||||
Thermo Fisher Scientific, Inc. | 314 | 59,622 | ||||||
Biogen, Inc.* | 166 | 52,883 | ||||||
Colgate-Palmolive Co. | 688 | 51,910 | ||||||
Mondelez International, Inc. — Class A | 1,171 | 50,119 | ||||||
Aetna, Inc. | 256 | 46,180 | ||||||
Anthem, Inc. | 201 | 45,227 | ||||||
Becton Dickinson and Co. | 209 | 44,699 | ||||||
Danaher Corp. | 480 | 44,554 | ||||||
Allergan plc | 261 | 42,694 | ||||||
Automatic Data Processing, Inc. | 348 | 40,782 | ||||||
Cigna Corp. | 193 | 39,196 | ||||||
Stryker Corp. | 252 | 39,020 | ||||||
Kraft Heinz Co. | 468 | 36,392 | ||||||
S&P Global, Inc. | 200 | 33,880 | ||||||
Kimberly-Clark Corp. | 276 | 33,302 | ||||||
Express Scripts Holding Co.* | 444 | 33,140 | ||||||
Intuitive Surgical, Inc.* | 88 | 32,115 | ||||||
Constellation Brands, Inc. — Class A | 135 | 30,857 | ||||||
Vertex Pharmaceuticals, Inc.* | 198 | 29,672 | ||||||
Humana, Inc. | 112 | 27,784 | ||||||
Zoetis, Inc. | 382 | 27,519 | ||||||
Ecolab, Inc. | 204 | 27,373 | ||||||
Boston Scientific Corp.* | 1,076 | 26,674 | ||||||
General Mills, Inc. | 445 | 26,384 | ||||||
McKesson Corp. | 163 | 25,420 | ||||||
Baxter International, Inc. | 393 | 25,403 | ||||||
Illumina, Inc.* | 114 | 24,908 | ||||||
Sysco Corp. | 376 | 22,834 | ||||||
Regeneron Pharmaceuticals, Inc.* | 60 | 22,558 | ||||||
Estee Lauder Companies, Inc. — Class A | 175 | 22,267 | ||||||
Alexion Pharmaceuticals, Inc.* | 175 | 20,928 | ||||||
Monster Beverage Corp.* | 323 | 20,443 | ||||||
HCA Healthcare, Inc.* | 222 | 19,500 | ||||||
Moody’s Corp. | 130 | 19,189 | ||||||
Zimmer Biomet Holdings, Inc. | 159 | 19,187 | ||||||
Kroger Co. | 697 | 19,133 | ||||||
Tyson Foods, Inc. — Class A | 233 | 18,889 | ||||||
Edwards Lifesciences Corp.* | 166 | 18,710 | ||||||
Mylan N.V.* | 420 | 17,770 | ||||||
Archer-Daniels-Midland Co. | 438 | 17,555 | ||||||
Cardinal Health, Inc. | 247 | 15,134 | ||||||
Clorox Co. | 101 | 15,023 | ||||||
Dr Pepper Snapple Group, Inc. | 142 | 13,783 | ||||||
Centene Corp.* | 135 | 13,619 | ||||||
Kellogg Co. | 195 | 13,256 | ||||||
Incyte Corp.* | 137 | 12,975 | ||||||
IHS Markit Ltd.* | 285 | 12,868 | ||||||
Laboratory Corporation of America Holdings* | 80 | 12,761 | ||||||
Align Technology, Inc.* | 57 | 12,665 | ||||||
Hershey Co. | 111 | 12,600 | ||||||
Global Payments, Inc. | 125 | 12,530 | ||||||
Conagra Brands, Inc. | 320 | 12,054 | ||||||
Molson Coors Brewing Co. — Class B | 145 | 11,900 | ||||||
Dentsply Sirona, Inc. | 180 | 11,849 | ||||||
Verisk Analytics, Inc. — Class A* | 122 | 11,712 | ||||||
AmerisourceBergen Corp. — Class A | 126 | 11,569 | ||||||
United Rentals, Inc.* | 66 | 11,346 | ||||||
IQVIA Holdings, Inc.* | 114 | 11,161 | ||||||
Equifax, Inc. | 94 | 11,084 | ||||||
JM Smucker Co. | 89 | 11,057 | ||||||
IDEXX Laboratories, Inc.* | 68 | 10,634 | ||||||
Quest Diagnostics, Inc. | 107 | 10,538 | ||||||
Brown-Forman Corp. — Class B | 153 | 10,506 | ||||||
Cintas Corp. | 67 | 10,441 | ||||||
Total System Services, Inc. | 131 | 10,361 | ||||||
Church & Dwight Company, Inc. | 196 | 9,833 | ||||||
McCormick & Company, Inc. | 94 | 9,580 | ||||||
Nielsen Holdings plc | 262 | 9,537 | ||||||
ResMed, Inc. | 111 | 9,401 | ||||||
Hologic, Inc.* | 216 | 9,234 | ||||||
Perrigo Company plc | 103 | 8,978 | ||||||
Gartner, Inc.* | 71 | 8,744 | ||||||
DaVita, Inc.* | 119 | 8,598 | ||||||
Henry Schein, Inc.* | 123 | 8,595 | ||||||
Cooper Companies, Inc. | 38 | 8,279 | ||||||
Varian Medical Systems, Inc.* | 72 | 8,003 | ||||||
Avery Dennison Corp. | 69 | 7,926 | ||||||
Universal Health Services, Inc. — Class B | 69 | 7,821 | ||||||
Hormel Foods Corp. | 211 | 7,678 | ||||||
Coty, Inc. — Class A | 370 | 7,359 | ||||||
Campbell Soup Co. | 151 | 7,265 | ||||||
Western Union Co. | 360 | 6,844 | ||||||
Robert Half International, Inc. | 98 | 5,443 | ||||||
Quanta Services, Inc.* | 121 | 4,732 | ||||||
H&R Block, Inc. | 164 | 4,300 | ||||||
Envision Healthcare Corp.* | 95 | 3,283 | ||||||
Patterson Companies, Inc. | 65 | 2,348 | ||||||
Total Consumer, Non-cyclical | 3,895,117 | |||||||
Financial - 6.5% | ||||||||
Berkshire Hathaway, Inc. — Class B* | 1,508 | 298,916 | ||||||
JPMorgan Chase & Co. | 2,720 | 290,877 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 11 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
NOVA FUND |
Shares | Value | |||||||
Bank of America Corp. | 7,604 | $ | 224,470 | |||||
Wells Fargo & Co. | 3,474 | 210,768 | ||||||
Visa, Inc. — Class A | 1,421 | 162,022 | ||||||
Citigroup, Inc. | 2,073 | 154,252 | ||||||
Mastercard, Inc. — Class A | 728 | 110,190 | ||||||
Goldman Sachs Group, Inc. | 275 | 70,059 | ||||||
U.S. Bancorp | 1,236 | 66,225 | ||||||
Morgan Stanley | 1,091 | 57,245 | ||||||
American Express Co. | 565 | 56,110 | ||||||
PNC Financial Services Group, Inc. | 373 | 53,820 | ||||||
Chubb Ltd. | 364 | 53,191 | ||||||
BlackRock, Inc. — Class A | 97 | 49,830 | ||||||
Charles Schwab Corp. | 935 | 48,031 | ||||||
American Tower Corp. — Class A REIT | 336 | 47,937 | ||||||
Bank of New York Mellon Corp. | 803 | 43,250 | ||||||
American International Group, Inc. | 705 | 42,004 | ||||||
Simon Property Group, Inc. REIT | 244 | 41,905 | ||||||
MetLife, Inc. | 825 | 41,712 | ||||||
CME Group, Inc. — Class A | 267 | 38,995 | ||||||
Prudential Financial, Inc. | 332 | 38,173 | ||||||
Capital One Financial Corp. | 380 | 37,840 | ||||||
Crown Castle International Corp. REIT | 318 | 35,301 | ||||||
Marsh & McLennan Companies, Inc. | 400 | 32,556 | ||||||
Intercontinental Exchange, Inc. | 459 | 32,387 | ||||||
BB&T Corp. | 618 | 30,727 | ||||||
Allstate Corp. | 281 | 29,424 | ||||||
Travelers Companies, Inc. | 215 | 29,163 | ||||||
State Street Corp. | 291 | 28,404 | ||||||
Equinix, Inc. REIT | 61 | 27,646 | ||||||
Aflac, Inc. | 308 | 27,036 | ||||||
Prologis, Inc. REIT | 417 | 26,901 | ||||||
Aon plc | 196 | 26,264 | ||||||
Progressive Corp. | 456 | 25,682 | ||||||
Public Storage REIT | 117 | 24,453 | ||||||
SunTrust Banks, Inc. | 373 | 24,092 | ||||||
Synchrony Financial | 577 | 22,278 | ||||||
Discover Financial Services | 285 | 21,922 | ||||||
Weyerhaeuser Co. REIT | 592 | 20,874 | ||||||
M&T Bank Corp. | 118 | 20,177 | ||||||
T. Rowe Price Group, Inc. | 190 | 19,937 | ||||||
Ameriprise Financial, Inc. | 116 | 19,659 | ||||||
AvalonBay Communities, Inc. REIT | 108 | 19,268 | ||||||
Welltower, Inc. REIT | 290 | 18,493 | ||||||
Equity Residential REIT | 288 | 18,366 | ||||||
Digital Realty Trust, Inc. REIT | 161 | 18,338 | ||||||
KeyCorp | 843 | 17,003 | ||||||
Northern Trust Corp. | 168 | 16,782 | ||||||
Fifth Third Bancorp | 553 | 16,778 | ||||||
Ventas, Inc. REIT | 279 | 16,743 | ||||||
Citizens Financial Group, Inc. | 386 | 16,204 | ||||||
Hartford Financial Services Group, Inc. | 280 | 15,758 | ||||||
Boston Properties, Inc. REIT | 121 | 15,734 | ||||||
Regions Financial Corp. | 909 | 15,708 | ||||||
Willis Towers Watson plc | 103 | 15,521 | ||||||
SBA Communications Corp. REIT* | 92 | 15,029 | ||||||
Principal Financial Group, Inc. | 210 | 14,818 | ||||||
Lincoln National Corp. | 172 | 13,222 | ||||||
Realty Income Corp. REIT | 221 | 12,601 | ||||||
Essex Property Trust, Inc. REIT | 52 | 12,551 | ||||||
Huntington Bancshares, Inc. | 847 | 12,332 | ||||||
Comerica, Inc. | 136 | 11,806 | ||||||
Invesco Ltd. | 319 | 11,656 | ||||||
Host Hotels & Resorts, Inc. REIT | 580 | 11,513 | ||||||
GGP, Inc. REIT | 489 | 11,438 | ||||||
Franklin Resources, Inc. | 256 | 11,092 | ||||||
Cboe Global Markets, Inc. | 89 | 11,089 | ||||||
Loews Corp. | 216 | 10,806 | ||||||
Vornado Realty Trust REIT | 135 | 10,554 | ||||||
E*TRADE Financial Corp.* | 212 | 10,509 | ||||||
CBRE Group, Inc. — Class A* | 237 | 10,265 | ||||||
Alexandria Real Estate Equities, Inc. REIT | 75 | 9,794 | ||||||
Unum Group | 176 | 9,661 | ||||||
Alliance Data Systems Corp. | 38 | 9,632 | ||||||
HCP, Inc. REIT | 368 | 9,597 | ||||||
Affiliated Managers Group, Inc. | 44 | 9,031 | ||||||
Raymond James Financial, Inc. | 101 | 9,019 | ||||||
Arthur J Gallagher & Co. | 142 | 8,986 | ||||||
Mid-America Apartment Communities, Inc. REIT | 89 | 8,950 | ||||||
Cincinnati Financial Corp. | 117 | 8,771 | ||||||
Extra Space Storage, Inc. REIT | 99 | 8,658 | ||||||
Iron Mountain, Inc. REIT | 221 | 8,338 | ||||||
UDR, Inc. REIT | 210 | 8,089 | ||||||
Regency Centers Corp. REIT | 116 | 8,025 | ||||||
Zions Bancorporation | 157 | 7,980 | ||||||
SL Green Realty Corp. REIT | 77 | 7,772 | ||||||
Torchmark Corp. | 84 | 7,620 | ||||||
Duke Realty Corp. REIT | 279 | 7,592 | ||||||
Federal Realty Investment Trust REIT | 57 | 7,570 | ||||||
Everest Re Group Ltd. | 32 | 7,080 | ||||||
XL Group Ltd. | 201 | 7,067 | ||||||
Nasdaq, Inc. | 91 | 6,992 | ||||||
Kimco Realty Corp. REIT | 334 | 6,062 | ||||||
Macerich Co. REIT | 85 | 5,583 | ||||||
Apartment Investment & Management Co. — Class A REIT | 123 | 5,376 | ||||||
People’s United Financial, Inc. | 271 | 5,068 | ||||||
Brighthouse Financial, Inc.* | 75 | 4,398 | ||||||
Assurant, Inc. | 42 | 4,235 | ||||||
Navient Corp. | 206 | 2,744 | ||||||
Total Financial | 3,384,372 | |||||||
Technology - 5.3% | ||||||||
Apple, Inc. | 4,025 | 681,151 | ||||||
Microsoft Corp. | 6,047 | 517,260 | ||||||
Intel Corp. | 3,668 | 169,315 | ||||||
Oracle Corp. | 2,388 | 112,905 | ||||||
International Business Machines Corp. | 675 | 103,558 | ||||||
NVIDIA Corp. | 475 | 91,912 | ||||||
Broadcom Ltd. | 319 | 81,951 | ||||||
Texas Instruments, Inc. | 773 | 80,732 | ||||||
Accenture plc — Class A | 484 | 74,096 |
12 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
NOVA FUND |
Shares | Value | |||||||
QUALCOMM, Inc. | 1,156 | $ | 74,007 | |||||
Adobe Systems, Inc.* | 386 | 67,643 | ||||||
salesforce.com, Inc.* | 538 | 55,000 | ||||||
Applied Materials, Inc. | 836 | 42,736 | ||||||
Activision Blizzard, Inc. | 593 | 37,549 | ||||||
Micron Technology, Inc.* | 904 | 37,172 | ||||||
Cognizant Technology Solutions Corp. — Class A | 462 | 32,811 | ||||||
Intuit, Inc. | 190 | 29,978 | ||||||
HP, Inc. | 1,309 | 27,502 | ||||||
Analog Devices, Inc. | 289 | 25,730 | ||||||
Electronic Arts, Inc.* | 241 | 25,319 | ||||||
Fidelity National Information Services, Inc. | 262 | 24,652 | ||||||
Lam Research Corp. | 127 | 23,377 | ||||||
Fiserv, Inc.* | 163 | 21,374 | ||||||
DXC Technology Co. | 224 | 21,258 | ||||||
Western Digital Corp. | 232 | 18,451 | ||||||
Autodesk, Inc.* | 172 | 18,031 | ||||||
Hewlett Packard Enterprise Co. | 1,250 | 17,950 | ||||||
Paychex, Inc. | 251 | 17,088 | ||||||
Cerner Corp.* | 248 | 16,713 | ||||||
Red Hat, Inc.* | 139 | 16,694 | ||||||
Microchip Technology, Inc. | 183 | 16,082 | ||||||
Skyworks Solutions, Inc. | 144 | 13,673 | ||||||
Xilinx, Inc. | 197 | 13,282 | ||||||
KLA-Tencor Corp. | 123 | 12,924 | ||||||
NetApp, Inc. | 211 | 11,672 | ||||||
Synopsys, Inc.* | 118 | 10,058 | ||||||
ANSYS, Inc.* | 67 | 9,889 | ||||||
Citrix Systems, Inc.* | 112 | 9,856 | ||||||
Seagate Technology plc | 227 | 9,498 | ||||||
Cadence Design Systems, Inc.* | 221 | 9,242 | ||||||
Akamai Technologies, Inc.* | 133 | 8,650 | ||||||
CA, Inc. | 246 | 8,187 | ||||||
Qorvo, Inc.* | 100 | 6,660 | ||||||
Advanced Micro Devices, Inc.* | 643 | 6,610 | ||||||
Xerox Corp. | 167 | 4,868 | ||||||
CSRA, Inc. | 128 | 3,830 | ||||||
Total Technology | 2,718,896 | |||||||
Communications - 4.7% | ||||||||
Amazon.com, Inc.* | 314 | 367,213 | ||||||
Facebook, Inc. — Class A* | 1,869 | 329,804 | ||||||
Alphabet, Inc. — Class C* | 237 | 247,997 | ||||||
Alphabet, Inc. — Class A* | 234 | 246,496 | ||||||
AT&T, Inc. | 4,813 | 187,129 | ||||||
Verizon Communications, Inc. | 3,198 | 169,270 | ||||||
Cisco Systems, Inc. | 3,875 | 148,413 | ||||||
Comcast Corp. — Class A | 3,656 | 146,423 | ||||||
Walt Disney Co. | 1,184 | 127,292 | ||||||
Priceline Group, Inc.* | 38 | 66,034 | ||||||
Netflix, Inc.* | 339 | 65,074 | ||||||
Time Warner, Inc. | 610 | 55,797 | ||||||
Charter Communications, Inc. — Class A* | 152 | 51,066 | ||||||
eBay, Inc.* | 761 | 28,720 | ||||||
Twenty-First Century Fox, Inc. — Class A | 826 | 28,522 | ||||||
CBS Corp. — Class B | 284 | 16,756 | ||||||
Symantec Corp. | 486 | 13,637 | ||||||
Omnicom Group, Inc. | 181 | 13,182 | ||||||
CenturyLink, Inc. | 763 | 12,727 | ||||||
Twenty-First Century Fox, Inc. — Class B | 344 | 11,737 | ||||||
Expedia, Inc. | 96 | 11,498 | ||||||
Motorola Solutions, Inc. | 127 | 11,473 | ||||||
DISH Network Corp. — Class A* | 179 | 8,547 | ||||||
Viacom, Inc. — Class B | 277 | 8,534 | ||||||
Juniper Networks, Inc. | 294 | 8,379 | ||||||
VeriSign, Inc.* | 66 | 7,553 | ||||||
F5 Networks, Inc.* | 49 | 6,430 | ||||||
Scripps Networks Interactive, Inc. — Class A | 75 | 6,404 | ||||||
Interpublic Group of Companies, Inc. | 305 | 6,149 | ||||||
News Corp. — Class A | 300 | 4,863 | ||||||
Discovery Communications, Inc. — Class C* | 159 | 3,366 | ||||||
TripAdvisor, Inc.* | 85 | 2,929 | ||||||
Discovery Communications, Inc. — Class A* | 121 | 2,708 | ||||||
News Corp. — Class B | 95 | 1,577 | ||||||
Total Communications | 2,423,699 | |||||||
Industrial - 3.5% | ||||||||
Boeing Co. | 439 | 129,465 | ||||||
General Electric Co. | 6,797 | 118,608 | ||||||
3M Co. | 468 | 110,153 | ||||||
Honeywell International, Inc. | 597 | 91,556 | ||||||
Union Pacific Corp. | 617 | 82,740 | ||||||
United Technologies Corp. | 582 | 74,246 | ||||||
Caterpillar, Inc. | 466 | 73,432 | ||||||
United Parcel Service, Inc. — Class B | 539 | 64,222 | ||||||
Lockheed Martin Corp. | 196 | 62,926 | ||||||
FedEx Corp. | 193 | 48,161 | ||||||
General Dynamics Corp. | 218 | 44,352 | ||||||
Raytheon Co. | 227 | 42,642 | ||||||
Northrop Grumman Corp. | 136 | 41,740 | ||||||
Illinois Tool Works, Inc. | 242 | 40,378 | ||||||
Deere & Co. | 251 | 39,284 | ||||||
CSX Corp. | 701 | 38,562 | ||||||
Emerson Electric Co. | 503 | 35,054 | ||||||
Norfolk Southern Corp. | 224 | 32,457 | ||||||
Johnson Controls International plc | 725 | 27,630 | ||||||
Eaton Corporation plc | 345 | 27,258 | ||||||
Waste Management, Inc. | 313 | 27,012 | ||||||
TE Connectivity Ltd. | 276 | 26,231 | ||||||
Corning, Inc. | 681 | 21,785 | ||||||
Cummins, Inc. | 122 | 21,550 | ||||||
Amphenol Corp. — Class A | 239 | 20,984 | ||||||
Parker-Hannifin Corp. | 104 | 20,756 | ||||||
Roper Technologies, Inc. | 80 | 20,720 | ||||||
Stanley Black & Decker, Inc. | 120 | 20,363 | ||||||
Rockwell Automation, Inc. | 101 | 19,832 | ||||||
Ingersoll-Rand plc | 196 | 17,481 | ||||||
Fortive Corp. | 240 | 17,364 | ||||||
Rockwell Collins, Inc. | 128 | 17,359 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 13 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
NOVA FUND |
Shares | Value | |||||||
Agilent Technologies, Inc. | 252 | $ | 16,877 | |||||
Vulcan Materials Co. | 104 | 13,351 | ||||||
Harris Corp. | 93 | 13,173 | ||||||
AMETEK, Inc. | 181 | 13,117 | ||||||
WestRock Co. | 200 | 12,642 | ||||||
Mettler-Toledo International, Inc.* | 20 | 12,390 | ||||||
Dover Corp. | 122 | 12,321 | ||||||
L3 Technologies, Inc. | 61 | 12,069 | ||||||
Republic Services, Inc. — Class A | 178 | 12,035 | ||||||
Waters Corp.* | 62 | 11,978 | ||||||
Textron, Inc. | 206 | 11,658 | ||||||
Masco Corp. | 247 | 10,853 | ||||||
Martin Marietta Materials, Inc. | 49 | 10,831 | ||||||
TransDigm Group, Inc. | 38 | 10,436 | ||||||
Ball Corp. | 274 | 10,371 | ||||||
CH Robinson Worldwide, Inc. | 109 | 9,711 | ||||||
Xylem, Inc. | 141 | 9,616 | ||||||
Pentair plc | 129 | 9,110 | ||||||
Arconic, Inc. | 332 | 9,047 | ||||||
Expeditors International of Washington, Inc. | 139 | 8,992 | ||||||
Packaging Corporation of America | 74 | 8,921 | ||||||
Kansas City Southern | 81 | 8,523 | ||||||
Fortune Brands Home & Security, Inc. | 121 | 8,281 | ||||||
Snap-on, Inc. | 45 | 7,843 | ||||||
J.B. Hunt Transport Services, Inc. | 67 | 7,703 | ||||||
AO Smith Corp. | 114 | 6,986 | ||||||
Sealed Air Corp. | 141 | 6,951 | ||||||
PerkinElmer, Inc. | 86 | 6,288 | ||||||
Jacobs Engineering Group, Inc. | 94 | 6,200 | ||||||
Allegion plc | 74 | 5,887 | ||||||
Acuity Brands, Inc. | 33 | 5,808 | ||||||
Fluor Corp. | 110 | 5,682 | ||||||
Garmin Ltd. | 87 | 5,183 | ||||||
FLIR Systems, Inc. | 109 | 5,082 | ||||||
Stericycle, Inc.* | 67 | 4,555 | ||||||
Flowserve Corp. | 102 | 4,297 | ||||||
Total Industrial | 1,811,071 | |||||||
Consumer, Cyclical - 3.1% | ||||||||
Home Depot, Inc. | 915 | 173,420 | ||||||
Wal-Mart Stores, Inc. | 1,147 | 113,266 | ||||||
McDonald’s Corp. | 625 | 107,575 | ||||||
Nike, Inc. — Class B | 1,030 | 64,427 | ||||||
Starbucks Corp. | 1,115 | 64,034 | ||||||
Costco Wholesale Corp. | 343 | 63,839 | ||||||
Lowe’s Companies, Inc. | 653 | 60,690 | ||||||
CVS Health Corp. | 794 | 57,565 | ||||||
Walgreens Boots Alliance, Inc. | 681 | 49,454 | ||||||
General Motors Co. | 1,002 | 41,072 | ||||||
Ford Motor Co. | 3,058 | 38,195 | ||||||
TJX Companies, Inc. | 499 | 38,154 | ||||||
Marriott International, Inc. — Class A | 240 | 32,575 | ||||||
Delta Air Lines, Inc. | 514 | 28,784 | ||||||
Southwest Airlines Co. | 428 | 28,012 | ||||||
Target Corp. | 426 | 27,796 | ||||||
Ross Stores, Inc. | 302 | 24,235 | ||||||
Yum! Brands, Inc. | 264 | 21,545 | ||||||
Carnival Corp. | 320 | 21,238 | ||||||
Dollar Tree, Inc.* | 186 | 19,960 | ||||||
PACCAR, Inc. | 276 | 19,618 | ||||||
VF Corp. | 257 | 19,018 | ||||||
Dollar General Corp. | 204 | 18,974 | ||||||
Aptiv plc | 208 | 17,644 | ||||||
American Airlines Group, Inc. | 334 | 17,378 | ||||||
O’Reilly Automotive, Inc.* | 67 | 16,116 | ||||||
Royal Caribbean Cruises Ltd. | 134 | 15,984 | ||||||
AutoZone, Inc.* | 22 | 15,650 | ||||||
Mohawk Industries, Inc.* | 50 | 13,795 | ||||||
DR Horton, Inc. | 268 | 13,687 | ||||||
Best Buy Company, Inc. | 199 | 13,626 | ||||||
MGM Resorts International | 399 | 13,323 | ||||||
United Continental Holdings, Inc.* | 197 | 13,278 | ||||||
Hilton Worldwide Holdings, Inc. | 159 | 12,698 | ||||||
Fastenal Co. | 225 | 12,306 | ||||||
Newell Brands, Inc. | 384 | 11,866 | ||||||
L Brands, Inc. | 194 | 11,683 | ||||||
Genuine Parts Co. | 115 | 10,926 | ||||||
Wynn Resorts Ltd. | 63 | 10,621 | ||||||
Ulta Beauty, Inc.* | 46 | 10,288 | ||||||
Lennar Corp. — Class A | 160 | 10,118 | ||||||
Tapestry, Inc. | 223 | 9,863 | ||||||
LKQ Corp.* | 242 | 9,842 | ||||||
WW Grainger, Inc. | 41 | 9,686 | ||||||
Whirlpool Corp. | 56 | 9,444 | ||||||
Darden Restaurants, Inc. | 97 | 9,314 | ||||||
CarMax, Inc.* | 143 | 9,171 | ||||||
Wyndham Worldwide Corp. | 79 | 9,154 | ||||||
PVH Corp. | 61 | 8,370 | ||||||
Tiffany & Co. | 80 | 8,316 | ||||||
Hasbro, Inc. | 89 | 8,089 | ||||||
BorgWarner, Inc. | 155 | 7,919 | ||||||
Michael Kors Holdings Ltd.* | 119 | 7,491 | ||||||
Norwegian Cruise Line Holdings Ltd.* | 140 | 7,455 | ||||||
Tractor Supply Co. | 98 | 7,326 | ||||||
Kohl’s Corp.1 | 132 | 7,158 | ||||||
Alaska Air Group, Inc. | 96 | 7,057 | ||||||
PulteGroup, Inc. | 212 | 7,049 | ||||||
Harley-Davidson, Inc. | 132 | 6,716 | ||||||
Goodyear Tire & Rubber Co. | 193 | 6,236 | ||||||
Macy’s, Inc. | 239 | 6,020 | ||||||
Hanesbrands, Inc. | 286 | 5,980 | ||||||
Gap, Inc. | 171 | 5,824 | ||||||
Advance Auto Parts, Inc. | 58 | 5,782 | ||||||
Chipotle Mexican Grill, Inc. — Class A* | 19 | 5,492 | ||||||
Leggett & Platt, Inc. | 103 | 4,916 | ||||||
Foot Locker, Inc.1 | 97 | 4,547 | ||||||
Ralph Lauren Corp. — Class A | 43 | 4,459 | ||||||
Nordstrom, Inc. | 91 | 4,312 | ||||||
Mattel, Inc. | 269 | 4,137 | ||||||
Signet Jewelers Ltd. | 47 | 2,658 | ||||||
Under Armour, Inc. — Class A* | 145 | 2,092 |
14 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
NOVA FUND |
Shares | Value | |||||||
Under Armour, Inc. — Class C* | 144 | $ | 1,918 | |||||
Total Consumer, Cyclical | 1,588,226 | |||||||
Energy - 2.1% | ||||||||
Exxon Mobil Corp. | 3,321 | 277,768 | ||||||
Chevron Corp. | 1,489 | 186,408 | ||||||
Schlumberger Ltd. | 1,086 | 73,185 | ||||||
ConocoPhillips | 937 | 51,432 | ||||||
EOG Resources, Inc. | 453 | 48,883 | ||||||
Occidental Petroleum Corp. | 600 | 44,196 | ||||||
Phillips 66 | 337 | 34,087 | ||||||
Halliburton Co. | 684 | 33,427 | ||||||
Valero Energy Corp. | 343 | 31,525 | ||||||
Kinder Morgan, Inc. | 1,505 | 27,195 | ||||||
Marathon Petroleum Corp. | 383 | 25,270 | ||||||
Anadarko Petroleum Corp. | 429 | 23,012 | ||||||
Pioneer Natural Resources Co. | 133 | 22,989 | ||||||
Williams Companies, Inc. | 648 | 19,758 | ||||||
Concho Resources, Inc.* | 117 | 17,576 | ||||||
Devon Energy Corp. | 412 | 17,057 | ||||||
ONEOK, Inc. | 301 | 16,089 | ||||||
Andeavor | 112 | 12,806 | ||||||
Apache Corp. | 299 | 12,624 | ||||||
Marathon Oil Corp. | 666 | 11,275 | ||||||
Noble Energy, Inc. | 381 | 11,102 | ||||||
Equities Corp. | 192 | 10,929 | ||||||
TechnipFMC plc | 344 | 10,771 | ||||||
National Oilwell Varco, Inc. | 298 | 10,734 | ||||||
Baker Hughes a GE Co. | 336 | 10,631 | ||||||
Cabot Oil & Gas Corp. — Class A | 363 | 10,382 | ||||||
Hess Corp. | 212 | 10,064 | ||||||
Cimarex Energy Co. | 75 | 9,151 | ||||||
Helmerich & Payne, Inc. | 85 | 5,494 | ||||||
Newfield Exploration Co.* | 156 | 4,919 | ||||||
Range Resources Corp. | 177 | 3,020 | ||||||
Chesapeake Energy Corp.* | 712 | 2,819 | ||||||
Total Energy | 1,086,578 | |||||||
Utilities - 1.0% | ||||||||
NextEra Energy, Inc. | 369 | 57,634 | ||||||
Duke Energy Corp. | 549 | 46,176 | ||||||
Dominion Energy, Inc. | 504 | 40,854 | ||||||
Southern Co. | 787 | 37,847 | ||||||
Exelon Corp. | 753 | 29,676 | ||||||
American Electric Power Company, Inc. | 386 | 28,398 | ||||||
Sempra Energy | 197 | 21,063 | ||||||
Consolidated Edison, Inc. | 243 | 20,643 | ||||||
Public Service Enterprise Group, Inc. | 397 | 20,446 | ||||||
Xcel Energy, Inc. | 398 | 19,148 | ||||||
PG&E Corp. | 402 | 18,022 | ||||||
PPL Corp. | 536 | 16,589 | ||||||
WEC Energy Group, Inc. | 247 | 16,408 | ||||||
Edison International | 255 | 16,126 | ||||||
Eversource Energy | 248 | 15,669 | ||||||
DTE Energy Co. | 141 | 15,434 | ||||||
American Water Works Company, Inc. | 140 | 12,809 | ||||||
Entergy Corp. | 141 | 11,476 | ||||||
Ameren Corp. | 190 | 11,208 | ||||||
FirstEnergy Corp. | 349 | 10,686 | ||||||
CMS Energy Corp. | 221 | 10,453 | ||||||
CenterPoint Energy, Inc. | 338 | 9,586 | ||||||
Alliant Energy Corp. | 181 | 7,712 | ||||||
Pinnacle West Capital Corp. | 88 | 7,496 | ||||||
NiSource, Inc. | 264 | 6,777 | ||||||
NRG Energy, Inc. | 236 | 6,721 | ||||||
AES Corp. | 518 | 5,610 | ||||||
SCANA Corp. | 112 | 4,455 | ||||||
Total Utilities | 525,122 | |||||||
Basic Materials - 0.9% | ||||||||
DowDuPont, Inc. | 1,834 | 130,618 | ||||||
Monsanto Co. | 344 | 40,172 | ||||||
Praxair, Inc. | 224 | 34,648 | ||||||
Air Products & Chemicals, Inc. | 171 | 28,058 | ||||||
LyondellBasell Industries N.V. — Class A | 254 | 28,021 | ||||||
Sherwin-Williams Co. | 65 | 26,653 | ||||||
PPG Industries, Inc. | 199 | 23,247 | ||||||
Freeport-McMoRan, Inc.* | 1,055 | 20,003 | ||||||
International Paper Co. | 324 | 18,773 | ||||||
Nucor Corp. | 249 | 15,831 | ||||||
Newmont Mining Corp. | 418 | 15,683 | ||||||
Albemarle Corp. | 87 | 11,126 | ||||||
Eastman Chemical Co. | 113 | 10,468 | ||||||
FMC Corp. | 105 | 9,939 | ||||||
International Flavors & Fragrances, Inc. | 62 | 9,462 | ||||||
CF Industries Holdings, Inc. | 183 | 7,785 | ||||||
Mosaic Co. | 275 | 7,057 | ||||||
Total Basic Materials | 437,544 | |||||||
Diversified - 0.0% | ||||||||
Leucadia National Corp. | 246 | 6,517 | ||||||
Total Common Stocks | ||||||||
(Cost $15,764,437) | 17,877,142 | |||||||
MUTUAL FUNDS† - 51.5% | ||||||||
Guggenheim Strategy Fund II2 | 660,808 | 16,526,813 | ||||||
Guggenheim Strategy Fund I2 | 404,721 | 10,142,312 | ||||||
Total Mutual Funds | ||||||||
(Cost $26,583,662) | 26,669,125 | |||||||
Face Amount | ||||||||
U.S. TREASURY BILLS†† - 1.4% | ||||||||
U.S Treasury Bills | ||||||||
1.26% due 03/01/183,4,5 | $ | 500,000 | 498,975 | |||||
1.31% due 04/19/184,5,6 | 250,000 | 248,963 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $747,957) | 747,938 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 15 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
NOVA FUND |
Face Amount | Value | |||||||
REPURCHASE AGREEMENTS††,7 - 7.1% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/183 | $ | 2,384,813 | $ | 2,384,813 | ||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/183 | 1,272,782 | 1,272,782 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $3,657,595) | 3,657,595 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,8 - 0.0% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%9 | 1,803 | 1,803 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $1,803) | 1,803 | |||||||
Total Investments - 94.6% | ||||||||
(Cost $46,755,454) | $ | 48,953,603 | ||||||
Other Assets & Liabilities, net - 5.4% | 2,771,404 | |||||||
Total Net Assets - 100.0% | $ | 51,725,007 |
Futures Contracts | ||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Value and Unrealized Gain | ||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||
S&P 500 Index Mini Futures Contracts | 85 | Mar 2018 | $ | 11,380,438 | $ | 134,035 |
Total Return Swap Agreements | ||||||||||||||||||||||
Counterparty | Index | Financing Rate Pay (Receive) | Payment Frequency | Maturity Date | Units | Notional Amount | Value and Unrealized Loss | |||||||||||||||
OTC Equity Index Swap Agreements†† | ||||||||||||||||||||||
BNP Paribas | S&P 500 Index | 2.02 | % | At Maturity | 01/26/18 | 1,200 | $ | 3,207,742 | $ | (10,810 | ) | |||||||||||
Barclays Bank plc | S&P 500 Index | 1.93 | % | At Maturity | 01/30/18 | 3,268 | 8,738,623 | (45,530 | ) | |||||||||||||
Goldman Sachs International | S&P 500 Index | 1.98 | % | At Maturity | 01/26/18 | 13,753 | 36,769,690 | (57,445 | ) | |||||||||||||
$ | 48,716,055 | $ | (113,785 | ) |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 7. |
2 | Affiliated issuer. |
3 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2017. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | Zero coupon rate security. |
6 | All or a portion of this security is pledged as futures collateral at December 31, 2017. |
7 | Repurchase Agreements — See Note 6. |
8 | Securities lending collateral — See Note 7. |
9 | Rate indicated is the 7 day yield as of December 31, 2017. |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
16 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
NOVA FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Common Stocks | $ | 17,877,142 | $ | — | $ | — | $ | — | $ | — | $ | 17,877,142 | ||||||||||||
Equity Futures Contracts | — | 134,035 | — | — | — | 134,035 | ||||||||||||||||||
Mutual Funds | 26,669,125 | — | — | — | — | 26,669,125 | ||||||||||||||||||
Repurchase Agreements | — | — | 3,657,595 | — | — | 3,657,595 | ||||||||||||||||||
Securities Lending Collateral | 1,803 | — | — | — | — | 1,803 | ||||||||||||||||||
U.S. Treasury Bills | — | — | 747,938 | — | — | 747,938 | ||||||||||||||||||
Total Assets | $ | 44,548,070 | $ | 134,035 | $ | 4,405,533 | $ | — | $ | — | $ | 49,087,638 | ||||||||||||
Investments in Securities (Liabilities) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Equity Index Swap Agreements | $ | — | $ | — | $ | — | $ | 113,785 | $ | — | $ | 113,785 |
* | Other financial instruments include futures contracts and swaps, which are reported as unrealized gain/loss at period end. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a portfolio company of a fund, or control of or by, or common control under Guggenheim Investments (“GI”), result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act.
The Fund may invest in the underlying series of the Guggenheim Strategy Funds Trust consisting of Guggenheim Strategy Fund I, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III (collectively, the “Cash Management Funds”), open-end management investment companies managed by GI. The Cash Management Funds, which launched on March 11, 2014, are offered as cash management options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Cash Management Funds pay no investment management fees. The Cash Management Funds’ annual report on Form N-CSR dated September 30, 2017, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180417000715/gug72218.htm.
Transactions during the year ended December 31, 2017, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value 12/31/16 | Additions | Reductions | Realized Gain (Loss) | Change in Unrealized | Value 12/31/17 | Shares 12/31/17 | Investment Income | Capital Gain Distributions |
Mutual Funds | |||||||||
Guggenheim Strategy Fund I | $ 10,509,393 | $ 6,707,086 | $ (7,100,000) | $ 12,713 | $ 13,120 | $ 10,142,312 | 404,721 | $ 198,785 | $ 3,646 |
Guggenheim Strategy Fund II | 7,423,618 | 14,214,937 | (5,130,000) | (549) | 18,807 | 16,526,813 | 660,808 | 234,582 | 5,626 |
$ 17,933,011 | $ 20,922,023 | $ (12,230,000) | $ 12,164 | $ 31,927 | $ 26,669,125 | $ 433,367 | $ 9,272 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 17 |
NOVA FUND |
STATEMENT OF ASSETS AND LIABILITIES | |
December 31, 2017 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $1,731 of securities loaned (cost $16,514,197) | $ | 18,626,883 | ||
Investments in affiliated issuers, at value (cost $26,583,662) | 26,669,125 | |||
Repurchase agreements, at value (cost $3,657,595) | 3,657,595 | |||
Segregated cash with broker | 304,103 | |||
Receivables: | ||||
Fund shares sold | 14,066,014 | |||
Swap settlement | 229,658 | |||
Dividends | 54,686 | |||
Securities sold | 9,140 | |||
Interest | 429 | |||
Securities lending income | 20 | |||
Total assets | 63,617,653 | |||
Liabilities: | ||||
Overdraft due to custodian bank | 200,776 | |||
Unrealized depreciation on swap agreements | 113,785 | |||
Payable for: | ||||
Securities purchased | 11,427,880 | |||
Management fees | 30,539 | |||
Variation margin | 29,064 | |||
Transfer agent and administrative fees | 10,180 | |||
Investor service fees | 10,180 | |||
Portfolio accounting fees | 4,072 | |||
Return of securities loaned | 1,803 | |||
Fund shares redeemed | 325 | |||
Miscellaneous | 64,042 | |||
Total liabilities | 11,892,646 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 51,725,007 | ||
Net assets consist of: | ||||
Paid in capital | $ | 47,247,623 | ||
Undistributed net investment income | 77,173 | |||
Accumulated net realized gain on investments | 2,181,812 | |||
Net unrealized appreciation on investments | 2,218,399 | |||
Net assets | $ | 51,725,007 | ||
Capital shares outstanding | 457,763 | |||
Net asset value per share | $ | 113.00 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 137,918 | ||
Dividends from securities of affiliated issuers | 433,367 | |||
Interest | 51,364 | |||
Income from securities lending, net | 108 | |||
Total investment income | 622,757 | |||
Expenses: | ||||
Management fees | 256,088 | |||
Investor service fees | 85,363 | |||
Transfer agent and administrative fees | 85,363 | |||
Professional fees | 47,872 | |||
Portfolio accounting fees | 34,145 | |||
Custodian fees | 5,881 | |||
Trustees’ fees* | 3,659 | |||
Line of credit fees | 100 | |||
Miscellaneous | 30,354 | |||
Total expenses | 548,825 | |||
Net investment income | 73,932 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 440,876 | |||
Investments in affiliated issuers | 12,164 | |||
Swap agreements | 7,991,316 | |||
Futures contracts | 1,074,458 | |||
Distributions received from affiliated investment company shares | 9,272 | |||
Net realized gain | 9,528,086 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 755,381 | |||
Investments in affiliated issuers | 31,927 | |||
Swap agreements | (247,488 | ) | ||
Futures contracts | 142,208 | |||
Net change in unrealized appreciation (depreciation) | 682,028 | |||
Net realized and unrealized gain | 10,210,114 | |||
Net increase in net assets resulting from operations | $ | 10,284,046 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
18 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
NOVA FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 73,932 | $ | 12,574 | ||||
Net realized gain on investments | 9,528,086 | 9,428,343 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 682,028 | (5,230,098 | ) | |||||
Net increase in net assets resulting from operations | 10,284,046 | 4,210,819 | ||||||
Distributions to shareholders from: | ||||||||
Net investment income | (13,432 | ) | — | |||||
Net realized gains | (1,183,600 | ) | — | |||||
Total distributions to shareholders | (1,197,032 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 293,927,461 | 185,187,116 | ||||||
Distributions reinvested | 1,197,032 | — | ||||||
Cost of shares redeemed | (291,254,450 | ) | (181,112,737 | ) | ||||
Net increase from capital share transactions | 3,870,043 | 4,074,379 | ||||||
Net increase in net assets | 12,957,057 | 8,285,198 | ||||||
Net assets: | ||||||||
Beginning of year | 38,767,950 | 30,482,752 | ||||||
End of year | $ | 51,725,007 | $ | 38,767,950 | ||||
Undistributed net investment income at end of year | $ | 77,173 | $ | 14,645 | ||||
Capital share activity: | ||||||||
Shares sold | 2,916,039 | 2,282,588 | * | |||||
Shares issued from reinvestment of distributions | 12,137 | — | ||||||
Shares redeemed | (2,903,190 | ) | (2,243,557 | )* | ||||
Net increase in shares | 24,986 | 39,031 | * |
* | Capital share activity for the period presented through December 31, 2016, has been restated to reflect a 2:1 share split effective December 1, 2016 — See Note 11. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 19 |
NOVA FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016d | Year Ended December 31, 2015d | Year Ended December 31, 2014d | Year Ended December 31, 2013d | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 89.58 | $ | 77.42 | $ | 77.97 | $ | 65.81 | $ | 44.21 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .22 | .06 | (.12 | ) | (.02 | ) | .07 | |||||||||||||
Net gain (loss) on investments (realized and unrealized) | 27.62 | 12.10 | (.43 | ) | 12.25 | 21.59 | ||||||||||||||
Total from investment operations | 27.84 | 12.16 | (.55 | ) | 12.23 | 21.66 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.05 | ) | — | — | (.07 | ) | (.06 | ) | ||||||||||||
Net realized gains | (4.37 | ) | — | — | — | — | ||||||||||||||
Total distributions | (4.42 | ) | — | — | (.07 | ) | (.06 | ) | ||||||||||||
Net asset value, end of period | $ | 113.00 | $ | 89.58 | $ | 77.42 | $ | 77.97 | $ | 65.81 | ||||||||||
Total Returnb | 31.78 | % | 15.72 | % | (0.72 | %) | 18.59 | % | 48.99 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 51,725 | $ | 38,768 | $ | 30,483 | $ | 38,983 | $ | 53,515 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.22 | % | 0.04 | % | (0.15 | %) | (0.03 | %) | 0.13 | % | ||||||||||
Total expensesc | 1.61 | % | 1.56 | % | 1.51 | % | 1.59 | % | 1.54 | % | ||||||||||
Portfolio turnover rate | 412 | % | 636 | % | 342 | % | 694 | % | 298 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Share split — Per share amounts for the periods presented through December 31, 2016, have been restated to reflect a 2:1 share split effective December 1, 2016 — See Note 11. |
20 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
INVERSE S&P 500® STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is the inverse (opposite) of the performance of the S&P 500® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2017, Inverse S&P 500® Strategy Fund maintained a daily correlation of over 99% to its benchmark of -100% of the daily price movement of the S&P 500 Index. Inverse S&P 500® Strategy Fund returned -17.35%, while the S&P 500 Index returned 21.83% over the same time period.
The sectors contributing the most to the performance of the underlying index for the period were Information Technology and Financials. The Energy sector detracted the most from return of the underlying index for the period, followed by the Telecommunications Services sector.
Apple, Inc., Microsoft Corp., and Amazon.com, Inc. contributed the most to performance of the underlying index for 2017. General Electric Co., Schlumberger NV, and Exxon Mobil Corp. detracted the most from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and not for hedging purposes.
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 6 of this report.
Performance displayed represents past performance, which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 21 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments or investments in Guggenheim Strategy Funds Trust mutual funds. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: June 9, 1997
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 35.5% |
Guggenheim Strategy Fund I | 26.1% |
Total | 61.6% |
“Largest Holdings” excludes any temporary cash or derivative investments.
Cumulative Fund Performance *,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Inverse S&P 500® Strategy Fund | (17.35%) | (15.26%) | (12.07%) |
S&P 500 Index | 21.83% | 15.79% | 8.50% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
22 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
INVERSE S&P 500® STRATEGY FUND |
Shares | Value | |||||||
MUTUAL FUNDS† - 61.6% | ||||||||
Guggenheim Strategy Fund II1 | 36,554 | $ | 914,204 | |||||
Guggenheim Strategy Fund I1 | 26,789 | 671,339 | ||||||
Total Mutual Funds | ||||||||
(Cost $1,570,728) | 1,585,543 | |||||||
Face Amount | ||||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 7.8% | ||||||||
Fannie Mae2 | ||||||||
1.26% due 01/12/183,4 | $ | 100,000 | 99,961 | |||||
Federal Home Loan Bank5 | ||||||||
1.27% due 01/24/183,4 | 100,000 | 99,919 | ||||||
Total Federal Agency Discount Notes | ||||||||
(Cost $199,880) | 199,880 | |||||||
FEDERAL AGENCY NOTES†† - 5.8% | ||||||||
Federal Farm Credit Bank5 | ||||||||
1.41% (1 Month USD LIBOR + 0.04%) due 01/02/186 | 150,000 | 150,000 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $150,001) | 150,000 | |||||||
REPURCHASE AGREEMENTS††,7 - 27.1% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/188 | 454,816 | 454,816 | ||||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/188 | 242,737 | 242,737 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $697,553) | 697,553 | |||||||
Total Investments - 102.3% | ||||||||
(Cost $2,618,162) | $ | 2,632,976 | ||||||
Other Assets & Liabilities, net - (2.3)% | (60,042 | ) | ||||||
Total Net Assets - 100.0% | $ | 2,572,934 |
Futures Contracts | ||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Value and Unrealized Loss | ||||||||||
Equity Futures Contracts Sold Short† | ||||||||||||||
S&P 500 Index Mini Futures Contracts | 1 | Mar 2018 | $ | 133,888 | $ | (1,779 | ) |
Total Return Swap Agreements | ||||||||||||||||||||||
Counterparty | Index | Financing Rate Pay (Receive) | Payment Frequency | Maturity Date | Units | Notional Amount | Value and Unrealized Gain | |||||||||||||||
OTC Equity Index Swap Agreements Sold Short†† | ||||||||||||||||||||||
BNP Paribas | S&P 500 Index | (1.52 | %) | At Maturity | 01/26/18 | 538 | $ | 1,438,626 | $ | 4,848 | ||||||||||||
Barclays Bank plc | S&P 500 Index | (1.78 | %) | At Maturity | 01/30/18 | 221 | 591,776 | 3,083 | ||||||||||||||
Goldman Sachs International | S&P 500 Index | (1.88 | %) | At Maturity | 01/26/18 | 166 | 443,264 | 1,650 | ||||||||||||||
$ | 2,473,666 | $ | 9,581 |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | On September 7, 2008, the issuer was placed in conservatorship by the Federal Housing Finance Agency (FHFA). As conservator, the FHFA has full powers to control the assets and operations of the firm. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | Zero coupon rate security. |
5 | The issuer operates under a Congressional charter; its securities are neither issued nor guaranteed by the U.S. Government. |
6 | Variable rate security. The rate indicated is the rate effective at December 31, 2017. In some instances, the underlying reference rate shown was below the minimum rate earned by the security or has been adjusted by a predetermined factor. The settlement status of a position may also impact the effective rate indicated. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
7 | Repurchase Agreements — See Note 6. |
8 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2017. |
LIBOR — London Interbank Offered Rate | |
USD — United States Dollar | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 23 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
INVERSE S&P 500® STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Equity Index Swap Agreements | $ | — | $ | — | $ | — | $ | 9,581 | $ | — | $ | 9,581 | ||||||||||||
Federal Agency Discount Notes | — | — | 199,880 | — | — | 199,880 | ||||||||||||||||||
Federal Agency Notes | — | — | 150,000 | — | — | 150,000 | ||||||||||||||||||
Mutual Funds | 1,585,543 | — | — | — | — | 1,585,543 | ||||||||||||||||||
Repurchase Agreements | — | — | 697,553 | — | — | 697,553 | ||||||||||||||||||
Total Assets | $ | 1,585,543 | $ | — | $ | 1,047,433 | $ | 9,581 | $ | — | $ | 2,642,557 | ||||||||||||
Investments in Securities (Liabilities) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Equity Futures Contracts | $ | — | $ | 1,779 | $ | — | $ | — | $ | — | $ | 1,779 |
* | Other financial instruments include futures contracts and swaps, which are reported as unrealized gain/loss at period end. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a portfolio company of a fund, or control of or by, or common control under GI, result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act.
The Fund may invest in the underlying series of the Guggenheim Strategy Funds Trust consisting of Guggenheim Strategy Fund I, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III (collectively, the “Cash Management Funds”), open-end management investment companies managed by GI. The Cash Management Funds, which launched on March 11, 2014, are offered as cash management options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Cash Management Funds pay no investment management fees. The Cash Management Funds’ annual report on Form N-CSR dated September 30, 2017, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180417000715/gug72218.htm.
Transactions during the year ended December 31, 2017, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value 12/31/16 | Additions | Reductions | Realized Gain | Change in Unrealized | Value 12/31/17 | Shares 12/31/17 | Investment Income | Capital Gain Distributions |
Mutual Funds | |||||||||
Guggenheim Strategy Fund I | $ 1,127,468 | $ 1,590,410 | $ (2,050,000) | $ 5,297 | $ (1,836) | $ 671,339 | 26,789 | $ 25,062 | $ 405 |
Guggenheim Strategy Fund II | 1,561,610 | 1,043,430 | (1,695,000) | 5,865 | (1,701) | 914,204 | 36,554 | 32,971 | 577 |
$ 2,689,078 | $ 2,633,840 | $ (3,745,000) | $ 11,162 | $ (3,537) | $ 1,585,543 | $ 58,033 | $ 982 |
24 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE S&P 500® STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2017 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $349,881) | $ | 349,880 | ||
Investments in affiliated issuers, at value (cost $1,570,728) | 1,585,543 | |||
Repurchase agreements, at value (cost $697,553) | 697,553 | |||
Segregated cash with broker | 214,500 | |||
Unrealized appreciation on swap agreements | 9,581 | |||
Receivables: | ||||
Dividends | 3,303 | |||
Swap settlement | 360 | |||
Variation margin | 398 | |||
Interest | 258 | |||
Total assets | 2,861,376 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 275,646 | |||
Securities purchased | 3,382 | |||
Management fees | 2,165 | |||
Transfer agent and administrative fees | 601 | |||
Investor service fees | 601 | |||
Portfolio accounting fees | 241 | |||
Miscellaneous | 5,806 | |||
Total liabilities | 288,442 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 2,572,934 | ||
Net assets consist of: | ||||
Paid in capital | $ | 16,559,579 | ||
Undistributed net investment income | — | |||
Accumulated net realized loss on investments | (14,009,261 | ) | ||
Net unrealized appreciation on investments | 22,616 | |||
Net assets | $ | 2,572,934 | ||
Capital shares outstanding | 36,966 | |||
Net asset value per share | $ | 69.60 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 58,033 | ||
Interest | 12,672 | |||
Total investment income | 70,705 | |||
Expenses: | ||||
Management fees | 39,536 | |||
Investor service fees | 10,982 | |||
Transfer agent and administrative fees | 10,982 | |||
Professional fees | 5,264 | |||
Portfolio accounting fees | 4,393 | |||
Custodian fees | 869 | |||
Trustees’ fees* | 781 | |||
Miscellaneous | 4,358 | |||
Total expenses | 77,165 | |||
Net investment loss | (6,460 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in affiliated issuers | 11,162 | |||
Swap agreements | (768,305 | ) | ||
Futures contracts | (48,680 | ) | ||
Distributions received from affiliated investment company shares | 982 | |||
Net realized loss | (804,841 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 151 | |||
Investments in affiliated issuers | (3,537 | ) | ||
Swap agreements | (23,015 | ) | ||
Futures contracts | (2,700 | ) | ||
Net change in unrealized appreciation (depreciation) | (29,101 | ) | ||
Net realized and unrealized loss | (833,942 | ) | ||
Net decrease in net assets resulting from operations | $ | (840,402 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 25 |
INVERSE S&P 500® STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (6,460 | ) | $ | (59,123 | ) | ||
Net realized loss on investments | (804,841 | ) | (925,533 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | (29,101 | ) | (4,832 | ) | ||||
Net decrease in net assets resulting from operations | (840,402 | ) | (989,488 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 52,117,952 | 108,998,026 | ||||||
Cost of shares redeemed | (53,288,975 | ) | (112,921,663 | ) | ||||
Net decrease from capital share transactions | (1,171,023 | ) | (3,923,637 | ) | ||||
Net decrease in net assets | (2,011,425 | ) | (4,913,125 | ) | ||||
Net assets: | ||||||||
Beginning of year | 4,584,359 | 9,497,484 | ||||||
End of year | $ | 2,572,934 | $ | 4,584,359 | ||||
Undistributed net investment income at end of year | $ | — | $ | — | ||||
Capital share activity: | ||||||||
Shares sold | 681,570 | 1,168,659 | * | |||||
Shares redeemed | (699,041 | ) | (1,213,455 | )* | ||||
Net decrease in shares | (17,471 | ) | (44,796 | )* |
* | Capital share activity for the period ended December 31, 2016, has been restated to reflect a 1:6 reverse share split effective December 1, 2016 — See Note 11. |
26 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE S&P 500® STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016d | Year Ended December 31, 2015d | Year Ended December 31, 2014d | Year Ended December 31, 2013d | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 84.21 | $ | 95.71 | $ | 100.13 | $ | 117.09 | $ | 159.28 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.11 | ) | (.11 | ) | (1.32 | ) | (1.62 | ) | (2.22 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | (14.50 | ) | (11.39 | ) | (3.10 | ) | (15.34 | ) | (39.97 | ) | ||||||||||
Total from investment operations | (14.61 | ) | (11.50 | ) | (4.42 | ) | (16.96 | ) | (42.19 | ) | ||||||||||
Net asset value, end of period | $ | 69.60 | $ | 84.21 | $ | 95.71 | $ | 100.13 | $ | 117.09 | ||||||||||
Total Returnb | (17.35 | %) | (12.01 | %) | (4.43 | %) | (14.45 | %) | (26.52 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 2,573 | $ | 4,584 | $ | 9,497 | $ | 4,456 | $ | 6,797 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.15 | %) | (0.69 | %) | (1.38 | %) | (1.46 | %) | (1.64 | %) | ||||||||||
Total expensesc | 1.76 | % | 1.71 | % | 1.66 | % | 1.72 | % | 1.69 | % | ||||||||||
Portfolio turnover rate | 100 | % | 311 | % | 137 | % | 398 | % | — |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Reverse share split — Per share amounts for the periods presented through December 31, 2016, have been restated to reflect a 1:6 reverse share split effective December 1, 2016 — See Note 11. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 27 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
NASDAQ-100® FUND
OBJECTIVE: Seeks to provide investment results that correspond, before fees and expenses, to a benchmark for over-the-counter securities on a daily basis. The Fund’s current benchmark is the NASDAQ-100® Index (the “underlying index”).
For the one-year period ended December 31, 2017, NASDAQ-100® Fund maintained a daily correlation of over 99% to its benchmark of 100% of the daily price movement of the NASDAQ-100 Index. The Fund returned 31.12%, while the NASDAQ-100 Index returned 32.99% over the same time period.
The Information Technology and Consumer Discretionary sectors contributed the most to the performance of the underlying index during the year. No sector detracted from performance. The Real Estate sector contributed the least to the performance of the underlying index for the year.
Apple, Inc., Amazon.com, Inc., and Microsoft Corp. contributed the most to performance of the underlying index for 2017. Walgreens Boots Alliance, Inc., Kraft Heinz Co., and Celgene Corp. detracted the most from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and not for hedging purposes.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments or investments in Guggenheim Strategy Funds Trust mutual funds. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: May 7, 1997
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 15.9% |
Apple, Inc. | 9.0% |
Microsoft Corp. | 6.8% |
Amazon.com, Inc. | 5.8% |
Guggenheim Strategy Fund I | 5.7% |
Facebook, Inc. — Class A | 4.3% |
Alphabet, Inc. — Class C | 3.8% |
Alphabet, Inc. — Class A | 3.2% |
Intel Corp. | 2.2% |
Cisco Systems, Inc. | 2.0% |
Top Ten Total | 58.7% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments.
28 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
NASDAQ-100® Fund | 31.12% | 18.92% | 11.49% |
NASDAQ-100 Index | 32.99% | 20.68% | 13.05% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The NASDAQ-100 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 29 |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
NASDAQ-100® FUND |
Shares | Value | |||||||
COMMON STOCKS† - 75.4% | ||||||||
Technology - 30.2% | ||||||||
Apple, Inc. | 40,658 | $ | 6,880,553 | |||||
Microsoft Corp. | 61,090 | 5,225,639 | ||||||
Intel Corp. | 37,060 | 1,710,690 | ||||||
NVIDIA Corp. | 4,799 | 928,606 | ||||||
Broadcom Ltd. | 3,231 | 830,044 | ||||||
Texas Instruments, Inc. | 7,804 | 815,050 | ||||||
QUALCOMM, Inc. | 11,674 | 747,369 | ||||||
Adobe Systems, Inc.* | 3,904 | 684,137 | ||||||
Applied Materials, Inc. | 8,445 | 431,708 | ||||||
Activision Blizzard, Inc. | 5,987 | 379,097 | ||||||
Micron Technology, Inc.* | 9,132 | 375,508 | ||||||
Cognizant Technology Solutions Corp. — Class A | 4,669 | 331,593 | ||||||
Intuit, Inc. | 2,024 | 319,347 | ||||||
Analog Devices, Inc. | 2,919 | 259,879 | ||||||
Electronic Arts, Inc.* | 2,438 | 256,136 | ||||||
Lam Research Corp. | 1,282 | 235,978 | ||||||
Fiserv, Inc.* | 1,650 | 216,364 | ||||||
NetEase, Inc. ADR | 601 | 207,387 | ||||||
Paychex, Inc. | 2,843 | 193,551 | ||||||
Western Digital Corp. | 2,342 | 186,259 | ||||||
Autodesk, Inc.* | 1,736 | 181,985 | ||||||
Cerner Corp.* | 2,632 | 177,370 | ||||||
Microchip Technology, Inc. | 1,852 | 162,754 | ||||||
Skyworks Solutions, Inc. | 1,451 | 137,772 | ||||||
Check Point Software Technologies Ltd.* | 1,294 | 134,084 | ||||||
Xilinx, Inc. | 1,987 | 133,963 | ||||||
KLA-Tencor Corp. | 1,241 | 130,392 | ||||||
Maxim Integrated Products, Inc. | 2,229 | 116,532 | ||||||
Workday, Inc. — Class A* | 1,085 | 110,388 | ||||||
CA, Inc. | 3,314 | 110,290 | ||||||
Citrix Systems, Inc.* | 1,193 | 104,984 | ||||||
Synopsys, Inc.* | 1,190 | 101,436 | ||||||
Take-Two Interactive Software, Inc.* | 903 | 99,131 | ||||||
ASML Holding N.V. — Class G | 569 | 98,904 | ||||||
Seagate Technology plc | 2,291 | 95,856 | ||||||
Cadence Design Systems, Inc.* | 2,236 | 93,510 | ||||||
Total Technology | 23,204,246 | |||||||
Communications - 27.8% | ||||||||
Amazon.com, Inc.* | 3,816 | 4,462,697 | ||||||
Facebook, Inc. — Class A* | 18,885 | 3,332,447 | ||||||
Alphabet, Inc. — Class C* | 2,767 | 2,895,389 | ||||||
Alphabet, Inc. — Class A* | 2,362 | 2,488,131 | ||||||
Cisco Systems, Inc. | 39,148 | 1,499,368 | ||||||
Comcast Corp. — Class A | 36,936 | 1,479,287 | ||||||
Priceline Group, Inc.* | 386 | 670,768 | ||||||
Charter Communications, Inc. — Class A* | 1,969 | 661,505 | ||||||
Netflix, Inc.* | 3,427 | 657,847 | ||||||
Baidu, Inc. ADR* | 2,223 | 520,649 | ||||||
T-Mobile US, Inc.* | 6,588 | 418,404 | ||||||
eBay, Inc.* | 8,272 | 312,185 | ||||||
JD.com, Inc. ADR* | 7,301 | 302,407 | ||||||
Twenty-First Century Fox, Inc. — Class A | 8,346 | 288,187 | ||||||
Twenty-First Century Fox, Inc. — Class B | 6,323 | 215,741 | ||||||
Sirius XM Holdings, Inc.1 | 36,393 | 195,066 | ||||||
Ctrip.com International Ltd. ADR* | 3,627 | 159,951 | ||||||
Liberty Global plc — Class C* | 4,659 | 157,661 | ||||||
Symantec Corp. | 4,910 | 137,775 | ||||||
Expedia, Inc. | 1,106 | 132,466 | ||||||
Vodafone Group plc ADR | 3,684 | 117,520 | ||||||
MercadoLibre, Inc. | 350 | 110,131 | ||||||
DISH Network Corp. — Class A* | 1,805 | 86,189 | ||||||
Liberty Global plc — Class A* | 1,751 | 62,756 | ||||||
Liberty Ventures* | 644 | 34,930 | ||||||
Total Communications | 21,399,457 | |||||||
Consumer, Non-cyclical - 11.3% | ||||||||
Amgen, Inc. | 5,748 | 999,577 | ||||||
Kraft Heinz Co. | 9,649 | 750,306 | ||||||
Gilead Sciences, Inc. | 10,344 | 741,044 | ||||||
PayPal Holdings, Inc.* | 9,518 | 700,715 | ||||||
Celgene Corp.* | 6,235 | 650,685 | ||||||
Biogen, Inc.* | 1,675 | 533,605 | ||||||
Mondelez International, Inc. — Class A | 11,834 | 506,495 | ||||||
Automatic Data Processing, Inc. | 3,512 | 411,571 | ||||||
Express Scripts Holding Co.* | 4,485 | 334,760 | ||||||
Intuitive Surgical, Inc.* | 887 | 323,702 | ||||||
Regeneron Pharmaceuticals, Inc.* | 836 | 314,303 | ||||||
Vertex Pharmaceuticals, Inc.* | 2,003 | 300,170 | ||||||
Monster Beverage Corp.* | 4,466 | 282,653 | ||||||
Illumina, Inc.* | 1,156 | 252,574 | ||||||
Alexion Pharmaceuticals, Inc.* | 1,769 | 211,555 | ||||||
Mylan N.V.* | 4,248 | 179,733 | ||||||
Incyte Corp.* | 1,671 | 158,260 | ||||||
Align Technology, Inc.* | 635 | 141,091 | ||||||
Cintas Corp. | 842 | 131,209 | ||||||
Verisk Analytics, Inc. — Class A* | 1,304 | 125,184 | ||||||
BioMarin Pharmaceutical, Inc.* | 1,391 | 124,035 | ||||||
Dentsply Sirona, Inc. | 1,819 | 119,745 | ||||||
IDEXX Laboratories, Inc.* | 691 | 108,058 | ||||||
Hologic, Inc.* | 2,183 | 93,323 | ||||||
Shire plc ADR | 587 | 91,056 | ||||||
Henry Schein, Inc.* | 1,243 | 86,861 | ||||||
Total Consumer, Non-cyclical | 8,672,270 | |||||||
Consumer, Cyclical - 5.5% | ||||||||
Starbucks Corp. | 11,267 | 647,064 | ||||||
Costco Wholesale Corp. | 3,460 | 643,975 | ||||||
Walgreens Boots Alliance, Inc. | 7,842 | 569,486 | ||||||
Tesla, Inc.*,1 | 1,331 | 414,407 | ||||||
Marriott International, Inc. — Class A | 2,887 | 391,853 | ||||||
Ross Stores, Inc. | 3,053 | 245,003 | ||||||
Dollar Tree, Inc.* | 1,878 | 201,528 | ||||||
PACCAR, Inc. | 2,784 | 197,887 | ||||||
American Airlines Group, Inc. | 3,789 | 197,142 | ||||||
O’Reilly Automotive, Inc.* | 673 | 161,884 | ||||||
Wynn Resorts Ltd. | 814 | 137,232 | ||||||
Fastenal Co. | 2,276 | 124,474 | ||||||
Ulta Beauty, Inc.* | 483 | 108,028 | ||||||
Hasbro, Inc. | 986 | 89,617 |
30 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
NASDAQ-100® FUND |
Shares | Value | |||||||
Liberty Interactive Corporation QVC Group — Class A* | 3,176 | $ | 77,558 | |||||
Total Consumer, Cyclical | 4,207,138 | |||||||
Industrial - 0.6% | ||||||||
CSX Corp. | 7,077 | 389,306 | ||||||
J.B. Hunt Transport Services, Inc. | 869 | 99,917 | ||||||
Total Industrial | 489,223 | |||||||
Total Common Stocks | ||||||||
(Cost $35,013,730) | 57,972,334 | |||||||
MUTUAL FUNDS† - 21.6% | ||||||||
Guggenheim Strategy Fund II2 | 490,203 | 12,259,973 | ||||||
Guggenheim Strategy Fund I2 | 173,649 | 4,351,654 | ||||||
Total Mutual Funds | ||||||||
(Cost $16,577,557) | 16,611,627 | |||||||
Face Amount | ||||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 0.7% | ||||||||
Federal Home Loan Bank3 | ||||||||
1.05% due 01/02/184,5 | $ | 500,000 | 499,985 | |||||
Total Federal Agency Discount Notes | ||||||||
(Cost $499,985) | 499,985 | |||||||
U.S. TREASURY BILLS†† - 0.5% | ||||||||
U. S. Treasury Bills | ||||||||
1.31% due 04/19/185,6 | 200,000 | 199,171 | ||||||
1.26% due 03/01/185,7 | 160,000 | 159,672 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $358,869) | 358,843 | |||||||
REPURCHASE AGREEMENTS††,8 - 1.5% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/187 | 770,930 | 770,930 | ||||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/187 | 411,447 | 411,447 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $1,182,377) | 1,182,377 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,9 - 0.6% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%10 | 475,766 | 475,766 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $475,766) | 475,766 | |||||||
Total Investments - 100.3% | ||||||||
(Cost $54,108,284) | $ | 77,100,932 | ||||||
Other Assets & Liabilities, net - (0.3)% | (239,097 | ) | ||||||
Total Net Assets - 100.0% | $ | 76,861,835 |
Futures Contracts | ||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Value and Unrealized Gain | ||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||
NASDAQ-100 Index Mini Futures Contracts | 60 | Mar 2018 | $ | 7,692,300 | $ | 82,181 |
Total Return Swap Agreements | ||||||||||||||||||||||||
Counterparty | Index | Financing Rate Pay (Receive) | Payment Frequency | Maturity Date | Units | Notional Amount | Value and Unrealized Loss | |||||||||||||||||
OTC Equity Index Swap Agreements†† | ||||||||||||||||||||||||
Barclays Bank plc | NASDAQ-100 Index | 1.98 | % | At Maturity | 01/30/18 | 151 | $ | 964,811 | $ | (6,788 | ) | |||||||||||||
Goldman Sachs International | NASDAQ-100 Index | 2.08 | % | At Maturity | 01/26/18 | 429 | 2,745,854 | (15,772 | ) | |||||||||||||||
BNP Paribas | NASDAQ-100 Index | 2.07 | % | At Maturity | 01/26/18 | 1,112 | 7,111,346 | (43,059 | ) | |||||||||||||||
$ | 10,822,011 | $ | (65,619 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 31 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
NASDAQ-100® FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 7. |
2 | Affiliated issuer. |
3 | The issuer operates under a Congressional charter; its securities are neither issued nor guaranteed by the U.S. Government. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | Zero coupon rate security. |
6 | All or a portion of this security is pledged as futures collateral at December 31, 2017. |
7 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2017. |
8 | Repurchase Agreements — See Note 6. |
9 | Securities lending collateral — See Note 7. |
10 | Rate indicated is the 7 day yield as of December 31, 2017. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Common Stocks | $ | 57,972,334 | $ | — | $ | — | $ | — | $ | — | $ | 57,972,334 | ||||||||||||
Equity Futures Contracts | — | 82,181 | — | — | — | 82,181 | ||||||||||||||||||
Federal Agency Discount Notes | — | — | 499,985 | — | — | 499,985 | ||||||||||||||||||
Mutual Funds | 16,611,627 | — | — | — | — | 16,611,627 | ||||||||||||||||||
Repurchase Agreements | — | — | 1,182,377 | — | — | 1,182,377 | ||||||||||||||||||
Securities Lending Collateral | 475,766 | — | — | — | — | 475,766 | ||||||||||||||||||
U.S. Treasury Bills | — | — | 358,843 | — | — | 358,843 | ||||||||||||||||||
Total Assets | $ | 75,059,727 | $ | 82,181 | $ | 2,041,205 | $ | — | $ | — | $ | 77,183,113 | ||||||||||||
Investments in Securities (Liabilities) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Equity Index Swap Agreements | $ | — | $ | — | $ | — | $ | 65,619 | $ | — | $ | 65,619 |
* | Other financial instruments include futures contracts and swaps, which are reported as unrealized gain/loss at period end. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
32 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
NASDAQ-100® FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a portfolio company of a fund, or control of or by, or common control under GI, result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act.
The Fund may invest in the underlying series of the Guggenheim Strategy Funds Trust consisting of Guggenheim Strategy Fund I, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III (collectively, the “Cash Management Funds”), open-end management investment companies managed by GI. The Cash Management Funds, which launched on March 11, 2014, are offered as cash management options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Cash Management Funds pay no investment management fees. The Cash Management Funds’ annual report on Form N-CSR dated September 30, 2017, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180417000715/gug72218.htm.
Transactions during the year ended December 31, 2017, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value 12/31/16 | Additions | Reductions | Realized Gain | Change in Unrealized | Value 12/31/17 | Shares 12/31/17 | Investment Income | Capital Gain Distributions |
Mutual Funds | |||||||||
Guggenheim Strategy Fund I | $ 10,255,870 | $ 13,690,757 | $ (19,650,000) | $ 65,289 | $ (10,262) | $ 4,351,654 | 173,649 | $ 239,898 | $ 1,455 |
Guggenheim Strategy Fund II | 4,387,709 | 18,387,192 | (10,520,000) | 3,569 | 1,503 | 12,259,973 | 490,203 | 200,500 | 6,522 |
$ 14,643,579 | $ 32,077,949 | $ (30,170,000) | $ 68,858 | $ (8,759) | $ 16,611,627 | $ 440,398 | $ 7,977 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 33 |
NASDAQ-100® FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2017 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $457,023 of securities loaned (cost $36,348,350) | $ | 59,306,928 | ||
Investments in affiliated issuers, at value (cost $16,577,557) | 16,611,627 | |||
Repurchase agreements, at value (cost $1,182,377) | 1,182,377 | |||
Cash | 5,652 | |||
Segregated cash with broker | 132,064 | |||
Receivables: | ||||
Fund shares sold | 416,295 | |||
Dividends | 44,041 | |||
Securities sold | 26,752 | |||
Securities lending income | 172 | |||
Interest | 139 | |||
Total assets | 77,726,047 | |||
Liabilities: | ||||
Unrealized depreciation on swap agreements | 65,619 | |||
Payable for: | ||||
Return of securities loaned | 475,766 | |||
Management fees | 50,375 | |||
Variation margin | 43,200 | |||
Fund shares redeemed | 36,545 | |||
Securities purchased | 30,754 | |||
Transfer agent and administrative fees | 16,792 | |||
Investor service fees | 16,792 | |||
Portfolio accounting fees | 6,717 | |||
Swap settlement | 941 | |||
Miscellaneous | 120,711 | |||
Total liabilities | 864,212 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 76,861,835 | ||
Net assets consist of: | ||||
Paid in capital | $ | 52,211,768 | ||
Undistributed net investment income | — | |||
Accumulated net realized gain on investments | 1,640,857 | |||
Net unrealized appreciation on investments | 23,009,210 | |||
Net assets | $ | 76,861,835 | ||
Capital shares outstanding | 1,986,088 | |||
Net asset value per share | $ | 38.70 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $242) | $ | 509,657 | ||
Dividends from securities of affiliated issuers | 440,398 | |||
Interest | 42,784 | |||
Income from securities lending, net | 3,429 | |||
Total investment income | 996,268 | |||
Expenses: | ||||
Management fees | 556,300 | |||
Investor service fees | 185,433 | |||
Transfer agent and administrative fees | 185,433 | |||
Professional fees | 105,016 | |||
Portfolio accounting fees | 74,173 | |||
Custodian fees | 12,477 | |||
Trustees’ fees* | 8,799 | |||
Line of credit fees | 425 | |||
Miscellaneous | 91,662 | |||
Total expenses | 1,219,718 | |||
Net investment loss | (223,450 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 2,120,934 | |||
Investments in affiliated issuers | 68,858 | |||
Swap agreements | 4,870,100 | |||
Futures contracts | 1,884,930 | |||
Distributions received from affiliated investment company shares | 7,977 | |||
Net realized gain | 8,952,799 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 10,872,514 | |||
Investments in affiliated issuers | (8,759 | ) | ||
Swap agreements | 29,234 | |||
Futures contracts | 135,613 | |||
Net change in unrealized appreciation (depreciation) | 11,028,602 | |||
Net realized and unrealized gain | 19,981,401 | |||
Net increase in net assets resulting from operations | $ | 19,757,951 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
34 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
NASDAQ-100® FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (223,450 | ) | $ | (214,760 | ) | ||
Net realized gain on investments | 8,952,799 | 13,610,926 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 11,028,602 | (14,788,491 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 19,757,951 | (1,392,325 | ) | |||||
Distributions to shareholders from: | ||||||||
Net realized gains | (5,453,414 | ) | (7,342,071 | ) | ||||
Total distributions to shareholders | (5,453,414 | ) | (7,342,071 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 192,464,835 | 177,841,642 | ||||||
Distributions reinvested | 5,453,414 | 7,342,071 | ||||||
Cost of shares redeemed | (196,876,945 | ) | (213,476,697 | ) | ||||
Net increase (decrease) from capital share transactions | 1,041,304 | (28,292,984 | ) | |||||
Net increase (decrease) in net assets | 15,345,841 | (37,027,380 | ) | |||||
Net assets: | ||||||||
Beginning of year | 61,515,994 | 98,543,374 | ||||||
End of year | $ | 76,861,835 | $ | 61,515,994 | ||||
Undistributed net investment income at end of year | $ | — | $ | — | ||||
Capital share activity: | ||||||||
Shares sold | 5,318,119 | 5,529,359 | ||||||
Shares issued from reinvestment of distributions | 155,368 | 243,761 | ||||||
Shares redeemed | (5,416,663 | ) | (6,728,211 | ) | ||||
Net increase (decrease) in shares | 56,824 | (955,091 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 35 |
NASDAQ-100® FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 31.89 | $ | 34.16 | $ | 33.70 | $ | 30.37 | $ | 22.57 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.11 | ) | (.11 | ) | (.16 | ) | (.11 | ) | (.09 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 9.73 | 1.92 | 2.90 | 5.40 | 7.89 | |||||||||||||||
Total from investment operations | 9.62 | 1.81 | 2.74 | 5.29 | 7.80 | |||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (2.81 | ) | (4.08 | ) | (2.28 | ) | (1.96 | ) | — | |||||||||||
Total distributions | (2.81 | ) | (4.08 | ) | (2.28 | ) | (1.96 | ) | — | |||||||||||
Net asset value, end of period | $ | 38.70 | $ | 31.89 | $ | 34.16 | $ | 33.70 | $ | 30.37 | ||||||||||
Total Returnb | 31.12 | % | 5.98 | % | 8.24 | % | 17.45 | % | 34.62 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 76,862 | $ | 61,516 | $ | 98,543 | $ | 82,082 | $ | 72,810 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.30 | %) | (0.34 | %) | (0.47 | %) | (0.33 | %) | (0.36 | %) | ||||||||||
Total expensesc | 1.64 | % | 1.60 | % | 1.54 | % | 1.60 | % | 1.57 | % | ||||||||||
Portfolio turnover rate | 101 | % | 284 | % | 241 | % | 225 | % | 186 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
36 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
INVERSE NASDAQ-100® STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is the inverse (opposite) of the performance of the NASDAQ-100® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2017, with the NASDAQ-100 Index returning 32.99%, the Inverse NASDAQ-100® Strategy Fund returned -24.66%. For the one-year period ended December 31, 2017, Inverse NASDAQ-100® Strategy Fund maintained a daily correlation of over 99% to its benchmark of -100% of the daily price movement of the NASDAQ-100 Index.
The Information Technology and Consumer Discretionary sectors contributed the most to the performance of the underlying index during the year. No sector detracted from performance. The Real Estate sector contributed the least to the performance of the underlying index for the year.
Apple, Inc., Amazon.com, Inc., and Microsoft Corp. contributed the most to performance of the underlying index for 2017. Walgreens Boots Alliance, Inc., Kraft Heinz Co., and Celgene Corp. detracted the most from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and not for hedging purposes.
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 6 of this report.
Performance displayed represents past performance, which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 37 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments or investments in Guggenheim Strategy Funds Trust mutual funds. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: May 21, 2001
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund I | 20.6% |
Guggenheim Strategy Fund II | 20.5% |
Total | 41.1% |
“Largest Holdings” excludes any temporary cash or derivative investments.
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Inverse NASDAQ-100® Strategy Fund | (24.66%) | (19.26%) | (15.98%) |
NASDAQ-100 Index | 32.99% | 20.68% | 13.05% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The NASDAQ-100 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
38 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
INVERSE NASDAQ-100® STRATEGY FUND |
Shares | Value | |||||||
MUTUAL FUNDS† - 41.1% | ||||||||
Guggenheim Strategy Fund I1 | 6,329 | $ | 158,610 | |||||
Guggenheim Strategy Fund II1 | 6,337 | 158,498 | ||||||
Total Mutual Funds | ||||||||
(Cost $313,951) | 317,108 | |||||||
Face Amount | ||||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 25.9% | ||||||||
Fannie Mae2 | ||||||||
1.26% due 01/12/183,4 | $ | 100,000 | 99,961 | |||||
Freddie Mac2 | ||||||||
1.31% due 02/02/183,4 | 100,000 | 99,884 | ||||||
Total Federal Agency Discount Notes | ||||||||
(Cost $199,845) | 199,845 | |||||||
FEDERAL AGENCY NOTES†† - 13.0% | ||||||||
Federal Farm Credit Bank5 | ||||||||
1.43% (1 Month USD LIBOR + 0.02%) due 01/08/186 | 50,000 | 50,002 | ||||||
1.41% (1 Month USD LIBOR + 0.04%) due 01/02/186 | 50,000 | 50,000 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $100,002) | 100,002 | |||||||
REPURCHASE AGREEMENTS††,7 - 16.4% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/188 | 82,759 | 82,759 | ||||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/188 | 44,169 | 44,169 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $126,928) | 126,928 | |||||||
Total Investments - 96.4% | ||||||||
(Cost $740,726) | $ | 743,883 | ||||||
Other Assets & Liabilities, net - 3.6% | 28,115 | |||||||
Total Net Assets - 100.0% | $ | 771,998 |
Total Return Swap Agreements | ||||||||||||||||||||||||
Counterparty | Index | Financing Rate Pay (Receive) | Payment Frequency | Maturity Date | Units | Notional Amount | Value and Unrealized Gain | |||||||||||||||||
OTC Equity Index Swap Agreements Sold Short†† | ||||||||||||||||||||||||
Barclays Bank plc | NASDAQ-100 Index | (1.83 | %) | At Maturity | 01/30/18 | 46 | $ | 296,343 | $ | 2,085 | ||||||||||||||
Goldman Sachs International | NASDAQ-100 Index | (1.78 | %) | At Maturity | 01/26/18 | 45 | 287,217 | 1,650 | ||||||||||||||||
BNP Paribas | NASDAQ-100 Index | (1.57 | %) | At Maturity | 01/26/18 | 30 | 190,456 | 1,153 | ||||||||||||||||
$ | 774,016 | $ | 4,888 |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | On September 7, 2008, the issuer was placed in conservatorship by the Federal Housing Finance Agency (FHFA). As conservator, the FHFA has full powers to control the assets and operations of the firm. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | Zero coupon rate security. |
5 | The issuer operates under a Congressional charter; its securities are neither issued nor guaranteed by the U.S. Government. |
6 | Variable rate security. The rate indicated is the rate effective at December 31, 2017. In some instances, the underlying reference rate shown was below the minimum rate earned by the security or has been adjusted by a predetermined factor. The settlement status of a position may also impact the effective rate indicated. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
7 | Repurchase Agreements — See Note 6. |
8 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2017. |
LIBOR — London Interbank Offered Rate | |
USD — United States Dollar | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 39 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
INVERSE NASDAQ-100® STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | |||||||||||||||
Equity Index Swap Agreements | $ | — | $ | — | $ | 4,888 | $ | — | $ | 4,888 | ||||||||||
Federal Agency Discount Notes | — | 199,845 | — | — | 199,845 | |||||||||||||||
Federal Agency Notes | — | 100,002 | — | — | 100,002 | |||||||||||||||
Mutual Funds | 317,108 | — | — | — | 317,108 | |||||||||||||||
Repurchase Agreements | — | 126,928 | — | — | 126,928 | |||||||||||||||
Total Assets | $ | 317,108 | $ | 426,775 | $ | 4,888 | $ | — | $ | 748,771 |
* | Other financial instruments include swaps, which are reported as unrealized gain/loss at period end. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a portfolio company of a fund, or control of or by, or common control under GI, result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act.
The Fund may invest in the underlying series of the Guggenheim Strategy Funds Trust consisting of Guggenheim Strategy Fund I, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III (collectively, the “Cash Management Funds”), open-end management investment companies managed by GI. The Cash Management Funds, which launched on March 11, 2014, are offered as cash management options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Cash Management Funds pay no investment management fees. The Cash Management Funds’ annual report on Form N-CSR dated September 30, 2017, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180417000715/gug72218.htm.
Transactions during the year ended December 31, 2017, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value 12/31/16 | Additions | Reductions | Realized Gain | Change in Unrealized | Value 12/31/17 | Shares 12/31/17 | Investment Income | Capital Gain Distributions |
Mutual Funds | |||||||||
Guggenheim Strategy Fund I | $ 564,036 | $ 628,393 | $ (1,035,000) | $ 2,417 | $ (1,236) | $ 158,610 | 6,329 | $ 8,271 | $ 155 |
Guggenheim Strategy Fund II | 515,846 | 310,895 | (670,000) | 3,777 | (2,020) | 158,498 | 6,337 | 10,768 | 164 |
$ 1,079,882 | $ 939,288 | $ (1,705,000) | $ 6,194 | $ (3,256) | $ 317,108 | $ 19,039 | $ 319 |
40 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE NASDAQ-100® STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2017 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $299,847) | $ | 299,847 | ||
Investments in affiliated issuers, at value (cost $313,951) | 317,108 | |||
Repurchase agreements, at value (cost $126,928) | 126,928 | |||
Segregated cash with broker | 40,000 | |||
Unrealized appreciation on swap agreements | 4,888 | |||
Receivables: | ||||
Securities sold | 250,000 | |||
Swap settlement | 1,483 | |||
Dividends | 1,069 | |||
Fund shares sold | 160 | |||
Interest | 121 | |||
Total assets | 1,041,604 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 261,957 | |||
Management fees | 1,261 | |||
Securities purchased | 1,097 | |||
Transfer agent and administrative fees | 350 | |||
Investor service fees | 350 | |||
Portfolio accounting fees | 140 | |||
Miscellaneous | 4,451 | |||
Total liabilities | 269,606 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 771,998 | ||
Net assets consist of: | ||||
Paid in capital | $ | 6,959,706 | ||
Undistributed net investment income | — | |||
Accumulated net realized loss on investments | (6,195,753 | ) | ||
Net unrealized appreciation on investments | 8,045 | |||
Net assets | $ | 771,998 | ||
Capital shares outstanding | 13,023 | |||
Net asset value per share | $ | 59.28 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 19,039 | ||
Interest | 5,768 | |||
Total investment income | 24,807 | |||
Expenses: | ||||
Management fees | 13,779 | |||
Investor service fees | 3,827 | |||
Transfer agent and administrative fees | 3,827 | |||
Professional fees | 1,785 | |||
Portfolio accounting fees | 1,531 | |||
Custodian fees | 331 | |||
Trustees’ fees* | 277 | |||
Miscellaneous | 2,093 | |||
Total expenses | 27,450 | |||
Net investment loss | (2,643 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in affiliated issuers | 6,194 | |||
Swap agreements | (463,051 | ) | ||
Futures contracts | (2,262 | ) | ||
Distributions received from affiliated investment company shares | 319 | |||
Net realized loss | (458,800 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in affiliated issuers | (3,256 | ) | ||
Swap agreements | (24,144 | ) | ||
Futures contracts | (568 | ) | ||
Net change in unrealized appreciation (depreciation) | (27,968 | ) | ||
Net realized and unrealized loss | (486,768 | ) | ||
Net decrease in net assets resulting from operations | $ | (489,411 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 41 |
INVERSE NASDAQ-100® STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (2,643 | ) | $ | (25,159 | ) | ||
Net realized loss on investments | (458,800 | ) | (630,788 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | (27,968 | ) | 23,824 | |||||
Net decrease in net assets resulting from operations | (489,411 | ) | (632,123 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 38,954,509 | 60,176,348 | ||||||
Cost of shares redeemed | (40,345,194 | ) | (58,419,384 | ) | ||||
Net increase (decrease) from capital share transactions | (1,390,685 | ) | 1,756,964 | |||||
Net increase (decrease) in net assets | (1,880,096 | ) | 1,124,841 | |||||
Net assets: | ||||||||
Beginning of year | 2,652,094 | 1,527,253 | ||||||
End of year | $ | 771,998 | $ | 2,652,094 | ||||
Undistributed net investment income at end of year | $ | — | $ | — | ||||
Capital share activity: | ||||||||
Shares sold | 588,712 | 677,118 | * | |||||
Shares redeemed | (609,395 | ) | (660,980 | )* | ||||
Net increase (decrease) in shares | (20,683 | ) | 16,138 | * |
* | Capital share activity for the period presented through December 31, 2016, has been restated to reflect a 1:4 reverse share split effective December 1, 2016 — See Note 11. |
42 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE NASDAQ-100® STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016d | Year Ended December 31, 2015d | Year Ended December 31, 2014d | Year Ended December 31, 2013d | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 78.68 | $ | 86.94 | $ | 99.74 | $ | 122.62 | $ | 172.83 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.11 | ) | (.18 | ) | (1.36 | ) | (1.68 | ) | (2.60 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | (19.29 | ) | (8.08 | ) | (11.44 | ) | (21.20 | ) | (47.61 | ) | ||||||||||
Total from investment operations | (19.40 | ) | (8.26 | ) | (12.80 | ) | (22.88 | ) | (50.21 | ) | ||||||||||
Net asset value, end of period | $ | 59.28 | $ | 78.68 | $ | 86.94 | $ | 99.74 | $ | 122.62 | ||||||||||
Total Returnb | (24.66 | %) | (9.48 | %) | (12.87 | %) | (18.63 | %) | (29.05 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 772 | $ | 2,652 | $ | 1,527 | $ | 1,634 | $ | 2,466 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.17 | %) | (0.78 | %) | (1.47 | %) | (1.47 | %) | (1.68 | %) | ||||||||||
Total expensesc | 1.79 | % | 1.74 | % | 1.70 | % | 1.77 | % | 1.73 | % | ||||||||||
Portfolio turnover rate | 119 | % | 382 | % | 406 | % | 302 | % | — |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Reverse share split — Per share amounts for the periods presented through December 31, 2016, have been restated to reflect a 1:4 reverse share split effective December 1, 2016 — See Note 11. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 43 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
S&P 500® 2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is 200% of the performance of the S&P 500® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2017, S&P 500® 2x Strategy Fund maintained a daily correlation of over 99% to its benchmark of 200% of the daily price movement of the S&P 500 Index. S&P 500® 2x Strategy Fund returned 43.49%, while the S&P 500 Index returned 21.83% over the same time period.
The sectors contributing the most to the performance of the underlying index for the period were Information Technology and Financials. The Energy sector detracted the most from return of the underlying index for the period, followed by the Telecommunications Services sector.
Apple, Inc., Microsoft Corp., and Amazon.com, Inc. contributed the most to performance of the underlying index for 2017. General Electric Co., Schlumberger NV, and Exxon Mobil Corp. detracted the most from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes.
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 6 of this report.
Performance displayed represents past performance, which is no guarantee of future results.
44 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments or investments in Guggenheim Strategy Funds Trust mutual funds. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: October 1, 2001
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 29.8% |
Guggenheim Strategy Fund I | 29.2% |
Apple, Inc. | 1.1% |
Microsoft Corp. | 0.8% |
Amazon.com, Inc. | 0.6% |
Facebook, Inc. — Class A | 0.5% |
Berkshire Hathaway, Inc. — Class B | 0.5% |
Johnson & Johnson | 0.5% |
JPMorgan Chase & Co. | 0.5% |
Exxon Mobil Corp. | 0.4% |
Top Ten Total | 63.9% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments.
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
S&P 500® 2x Strategy Fund | 43.49% | 29.00% | 10.07% |
S&P 500 Index | 21.83% | 15.79% | 8.50% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 45 |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
S&P 500® 2x STRATEGY FUND |
Shares | Value | |||||||
COMMON STOCKS† - 27.2% | ||||||||
Consumer, Non-cyclical - 5.9% | ||||||||
Johnson & Johnson | 1,172 | $ | 163,752 | |||||
Procter & Gamble Co. | 1,110 | 101,987 | ||||||
Pfizer, Inc. | 2,597 | 94,063 | ||||||
UnitedHealth Group, Inc. | 423 | 93,255 | ||||||
Coca-Cola Co. | 1,671 | 76,665 | ||||||
PepsiCo, Inc. | 620 | 74,350 | ||||||
Philip Morris International, Inc. | 677 | 71,525 | ||||||
AbbVie, Inc. | 695 | 67,214 | ||||||
Merck & Company, Inc. | 1,192 | 67,074 | ||||||
Altria Group, Inc. | 831 | 59,342 | ||||||
Amgen, Inc. | 316 | 54,952 | ||||||
Medtronic plc | 590 | 47,643 | ||||||
Bristol-Myers Squibb Co. | 714 | 43,754 | ||||||
Abbott Laboratories | 758 | 43,259 | ||||||
Gilead Sciences, Inc. | 569 | 40,763 | ||||||
PayPal Holdings, Inc.* | 492 | 36,221 | ||||||
Celgene Corp.* | 343 | 35,796 | ||||||
Eli Lilly & Co. | 422 | 35,642 | ||||||
Thermo Fisher Scientific, Inc. | 175 | 33,229 | ||||||
Biogen, Inc.* | 92 | 29,308 | ||||||
Colgate-Palmolive Co. | 383 | 28,897 | ||||||
Mondelez International, Inc. — Class A | 651 | 27,863 | ||||||
Aetna, Inc. | 142 | 25,615 | ||||||
Anthem, Inc. | 112 | 25,201 | ||||||
Danaher Corp. | 267 | 24,783 | ||||||
Becton Dickinson and Co. | 115 | 24,706 | ||||||
Allergan plc | 145 | 23,719 | ||||||
Automatic Data Processing, Inc. | 193 | 22,618 | ||||||
Cigna Corp. | 108 | 21,934 | ||||||
Stryker Corp. | 140 | 21,678 | ||||||
Kraft Heinz Co. | 260 | 20,217 | ||||||
S&P Global, Inc. | 111 | 18,803 | ||||||
Kimberly-Clark Corp. | 153 | 18,461 | ||||||
Express Scripts Holding Co.* | 247 | 18,436 | ||||||
Intuitive Surgical, Inc.* | 49 | 17,882 | ||||||
Constellation Brands, Inc. — Class A | 75 | 17,143 | ||||||
Vertex Pharmaceuticals, Inc.* | 111 | 16,635 | ||||||
Humana, Inc. | 62 | 15,380 | ||||||
Zoetis, Inc. | 213 | 15,345 | ||||||
Ecolab, Inc. | 114 | 15,296 | ||||||
Boston Scientific Corp.* | 598 | 14,824 | ||||||
General Mills, Inc. | 248 | 14,704 | ||||||
McKesson Corp. | 91 | 14,191 | ||||||
Baxter International, Inc. | 219 | 14,156 | ||||||
Illumina, Inc.* | 64 | 13,983 | ||||||
Regeneron Pharmaceuticals, Inc.* | 34 | 12,783 | ||||||
Sysco Corp. | 210 | 12,753 | ||||||
Estee Lauder Companies, Inc. — Class A | 98 | 12,470 | ||||||
Alexion Pharmaceuticals, Inc.* | 98 | 11,720 | ||||||
Monster Beverage Corp.* | 179 | 11,329 | ||||||
HCA Healthcare, Inc.* | 124 | 10,892 | ||||||
Kroger Co. | 388 | 10,651 | ||||||
Moody’s Corp. | 72 | 10,628 | ||||||
Zimmer Biomet Holdings, Inc. | 88 | 10,619 | ||||||
Tyson Foods, Inc. — Class A | 130 | 10,539 | ||||||
Edwards Lifesciences Corp.* | 93 | 10,482 | ||||||
Mylan N.V.* | 234 | 9,901 | ||||||
Archer-Daniels-Midland Co. | 244 | 9,779 | ||||||
Cardinal Health, Inc. | 137 | 8,394 | ||||||
Clorox Co. | 56 | 8,329 | ||||||
Dr Pepper Snapple Group, Inc. | 79 | 7,668 | ||||||
Centene Corp.* | 75 | 7,566 | ||||||
Kellogg Co. | 108 | 7,342 | ||||||
Incyte Corp.* | 76 | 7,198 | ||||||
Laboratory Corporation of America Holdings* | 45 | 7,178 | ||||||
IHS Markit Ltd.* | 158 | 7,134 | ||||||
Align Technology, Inc.* | 32 | 7,110 | ||||||
Hershey Co. | 62 | 7,038 | ||||||
Global Payments, Inc. | 69 | 6,917 | ||||||
Conagra Brands, Inc. | 178 | 6,705 | ||||||
Molson Coors Brewing Co. — Class B | 81 | 6,648 | ||||||
Dentsply Sirona, Inc. | 100 | 6,583 | ||||||
Verisk Analytics, Inc. — Class A* | 68 | 6,528 | ||||||
AmerisourceBergen Corp. — Class A | 71 | 6,519 | ||||||
United Rentals, Inc.* | 37 | 6,361 | ||||||
IQVIA Holdings, Inc.* | 64 | 6,266 | ||||||
Equifax, Inc. | 53 | 6,250 | ||||||
JM Smucker Co. | 49 | 6,088 | ||||||
IDEXX Laboratories, Inc.* | 38 | 5,942 | ||||||
Cintas Corp. | 38 | 5,921 | ||||||
Brown-Forman Corp. — Class B | 85 | 5,837 | ||||||
Quest Diagnostics, Inc. | 59 | 5,811 | ||||||
Total System Services, Inc. | 73 | 5,774 | ||||||
Church & Dwight Company, Inc. | 109 | 5,468 | ||||||
Nielsen Holdings plc | 146 | 5,314 | ||||||
McCormick & Company, Inc. | 52 | 5,299 | ||||||
ResMed, Inc. | 62 | 5,251 | ||||||
Hologic, Inc.* | 120 | 5,130 | ||||||
Perrigo Company plc | 57 | 4,968 | ||||||
Gartner, Inc.* | 39 | 4,803 | ||||||
DaVita, Inc.* | 66 | 4,768 | ||||||
Henry Schein, Inc.* | 68 | 4,752 | ||||||
Cooper Companies, Inc. | 21 | 4,575 | ||||||
Avery Dennison Corp. | 39 | 4,480 | ||||||
Varian Medical Systems, Inc.* | 40 | 4,446 | ||||||
Universal Health Services, Inc. — Class B | 38 | 4,307 | ||||||
Hormel Foods Corp. | 118 | 4,294 | ||||||
Coty, Inc. — Class A | 206 | 4,097 | ||||||
Campbell Soup Co. | 84 | 4,041 | ||||||
Western Union Co. | 201 | 3,821 | ||||||
Robert Half International, Inc. | 55 | 3,055 | ||||||
Quanta Services, Inc.* | 68 | 2,659 | ||||||
H&R Block, Inc. | 91 | 2,386 | ||||||
Envision Healthcare Corp.* | 53 | 1,832 | ||||||
Patterson Companies, Inc. | 36 | 1,301 | ||||||
Total Consumer, Non-cyclical | 2,166,964 | |||||||
Financial - 5.2% | ||||||||
Berkshire Hathaway, Inc. — Class B* | 839 | 166,307 | ||||||
JPMorgan Chase & Co. | 1,512 | 161,693 |
46 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
S&P 500® 2x STRATEGY FUND |
Shares | Value | |||||||
Bank of America Corp. | 4,227 | $ | 124,781 | |||||
Wells Fargo & Co. | 1,931 | 117,154 | ||||||
Visa, Inc. — Class A | 790 | 90,076 | ||||||
Citigroup, Inc. | 1,153 | 85,795 | ||||||
Mastercard, Inc. — Class A | 405 | 61,301 | ||||||
Goldman Sachs Group, Inc. | 153 | 38,978 | ||||||
U.S. Bancorp | 687 | 36,809 | ||||||
Morgan Stanley | 607 | 31,849 | ||||||
American Express Co. | 314 | 31,183 | ||||||
PNC Financial Services Group, Inc. | 207 | 29,868 | ||||||
Chubb Ltd. | 202 | 29,518 | ||||||
BlackRock, Inc. — Class A | 54 | 27,740 | ||||||
Charles Schwab Corp. | 520 | 26,712 | ||||||
American Tower Corp. — Class A REIT | 187 | 26,679 | ||||||
Bank of New York Mellon Corp. | 446 | 24,022 | ||||||
Simon Property Group, Inc. REIT | 136 | 23,357 | ||||||
American International Group, Inc. | 392 | 23,355 | ||||||
MetLife, Inc. | 459 | 23,207 | ||||||
CME Group, Inc. — Class A | 149 | 21,761 | ||||||
Prudential Financial, Inc. | 185 | 21,271 | ||||||
Capital One Financial Corp. | 211 | 21,011 | ||||||
Crown Castle International Corp. REIT | 177 | 19,649 | ||||||
Marsh & McLennan Companies, Inc. | 223 | 18,150 | ||||||
Intercontinental Exchange, Inc. | 255 | 17,993 | ||||||
BB&T Corp. | 344 | 17,104 | ||||||
Allstate Corp. | 156 | 16,335 | ||||||
Travelers Companies, Inc. | 119 | 16,141 | ||||||
State Street Corp. | 162 | 15,813 | ||||||
Equinix, Inc. REIT | 34 | 15,409 | ||||||
Aflac, Inc. | 172 | 15,098 | ||||||
Prologis, Inc. REIT | 232 | 14,966 | ||||||
Aon plc | 109 | 14,606 | ||||||
Progressive Corp. | 253 | 14,249 | ||||||
Public Storage REIT | 66 | 13,794 | ||||||
SunTrust Banks, Inc. | 207 | 13,370 | ||||||
Synchrony Financial | 321 | 12,394 | ||||||
Discover Financial Services | 159 | 12,230 | ||||||
Weyerhaeuser Co. REIT | 329 | 11,600 | ||||||
M&T Bank Corp. | 66 | 11,285 | ||||||
T. Rowe Price Group, Inc. | 106 | 11,123 | ||||||
Ameriprise Financial, Inc. | 65 | 11,016 | ||||||
AvalonBay Communities, Inc. REIT | 60 | 10,705 | ||||||
Welltower, Inc. REIT | 162 | 10,331 | ||||||
Digital Realty Trust, Inc. REIT | 90 | 10,251 | ||||||
Equity Residential REIT | 160 | 10,203 | ||||||
KeyCorp | 469 | 9,460 | ||||||
Northern Trust Corp. | 94 | 9,390 | ||||||
Fifth Third Bancorp | 307 | 9,314 | ||||||
Ventas, Inc. REIT | 155 | 9,302 | ||||||
Citizens Financial Group, Inc. | 214 | 8,984 | ||||||
Hartford Financial Services Group, Inc. | 156 | 8,780 | ||||||
Willis Towers Watson plc | 58 | 8,740 | ||||||
Regions Financial Corp. | 505 | 8,726 | ||||||
Boston Properties, Inc. REIT | 67 | 8,712 | ||||||
SBA Communications Corp. REIT* | 51 | 8,331 | ||||||
Principal Financial Group, Inc. | 118 | 8,326 | ||||||
Lincoln National Corp. | 95 | 7,303 | ||||||
Realty Income Corp. REIT | 123 | 7,013 | ||||||
Essex Property Trust, Inc. REIT | 29 | 7,000 | ||||||
Huntington Bancshares, Inc. | 471 | 6,858 | ||||||
Comerica, Inc. | 76 | 6,598 | ||||||
Invesco Ltd. | 177 | 6,468 | ||||||
Host Hotels & Resorts, Inc. REIT | 323 | 6,412 | ||||||
GGP, Inc. REIT | 272 | 6,362 | ||||||
Franklin Resources, Inc. | 142 | 6,153 | ||||||
Cboe Global Markets, Inc. | 49 | 6,105 | ||||||
Loews Corp. | 121 | 6,054 | ||||||
Vornado Realty Trust REIT | 75 | 5,863 | ||||||
E*TRADE Financial Corp.* | 118 | 5,849 | ||||||
CBRE Group, Inc. — Class A* | 132 | 5,717 | ||||||
Alexandria Real Estate Equities, Inc. REIT | 42 | 5,485 | ||||||
Unum Group | 98 | 5,379 | ||||||
HCP, Inc. REIT | 205 | 5,346 | ||||||
Alliance Data Systems Corp. | 21 | 5,323 | ||||||
Mid-America Apartment Communities, Inc. REIT | 50 | 5,028 | ||||||
Raymond James Financial, Inc. | 56 | 5,001 | ||||||
Arthur J Gallagher & Co. | 79 | 4,999 | ||||||
Affiliated Managers Group, Inc. | 24 | 4,926 | ||||||
Cincinnati Financial Corp. | 65 | 4,873 | ||||||
Extra Space Storage, Inc. REIT | 55 | 4,810 | ||||||
Iron Mountain, Inc. REIT | 123 | 4,641 | ||||||
UDR, Inc. REIT | 117 | 4,507 | ||||||
SL Green Realty Corp. REIT | 44 | 4,441 | ||||||
Regency Centers Corp. REIT | 64 | 4,427 | ||||||
Zions Bancorporation | 87 | 4,422 | ||||||
Torchmark Corp. | 48 | 4,354 | ||||||
Federal Realty Investment Trust REIT | 32 | 4,250 | ||||||
Duke Realty Corp. REIT | 155 | 4,218 | ||||||
Everest Re Group Ltd. | 18 | 3,983 | ||||||
XL Group Ltd. | 112 | 3,938 | ||||||
Nasdaq, Inc. | 51 | 3,918 | ||||||
Kimco Realty Corp. REIT | 186 | 3,376 | ||||||
Macerich Co. REIT | 47 | 3,087 | ||||||
Apartment Investment & Management Co. — Class A REIT | 68 | 2,972 | ||||||
People’s United Financial, Inc. | 151 | 2,824 | ||||||
Brighthouse Financial, Inc.* | 43 | 2,521 | ||||||
Assurant, Inc. | 24 | 2,420 | ||||||
Navient Corp. | 115 | 1,532 | ||||||
Total Financial | 1,883,063 | |||||||
Technology - 4.1% | ||||||||
Apple, Inc. | 2,237 | 378,568 | ||||||
Microsoft Corp. | 3,361 | 287,500 | ||||||
Intel Corp. | 2,039 | 94,120 | ||||||
Oracle Corp. | 1,328 | 62,788 | ||||||
International Business Machines Corp. | 376 | 57,686 | ||||||
NVIDIA Corp. | 264 | 51,084 | ||||||
Broadcom Ltd. | 178 | 45,728 | ||||||
Texas Instruments, Inc. | 430 | 44,909 | ||||||
Accenture plc — Class A | 269 | 41,181 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 47 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
S&P 500® 2x STRATEGY FUND |
Shares | Value | |||||||
QUALCOMM, Inc. | 642 | $ | 41,101 | |||||
Adobe Systems, Inc.* | 215 | 37,676 | ||||||
salesforce.com, Inc.* | 299 | 30,567 | ||||||
Applied Materials, Inc. | 465 | 23,771 | ||||||
Activision Blizzard, Inc. | 330 | 20,895 | ||||||
Micron Technology, Inc.* | 503 | 20,683 | ||||||
Cognizant Technology Solutions Corp. — Class A | 257 | 18,252 | ||||||
Intuit, Inc. | 106 | 16,725 | ||||||
HP, Inc. | 728 | 15,295 | ||||||
Analog Devices, Inc. | 161 | 14,334 | ||||||
Electronic Arts, Inc.* | 134 | 14,078 | ||||||
Fidelity National Information Services, Inc. | 146 | 13,737 | ||||||
Lam Research Corp. | 71 | 13,069 | ||||||
Fiserv, Inc.* | 91 | 11,933 | ||||||
DXC Technology Co. | 125 | 11,862 | ||||||
Western Digital Corp. | 129 | 10,259 | ||||||
Autodesk, Inc.* | 96 | 10,064 | ||||||
Hewlett Packard Enterprise Co. | 696 | 9,995 | ||||||
Paychex, Inc. | 140 | 9,531 | ||||||
Red Hat, Inc.* | 79 | 9,488 | ||||||
Cerner Corp.* | 138 | 9,300 | ||||||
Microchip Technology, Inc. | 102 | 8,964 | ||||||
Skyworks Solutions, Inc. | 80 | 7,596 | ||||||
Xilinx, Inc. | 109 | 7,349 | ||||||
KLA-Tencor Corp. | 68 | 7,145 | ||||||
NetApp, Inc. | 118 | 6,528 | ||||||
Synopsys, Inc.* | 65 | 5,541 | ||||||
ANSYS, Inc.* | 37 | 5,461 | ||||||
Citrix Systems, Inc.* | 62 | 5,456 | ||||||
Seagate Technology plc | 127 | 5,314 | ||||||
Cadence Design Systems, Inc.* | 123 | 5,144 | ||||||
Akamai Technologies, Inc.* | 74 | 4,813 | ||||||
CA, Inc. | 137 | 4,559 | ||||||
Advanced Micro Devices, Inc.*,1 | 357 | 3,670 | ||||||
Qorvo, Inc.* | 55 | 3,663 | ||||||
Xerox Corp. | 93 | 2,711 | ||||||
CSRA, Inc. | 71 | 2,124 | ||||||
Total Technology | 1,512,217 | |||||||
Communications - 3.7% | ||||||||
Amazon.com, Inc.* | 175 | 204,657 | ||||||
Facebook, Inc. — Class A* | 1,039 | 183,342 | ||||||
Alphabet, Inc. — Class C* | 132 | 138,125 | ||||||
Alphabet, Inc. — Class A* | 130 | 136,942 | ||||||
AT&T, Inc. | 2,676 | 104,043 | ||||||
Verizon Communications, Inc. | 1,778 | 94,110 | ||||||
Cisco Systems, Inc. | 2,154 | 82,498 | ||||||
Comcast Corp. — Class A | 2,032 | 81,382 | ||||||
Walt Disney Co. | 658 | 70,741 | ||||||
Priceline Group, Inc.* | 21 | 36,493 | ||||||
Netflix, Inc.* | 189 | 36,280 | ||||||
Time Warner, Inc. | 340 | 31,100 | ||||||
Charter Communications, Inc. — Class A* | 84 | 28,221 | ||||||
eBay, Inc.* | 423 | 15,964 | ||||||
Twenty-First Century Fox, Inc. — Class A | 460 | 15,884 | ||||||
CBS Corp. — Class B | 158 | 9,322 | ||||||
Symantec Corp. | 270 | 7,576 | ||||||
Omnicom Group, Inc. | 101 | 7,356 | ||||||
CenturyLink, Inc. | 424 | 7,072 | ||||||
Twenty-First Century Fox, Inc. — Class B | 192 | 6,551 | ||||||
Expedia, Inc. | 54 | 6,468 | ||||||
Motorola Solutions, Inc. | 71 | 6,414 | ||||||
Viacom, Inc. — Class B | 154 | 4,745 | ||||||
DISH Network Corp. — Class A* | 99 | 4,727 | ||||||
Juniper Networks, Inc. | 163 | 4,646 | ||||||
VeriSign, Inc.* | 37 | 4,234 | ||||||
F5 Networks, Inc.* | 28 | 3,674 | ||||||
Scripps Networks Interactive, Inc. — Class A | 43 | 3,671 | ||||||
Interpublic Group of Companies, Inc. | 169 | 3,407 | ||||||
News Corp. — Class A | 167 | 2,707 | ||||||
Discovery Communications, Inc. — Class C* | 89 | 1,884 | ||||||
TripAdvisor, Inc.* | 47 | 1,620 | ||||||
Discovery Communications, Inc. — Class A*,1 | 67 | 1,499 | ||||||
News Corp. — Class B | 53 | 880 | ||||||
Total Communications | 1,348,235 | |||||||
Industrial - 2.8% | ||||||||
Boeing Co. | 244 | 71,958 | ||||||
General Electric Co. | 3,779 | 65,943 | ||||||
3M Co. | 261 | 61,431 | ||||||
Honeywell International, Inc. | 332 | 50,915 | ||||||
Union Pacific Corp. | 343 | 45,996 | ||||||
United Technologies Corp. | 324 | 41,333 | ||||||
Caterpillar, Inc. | 259 | 40,813 | ||||||
United Parcel Service, Inc. — Class B | 300 | 35,745 | ||||||
Lockheed Martin Corp. | 109 | 34,994 | ||||||
FedEx Corp. | 108 | 26,950 | ||||||
General Dynamics Corp. | 121 | 24,618 | ||||||
Raytheon Co. | 126 | 23,669 | ||||||
Northrop Grumman Corp. | 76 | 23,325 | ||||||
Illinois Tool Works, Inc. | 135 | 22,525 | ||||||
Deere & Co. | 139 | 21,755 | ||||||
CSX Corp. | 390 | 21,454 | ||||||
Emerson Electric Co. | 280 | 19,513 | ||||||
Norfolk Southern Corp. | 125 | 18,113 | ||||||
Johnson Controls International plc | 403 | 15,358 | ||||||
Eaton Corporation plc | 192 | 15,170 | ||||||
Waste Management, Inc. | 174 | 15,016 | ||||||
TE Connectivity Ltd. | 153 | 14,541 | ||||||
Cummins, Inc. | 69 | 12,188 | ||||||
Corning, Inc. | 379 | 12,124 | ||||||
Amphenol Corp. — Class A | 133 | 11,677 | ||||||
Roper Technologies, Inc. | 45 | 11,655 | ||||||
Parker-Hannifin Corp. | 58 | 11,576 | ||||||
Stanley Black & Decker, Inc. | 67 | 11,369 | ||||||
Rockwell Automation, Inc. | 56 | 10,996 | ||||||
Ingersoll-Rand plc | 109 | 9,722 | ||||||
Rockwell Collins, Inc. | 71 | 9,629 | ||||||
Fortive Corp. | 133 | 9,623 |
48 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
S&P 500® 2x STRATEGY FUND |
Shares | Value | |||||||
Agilent Technologies, Inc. | 141 | $ | 9,443 | |||||
Vulcan Materials Co. | 58 | 7,445 | ||||||
Harris Corp. | 52 | 7,366 | ||||||
AMETEK, Inc. | 101 | 7,320 | ||||||
WestRock Co. | 111 | 7,016 | ||||||
Dover Corp. | 68 | 6,867 | ||||||
Mettler-Toledo International, Inc.* | 11 | 6,815 | ||||||
Waters Corp.* | 35 | 6,762 | ||||||
L3 Technologies, Inc. | 34 | 6,727 | ||||||
Republic Services, Inc. — Class A | 99 | 6,693 | ||||||
Textron, Inc. | 115 | 6,508 | ||||||
Martin Marietta Materials, Inc. | 28 | 6,189 | ||||||
Masco Corp. | 137 | 6,020 | ||||||
Ball Corp. | 153 | 5,791 | ||||||
TransDigm Group, Inc. | 21 | 5,767 | ||||||
CH Robinson Worldwide, Inc. | 61 | 5,435 | ||||||
Xylem, Inc. | 78 | 5,320 | ||||||
Pentair plc | 72 | 5,085 | ||||||
Expeditors International of Washington, Inc. | 78 | 5,046 | ||||||
Arconic, Inc. | 185 | 5,041 | ||||||
Packaging Corporation of America | 41 | 4,943 | ||||||
Kansas City Southern | 46 | 4,840 | ||||||
Fortune Brands Home & Security, Inc. | 67 | 4,586 | ||||||
Snap-on, Inc. | 25 | 4,358 | ||||||
J.B. Hunt Transport Services, Inc. | 37 | 4,254 | ||||||
AO Smith Corp. | 64 | 3,922 | ||||||
Sealed Air Corp. | 79 | 3,895 | ||||||
PerkinElmer, Inc. | 48 | 3,510 | ||||||
Jacobs Engineering Group, Inc. | 53 | 3,496 | ||||||
Allegion plc | 41 | 3,262 | ||||||
Acuity Brands, Inc. | 18 | 3,168 | ||||||
Fluor Corp. | 61 | 3,150 | ||||||
Garmin Ltd. | 48 | 2,859 | ||||||
FLIR Systems, Inc. | 60 | 2,797 | ||||||
Stericycle, Inc.* | 37 | 2,516 | ||||||
Flowserve Corp. | 57 | 2,401 | ||||||
Total Industrial | 1,008,307 | |||||||
Consumer, Cyclical - 2.4% | ||||||||
Home Depot, Inc. | 509 | 96,488 | ||||||
Wal-Mart Stores, Inc. | 638 | 63,003 | ||||||
McDonald’s Corp. | 347 | 59,726 | ||||||
Nike, Inc. — Class B | 573 | 35,841 | ||||||
Starbucks Corp. | 620 | 35,607 | ||||||
Costco Wholesale Corp. | 190 | 35,363 | ||||||
Lowe’s Companies, Inc. | 363 | 33,737 | ||||||
CVS Health Corp. | 441 | 31,973 | ||||||
Walgreens Boots Alliance, Inc. | 378 | 27,450 | ||||||
General Motors Co. | 557 | 22,832 | ||||||
Ford Motor Co. | 1,700 | 21,233 | ||||||
TJX Companies, Inc. | 277 | 21,179 | ||||||
Marriott International, Inc. — Class A | 133 | 18,052 | ||||||
Delta Air Lines, Inc. | 286 | 16,016 | ||||||
Southwest Airlines Co. | 238 | 15,577 | ||||||
Target Corp. | 237 | 15,464 | ||||||
Ross Stores, Inc. | 168 | 13,482 | ||||||
Yum! Brands, Inc. | 147 | 11,997 | ||||||
Carnival Corp. | 178 | 11,814 | ||||||
Dollar Tree, Inc.* | 103 | 11,053 | ||||||
PACCAR, Inc. | 153 | 10,875 | ||||||
Dollar General Corp. | 114 | 10,603 | ||||||
VF Corp. | 143 | 10,582 | ||||||
Aptiv plc | 116 | 9,840 | ||||||
American Airlines Group, Inc. | 186 | 9,678 | ||||||
Royal Caribbean Cruises Ltd. | 75 | 8,946 | ||||||
O’Reilly Automotive, Inc.* | 37 | 8,900 | ||||||
AutoZone, Inc.*,1 | 12 | 8,536 | ||||||
Mohawk Industries, Inc.* | 28 | 7,725 | ||||||
DR Horton, Inc. | 149 | 7,609 | ||||||
Best Buy Company, Inc. | 111 | 7,600 | ||||||
United Continental Holdings, Inc.* | 110 | 7,414 | ||||||
MGM Resorts International | 222 | 7,412 | ||||||
Hilton Worldwide Holdings, Inc. | 88 | 7,028 | ||||||
Fastenal Co. | 125 | 6,836 | ||||||
Newell Brands, Inc. | 214 | 6,613 | ||||||
L Brands, Inc. | 108 | 6,504 | ||||||
Genuine Parts Co. | 64 | 6,081 | ||||||
Wynn Resorts Ltd. | 35 | 5,901 | ||||||
Ulta Beauty, Inc.* | 26 | 5,815 | ||||||
Lennar Corp. — Class A | 89 | 5,628 | ||||||
LKQ Corp.* | 135 | 5,490 | ||||||
Tapestry, Inc. | 124 | 5,485 | ||||||
WW Grainger, Inc. | 23 | 5,434 | ||||||
Whirlpool Corp. | 31 | 5,228 | ||||||
Darden Restaurants, Inc. | 54 | 5,185 | ||||||
Wyndham Worldwide Corp. | 44 | 5,098 | ||||||
CarMax, Inc.* | 79 | 5,066 | ||||||
Tiffany & Co. | 45 | 4,678 | ||||||
PVH Corp. | 34 | 4,665 | ||||||
Hasbro, Inc. | 49 | 4,454 | ||||||
BorgWarner, Inc. | 87 | 4,445 | ||||||
Michael Kors Holdings Ltd.* | 66 | 4,155 | ||||||
Norwegian Cruise Line Holdings Ltd.* | 78 | 4,154 | ||||||
Tractor Supply Co. | 55 | 4,111 | ||||||
Kohl’s Corp.1 | 74 | 4,013 | ||||||
Alaska Air Group, Inc. | 54 | 3,969 | ||||||
PulteGroup, Inc. | 118 | 3,924 | ||||||
Harley-Davidson, Inc.1 | 74 | 3,765 | ||||||
Goodyear Tire & Rubber Co. | 107 | 3,457 | ||||||
Macy’s, Inc. | 133 | 3,350 | ||||||
Hanesbrands, Inc. | 159 | 3,325 | ||||||
Gap, Inc. | 95 | 3,236 | ||||||
Advance Auto Parts, Inc. | 32 | 3,190 | ||||||
Chipotle Mexican Grill, Inc. — Class A* | 11 | 3,179 | ||||||
Leggett & Platt, Inc. | 57 | 2,720 | ||||||
Foot Locker, Inc.1 | 54 | 2,532 | ||||||
Ralph Lauren Corp. — Class A | 24 | 2,488 | ||||||
Nordstrom, Inc. | 51 | 2,416 | ||||||
Mattel, Inc.1 | 150 | 2,307 | ||||||
Signet Jewelers Ltd. | 26 | 1,470 | ||||||
Under Armour, Inc. — Class A*,1 | 81 | 1,169 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 49 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
S&P 500® 2x STRATEGY FUND |
Shares | Value | |||||||
Under Armour, Inc. — Class C*,1 | 81 | $ | 1,079 | |||||
Total Consumer, Cyclical | 883,250 | |||||||
Energy - 1.6% | ||||||||
Exxon Mobil Corp. | 1,846 | 154,399 | ||||||
Chevron Corp. | 828 | 103,657 | ||||||
Schlumberger Ltd. | 604 | 40,704 | ||||||
ConocoPhillips | 521 | 28,598 | ||||||
EOG Resources, Inc. | 252 | 27,193 | ||||||
Occidental Petroleum Corp. | 334 | 24,602 | ||||||
Phillips 66 | 188 | 19,016 | ||||||
Halliburton Co. | 380 | 18,571 | ||||||
Valero Energy Corp. | 191 | 17,555 | ||||||
Kinder Morgan, Inc. | 837 | 15,125 | ||||||
Marathon Petroleum Corp. | 213 | 14,054 | ||||||
Pioneer Natural Resources Co. | 75 | 12,964 | ||||||
Anadarko Petroleum Corp. | 238 | 12,766 | ||||||
Williams Companies, Inc. | 360 | 10,976 | ||||||
Concho Resources, Inc.* | 65 | 9,764 | ||||||
Devon Energy Corp. | 229 | 9,481 | ||||||
ONEOK, Inc. | 167 | 8,926 | ||||||
Andeavor | 63 | 7,203 | ||||||
Apache Corp. | 166 | 7,009 | ||||||
Marathon Oil Corp. | 370 | 6,264 | ||||||
Noble Energy, Inc. | 212 | 6,178 | ||||||
Equities Corp. | 107 | 6,091 | ||||||
TechnipFMC plc | 191 | 5,980 | ||||||
National Oilwell Varco, Inc. | 166 | 5,979 | ||||||
Baker Hughes a GE Co. | 187 | 5,917 | ||||||
Cabot Oil & Gas Corp. — Class A | 202 | 5,777 | ||||||
Hess Corp. | 118 | 5,602 | ||||||
Cimarex Energy Co. | 42 | 5,124 | ||||||
Helmerich & Payne, Inc.1 | 48 | 3,103 | ||||||
Newfield Exploration Co.* | 87 | 2,743 | ||||||
Range Resources Corp. | 98 | 1,672 | ||||||
Chesapeake Energy Corp.*,1 | 396 | 1,568 | ||||||
Total Energy | 604,561 | |||||||
Utilities - 0.8% | ||||||||
NextEra Energy, Inc. | 205 | 32,019 | ||||||
Duke Energy Corp. | 305 | 25,654 | ||||||
Dominion Energy, Inc. | 280 | 22,697 | ||||||
Southern Co. | 438 | 21,063 | ||||||
Exelon Corp. | 418 | 16,473 | ||||||
American Electric Power Company, Inc. | 214 | 15,744 | ||||||
Sempra Energy | 109 | 11,654 | ||||||
Consolidated Edison, Inc. | 135 | 11,468 | ||||||
Public Service Enterprise Group, Inc. | 220 | 11,330 | ||||||
Xcel Energy, Inc. | 221 | 10,632 | ||||||
PG&E Corp. | 223 | 9,997 | ||||||
PPL Corp. | 298 | 9,223 | ||||||
WEC Energy Group, Inc. | 138 | 9,167 | ||||||
Edison International | 142 | 8,980 | ||||||
Eversource Energy | 138 | 8,719 | ||||||
DTE Energy Co. | 78 | 8,538 | ||||||
American Water Works Company, Inc. | 78 | 7,136 | ||||||
Entergy Corp. | 79 | 6,430 | ||||||
Ameren Corp. | 106 | 6,253 | ||||||
FirstEnergy Corp. | 194 | 5,940 | ||||||
CMS Energy Corp. | 123 | 5,818 | ||||||
CenterPoint Energy, Inc. | 188 | 5,332 | ||||||
Alliant Energy Corp. | 101 | 4,304 | ||||||
Pinnacle West Capital Corp. | 49 | 4,174 | ||||||
NiSource, Inc. | 147 | 3,774 | ||||||
NRG Energy, Inc. | 131 | 3,731 | ||||||
AES Corp. | 289 | 3,130 | ||||||
SCANA Corp. | 62 | 2,466 | ||||||
Total Utilities | 291,846 | |||||||
Basic Materials - 0.7% | ||||||||
DowDuPont, Inc. | 1,020 | 72,644 | ||||||
Monsanto Co. | 192 | 22,422 | ||||||
Praxair, Inc. | 125 | 19,335 | ||||||
Air Products & Chemicals, Inc. | 95 | 15,588 | ||||||
LyondellBasell Industries N.V. — Class A | 141 | 15,555 | ||||||
Sherwin-Williams Co. | 36 | 14,762 | ||||||
PPG Industries, Inc. | 111 | 12,967 | ||||||
Freeport-McMoRan, Inc.* | 587 | 11,130 | ||||||
International Paper Co. | 180 | 10,429 | ||||||
Nucor Corp. | 139 | 8,837 | ||||||
Newmont Mining Corp. | 233 | 8,742 | ||||||
Albemarle Corp. | 48 | 6,139 | ||||||
Eastman Chemical Co. | 63 | 5,836 | ||||||
FMC Corp. | 59 | 5,585 | ||||||
International Flavors & Fragrances, Inc. | 35 | 5,341 | ||||||
CF Industries Holdings, Inc. | 102 | 4,339 | ||||||
Mosaic Co. | 153 | 3,926 | ||||||
Total Basic Materials | 243,577 | |||||||
Diversified - 0.0% | ||||||||
Leucadia National Corp. | 137 | 3,629 | ||||||
Total Common Stocks | ||||||||
(Cost $8,286,706) | 9,945,649 | |||||||
MUTUAL FUNDS† - 59.0% | ||||||||
Guggenheim Strategy Fund II2 | 434,425 | 10,864,972 | ||||||
Guggenheim Strategy Fund I2 | 426,074 | 10,677,417 | ||||||
Total Mutual Funds | ||||||||
(Cost $21,501,323) | 21,542,389 | |||||||
Face Amount | ||||||||
U.S. TREASURY BILLS†† - 8.8% | ||||||||
U.S. Treasury Bills | ||||||||
1.26% due 03/01/183,4,5 | $ | 3,000,000 | 2,993,850 | |||||
1.31% due 04/19/184,5,6 | 200,000 | 199,171 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $3,192,907) | 3,193,021 |
50 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
S&P 500® 2x STRATEGY FUND |
Face Amount | Value | |||||||
REPURCHASE AGREEMENTS††,7 - 8.1% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/183 | $ | 1,935,456 | $ | 1,935,456 | ||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/183 | 1,032,959 | 1,032,959 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $2,968,415) | 2,968,415 |
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,8 - 0.1% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%9 | 40,188 | 40,188 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $40,188) | 40,188 | |||||||
Total Investments - 103.2% | ||||||||
(Cost $35,989,539) | $ | 37,689,662 | ||||||
Other Assets & Liabilities, net - (3.2)% | (1,176,971 | ) | ||||||
Total Net Assets - 100.0% | $ | 36,512,691 |
Futures Contracts | ||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Value and Unrealized Gain | ||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||
S&P 500 Index Mini Futures Contracts | 105 | Mar 2018 | $ | 14,058,188 | $ | 157,220 |
Total Return Swap Agreements | ||||||||||||||||||||||
Counterparty | Index | Financing Rate Pay (Receive) | Payment Frequency | Maturity Date | Units | Notional Amount | Value and Unrealized Loss | |||||||||||||||
OTC Equity Index Swap Agreements†† | ||||||||||||||||||||||
Goldman Sachs International | S&P 500 Index | 1.98 | % | At Maturity | 01/26/18 | 1,454 | $ | 3,887,025 | $ | (10,017 | ) | |||||||||||
BNP Paribas | S&P 500 Index | 2.02 | % | At Maturity | 01/26/18 | 4,097 | 10,953,575 | (36,913 | ) | |||||||||||||
Barclays Bank plc | S&P 500 Index | 1.93 | % | At Maturity | 01/30/18 | 12,761 | 34,117,539 | (177,759 | ) | |||||||||||||
$ | 48,958,139 | $ | (224,689 | ) |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 7. |
2 | Affiliated issuer. |
3 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2017. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | Zero coupon rate security. |
6 | All or a portion of this security is pledged as futures collateral at December 31, 2017. |
7 | Repurchase Agreements — See Note 6. |
8 | Securities lending collateral — See Note 7. |
9 | Rate indicated is the 7 day yield as of December 31, 2017. |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 51 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
S&P 500® 2x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Common Stocks | $ | 9,945,649 | $ | — | $ | — | $ | — | $ | — | $ | 9,945,649 | ||||||||||||
Equity Futures Contracts | — | 157,220 | — | — | — | 157,220 | ||||||||||||||||||
Mutual Funds | 21,542,389 | — | — | — | — | 21,542,389 | ||||||||||||||||||
Repurchase Agreements | — | — | 2,968,415 | — | — | 2,968,415 | ||||||||||||||||||
Securities Lending Collateral | 40,188 | — | — | — | — | 40,188 | ||||||||||||||||||
U.S. Treasury Bills | — | — | 3,193,021 | — | — | 3,193,021 | ||||||||||||||||||
Total Assets | $ | 31,528,226 | $ | 157,220 | $ | 6,161,436 | $ | — | $ | — | $ | 37,846,882 | ||||||||||||
Investments in Securities (Liabilities) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Equity Index Swap Agreements | $ | — | $ | — | $ | — | $ | 224,689 | $ | — | $ | 224,689 |
* | Other financial instruments include futures contracts and swaps, which are reported as unrealized gain/loss at period end. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a portfolio company of a fund, or control of or by, or common control under GI, result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act.
The Fund may invest in the underlying series of the Guggenheim Strategy Funds Trust consisting of Guggenheim Strategy Fund I, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III (collectively, the “Cash Management Funds”), open-end management investment companies managed by GI. The Cash Management Funds, which launched on March 11, 2014, are offered as cash management options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Cash Management Funds pay no investment management fees. The Cash Management Funds’ annual report on Form N-CSR dated September 30, 2017, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180417000715/gug72218.htm.
Transactions during the year ended December 31, 2017, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value 12/31/16 | Additions | Reductions | Realized Gain (Loss) | Change in Unrealized | Value 12/31/17 | Shares 12/31/17 | Investment Income | Capital Gain Distributions |
Mutual Funds | |||||||||
Guggenheim Strategy Fund I | $ 4,354,995 | $ 10,699,259 | $ (4,400,000) | $ 10,841 | $ 12,322 | $ 10,677,417 | 426,074 | $ 186,381 | $ 2,713 |
Guggenheim Strategy Fund II | 3,476,371 | 8,877,209 | (1,500,000) | (1,689) | 13,081 | 10,864,972 | 434,425 | 216,030 | 5,993 |
$ 7,831,366 | $ 19,576,468 | $ (5,900,000) | $ 9,152 | $ 25,403 | $ 21,542,389 | $ 402,411 | $ 8,706 |
52 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P 500® 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2017 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $38,077 of securities loaned (cost $11,519,801) | $ | 13,178,858 | ||
Investments in affiliated issuers, at value (cost $21,501,323) | 21,542,389 | |||
Repurchase agreements, at value (cost $2,968,415) | 2,968,415 | |||
Segregated cash with broker | 277,037 | |||
Receivables: | ||||
Securities sold | 6,980,018 | |||
Swap settlement | 448,953 | |||
Fund shares sold | 140,443 | |||
Dividends | 45,155 | |||
Interest | 348 | |||
Securities lending income | 12 | |||
Total assets | 45,581,628 | |||
Liabilities: | ||||
Overdraft due to custodian bank | 472,437 | |||
Unrealized depreciation on swap agreements | 224,689 | |||
Payable for: | ||||
Fund shares redeemed | 8,142,099 | |||
Variation margin | 41,738 | |||
Return of securities loaned | 40,188 | |||
Management fees | 31,532 | |||
Securities purchased | 31,413 | |||
Transfer agent and administrative fees | 8,759 | |||
Investor service fees | 8,759 | |||
Portfolio accounting fees | 3,504 | |||
Miscellaneous | 63,819 | |||
Total liabilities | 9,068,937 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 36,512,691 | ||
Net assets consist of: | ||||
Paid in capital | $ | 32,392,809 | ||
Undistributed net investment income | 26,627 | |||
Accumulated net realized gain on investments | 2,460,601 | |||
Net unrealized appreciation on investments | 1,632,654 | |||
Net assets | $ | 36,512,691 | ||
Capital shares outstanding | 149,408 | |||
Net asset value per share | $ | 244.38 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 183,179 | ||
Dividends from securities of affiliated issuers | 402,411 | |||
Interest | 54,262 | |||
Income from securities lending, net | 193 | |||
Total investment income | 640,045 | |||
Expenses: | ||||
Management fees | 316,174 | |||
Investor service fees | 87,826 | |||
Transfer agent and administrative fees | 87,826 | |||
Professional fees | 48,518 | |||
Portfolio accounting fees | 35,130 | |||
Custodian fees | 5,625 | |||
Trustees’ fees* | 3,557 | |||
Line of credit fees | 518 | |||
Miscellaneous | 32,780 | |||
Total expenses | 617,954 | |||
Net investment income | 22,091 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 461,694 | |||
Investments in affiliated issuers | 9,152 | |||
Swap agreements | 9,537,829 | |||
Futures contracts | 778,787 | |||
Distributions received from affiliated investment company shares | 8,706 | |||
Net realized gain | 10,796,168 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 1,182,716 | |||
Investments in affiliated issuers | 25,403 | |||
Swap agreements | 103,124 | |||
Futures contracts | 158,908 | |||
Net change in unrealized appreciation (depreciation) | 1,470,151 | |||
Net realized and unrealized gain | 12,266,319 | |||
Net increase in net assets resulting from operations | $ | 12,288,410 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 53 |
S&P 500® 2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | 22,091 | $ | (73,707 | ) | |||
Net realized gain on investments | 10,796,168 | 6,362,818 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 1,470,151 | (730,776 | ) | |||||
Net increase in net assets resulting from operations | 12,288,410 | 5,558,335 | ||||||
Distributions to shareholders from: | ||||||||
Net realized gains | (1,231,746 | ) | (2,430,576 | ) | ||||
Total distributions to shareholders | (1,231,746 | ) | (2,430,576 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 300,834,376 | 262,943,430 | ||||||
Distributions reinvested | 1,231,746 | 2,430,576 | ||||||
Cost of shares redeemed | (301,504,599 | ) | (264,774,391 | ) | ||||
Net increase from capital share transactions | 561,523 | 599,615 | ||||||
Net increase in net assets | 11,618,187 | 3,727,374 | ||||||
Net assets: | ||||||||
Beginning of year | 24,894,504 | 21,167,130 | ||||||
End of year | $ | 36,512,691 | $ | 24,894,504 | ||||
Undistributed net investment income at end of year | $ | 26,627 | $ | — | ||||
Capital share activity: | ||||||||
Shares sold | 1,422,906 | 1,621,447 | ||||||
Shares issued from reinvestment of distributions | 6,025 | 14,823 | ||||||
Shares redeemed | (1,420,551 | ) | (1,623,359 | ) | ||||
Net increase in shares | 8,380 | 12,911 |
54 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P 500® 2x STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 176.52 | $ | 165.22 | $ | 227.28 | $ | 235.85 | $ | 139.79 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .13 | (.53 | ) | (1.11 | ) | (.86 | ) | (.91 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | 75.18 | 32.62 | 1.42 | 57.67 | 96.97 | |||||||||||||||
Total from investment operations | 75.31 | 32.09 | .31 | 56.81 | 96.06 | |||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (7.45 | ) | (20.79 | ) | (62.37 | ) | (65.38 | ) | — | |||||||||||
Total distributions | (7.45 | ) | (20.79 | ) | (62.37 | ) | (65.38 | ) | — | |||||||||||
Net asset value, end of period | $ | 244.38 | $ | 176.52 | $ | 165.22 | $ | 227.28 | $ | 235.85 | ||||||||||
Total Returnb | 43.49 | % | 20.40 | % | (1.66 | %) | 24.66 | % | 68.71 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 36,513 | $ | 24,895 | $ | 21,167 | $ | 38,795 | $ | 27,492 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.06 | % | (0.32 | %) | (0.55 | %) | (0.35 | %) | (0.49 | %) | ||||||||||
Total expensesc | 1.76 | % | 1.71 | % | 1.66 | % | 1.74 | % | 1.69 | % | ||||||||||
Portfolio turnover rate | 282 | % | 578 | % | 558 | % | 475 | % | 225 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 55 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
NASDAQ-100® 2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is 200% of the performance of the NASDAQ-100® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2017, with the NASDAQ-100 Index returning 32.99%, the NASDAQ-100® 2x Strategy Fund returned 69.49%. For the one year period ending December 31, 2017, the Fund maintained a daily correlation of over 99% to its benchmark of 200% of the daily price movement of the NASDAQ-100 Index.
The Information Technology and Consumer Discretionary sectors contributed the most to the performance of the underlying index during the year. No sector detracted from performance. The Real Estate sector contributed the least to the performance of the underlying index for the year.
Apple, Inc., Amazon.com, Inc., and Microsoft Corp. contributed the most to performance of the underlying index for 2017. Walgreens Boots Alliance, Inc., Kraft Heinz Co., and Celgene Corp. detracted the most from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes.
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 6 of this report.
Performance displayed represents past performance, which is no guarantee of future results.
56 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments or investments in Guggenheim Strategy Funds Trust mutual funds. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: October 1, 2001
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund I | 26.8% |
Guggenheim Strategy Fund II | 16.5% |
Apple, Inc. | 5.3% |
Microsoft Corp. | 4.1% |
Amazon.com, Inc. | 3.5% |
Facebook, Inc. — Class A | 2.6% |
Alphabet, Inc. — Class C | 2.2% |
Alphabet, Inc. — Class A | 1.9% |
Intel Corp. | 1.3% |
Cisco Systems, Inc. | 1.2% |
Top Ten Total | 65.4% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments.
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
NASDAQ-100® 2x Strategy Fund | 69.49% | 39.28% | 19.02% |
NASDAQ-100 Index | 32.99% | 20.68% | 13.05% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The NASDAQ-100 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 57 |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
NASDAQ-100® 2x STRATEGY FUND |
Shares | Value | |||||||
COMMON STOCKS† - 45.0% | ||||||||
Technology - 18.0% | ||||||||
Apple, Inc. | 22,346 | $ | 3,781,614 | |||||
Microsoft Corp. | 33,576 | 2,872,091 | ||||||
Intel Corp. | 20,369 | 940,233 | ||||||
NVIDIA Corp. | 2,637 | 510,260 | ||||||
Broadcom Ltd. | 1,775 | 455,998 | ||||||
Texas Instruments, Inc. | 4,289 | 447,943 | ||||||
QUALCOMM, Inc. | 6,416 | 410,752 | ||||||
Adobe Systems, Inc.* | 2,144 | 375,715 | ||||||
Applied Materials, Inc. | 4,642 | 237,299 | ||||||
Activision Blizzard, Inc. | 3,291 | 208,386 | ||||||
Micron Technology, Inc.* | 5,019 | 206,381 | ||||||
Cognizant Technology Solutions Corp. — Class A | 2,566 | 182,237 | ||||||
Intuit, Inc. | 1,112 | 175,451 | ||||||
Analog Devices, Inc. | 1,604 | 142,804 | ||||||
Electronic Arts, Inc.* | 1,340 | 140,780 | ||||||
Lam Research Corp. | 705 | 129,769 | ||||||
Fiserv, Inc.* | 906 | 118,804 | ||||||
NetEase, Inc. ADR | 330 | 113,873 | ||||||
Paychex, Inc. | 1,562 | 106,341 | ||||||
Western Digital Corp. | 1,287 | 102,355 | ||||||
Autodesk, Inc.* | 954 | 100,008 | ||||||
Cerner Corp.* | 1,447 | 97,513 | ||||||
Microchip Technology, Inc. | 1,017 | 89,374 | ||||||
Skyworks Solutions, Inc. | 797 | 75,675 | ||||||
Check Point Software Technologies Ltd.* | 711 | 73,674 | ||||||
Xilinx, Inc. | 1,092 | 73,623 | ||||||
KLA-Tencor Corp. | 682 | 71,658 | ||||||
Maxim Integrated Products, Inc. | 1,225 | 64,043 | ||||||
CA, Inc. | 1,821 | 60,603 | ||||||
Workday, Inc. — Class A* | 595 | 60,535 | ||||||
Citrix Systems, Inc.* | 656 | 57,728 | ||||||
Synopsys, Inc.* | 653 | 55,662 | ||||||
Take-Two Interactive Software, Inc.* | 496 | 54,451 | ||||||
ASML Holding N.V. — Class G | 312 | 54,232 | ||||||
Seagate Technology plc | 1,259 | 52,676 | ||||||
Cadence Design Systems, Inc.* | 1,228 | 51,355 | ||||||
Total Technology | 12,751,896 | |||||||
Communications - 16.6% | ||||||||
Amazon.com, Inc.* | 2,097 | 2,452,379 | ||||||
Facebook, Inc. — Class A* | 10,379 | 1,831,478 | ||||||
Alphabet, Inc. — Class C* | 1,521 | 1,591,574 | ||||||
Alphabet, Inc. — Class A* | 1,298 | 1,367,313 | ||||||
Cisco Systems, Inc. | 21,516 | 824,063 | ||||||
Comcast Corp. — Class A | 20,300 | 813,015 | ||||||
Priceline Group, Inc.* | 212 | 368,401 | ||||||
Charter Communications, Inc. — Class A* | 1,082 | 363,509 | ||||||
Netflix, Inc.* | 1,883 | 361,461 | ||||||
Baidu, Inc. ADR* | 1,222 | 286,205 | ||||||
T-Mobile US, Inc.* | 3,621 | 229,970 | ||||||
eBay, Inc.* | 4,546 | 171,566 | ||||||
JD.com, Inc. ADR* | 4,013 | 166,218 | ||||||
Twenty-First Century Fox, Inc. — Class A | 4,586 | 158,355 | ||||||
Twenty-First Century Fox, Inc. — Class B | 3,475 | 118,567 | ||||||
Sirius XM Holdings, Inc.1 | 20,002 | 107,211 | ||||||
Ctrip.com International Ltd. ADR* | 1,993 | 87,891 | ||||||
Liberty Global plc — Class C* | 2,561 | 86,664 | ||||||
Symantec Corp. | 2,698 | 75,706 | ||||||
Expedia, Inc. | 608 | 72,820 | ||||||
Vodafone Group plc ADR | 2,025 | 64,597 | ||||||
MercadoLibre, Inc. | 192 | 60,415 | ||||||
DISH Network Corp. — Class A* | 992 | 47,368 | ||||||
Liberty Global plc — Class A* | 962 | 34,478 | ||||||
Liberty Ventures* | 353 | 19,147 | ||||||
Total Communications | 11,760,371 | |||||||
Consumer, Non-cyclical - 6.7% | ||||||||
Amgen, Inc. | 3,159 | 549,350 | ||||||
Kraft Heinz Co. | 5,303 | 412,362 | ||||||
Gilead Sciences, Inc. | 5,685 | 407,273 | ||||||
PayPal Holdings, Inc.* | 5,231 | 385,106 | ||||||
Celgene Corp.* | 3,426 | 357,537 | ||||||
Biogen, Inc.* | 920 | 293,084 | ||||||
Mondelez International, Inc. — Class A | 6,504 | 278,371 | ||||||
Automatic Data Processing, Inc. | 1,930 | 226,177 | ||||||
Express Scripts Holding Co.* | 2,465 | 183,987 | ||||||
Intuitive Surgical, Inc.* | 488 | 178,091 | ||||||
Regeneron Pharmaceuticals, Inc.* | 458 | 172,190 | ||||||
Vertex Pharmaceuticals, Inc.* | 1,100 | 164,846 | ||||||
Monster Beverage Corp.* | 2,455 | 155,377 | ||||||
Illumina, Inc.* | 635 | 138,741 | ||||||
Alexion Pharmaceuticals, Inc.* | 972 | 116,242 | ||||||
Mylan N.V.* | 2,335 | 98,794 | ||||||
Incyte Corp.* | 918 | 86,944 | ||||||
Align Technology, Inc.* | 349 | 77,544 | ||||||
Cintas Corp. | 462 | 71,994 | ||||||
Verisk Analytics, Inc. — Class A* | 716 | 68,736 | ||||||
BioMarin Pharmaceutical, Inc.* | 764 | 68,126 | ||||||
Dentsply Sirona, Inc. | 1,000 | 65,830 | ||||||
IDEXX Laboratories, Inc.* | 379 | 59,268 | ||||||
Hologic, Inc.* | 1,199 | 51,257 | ||||||
Shire plc ADR | 322 | 49,949 | ||||||
Henry Schein, Inc.* | 683 | 47,728 | ||||||
Total Consumer, Non-cyclical | 4,764,904 | |||||||
Consumer, Cyclical - 3.3% | ||||||||
Starbucks Corp. | 6,192 | 355,607 | ||||||
Costco Wholesale Corp. | 1,902 | 354,000 | ||||||
Walgreens Boots Alliance, Inc. | 4,310 | 312,992 | ||||||
Tesla, Inc.*,1 | 731 | 227,597 | ||||||
Marriott International, Inc. — Class A | 1,586 | 215,268 | ||||||
Ross Stores, Inc. | 1,678 | 134,659 | ||||||
Dollar Tree, Inc.* | 1,032 | 110,744 | ||||||
PACCAR, Inc. | 1,530 | 108,752 | ||||||
American Airlines Group, Inc. | 2,082 | 108,326 | ||||||
O’Reilly Automotive, Inc.* | 370 | 89,000 | ||||||
Wynn Resorts Ltd. | 447 | 75,360 | ||||||
Fastenal Co. | 1,251 | 68,417 | ||||||
Ulta Beauty, Inc.* | 265 | 59,270 | ||||||
Hasbro, Inc. | 541 | 49,172 |
58 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
NASDAQ-100® 2x STRATEGY FUND |
Shares | Value | |||||||
Liberty Interactive Corporation QVC Group — Class A* | 1,746 | $ | 42,637 | |||||
Total Consumer, Cyclical | 2,311,801 | |||||||
Industrial - 0.4% | ||||||||
CSX Corp. | 3,889 | 213,934 | ||||||
J.B. Hunt Transport Services, Inc. | 478 | 54,960 | ||||||
Total Industrial | 268,894 | |||||||
Total Common Stocks | ||||||||
(Cost $24,361,829) | 31,857,866 | |||||||
MUTUAL FUNDS† - 43.3% | ||||||||
Guggenheim Strategy Fund I2 | 758,144 | 18,999,077 | ||||||
Guggenheim Strategy Fund II2 | 467,805 | 11,699,809 | ||||||
Total Mutual Funds | ||||||||
(Cost $30,659,415) | 30,698,886 | |||||||
Face Amount | ||||||||
U.S. TREASURY BILLS†† - 1.4% | ||||||||
U.S Treasury Bills | ||||||||
1.26% due 03/01/183,4,5 | $ | 1,000,000 | 997,950 | |||||
Total U.S. Treasury Bills | ||||||||
(Cost $997,901) | 997,950 | |||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 0.7% | ||||||||
Federal Home Loan Bank6 | ||||||||
1.05% due 01/02/184,5 | 500,000 | 499,985 | ||||||
Total Federal Agency Discount Notes | ||||||||
(Cost $499,985) | 499,985 | |||||||
REPURCHASE AGREEMENTS††,7 - 10.6% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/183 | 4,880,152 | 4,880,152 | ||||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/183 | 2,604,552 | 2,604,552 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $7,484,704) | 7,484,704 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,8 - 0.3% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%9 | 240,860 | 240,860 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $240,860) | 240,860 | |||||||
Total Investments - 101.3% | ||||||||
(Cost $64,244,694) | $ | 71,780,251 | ||||||
Other Assets & Liabilities, net - (1.3)% | (927,628 | ) | ||||||
Total Net Assets - 100.0% | $ | 70,852,623 |
Futures Contracts | ||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Value and Unrealized Gain | ||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||
NASDAQ-100 Index Mini Futures Contracts | 25 | Mar 2018 | $ | 3,205,125 | $ | 6,198 |
Total Return Swap Agreements | ||||||||||||||||||||||||
Counterparty | Index | Financing Rate Pay (Receive) | Payment Frequency | Maturity Date | Units | Notional Amount | Value and Unrealized Loss | |||||||||||||||||
OTC Equity Index Swap Agreements†† | ||||||||||||||||||||||||
Barclays Bank plc | NASDAQ-100 Index | 1.98 | % | At Maturity | 01/30/18 | 2,308 | $ | 14,761,056 | $ | (103,844 | ) | |||||||||||||
Goldman Sachs International | NASDAQ-100 Index | 2.08 | % | At Maturity | 01/26/18 | 3,663 | 23,430,835 | (134,634 | ) | |||||||||||||||
BNP Paribas | NASDAQ-100 Index | 2.07 | % | At Maturity | 01/26/18 | 10,768 | 68,878,869 | (417,058 | ) | |||||||||||||||
$ | 107,070,760 | $ | (655,536 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 59 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
NASDAQ-100® 2x STRATEGY FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 7. |
2 | Affiliated issuer. |
3 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2017. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | Zero coupon rate security. |
6 | The issuer operates under a Congressional charter; its securities are neither issued nor guaranteed by the U.S. Government. |
7 | Repurchase Agreements — See Note 6. |
8 | Securities lending collateral — See Note 7. |
9 | Rate indicated is the 7 day yield as of December 31, 2017. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Common Stocks | $ | 31,857,866 | $ | — | $ | — | $ | — | $ | — | $ | 31,857,866 | ||||||||||||
Equity Futures Contracts | — | 6,198 | — | — | — | 6,198 | ||||||||||||||||||
Federal Agency Discount Notes | — | — | 499,985 | — | — | 499,985 | ||||||||||||||||||
Mutual Funds | 30,698,886 | — | — | — | — | 30,698,886 | ||||||||||||||||||
Repurchase Agreements | — | — | 7,484,704 | — | — | 7,484,704 | ||||||||||||||||||
Securities Lending Collateral | 240,860 | — | — | — | — | 240,860 | ||||||||||||||||||
U.S. Treasury Bills | — | — | 997,950 | — | — | 997,950 | ||||||||||||||||||
Total Assets | $ | 62,797,612 | $ | 6,198 | $ | 8,982,639 | $ | — | $ | — | $ | 71,786,449 | ||||||||||||
Investments in Securities (Liabilities) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Equity Index Swap Agreements | $ | — | $ | — | �� | $ | — | $ | 655,536 | $ | — | $ | 655,536 |
* | Other financial instruments include futures contracts and swaps, which are reported as unrealized gain/loss at period end. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
60 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
NASDAQ-100® 2x STRATEGY FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a portfolio company of a fund, or control of or by, or common control under GI, result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act.
The Fund may invest in the underlying series of the Guggenheim Strategy Funds Trust consisting of Guggenheim Strategy Fund I, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III (collectively, the “Cash Management Funds”), open-end management investment companies managed by GI. The Cash Management Funds, which launched on March 11, 2014, are offered as cash management options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Cash Management Funds pay no investment management fees. The Cash Management Funds’ annual report on Form N-CSR dated September 30, 2017, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180417000715/gug72218.htm.
Transactions during the year ended December 31, 2017, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value 12/31/16 | Additions | Reductions | Realized Gain | Change in Unrealized | Value 12/31/17 | Shares 12/31/17 | Investment Income | Capital Gain Distributions |
Mutual Funds | |||||||||
Guggenheim Strategy Fund I | $ 4,651,072 | $ 19,536,613 | $ (5,200,000) | $ 1,130 | $ 10,262 | $ 18,999,077 | 758,144 | $ 289,124 | $ 6,957 |
Guggenheim Strategy Fund II | 1,313,984 | 16,250,732 | (5,870,000) | 1,389 | 3,704 | 11,699,809 | 467,805 | 204,253 | 6,027 |
$ 5,965,056 | $ 35,787,345 | $ (11,070,000) | $ 2,519 | $ 13,966 | $ 30,698,886 | $ 493,377 | $ 12,984 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 61 |
NASDAQ-100® 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2017 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $231,371 of securities loaned (cost $26,100,575) | $ | 33,596,661 | ||
Investments in affiliated issuers, at value (cost $30,659,415) | 30,698,886 | |||
Repurchase agreements, at value (cost $7,484,704) | 7,484,704 | |||
Segregated cash with broker | 127,938 | |||
Receivables: | ||||
Fund shares sold | 365,202 | |||
Swap settlement | 262,855 | |||
Dividends | 54,985 | |||
Securities sold | 14,693 | |||
Interest | 877 | |||
Securities lending income | 92 | |||
Total assets | 72,606,893 | |||
Liabilities: | ||||
Overdraft due to custodian bank | 274,283 | |||
Unrealized depreciation on swap agreements | 655,536 | |||
Payable for: | ||||
Securities purchased | 299,344 | |||
Return of securities loaned | 240,860 | |||
Fund shares redeemed | 66,271 | |||
Management fees | 53,883 | |||
Variation margin | 18,000 | |||
Transfer agent and administrative fees | 14,968 | |||
Investor service fees | 14,968 | |||
Portfolio accounting fees | 5,987 | |||
Miscellaneous | 110,170 | |||
Total liabilities | 1,754,270 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 70,852,623 | ||
Net assets consist of: | ||||
Paid in capital | $ | 53,113,337 | ||
Undristributed net investment income | — | |||
Accumulated net realized gain on investments | 10,853,067 | |||
Net unrealized appreciation on investments | 6,886,219 | |||
Net assets | $ | 70,852,623 | ||
Capital shares outstanding | 1,090,806 | |||
Net asset value per share | $ | 64.95 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $145) | $ | 283,505 | ||
Dividends from securities of affiliated issuers | 493,377 | |||
Interest | 73,379 | |||
Income from securities lending, net | 1,838 | |||
Total investment income | 852,099 | |||
Expenses: | ||||
Management fees | 518,945 | |||
Investor service fees | 144,151 | |||
Transfer agent and administrative fees | 144,151 | |||
Professional fees | 82,928 | |||
Portfolio accounting fees | 57,660 | |||
Custodian fees | 9,326 | |||
Trustees’ fees* | 5,847 | |||
Line of credit fees | 453 | |||
Miscellaneous | 71,616 | |||
Total expenses | 1,035,077 | |||
Net investment loss | (182,978 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 560,276 | |||
Investments in affiliated issuers | 2,519 | |||
Swap agreements | 19,924,944 | |||
Futures contracts | 1,142,843 | |||
Distributions received from affiliated investment company shares | 12,984 | |||
Net realized gain | 21,643,566 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 5,883,400 | |||
Investments in affiliated issuers | 13,966 | |||
Swap agreements | (156,338 | ) | ||
Futures contracts | 42,441 | |||
Net change in unrealized appreciation (depreciation) | 5,783,469 | |||
Net realized and unrealized gain | 27,427,035 | |||
Net increase in net assets resulting from operations | $ | 27,244,057 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
62 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
NASDAQ-100® 2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (182,978 | ) | $ | (195,637 | ) | ||
Net realized gain on investments | 21,643,566 | 1,680,673 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 5,783,469 | (1,791,988 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 27,244,057 | (306,952 | ) | |||||
Distributions to shareholders from: | ||||||||
Net realized gains | (681,689 | ) | (2,940,879 | ) | ||||
Total distributions to shareholders | (681,689 | ) | (2,940,879 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 126,976,096 | 152,962,175 | ||||||
Distributions reinvested | 681,689 | 2,940,879 | ||||||
Cost of shares redeemed | (124,482,969 | ) | (161,533,807 | ) | ||||
Net increase (decrease) from capital share transactions | 3,174,816 | (5,630,753 | ) | |||||
Net increase (decrease) in net assets | 29,737,184 | (8,878,584 | ) | |||||
Net assets: | ||||||||
Beginning of year | 41,115,439 | 49,994,023 | ||||||
End of year | $ | 70,852,623 | $ | 41,115,439 | ||||
Undistributed net investment income at end of year | $ | — | $ | — | ||||
Capital share activity: | ||||||||
Shares sold | 2,423,912 | 4,160,580 | ||||||
Shares issued from reinvestment of distributions | 12,661 | 84,508 | ||||||
Shares redeemed | (2,405,839 | ) | (4,477,772 | ) | ||||
Net increase (decrease) in shares | 30,734 | (232,684 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 63 |
NASDAQ-100® 2x STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 38.79 | $ | 38.67 | $ | 41.60 | $ | 45.40 | $ | 27.75 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.17 | ) | (.22 | ) | (.31 | ) | (.34 | ) | (.25 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 26.97 | 3.57 | 6.26 | 16.78 | 21.99 | |||||||||||||||
Total from investment operations | 26.80 | 3.35 | 5.95 | 16.44 | 21.74 | |||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (.64 | ) | (3.23 | ) | (8.88 | ) | (20.24 | ) | (4.09 | ) | ||||||||||
Total distributions | (.64 | ) | (3.23 | ) | (8.88 | ) | (20.24 | ) | (4.09 | ) | ||||||||||
Net asset value, end of period | $ | 64.95 | $ | 38.79 | $ | 38.67 | $ | 41.60 | $ | 45.40 | ||||||||||
Total Returnb | 69.49 | % | 9.60 | % | 14.63 | % | 36.57 | % | 80.21 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 70,853 | $ | 41,115 | $ | 49,994 | $ | 58,484 | $ | 46,018 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.32 | %) | (0.62 | %) | (0.75 | %) | (0.69 | %) | (0.70 | %) | ||||||||||
Total expensesc | 1.80 | % | 1.75 | % | 1.68 | % | 1.75 | % | 1.72 | % | ||||||||||
Portfolio turnover rate | 97 | % | 494 | % | 294 | % | 275 | % | 174 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
64 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
MID-CAP 1.5x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that correlate, before fees and expenses, to the performance of a specific benchmark for midcap securities on a daily basis. The Fund’s current benchmark is 150% of the performance of the S&P MidCap 400® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2017, the Mid-Cap 1.5x Strategy Fund returned 22.44%. Over the year, its benchmark, the S&P MidCap 400 Index, returned 16.24%. The Fund had a correlation of more than 99% to its benchmark of 150% of the daily price movement of the S&P MidCap 400 Index.
The Information Technology and Industrials sectors contributed the most to performance of the underlying index during the year. The Energy and Telecommunications Services sectors detracted the most from performance of the underlying index for the year.
NVR, Inc., Take-Two Interactive Software, Inc., and Chemours Co. contributed the most to performance of the underlying index for the year. Nabors Industries Ltd., Mallinckrodt plc, and QEP Resources, Inc. were the largest detractors from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes.
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 6 of this report.
Performance displayed represents past performance, which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 65 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments or investments in Guggenheim Strategy Funds Trust mutual funds. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: October 1, 2001
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 30.2% |
Guggenheim Strategy Fund I | 30.1% |
NVR, Inc. | 0.1% |
Take-Two Interactive Software, Inc. | 0.1% |
SVB Financial Group | 0.1% |
MSCI, Inc. — Class A | 0.1% |
Huntington Ingalls Industries, Inc. | 0.1% |
Teleflex, Inc. | 0.1% |
Cognex Corp. | 0.1% |
Reinsurance Group of America, Inc. — Class A | 0.1% |
Top Ten Total | 61.1% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments.
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Mid-Cap 1.5x Strategy Fund | 22.44% | 20.33% | 10.62% |
S&P MidCap 400 Index | 16.24% | 15.01% | 9.97% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P MidCap 400 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
66 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
MID-CAP 1.5x STRATEGY FUND |
Shares | Value | |||||||
COMMON STOCKS† - 4.8% | ||||||||
Financial - 1.2% | ||||||||
SVB Financial Group* | 11 | $ | 2,571 | |||||
Reinsurance Group of America, Inc. — Class A | 14 | 2,183 | ||||||
SEI Investments Co. | 27 | 1,940 | ||||||
East West Bancorp, Inc. | 30 | 1,825 | ||||||
Alleghany Corp.* | 3 | 1,788 | ||||||
Camden Property Trust REIT | 19 | 1,749 | ||||||
Kilroy Realty Corp. REIT | 21 | 1,568 | ||||||
American Financial Group, Inc. | 14 | 1,520 | ||||||
Signature Bank* | 11 | 1,510 | ||||||
Jones Lang LaSalle, Inc. | 10 | 1,489 | ||||||
Janus Henderson Group plc | 38 | 1,454 | ||||||
WR Berkley Corp. | 20 | 1,433 | ||||||
Eaton Vance Corp. | 25 | 1,410 | ||||||
National Retail Properties, Inc. REIT | 32 | 1,380 | ||||||
PacWest Bancorp | 27 | 1,361 | ||||||
First Horizon National Corp. | 68 | 1,359 | ||||||
Douglas Emmett, Inc. REIT | 33 | 1,355 | ||||||
New York Community Bancorp, Inc. | 103 | 1,341 | ||||||
Lamar Advertising Co. — Class A REIT | 18 | 1,336 | ||||||
Liberty Property Trust REIT | 31 | 1,333 | ||||||
First American Financial Corp. | 23 | 1,289 | ||||||
Bank of the Ozarks | 26 | 1,260 | ||||||
Brown & Brown, Inc. | 24 | 1,235 | ||||||
Synovus Financial Corp. | 25 | 1,199 | ||||||
American Campus Communities, Inc. REIT | 29 | 1,190 | ||||||
DCT Industrial Trust, Inc. REIT | 20 | 1,176 | ||||||
Omega Healthcare Investors, Inc. REIT1 | 42 | 1,157 | ||||||
Sterling Bancorp | 47 | 1,156 | ||||||
Cullen/Frost Bankers, Inc. | 12 | 1,136 | ||||||
CyrusOne, Inc. REIT | 19 | 1,131 | ||||||
Highwoods Properties, Inc. REIT | 22 | 1,120 | ||||||
Commerce Bancshares, Inc. | 20 | 1,117 | ||||||
Old Republic International Corp. | 52 | 1,112 | ||||||
Webster Financial Corp. | 19 | 1,067 | ||||||
Medical Properties Trust, Inc. REIT | 77 | 1,061 | ||||||
Pinnacle Financial Partners, Inc. | 16 | 1,061 | ||||||
Prosperity Bancshares, Inc. | 15 | 1,051 | ||||||
Hospitality Properties Trust REIT | 35 | 1,045 | ||||||
SLM Corp.* | 91 | 1,028 | ||||||
RenaissanceRe Holdings Ltd. | 8 | 1,005 | ||||||
Wintrust Financial Corp. | 12 | 988 | ||||||
Hanover Insurance Group, Inc. | 9 | 973 | ||||||
Senior Housing Properties Trust REIT | 50 | 957 | ||||||
Umpqua Holdings Corp. | 46 | 957 | ||||||
FNB Corp. | 68 | 940 | ||||||
Primerica, Inc. | 9 | 914 | ||||||
Hancock Holding Co. | 18 | 891 | ||||||
Life Storage, Inc. REIT | 10 | 891 | ||||||
Texas Capital Bancshares, Inc.* | 10 | 889 | ||||||
Interactive Brokers Group, Inc. — Class A | 15 | 888 | ||||||
CNO Financial Group, Inc. | 35 | 864 | ||||||
Rayonier, Inc. REIT | 27 | 854 | ||||||
EPR Properties REIT | 13 | 851 | ||||||
Taubman Centers, Inc. REIT | 13 | 850 | ||||||
Healthcare Realty Trust, Inc. REIT | 26 | 835 | ||||||
Stifel Financial Corp. | 14 | 834 | ||||||
Weingarten Realty Investors REIT | 25 | 822 | ||||||
Cousins Properties, Inc. REIT | 88 | 814 | ||||||
Associated Banc-Corp. | 32 | 813 | ||||||
Chemical Financial Corp. | 15 | 802 | ||||||
MB Financial, Inc. | 18 | 801 | ||||||
CoreSite Realty Corp. REIT | 7 | 797 | ||||||
First Industrial Realty Trust, Inc. REIT | 25 | 787 | ||||||
Bank of Hawaii Corp. | 9 | 771 | ||||||
Home BancShares, Inc. | 33 | 767 | ||||||
United Bankshares, Inc. | 22 | 765 | ||||||
Legg Mason, Inc. | 18 | 756 | ||||||
TCF Financial Corp. | 36 | 738 | ||||||
Federated Investors, Inc. — Class B | 20 | 721 | ||||||
JBG SMITH Properties REIT | 20 | 695 | ||||||
Sabra Health Care REIT, Inc. | 37 | 694 | ||||||
Kemper Corp. | 10 | 689 | ||||||
Cathay General Bancorp | 16 | 675 | ||||||
LaSalle Hotel Properties REIT | 24 | 674 | ||||||
Fulton Financial Corp. | 37 | 662 | ||||||
UMB Financial Corp. | 9 | 647 | ||||||
Valley National Bancorp | 56 | 628 | ||||||
Uniti Group, Inc. REIT1 | 35 | 623 | ||||||
Washington Federal, Inc. | 18 | 617 | ||||||
GEO Group, Inc. REIT | 26 | 614 | ||||||
Corporate Office Properties Trust REIT | 21 | 613 | ||||||
BancorpSouth Bank | 18 | 566 | ||||||
CoreCivic, Inc. REIT | 25 | 562 | ||||||
Urban Edge Properties REIT | 22 | 561 | ||||||
Education Realty Trust, Inc. REIT | 16 | 559 | ||||||
Tanger Factory Outlet Centers, Inc. REIT1 | 20 | 530 | ||||||
Aspen Insurance Holdings Ltd. | 12 | 487 | ||||||
Potlatch Corp. REIT | 9 | 449 | ||||||
Trustmark Corp. | 14 | 446 | ||||||
International Bancshares Corp. | 11 | 437 | ||||||
Mercury General Corp. | 8 | 427 | ||||||
Mack-Cali Realty Corp. REIT | 19 | 410 | ||||||
Genworth Financial, Inc. — Class A* | 105 | 326 | ||||||
Washington Prime Group, Inc. REIT | 39 | 278 | ||||||
Alexander & Baldwin, Inc. REIT | 10 | 277 | ||||||
Quality Care Properties, Inc. REIT* | 20 | 276 | ||||||
Total Financial | 93,453 | |||||||
Industrial - 0.9% | ||||||||
Huntington Ingalls Industries, Inc. | 10 | 2,357 | ||||||
Cognex Corp. | 36 | 2,202 | ||||||
Trimble, Inc.* | 53 | 2,154 | ||||||
IDEX Corp. | 16 | 2,111 | ||||||
Old Dominion Freight Line, Inc. | 14 | 1,842 | ||||||
Lennox International, Inc. | 8 | 1,666 | ||||||
Keysight Technologies, Inc.* | 39 | 1,622 | ||||||
Nordson Corp. | 11 | 1,610 | ||||||
Graco, Inc. | 35 | 1,583 | ||||||
Orbital ATK, Inc. | 12 | 1,578 | ||||||
Hubbell, Inc. | 11 | 1,489 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 67 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
MID-CAP 1.5x STRATEGY FUND |
Shares | Value | |||||||
Carlisle Companies, Inc. | 13 | $ | 1,477 | |||||
Wabtec Corp. | 18 | 1,466 | ||||||
Oshkosh Corp. | 16 | 1,454 | ||||||
Arrow Electronics, Inc.* | 18 | 1,447 | ||||||
Coherent, Inc.* | 5 | 1,411 | ||||||
Donaldson Company, Inc. | 27 | 1,322 | ||||||
Teledyne Technologies, Inc.* | 7 | 1,268 | ||||||
Gentex Corp. | 60 | 1,257 | ||||||
AECOM* | 33 | 1,226 | ||||||
Trinity Industries, Inc. | 32 | 1,199 | ||||||
Lincoln Electric Holdings, Inc. | 13 | 1,191 | ||||||
Knight-Swift Transportation Holdings, Inc. | 27 | 1,180 | ||||||
Zebra Technologies Corp. — Class A* | 11 | 1,142 | ||||||
Eagle Materials, Inc. | 10 | 1,133 | ||||||
AptarGroup, Inc. | 13 | 1,121 | ||||||
Sonoco Products Co. | 21 | 1,116 | ||||||
Curtiss-Wright Corp. | 9 | 1,097 | ||||||
Genesee & Wyoming, Inc. — Class A* | 13 | 1,023 | ||||||
AGCO Corp. | 14 | 1,000 | ||||||
Avnet, Inc. | 25 | 991 | ||||||
Littelfuse, Inc. | 5 | 989 | ||||||
Crane Co. | 11 | 981 | ||||||
EMCOR Group, Inc. | 12 | 981 | ||||||
Jabil, Inc. | 37 | 971 | ||||||
ITT, Inc. | 18 | 961 | ||||||
National Instruments Corp. | 23 | 958 | ||||||
Landstar System, Inc. | 9 | 937 | ||||||
Ryder System, Inc. | 11 | 926 | ||||||
Woodward, Inc. | 12 | 918 | ||||||
Bemis Company, Inc. | 19 | 908 | ||||||
Valmont Industries, Inc. | 5 | 829 | ||||||
Kennametal, Inc. | 17 | 823 | ||||||
Terex Corp. | 17 | 820 | ||||||
SYNNEX Corp. | 6 | 816 | ||||||
Louisiana-Pacific Corp.* | 30 | 788 | ||||||
Dycom Industries, Inc.* | 7 | 780 | ||||||
Cree, Inc.* | 21 | 780 | ||||||
Owens-Illinois, Inc.* | 34 | 754 | ||||||
KLX, Inc.* | 11 | 751 | ||||||
Kirby Corp.* | 11 | 735 | ||||||
Belden, Inc. | 9 | 694 | ||||||
Regal Beloit Corp. | 9 | 689 | ||||||
Timken Co. | 14 | 688 | ||||||
Tech Data Corp.* | 7 | 686 | ||||||
EnerSys | 9 | 627 | ||||||
Energizer Holdings, Inc. | 13 | 624 | ||||||
Clean Harbors, Inc.* | 11 | 596 | ||||||
Vishay Intertechnology, Inc. | 28 | 581 | ||||||
KBR, Inc. | 29 | 575 | ||||||
MSA Safety, Inc. | 7 | 543 | ||||||
Granite Construction, Inc. | 8 | 507 | ||||||
GATX Corp. | 8 | 497 | ||||||
Silgan Holdings, Inc. | 16 | 470 | ||||||
Esterline Technologies Corp.* | 6 | 448 | ||||||
Worthington Industries, Inc. | 9 | 397 | ||||||
Werner Enterprises, Inc. | 9 | 348 | ||||||
Greif, Inc. — Class A | 5 | 303 | ||||||
Knowles Corp.* | 19 | 279 | ||||||
Total Industrial | 71,693 | |||||||
Consumer, Non-cyclical - 0.7% | ||||||||
Teleflex, Inc. | 9 | 2,239 | ||||||
Ingredion, Inc. | 15 | 2,097 | ||||||
WellCare Health Plans, Inc.* | 9 | 1,810 | ||||||
ManpowerGroup, Inc. | 14 | 1,765 | ||||||
Lamb Weston Holdings, Inc. | 31 | 1,750 | ||||||
ABIOMED, Inc.* | 9 | 1,687 | ||||||
MarketAxess Holdings, Inc. | 8 | 1,614 | ||||||
West Pharmaceutical Services, Inc. | 16 | 1,579 | ||||||
STERIS plc | 18 | 1,575 | ||||||
Service Corporation International | 39 | 1,455 | ||||||
United Therapeutics Corp.* | 9 | 1,332 | ||||||
Bioverativ, Inc.* | 23 | 1,240 | ||||||
Live Nation Entertainment, Inc.* | 28 | 1,192 | ||||||
Hill-Rom Holdings, Inc. | 14 | 1,180 | ||||||
Catalent, Inc.* | 28 | 1,150 | ||||||
WEX, Inc.* | 8 | 1,130 | ||||||
Post Holdings, Inc.* | 14 | 1,109 | ||||||
Charles River Laboratories International, Inc.* | 10 | 1,094 | ||||||
MEDNAX, Inc.* | 20 | 1,069 | ||||||
HealthSouth Corp. | 21 | 1,037 | ||||||
Bio-Techne Corp. | 8 | 1,036 | ||||||
Bio-Rad Laboratories, Inc. — Class A* | 4 | 955 | ||||||
Hain Celestial Group, Inc.* | 22 | 933 | ||||||
Rollins, Inc. | 20 | 931 | ||||||
Sabre Corp. | 44 | 902 | ||||||
Snyder’s-Lance, Inc. | 18 | 901 | ||||||
Brink’s Co. | 11 | 866 | ||||||
Masimo Corp.* | 10 | 848 | ||||||
CoreLogic, Inc.* | 17 | 786 | ||||||
Deluxe Corp. | 10 | 768 | ||||||
Flowers Foods, Inc. | 39 | 753 | ||||||
LivaNova plc* | 9 | 719 | ||||||
Edgewell Personal Care Co.* | 12 | 713 | ||||||
Molina Healthcare, Inc.* | 9 | 690 | ||||||
Avis Budget Group, Inc.* | 15 | 658 | ||||||
Akorn, Inc.* | 20 | 645 | ||||||
NuVasive, Inc.* | 11 | 643 | ||||||
Sprouts Farmers Market, Inc.* | 26 | 633 | ||||||
Globus Medical, Inc. — Class A* | 15 | 617 | ||||||
TreeHouse Foods, Inc.* | 12 | 593 | ||||||
Helen of Troy Ltd.* | 6 | 578 | ||||||
Graham Holdings Co. — Class B | 1 | 558 | ||||||
Sanderson Farms, Inc. | 4 | 555 | ||||||
Acadia Healthcare Company, Inc.* | 17 | 555 | ||||||
Adtalem Global Education, Inc.* | 13 | 547 | ||||||
United Natural Foods, Inc.* | 11 | 542 | ||||||
Incorporated Research Holdings, Inc. — Class A* | 12 | 523 | ||||||
Aaron’s, Inc. | 13 | 518 | ||||||
Lancaster Colony Corp. | 4 | 517 |
68 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
MID-CAP 1.5x STRATEGY FUND |
Shares | Value | |||||||
Prestige Brands Holdings, Inc.* | 11 | $ | 489 | |||||
Halyard Health, Inc.* | 10 | 462 | ||||||
Mallinckrodt plc* | 20 | 451 | ||||||
Sotheby’s* | 8 | 413 | ||||||
LifePoint Health, Inc.* | 8 | 398 | ||||||
Boston Beer Company, Inc. — Class A* | 2 | 382 | ||||||
Endo International plc* | 42 | 326 | ||||||
Tenet Healthcare Corp.* | 17 | 258 | ||||||
Owens & Minor, Inc. | 13 | 245 | ||||||
Dean Foods Co. | 19 | 220 | ||||||
Avon Products, Inc.* | 92 | 198 | ||||||
Tootsie Roll Industries, Inc. | 4 | 146 | ||||||
Total Consumer, Non-cyclical | 53,575 | |||||||
Consumer, Cyclical - 0.6% | ||||||||
NVR, Inc.* | 1 | 3,508 | ||||||
Copart, Inc.* | 42 | 1,814 | ||||||
Domino’s Pizza, Inc. | 9 | 1,701 | ||||||
Thor Industries, Inc. | 10 | 1,507 | ||||||
Toro Co. | 23 | 1,500 | ||||||
JetBlue Airways Corp.* | 67 | 1,497 | ||||||
Toll Brothers, Inc. | 31 | 1,489 | ||||||
Polaris Industries, Inc. | 12 | 1,488 | ||||||
Dunkin’ Brands Group, Inc. | 19 | 1,225 | ||||||
Carter’s, Inc. | 10 | 1,175 | ||||||
Six Flags Entertainment Corp. | 16 | 1,065 | ||||||
Skechers U.S.A., Inc. — Class A* | 28 | 1,059 | ||||||
Pool Corp. | 8 | 1,037 | ||||||
Watsco, Inc. | 6 | 1,020 | ||||||
Delphi Technologies plc* | 19 | 997 | ||||||
Brunswick Corp. | 18 | 994 | ||||||
Scotts Miracle-Gro Co. — Class A | 9 | 963 | ||||||
Dana, Inc. | 30 | 960 | ||||||
CalAtlantic Group, Inc. | 16 | 902 | ||||||
Casey’s General Stores, Inc. | 8 | 895 | ||||||
MSC Industrial Direct Company, Inc. — Class A | 9 | 870 | ||||||
Williams-Sonoma, Inc. | 16 | 827 | ||||||
Cracker Barrel Old Country Store, Inc.1 | 5 | 794 | ||||||
Cinemark Holdings, Inc. | 22 | 766 | ||||||
Texas Roadhouse, Inc. — Class A | 14 | 738 | ||||||
Churchill Downs, Inc. | 3 | 698 | ||||||
Tupperware Brands Corp. | 11 | 690 | ||||||
Nu Skin Enterprises, Inc. — Class A | 10 | 682 | ||||||
Bed Bath & Beyond, Inc. | 30 | 660 | ||||||
American Eagle Outfitters, Inc. | 35 | 658 | ||||||
Tempur Sealy International, Inc.* | 10 | 627 | ||||||
ILG, Inc. | 22 | 626 | ||||||
Wendy’s Co. | 38 | 624 | ||||||
AutoNation, Inc.* | 12 | 616 | ||||||
Urban Outfitters, Inc.* | 17 | 596 | ||||||
Jack in the Box, Inc. | 6 | 589 | ||||||
KB Home | 18 | 575 | ||||||
TRI Pointe Group, Inc.* | 32 | 574 | ||||||
Deckers Outdoor Corp.* | 7 | 562 | ||||||
Michaels Companies, Inc.* | 23 | 556 | ||||||
Herman Miller, Inc. | 13 | 521 | ||||||
Sally Beauty Holdings, Inc.* | 27 | 507 | ||||||
Big Lots, Inc. | 9 | 505 | ||||||
Dick’s Sporting Goods, Inc. | 17 | 489 | ||||||
Buffalo Wild Wings, Inc.* | 3 | 469 | ||||||
Cheesecake Factory, Inc.1 | 9 | 434 | ||||||
World Fuel Services Corp. | 14 | 394 | ||||||
Cooper Tire & Rubber Co. | 11 | 389 | ||||||
Brinker International, Inc.1 | 10 | 388 | ||||||
Office Depot, Inc. | 108 | 382 | ||||||
GameStop Corp. — Class A | 21 | 377 | ||||||
HNI Corp. | 9 | 347 | ||||||
Papa John’s International, Inc. | 5 | 281 | ||||||
Dillard’s, Inc. — Class A1 | 4 | 240 | ||||||
International Speedway Corp. — Class A | 5 | 199 | ||||||
Total Consumer, Cyclical | 46,046 | |||||||
Technology - 0.5% | ||||||||
Take-Two Interactive Software, Inc.* | 24 | 2,635 | ||||||
MSCI, Inc. — Class A | 19 | 2,404 | ||||||
Broadridge Financial Solutions, Inc. | 24 | 2,174 | ||||||
CDK Global, Inc. | 28 | 1,996 | ||||||
Leidos Holdings, Inc. | 30 | 1,937 | ||||||
Jack Henry & Associates, Inc. | 16 | 1,871 | ||||||
Teradyne, Inc. | 41 | 1,717 | ||||||
IPG Photonics Corp.* | 8 | 1,713 | ||||||
PTC, Inc.* | 24 | 1,459 | ||||||
Fortinet, Inc.* | 31 | 1,354 | ||||||
Ultimate Software Group, Inc.* | 6 | 1,309 | ||||||
Microsemi Corp.* | 25 | 1,291 | ||||||
Tyler Technologies, Inc.* | 7 | 1,239 | ||||||
Cypress Semiconductor Corp. | 70 | 1,067 | ||||||
MKS Instruments, Inc. | 11 | 1,039 | ||||||
MAXIMUS, Inc. | 14 | 1,002 | ||||||
Teradata Corp.* | 25 | 962 | ||||||
Dun & Bradstreet Corp. | 8 | 947 | ||||||
Blackbaud, Inc. | 10 | 945 | ||||||
Fair Isaac Corp. | 6 | 919 | ||||||
Monolithic Power Systems, Inc. | 8 | 899 | ||||||
NCR Corp.* | 26 | 884 | ||||||
Integrated Device Technology, Inc.* | 28 | 832 | ||||||
DST Systems, Inc. | 13 | 807 | ||||||
Silicon Laboratories, Inc.* | 9 | 795 | ||||||
Medidata Solutions, Inc.* | 12 | 760 | ||||||
j2 Global, Inc. | 10 | 750 | ||||||
Manhattan Associates, Inc.* | 14 | 694 | ||||||
Science Applications International Corp. | 9 | 689 | ||||||
Cirrus Logic, Inc.* | 13 | 674 | ||||||
ACI Worldwide, Inc.* | 25 | 567 | ||||||
Allscripts Healthcare Solutions, Inc.* | 38 | 553 | ||||||
NetScout Systems, Inc.* | 18 | 548 | ||||||
CommVault Systems, Inc.* | 9 | 473 | ||||||
Acxiom Corp.* | 17 | 469 | ||||||
Convergys Corp. | 19 | 446 | ||||||
Pitney Bowes, Inc. | 39 | 436 | ||||||
VeriFone Systems, Inc.* | 24 | 425 | ||||||
Synaptics, Inc.* | 7 | 280 | ||||||
Diebold Nixdorf, Inc.1 | 16 | 262 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 69 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
MID-CAP 1.5x STRATEGY FUND |
Shares | Value | |||||||
3D Systems Corp.*,1 | 24 | $ | 207 | |||||
Total Technology | 42,430 | |||||||
Utilities - 0.3% | ||||||||
Atmos Energy Corp. | 23 | 1,976 | ||||||
UGI Corp. | 36 | 1,690 | ||||||
Westar Energy, Inc. | 30 | 1,584 | ||||||
Aqua America, Inc. | 37 | 1,452 | ||||||
Great Plains Energy, Inc. | 45 | 1,451 | ||||||
OGE Energy Corp. | 42 | 1,382 | ||||||
Vectren Corp. | 17 | 1,105 | ||||||
MDU Resources Group, Inc. | 41 | 1,102 | ||||||
IDACORP, Inc. | 11 | 1,005 | ||||||
National Fuel Gas Co. | 18 | 988 | ||||||
WGL Holdings, Inc. | 11 | 944 | ||||||
Hawaiian Electric Industries, Inc. | 23 | 831 | ||||||
ONE Gas, Inc. | 11 | 806 | ||||||
Southwest Gas Holdings, Inc. | 10 | 805 | ||||||
New Jersey Resources Corp. | 18 | 724 | ||||||
PNM Resources, Inc. | 17 | 688 | ||||||
Black Hills Corp. | 11 | 661 | ||||||
NorthWestern Corp. | 10 | 597 | ||||||
Total Utilities | 19,791 | |||||||
Basic Materials - 0.3% | ||||||||
Steel Dynamics, Inc. | 50 | 2,156 | ||||||
Chemours Co. | 39 | 1,952 | ||||||
RPM International, Inc. | 28 | 1,468 | ||||||
United States Steel Corp. | 37 | 1,302 | ||||||
Reliance Steel & Aluminum Co. | 15 | 1,287 | ||||||
Olin Corp. | 35 | 1,245 | ||||||
Royal Gold, Inc. | 14 | 1,149 | ||||||
Valvoline, Inc. | 43 | 1,078 | ||||||
Ashland Global Holdings, Inc. | 13 | 926 | ||||||
Versum Materials, Inc. | 23 | 870 | ||||||
Cabot Corp. | 13 | 801 | ||||||
NewMarket Corp. | 2 | 795 | ||||||
PolyOne Corp. | 17 | 739 | ||||||
Sensient Technologies Corp. | 9 | 658 | ||||||
Domtar Corp. | 13 | 644 | ||||||
Allegheny Technologies, Inc.* | 26 | 628 | ||||||
Commercial Metals Co. | 24 | 512 | ||||||
Carpenter Technology Corp. | 10 | 510 | ||||||
Compass Minerals International, Inc. | 7 | 506 | ||||||
Minerals Technologies, Inc. | 7 | 482 | ||||||
Total Basic Materials | 19,708 | |||||||
Energy - 0.2% | ||||||||
HollyFrontier Corp. | 37 | 1,905 | ||||||
WPX Energy, Inc.* | 84 | 1,182 | ||||||
Energen Corp.* | 20 | 1,151 | ||||||
First Solar, Inc.* | 17 | 1,148 | ||||||
Patterson-UTI Energy, Inc. | 47 | 1,081 | ||||||
Murphy Oil Corp. | 34 | 1,056 | ||||||
Core Laboratories N.V.1 | 9 | 986 | ||||||
Transocean Ltd.* | 82 | 876 | ||||||
PBF Energy, Inc. — Class A | 23 | 815 | ||||||
CNX Resources Corp.* | 44 | 644 | ||||||
Matador Resources Co.* | 20 | 623 | ||||||
Southwestern Energy Co.* | 108 | 603 | ||||||
Murphy USA, Inc.* | 7 | 562 | ||||||
Ensco plc — Class A | 92 | 544 | ||||||
Callon Petroleum Co.* | 42 | 510 | ||||||
QEP Resources, Inc.* | 51 | 488 | ||||||
SM Energy Co. | 22 | 486 | ||||||
Nabors Industries Ltd. | 67 | 458 | ||||||
Gulfport Energy Corp.* | 35 | 446 | ||||||
Oceaneering International, Inc. | 21 | 444 | ||||||
Dril-Quip, Inc.* | 8 | 381 | ||||||
Rowan Companies plc — Class A* | 24 | 376 | ||||||
Superior Energy Services, Inc.* | 32 | 308 | ||||||
Diamond Offshore Drilling, Inc.*,1 | 14 | 260 | ||||||
NOW, Inc.* | 23 | 254 | ||||||
Total Energy | 17,587 | |||||||
Communications - 0.1% | ||||||||
FactSet Research Systems, Inc. | 8 | 1,542 | ||||||
LogMeIn, Inc. | 11 | 1,259 | ||||||
ARRIS International plc* | 37 | 951 | ||||||
ViaSat, Inc.*,1 | 11 | 823 | ||||||
Cable One, Inc. | 1 | 703 | ||||||
TEGNA, Inc. | 45 | 634 | ||||||
Ciena Corp.* | 30 | 628 | ||||||
AMC Networks, Inc. — Class A* | 11 | 595 | ||||||
John Wiley & Sons, Inc. — Class A | 9 | 592 | ||||||
InterDigital, Inc. | 7 | 533 | ||||||
Meredith Corp. | 8 | 528 | ||||||
Telephone & Data Systems, Inc. | 19 | 528 | ||||||
New York Times Co. — Class A | 26 | 481 | ||||||
Cars.com, Inc.*,1 | 15 | 433 | ||||||
Plantronics, Inc. | 7 | 353 | ||||||
Total Communications | 10,583 | |||||||
Total Common Stocks | ||||||||
(Cost $256,545) | 374,866 | |||||||
MUTUAL FUNDS† - 60.3% | ||||||||
Guggenheim Strategy Fund II2 | 95,038 | 2,376,905 | ||||||
Guggenheim Strategy Fund I2 | 94,617 | 2,371,103 | ||||||
Total Mutual Funds | ||||||||
(Cost $4,732,617) | 4,748,008 | |||||||
Face Amount | ||||||||
U.S. TREASURY BILLS†† - 12.7% | ||||||||
U.S. Treasury Bills | ||||||||
0.80% due 01/02/184,5 | $ | 1,000,000 | 1,000,000 | |||||
Total U.S. Treasury Bills | ||||||||
(Cost $999,972) | 1,000,000 |
70 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
MID-CAP 1.5x STRATEGY FUND |
Face Value | Value | |||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 6.3% | ||||||||
Federal Home Loan Bank6 | ||||||||
1.05% due 01/02/184,5 | $ | 500,000 | $ | 499,985 | ||||
Total Federal Agency Discount Notes | ||||||||
(Cost $499,985) | 499,985 | |||||||
REPURCHASE AGREEMENTS††,7 - 43.1% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/188 | 2,212,872 | 2,212,872 | ||||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/188 | 1,181,017 | 1,181,017 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $3,393,889) | 3,393,889 |
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,9 - 1.3% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%3 | 103,196 | 103,196 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $103,196) | 103,196 | |||||||
Total Investments - 128.5% | ||||||||
(Cost $9,986,204) | $ | 10,119,944 | ||||||
Other Assets & Liabilities, net - (28.5)% | (2,244,482 | ) | ||||||
Total Net Assets - 100.0% | $ | 7,875,462 |
Futures Contracts | ||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Value and Unrealized Gain | ||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||
S&P MidCap 400 Index Mini Futures Contracts | 23 | Mar 2018 | $ | 4,375,520 | $ | 30,943 |
Total Return Swap Agreements | ||||||||||||||||||||||
Counterparty | Index | Financing Rate Pay (Receive) | Payment Frequency | Maturity Date | Units | Notional Amount | Value and Unrealized Loss | |||||||||||||||
OTC Equity Index Swap Agreements†† | ||||||||||||||||||||||
BNP Paribas | S&P MidCap 400 Index | 1.92 | % | At Maturity | 01/29/18 | 309 | $ | 587,210 | $ | (1,529 | ) | |||||||||||
Barclays Bank plc | S&P MidCap 400 Index | 1.83 | % | At Maturity | 01/30/18 | 297 | 563,963 | (3,178 | ) | |||||||||||||
Goldman Sachs International | S&P MidCap 400 Index | 1.83 | % | At Maturity | 01/29/18 | 2,987 | 5,676,483 | (15,412 | ) | |||||||||||||
$ | 6,827,656 | $ | (20,119 | ) |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 7. |
2 | Affiliated issuer. |
3 | Rate indicated is the 7 day yield as of December 31, 2017. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | Zero coupon rate security. |
6 | The issuer operates under a Congressional charter; its securities are neither issued nor guaranteed by the U.S. Government. |
7 | Repurchase Agreements — See Note 6. |
8 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2017. |
9 | Securities lending collateral — See Note 7. |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 71 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
MID-CAP 1.5x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Common Stocks | $ | 374,866 | $ | — | $ | — | $ | — | $ | — | $ | 374,866 | ||||||||||||
Equity Futures Contracts | — | 30,943 | — | — | — | 30,943 | ||||||||||||||||||
Federal Agency Discount Notes | — | — | 499,985 | — | — | 499,985 | ||||||||||||||||||
Mutual Funds | 4,748,008 | — | — | — | — | 4,748,008 | ||||||||||||||||||
Repurchase Agreements | — | — | 3,393,889 | — | — | 3,393,889 | ||||||||||||||||||
Securities Lending Collateral | 103,196 | — | — | — | — | 103,196 | ||||||||||||||||||
U.S. Treasury Bills | — | — | 1,000,000 | — | — | 1,000,000 | ||||||||||||||||||
Total Assets | $ | 5,226,070 | $ | 30,943 | $ | 4,893,874 | $ | — | $ | — | $ | 10,150,887 | ||||||||||||
Investments in Securities (Liabilities) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Equity Index Swap Agreements | $ | — | $ | — | $ | — | $ | 20,119 | $ | — | $ | 20,119 |
* | Other financial instruments include futures contracts and swaps, which are reported as unrealized gain/loss at period end. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a portfolio company of a fund, or control of or by, or common control under GI, result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act.
The Fund may invest in the underlying series of the Guggenheim Strategy Funds Trust consisting of Guggenheim Strategy Fund I, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III (collectively, the “Cash Management Funds”), open-end management investment companies managed by GI. The Cash Management Funds, which launched on March 11, 2014, are offered as cash management options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Cash Management Funds pay no investment management fees. The Cash Management Funds’ annual report on Form N-CSR dated September 30, 2017, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180417000715/gug72218.htm.
Transactions during the year ended December 31, 2017, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value 12/31/16 | Additions | Reductions | Realized Gain (Loss) | Change in Unrealized | Value 12/31/17 | Shares 12/31/17 | Investment Income | Capital Gain Distributions |
Mutual Funds | |||||||||
Guggenheim Strategy Fund I | $ 6,467,999 | $ 9,848,940 | $ (13,950,000) | $ 5,663 | $ (1,499) | $ 2,371,103 | 94,617 | $ 67,182 | $ 1,924 |
Guggenheim Strategy Fund II | 5,321,626 | 6,728,301 | (9,670,000) | (5,509) | 2,487 | 2,376,905 | 95,038 | 89,741 | 3,806 |
$ 11,789,625 | $ 16,577,241 | $ (23,620,000) | $ 154 | $ 988 | $ 4,748,008 | $ 156,923 | $ 5,730 |
72 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
MID-CAP 1.5x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2017 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $99,088 of securities loaned (cost $1,859,698) | $ | 1,978,047 | ||
Investments in affiliated issuers, at value (cost $4,732,617) | 4,748,008 | |||
Repurchase agreements, at value (cost $3,393,889) | 3,393,889 | |||
Segregated cash with broker | 552,000 | |||
Receivables: | ||||
Securities sold | 15,682,268 | |||
Dividends | 31,363 | |||
Interest | 398 | |||
Fund shares sold | 217 | |||
Securities lending income | 81 | |||
Total assets | 26,386,271 | |||
Liabilities: | ||||
Unrealized depreciation on swap agreements | 20,119 | |||
Overdraft due to custodian bank | 17,679 | |||
Payable for: | ||||
Fund shares redeemed | 18,228,138 | |||
Return of securities loaned | 103,196 | |||
Variation margin | 39,872 | |||
Securities purchased | 38,778 | |||
Swap settlement | 20,878 | |||
Management fees | 18,322 | |||
Transfer agent and administrative fees | 5,090 | |||
Investor service fees | 5,090 | |||
Portfolio accounting fees | 2,036 | |||
Miscellaneous | 11,611 | |||
Total liabilities | 18,510,809 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 7,875,462 | ||
Net assets consist of: | ||||
Paid in capital | $ | 6,300,641 | ||
Undistributed net investment income | 16,752 | |||
Accumulated net realized gain on investments | 1,413,505 | |||
Net unrealized appreciation on investments | 144,564 | |||
Net assets | $ | 7,875,462 | ||
Capital shares outstanding | 336,983 | |||
Net asset value per share | $ | 23.37 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $22) | $ | 47,958 | ||
Dividends from securities of affiliated issuers | 156,923 | |||
Interest | 13,454 | |||
Income from securities lending, net | 490 | |||
Total investment income | 218,825 | |||
Expenses: | ||||
Management fees | 107,967 | |||
Investor service fees | 29,991 | |||
Transfer agent and administrative fees | 29,991 | |||
Professional fees | 19,939 | |||
Portfolio accounting fees | 11,996 | |||
Custodian fees | 2,196 | |||
Trustees’ fees* | 1,339 | |||
Line of credit fees | 118 | |||
Miscellaneous | 7,279 | |||
Total expenses | 210,816 | |||
Net investment income | 8,009 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 599,097 | |||
Investments in affiliated issuers | 154 | |||
Swap agreements | 1,825,179 | |||
Futures contracts | 400,698 | |||
Distributions received from affiliated investment company shares | 5,730 | |||
Net realized gain | 2,830,858 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (39,820 | ) | ||
Investments in affiliated issuers | 988 | |||
Swap agreements | (27,516 | ) | ||
Futures contracts | 164,768 | |||
Net change in unrealized appreciation (depreciation) | 98,420 | |||
Net realized and unrealized gain | 2,929,278 | |||
Net increase in net assets resulting from operations | $ | 2,937,287 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 73 |
MID-CAP 1.5x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | 8,009 | $ | (40,213 | ) | |||
Net realized gain on investments | 2,830,858 | 3,553,702 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 98,420 | (40,690 | ) | |||||
Net increase in net assets resulting from operations | 2,937,287 | 3,472,799 | ||||||
Distributions to shareholders from: | ||||||||
Net realized gains | (3,053,428 | ) | (750,000 | ) | ||||
Total distributions to shareholders | (3,053,428 | ) | (750,000 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 51,121,306 | 60,370,097 | ||||||
Distributions reinvested | 3,053,428 | 750,000 | ||||||
Cost of shares redeemed | (66,131,295 | ) | (58,987,307 | ) | ||||
Net increase (decrease) from capital share transactions | (11,956,561 | ) | 2,132,790 | |||||
Net increase (decrease) in net assets | (12,072,702 | ) | 4,855,589 | |||||
Net assets: | ||||||||
Beginning of year | 19,948,164 | 15,092,575 | ||||||
End of year | $ | 7,875,462 | $ | 19,948,164 | ||||
Undistributed net investment income/Accumulated net investment loss at end of year | $ | 16,752 | $ | (12 | ) | |||
Capital share activity: | ||||||||
Shares sold | 2,058,544 | 1,829,775 | ||||||
Shares issued from reinvestment of distributions | 146,658 | 23,177 | ||||||
Shares redeemed | (2,419,500 | ) | (1,786,357 | ) | ||||
Net increase (decrease) in shares | (214,298 | ) | 66,595 |
74 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
MID-CAP 1.5x STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 36.19 | $ | 31.14 | $ | 35.05 | $ | 35.47 | $ | 23.61 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .02 | (.10 | ) | (.20 | ) | (.25 | ) | (.17 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | 5.81 | 8.87 | (1.45 | ) | 4.39 | 12.03 | ||||||||||||||
Total from investment operations | 5.83 | 8.77 | (1.65 | ) | 4.14 | 11.86 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (18.65 | ) | (3.72 | ) | (2.26 | ) | (4.56 | ) | — | |||||||||||
Total distributions | (18.65 | ) | (3.72 | ) | (2.26 | ) | (4.56 | ) | — | |||||||||||
Net asset value, end of period | $ | 23.37 | $ | 36.19 | $ | 31.14 | $ | 35.05 | $ | 35.47 | ||||||||||
Total Returnb | 22.44 | % | 29.64 | % | (5.50 | %) | 11.93 | % | 50.23 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 7,875 | $ | 19,948 | $ | 15,093 | $ | 10,673 | $ | 17,076 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.07 | % | (0.30 | %) | (0.58 | %) | (0.69 | %) | (0.56 | %) | ||||||||||
Total expensesc | 1.76 | % | 1.72 | % | 1.67 | % | 1.72 | % | 1.69 | % | ||||||||||
Portfolio turnover rate | 403 | % | 368 | % | 477 | % | 255 | % | 279 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 75 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
INVERSE MID-CAP STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is the inverse (opposite) of the performance of the S&P MidCap 400® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2017, Inverse Mid-Cap Strategy Fund returned -13.55%. Over the year, its benchmark, the S&P MidCap 400 Index, returned 16.24%. Inverse Mid-Cap Strategy Fund achieved a daily correlation of 99% to its benchmark of -100% of the daily price movement of the S&P MidCap 400 Index.
The Information Technology and Industrials sectors contributed the most to performance of the underlying index during the year. The Energy and Telecommunications Services sectors detracted the most from performance of the underlying index for the year.
NVR, Inc., Take-Two Interactive Software, Inc., and Chemours Co. contributed the most to performance of the underlying index for the year. Nabors Industries Ltd., Mallinckrodt plc, and QEP Resources, Inc. were the largest detractors from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and not for hedging purposes.
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 6 of this report.
Performance displayed represents past performance, which is no guarantee of future results.
76 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments or investments in Guggenheim Strategy Funds Trust mutual funds. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: May 3, 2004
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 33.7% |
Guggenheim Strategy Fund I | 12.7% |
Total | 46.4% |
“Largest Holdings” excludes any temporary cash or derivative investments.
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Inverse Mid-Cap Strategy Fund | (13.55%) | (15.03%) | (14.14%) |
S&P MidCap 400 Index | 16.24% | 15.01% | 9.97% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P MidCap 400 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 77 |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
INVERSE MID-CAP STRATEGY FUND |
Shares | Value | |||||||
MUTUAL FUNDS† - 46.4% | ||||||||
Guggenheim Strategy Fund II1 | 2,392 | $ | 59,830 | |||||
Guggenheim Strategy Fund I1 | 897 | 22,474 | ||||||
Total Mutual Funds | ||||||||
(Cost $81,708) | 82,304 | |||||||
Face Amount | ||||||||
FEDERAL AGENCY NOTES†† - 11.3% | ||||||||
Federal Farm Credit Bank2 | ||||||||
1.41% (1 Month USD LIBOR + 0.04%) due 01/02/183 | $ | 20,000 | 20,000 | |||||
Total Federal Agency Notes | ||||||||
(Cost $20,000) | 20,000 | |||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 11.2% | ||||||||
Fannie Mae4 | ||||||||
1.26% due 01/12/185,6 | 20,000 | 19,992 | ||||||
Total Federal Agency Discount Notes | ||||||||
(Cost $19,992) | 19,992 | |||||||
REPURCHASE AGREEMENTS††,7 - 29.9% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/188 | 34,623 | 34,623 | ||||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/188 | 18,479 | 18,479 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $53,102) | 53,102 | |||||||
Total Investments - 98.8% | ||||||||
(Cost $174,802) | $ | 175,398 | ||||||
Other Assets & Liabilities, net - 1.2% | 2,103 | |||||||
Total Net Assets - 100.0% | $ | 177,501 |
Total Return Swap Agreements | ||||||||||||||||||||||
Counterparty | Index | Financing Rate Pay (Receive) | Payment Frequency | Maturity Date | Units | Notional Amount | Value and Unrealized Gain | |||||||||||||||
OTC Equity Index Swap Agreements Sold Short†† | ||||||||||||||||||||||
Barclays Bank plc | S&P MidCap 400 Index | (1.68 | %) | At Maturity | 01/30/18 | 23 | $ | 44,358 | $ | 250 | ||||||||||||
BNP Paribas | S&P MidCap 400 Index | (1.42 | %) | At Maturity | 01/26/18 | 48 | 92,153 | 240 | ||||||||||||||
Goldman Sachs International | S&P MidCap 400 Index | (1.53 | %) | At Maturity | 01/26/18 | 22 | 41,015 | 111 | ||||||||||||||
$ | 177,526 | $ | 601 |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | The issuer operates under a Congressional charter; its securities are neither issued nor guaranteed by the U.S. Government. |
3 | Variable rate security. The rate indicated is the rate effective at December 31, 2017. In some instances, the underlying reference rate shown was below the minimum rate earned by the security or has been adjusted by a predetermined factor. The settlement status of a position may also impact the effective rate indicated. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
4 | On September 7, 2008, the issuer was placed in conservatorship by the Federal Housing Finance Agency (FHFA). As conservator, the FHFA has full powers to control the assets and operations of the firm. |
5 | Rate indicated is the effective yield at the time of purchase. |
6 | Zero coupon rate security. |
7 | Repurchase Agreements — See Note 6. |
8 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2017. |
LIBOR — London Interbank Offered Rate | |
USD — United States Dollar | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
78 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
INVERSE MID-CAP STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Equity Index Swap Agreements | $ | — | $ | — | $ | — | $ | 601 | $ | — | $ | 601 | ||||||||||||
Federal Agency Discount Notes | — | — | 19,992 | — | — | 19,992 | ||||||||||||||||||
Federal Agency Notes | — | — | 20,000 | — | — | 20,000 | ||||||||||||||||||
Mutual Funds | 82,304 | — | — | — | — | 82,304 | ||||||||||||||||||
Repurchase Agreements | — | — | 53,102 | — | — | 53,102 | ||||||||||||||||||
Total Assets | $ | 82,304 | $ | — | $ | 93,094 | $ | 601 | $ | — | $ | 175,999 |
* | Other financial instruments include swaps, which are reported as unrealized gain/loss at period end. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a portfolio company of a fund, or control of or by, or common control under GI, result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act.
The Fund may invest in the underlying series of the Guggenheim Strategy Funds Trust consisting of Guggenheim Strategy Fund I, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III (collectively, the “Cash Management Funds”), open-end management investment companies managed by GI. The Cash Management Funds, which launched on March 11, 2014, are offered as cash management options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Cash Management Funds pay no investment management fees. The Cash Management Funds’ annual report on Form N-CSR dated September 30, 2017, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180417000715/gug72218.htm.
Transactions during the year ended December 31, 2017, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value 12/31/16 | Additions | Reductions | Realized Gain | Change in Unrealized | Value 12/31/17 | Shares 12/31/17 | Investment Income | Capital Gain Distributions |
Mutual Funds | |||||||||
Guggenheim Strategy Fund I | $ 96,762 | $ 130,335 | $ (205,000) | $ 845 | $ (468) | $ 22,474 | 897 | $ 1,339 | $ 3 |
Guggenheim Strategy Fund II | 117,399 | 42,134 | (100,000) | 469 | (172) | 59,830 | 2,392 | 2,112 | 32 |
$ 214,161 | $ 172,469 | $ (305,000) | $ 1,314 | $ (640) | $ 82,304 | $ 3,451 | $ 35 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 79 |
INVERSE MID-CAP STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES | |
December 31, 2017 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $39,992) | $ | 39,992 | ||
Investments in affiliated issuers, at value (cost $81,708) | 82,304 | |||
Repurchase agreements, at value (cost $53,102) | 53,102 | |||
Unrealized appreciation on swap agreements | 601 | |||
Receivables: | ||||
Fund shares sold | 2,094 | |||
Dividends | 118 | |||
Variation margin | 56 | |||
Interest | 31 | |||
Total assets | 178,298 | |||
Liabilities: | ||||
Payable for: | ||||
Management fees | 162 | |||
Securities purchased | 122 | |||
Swap settlement | 42 | |||
Fund shares redeemed | 59 | |||
Transfer agent and administrative fees | 45 | |||
Investor service fees | 45 | |||
Portfolio accounting fees | 18 | |||
Miscellaneous | 304 | |||
Total liabilities | 797 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 177,501 | ||
Net assets consist of: | ||||
Paid in capital | $ | 1,831,959 | ||
Undistributed net investment income | — | |||
Accumulated net realized loss on investments | (1,655,655 | ) | ||
Net unrealized appreciation on investments | 1,197 | |||
Net assets | $ | 177,501 | ||
Capital shares outstanding | 2,602 | |||
Net asset value per share | $ | 68.22 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 3,451 | ||
Interest | 1,106 | |||
Total investment income | 4,557 | |||
Expenses: | ||||
Management fees | 2,669 | |||
Investor service fees | 741 | |||
Transfer agent and administrative fees | 741 | |||
Professional fees | 344 | |||
Portfolio accounting fees | 297 | |||
Custodian fees | 64 | |||
Trustees’ fees* | 56 | |||
Miscellaneous | 298 | |||
Total expenses | 5,210 | |||
Net investment loss | (653 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in affiliated issuers | 1,314 | |||
Swap agreements | (49,078 | ) | ||
Distributions received from affiliated investment company shares | 35 | |||
Net realized loss | (47,729 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in affiliated issuers | (640 | ) | ||
Swap agreements | (554 | ) | ||
Net change in unrealized appreciation (depreciation) | (1,194 | ) | ||
Net realized and unrealized loss | (48,923 | ) | ||
Net decrease in net assets resulting from operations | $ | (49,576 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
80 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE MID-CAP STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (653 | ) | $ | (5,585 | ) | ||
Net realized loss on investments | (47,729 | ) | (195,331 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | (1,194 | ) | (3,049 | ) | ||||
Net decrease in net assets resulting from operations | (49,576 | ) | (203,965 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 4,129,307 | 7,479,212 | ||||||
Cost of shares redeemed | (4,282,310 | ) | (7,505,865 | ) | ||||
Net decrease from capital share transactions | (153,003 | ) | (26,653 | ) | ||||
Net decrease in net assets | (202,579 | ) | (230,618 | ) | ||||
Net assets: | ||||||||
Beginning of year | 380,080 | 610,698 | ||||||
End of year | $ | 177,501 | $ | 380,080 | ||||
Undistributed net investment income at end of year | $ | — | $ | — | ||||
Capital share activity: | ||||||||
Shares sold | 55,807 | 79,141 | * | |||||
Shares redeemed | (58,021 | ) | (80,582 | )* | ||||
Net decrease in shares | (2,214 | ) | (1,441 | )* |
* | Capital share activity for the period presented through December 31, 2016, has been restated to reflect a 1:3 reverse share split effective December 1, 2016 — See Note 11. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 81 |
INVERSE MID-CAP STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016d | Year Ended December 31, 2015d | Year Ended December 31, 2014d,e | Year Ended December 31, 2013d,e | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 78.92 | $ | 97.61 | $ | 98.69 | $ | 111.65 | $ | 154.08 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.16 | ) | (.26 | ) | (1.38 | ) | (1.59 | ) | (2.07 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | (10.54 | ) | (18.43 | ) | .30 | (11.37 | ) | (40.36 | ) | |||||||||||
Total from investment operations | (10.70 | ) | (18.69 | ) | (1.08 | ) | (12.96 | ) | (42.43 | ) | ||||||||||
Net asset value, end of period | $ | 68.22 | $ | 78.92 | $ | 97.61 | $ | 98.69 | $ | 111.65 | ||||||||||
Total Returnb | (13.55 | %) | (19.13 | %) | (1.12 | %) | (11.56 | %) | (27.57 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 178 | $ | 380 | $ | 611 | $ | 850 | $ | 911 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.22 | %) | (0.82 | %) | (1.46 | %) | (1.51 | %) | (1.65 | %) | ||||||||||
Total expensesc | 1.76 | % | 1.71 | % | 1.66 | % | 1.72 | % | 1.68 | % | ||||||||||
Portfolio turnover rate | 111 | % | 565 | % | 220 | % | 323 | % | — |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Reverse Share Split — Per share amounts for periods presented through December 31, 2016, have been restated to reflect a 1:3 reverse share split effective December 1, 2016 — See Note 11. |
e | Reverse Share Split — Per share amounts for periods presented through December 31, 2014, have been restated to reflect a 1:3 reverse share split effective January 24, 2014. |
82 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
RUSSELL 2000® 2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is 200% of the performance of the Russell 2000® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2017, Russell 2000® 2x Strategy Fund maintained a daily correlation of over 99% to its benchmark of 200% of the daily price movement of the Russell 2000 Index. Russell 2000® 2x Strategy Fund returned 26.26%, while the Russell 2000 Index returned 14.65% over the same time period.
Among sectors, the biggest performance contributors to the underlying index during the period were Health Care and Information Technology. The only sector detracting from return was Energy; Telecommunications Services contributed least.
Nektar Therapeutics, Kite Pharma, Inc., and bluebird bio, Inc. were the largest contributors to performance of the underlying index for the year. U.S. Silica Holdings, Inc., Oasis Petroleum, Inc., and Cardtronics plc Class A were the leading detractors from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes.
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 6 of this report.
Performance displayed represents past performance, which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 83 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments or investments in Guggenheim Strategy Funds Trust mutual funds. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: October 27, 2006
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund I | 23.1% |
Guggenheim Strategy Fund II | 15.9% |
Nektar Therapeutics | 0.1% |
Bluebird Bio, Inc. | 0.1% |
GrubHub, Inc. | 0.1% |
Exact Sciences Corp. | 0.1% |
Sage Therapeutics, Inc. | 0.1% |
Curtiss-Wright Corp. | 0.1% |
Knight-Swift Transportation Holdings, Inc. | 0.1% |
Sterling Bancorp | 0.1% |
Top Ten Total | 39.8% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments.
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Russell 2000® 2x Strategy Fund | 26.26% | 24.22% | 7.69% |
Russell 2000 Index | 14.65% | 17.20% | 10.82% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell 2000 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
84 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
RUSSELL 2000® 2x STRATEGY FUND |
Shares | Value | |||||||
COMMON STOCKS† - 34.6% | ||||||||
Financial - 8.4% | ||||||||
Sterling Bancorp | 249 | $ | 6,125 | |||||
MGIC Investment Corp.* | 433 | 6,110 | ||||||
Primerica, Inc. | 53 | 5,382 | ||||||
Umpqua Holdings Corp. | 258 | 5,366 | ||||||
Wintrust Financial Corp. | 64 | 5,272 | ||||||
Radian Group, Inc. | 253 | 5,214 | ||||||
Texas Capital Bancshares, Inc.* | 58 | 5,156 | ||||||
Hancock Holding Co. | 99 | 4,900 | ||||||
CNO Financial Group, Inc. | 198 | 4,889 | ||||||
Gramercy Property Trust REIT | 177 | 4,719 | ||||||
Stifel Financial Corp. | 78 | 4,646 | ||||||
Healthcare Realty Trust, Inc. REIT | 144 | 4,625 | ||||||
IBERIABANK Corp. | 59 | 4,573 | ||||||
Cousins Properties, Inc. REIT | 487 | 4,505 | ||||||
Chemical Financial Corp. | 83 | 4,438 | ||||||
RLJ Lodging Trust REIT | 198 | 4,350 | ||||||
First Industrial Realty Trust, Inc. REIT | 138 | 4,343 | ||||||
Sunstone Hotel Investors, Inc. REIT | 261 | 4,314 | ||||||
Home BancShares, Inc. | 184 | 4,278 | ||||||
Investors Bancorp, Inc. | 303 | 4,206 | ||||||
MB Financial, Inc. | 94 | 4,185 | ||||||
Essent Group Ltd.* | 94 | 4,081 | ||||||
United Bankshares, Inc. | 117 | 4,066 | ||||||
Evercore, Inc. — Class A | 45 | 4,050 | ||||||
Selective Insurance Group, Inc. | 67 | 3,933 | ||||||
UMB Financial Corp. | 53 | 3,812 | ||||||
Cathay General Bancorp | 89 | 3,753 | ||||||
Physicians Realty Trust REIT | 208 | 3,742 | ||||||
LaSalle Hotel Properties REIT | 132 | 3,705 | ||||||
Ryman Hospitality Properties, Inc. REIT | 53 | 3,658 | ||||||
Columbia Banking System, Inc. | 84 | 3,649 | ||||||
First Citizens BancShares, Inc. — Class A | 9 | 3,627 | ||||||
Fulton Financial Corp. | 200 | 3,580 | ||||||
South State Corp. | 41 | 3,573 | ||||||
Glacier Bancorp, Inc. | 90 | 3,545 | ||||||
Washington Federal, Inc. | 103 | 3,528 | ||||||
Ellie Mae, Inc.* | 39 | 3,487 | ||||||
Sabra Health Care REIT, Inc. | 185 | 3,472 | ||||||
National Health Investors, Inc. REIT | 46 | 3,467 | ||||||
Valley National Bancorp | 302 | 3,388 | ||||||
EastGroup Properties, Inc. REIT1 | 38 | 3,358 | ||||||
GEO Group, Inc. REIT | 142 | 3,351 | ||||||
First Financial Bankshares, Inc.1 | 74 | 3,334 | ||||||
Kemper Corp. | 47 | 3,238 | ||||||
BancorpSouth Bank | 101 | 3,176 | ||||||
QTS Realty Trust, Inc. — Class A REIT | 57 | 3,087 | ||||||
American Equity Investment Life Holding Co. | 100 | 3,073 | ||||||
Community Bank System, Inc. | 57 | 3,064 | ||||||
Pebblebrook Hotel Trust REIT | 81 | 3,011 | ||||||
Education Realty Trust, Inc. REIT | 85 | 2,968 | ||||||
Urban Edge Properties REIT | 114 | 2,906 | ||||||
STAG Industrial, Inc. REIT | 106 | 2,897 | ||||||
PS Business Parks, Inc. REIT | 23 | 2,877 | ||||||
First Midwest Bancorp, Inc. | 119 | 2,857 | ||||||
WageWorks, Inc.* | 46 | 2,852 | ||||||
CVB Financial Corp. | 121 | 2,851 | ||||||
Enstar Group Ltd.* | 14 | 2,811 | ||||||
Washington Real Estate Investment Trust REIT | 90 | 2,801 | ||||||
RLI Corp. | 46 | 2,790 | ||||||
Hope Bancorp, Inc. | 152 | 2,774 | ||||||
Great Western Bancorp, Inc. | 69 | 2,746 | ||||||
Old National Bancorp | 157 | 2,740 | ||||||
Xenia Hotels & Resorts, Inc. REIT | 126 | 2,720 | ||||||
DiamondRock Hospitality Co. REIT | 234 | 2,642 | ||||||
Acadia Realty Trust REIT | 96 | 2,627 | ||||||
Retail Opportunity Investments Corp. REIT | 127 | 2,534 | ||||||
Trustmark Corp. | 79 | 2,517 | ||||||
International Bancshares Corp. | 63 | 2,501 | ||||||
Simmons First National Corp. — Class A | 43 | 2,455 | ||||||
Lexington Realty Trust REIT | 253 | 2,441 | ||||||
Kennedy-Wilson Holdings, Inc. | 139 | 2,412 | ||||||
LegacyTexas Financial Group, Inc. | 56 | 2,364 | ||||||
Rexford Industrial Realty, Inc. REIT | 81 | 2,362 | ||||||
Invesco Mortgage Capital, Inc. REIT | 132 | 2,354 | ||||||
Potlatch Corp. REIT | 47 | 2,345 | ||||||
United Community Banks, Inc. | 83 | 2,336 | ||||||
Bank of NT Butterfield & Son Ltd. | 63 | 2,286 | ||||||
Apollo Commercial Real Estate Finance, Inc. REIT | 123 | 2,269 | ||||||
Mack-Cali Realty Corp. REIT | 105 | 2,264 | ||||||
Blackhawk Network Holdings, Inc.* | 63 | 2,246 | ||||||
ServisFirst Bancshares, Inc. | 53 | 2,200 | ||||||
Hilltop Holdings, Inc. | 86 | 2,178 | ||||||
Independent Bank Corp. | 31 | 2,165 | ||||||
Banner Corp. | 39 | 2,150 | ||||||
Eagle Bancorp, Inc.* | 37 | 2,142 | ||||||
Waddell & Reed Financial, Inc. — Class A | 95 | 2,122 | ||||||
Horace Mann Educators Corp. | 48 | 2,117 | ||||||
Argo Group International Holdings Ltd. | 34 | 2,096 | ||||||
BofI Holding, Inc.*,1 | 70 | 2,093 | ||||||
Financial Engines, Inc. | 69 | 2,091 | ||||||
FCB Financial Holdings, Inc. — Class A* | 41 | 2,083 | ||||||
Ameris Bancorp | 43 | 2,073 | ||||||
Terreno Realty Corp. REIT | 59 | 2,069 | ||||||
Government Properties Income Trust REIT | 111 | 2,058 | ||||||
Artisan Partners Asset Management, Inc. — Class A | 52 | 2,054 | ||||||
Renasant Corp. | 50 | 2,045 | ||||||
HFF, Inc. — Class A | 42 | 2,043 | ||||||
TowneBank | 66 | 2,030 | ||||||
Capitol Federal Financial, Inc. | 150 | 2,011 | ||||||
WesBanco, Inc. | 49 | 1,992 | ||||||
First Merchants Corp. | 47 | 1,977 | ||||||
LTC Properties, Inc. REIT | 45 | 1,960 | ||||||
Provident Financial Services, Inc. | 72 | 1,942 | ||||||
Kite Realty Group Trust REIT | 97 | 1,901 | ||||||
First Financial Bancorp | 72 | 1,897 | ||||||
Chesapeake Lodging Trust REIT | 69 | 1,869 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 85 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 2x STRATEGY FUND |
Shares | Value | |||||||
Select Income REIT | 74 | $ | 1,860 | |||||
Northwest Bancshares, Inc. | 111 | 1,857 | ||||||
Four Corners Property Trust, Inc. REIT | 72 | 1,850 | ||||||
Summit Hotel Properties, Inc. REIT | 121 | 1,843 | ||||||
Pacific Premier Bancorp, Inc.* | 46 | 1,840 | ||||||
Genworth Financial, Inc. — Class A* | 586 | 1,822 | ||||||
Union Bankshares Corp. | 50 | 1,809 | ||||||
NBT Bancorp, Inc. | 49 | 1,803 | ||||||
American Assets Trust, Inc. REIT | 47 | 1,797 | ||||||
PRA Group, Inc.* | 54 | 1,793 | ||||||
Moelis & Co. — Class A | 36 | 1,746 | ||||||
Westamerica Bancorporation | 29 | 1,727 | ||||||
Berkshire Hills Bancorp, Inc. | 47 | 1,720 | ||||||
WisdomTree Investments, Inc. | 135 | 1,694 | ||||||
WSFS Financial Corp. | 35 | 1,675 | ||||||
Park National Corp. | 16 | 1,664 | ||||||
Agree Realty Corp. REIT | 32 | 1,646 | ||||||
Employers Holdings, Inc. | 37 | 1,643 | ||||||
First Commonwealth Financial Corp. | 114 | 1,632 | ||||||
CenterState Bank Corp. | 63 | 1,621 | ||||||
Global Net Lease, Inc. REIT | 78 | 1,605 | ||||||
S&T Bancorp, Inc. | 40 | 1,592 | ||||||
Heartland Financial USA, Inc. | 29 | 1,556 | ||||||
Third Point Reinsurance Ltd.* | 106 | 1,553 | ||||||
Washington Prime Group, Inc. REIT | 218 | 1,552 | ||||||
Quality Care Properties, Inc. REIT* | 111 | 1,533 | ||||||
LendingClub Corp.* | 371 | 1,532 | ||||||
Alexander & Baldwin, Inc. REIT | 55 | 1,526 | ||||||
Walker & Dunlop, Inc.* | 32 | 1,520 | ||||||
Boston Private Financial Holdings, Inc. | 98 | 1,514 | ||||||
OM Asset Management plc | 87 | 1,457 | ||||||
Monmouth Real Estate Investment Corp. REIT | 81 | 1,442 | ||||||
CareTrust REIT, Inc. REIT | 86 | 1,441 | ||||||
Kearny Financial Corp. | 99 | 1,431 | ||||||
Independent Bank Group, Inc. | 21 | 1,420 | ||||||
National Storage Affiliates Trust REIT | 52 | 1,418 | ||||||
AMERISAFE, Inc. | 23 | 1,417 | ||||||
CYS Investments, Inc. REIT | 176 | 1,413 | ||||||
Hannon Armstrong Sustainable Infrastructure Capital, Inc. REIT | 58 | 1,395 | ||||||
Tompkins Financial Corp. | 17 | 1,383 | ||||||
Brookline Bancorp, Inc. | 88 | 1,382 | ||||||
Piper Jaffray Cos. | 16 | 1,380 | ||||||
Safety Insurance Group, Inc. | 17 | 1,367 | ||||||
Lakeland Financial Corp. | 28 | 1,358 | ||||||
Ramco-Gershenson Properties Trust REIT | 92 | 1,355 | ||||||
First Busey Corp. | 45 | 1,347 | ||||||
Redwood Trust, Inc. REIT | 90 | 1,334 | ||||||
Beneficial Bancorp, Inc. | 81 | 1,332 | ||||||
Houlihan Lokey, Inc. | 29 | 1,317 | ||||||
Franklin Street Properties Corp. REIT | 122 | 1,310 | ||||||
Aircastle Ltd. | 55 | 1,286 | ||||||
State Bank Financial Corp. | 43 | 1,283 | ||||||
Infinity Property & Casualty Corp. | 12 | 1,272 | ||||||
Nelnet, Inc. — Class A | 23 | 1,260 | ||||||
PennyMac Mortgage Investment Trust REIT | 77 | 1,237 | ||||||
Seacoast Banking Corporation of Florida* | 49 | 1,235 | ||||||
Cannae Holdings, Inc.* | 72 | 1,226 | ||||||
Navigators Group, Inc. | 25 | 1,217 | ||||||
ARMOUR Residential, Inc. REIT | 47 | 1,209 | ||||||
First Interstate BancSystem, Inc. — Class A | 30 | 1,201 | ||||||
Ladder Capital Corp. — Class A REIT | 87 | 1,186 | ||||||
Encore Capital Group, Inc.* | 28 | 1,179 | ||||||
Meridian Bancorp, Inc. | 57 | 1,174 | ||||||
Enterprise Financial Services Corp. | 26 | 1,174 | ||||||
Seritage Growth Properties REIT | 29 | 1,173 | ||||||
City Holding Co. | 17 | 1,147 | ||||||
First BanCorp*,1 | 224 | 1,142 | ||||||
Tier REIT, Inc. | 56 | 1,142 | ||||||
United Fire Group, Inc. | 25 | 1,139 | ||||||
Cohen & Steers, Inc. | 24 | 1,135 | ||||||
Universal Health Realty Income Trust REIT | 15 | 1,127 | ||||||
Hanmi Financial Corp. | 37 | 1,123 | ||||||
NMI Holdings, Inc. — Class A* | 66 | 1,122 | ||||||
National General Holdings Corp. | 57 | 1,119 | ||||||
CBL & Associates Properties, Inc. REIT1 | 197 | 1,115 | ||||||
Southside Bancshares, Inc. | 33 | 1,111 | ||||||
First Bancorp | 31 | 1,095 | ||||||
Sandy Spring Bancorp, Inc. | 28 | 1,093 | ||||||
MBIA, Inc.*,1 | 147 | 1,076 | ||||||
Banc of California, Inc.1 | 52 | 1,074 | ||||||
Heritage Financial Corp. | 34 | 1,047 | ||||||
United Financial Bancorp, Inc. | 59 | 1,041 | ||||||
James River Group Holdings Ltd. | 26 | 1,040 | ||||||
Chatham Lodging Trust REIT | 45 | 1,024 | ||||||
RE/MAX Holdings, Inc. — Class A | 21 | 1,019 | ||||||
MainSource Financial Group, Inc. | 28 | 1,017 | ||||||
Stewart Information Services Corp. | 24 | 1,015 | ||||||
Central Pacific Financial Corp. | 34 | 1,014 | ||||||
Universal Insurance Holdings, Inc. | 37 | 1,012 | ||||||
St. Joe Co.* | 56 | 1,011 | ||||||
Lakeland Bancorp, Inc. | 52 | 1,001 | ||||||
AmTrust Financial Services, Inc.1 | 99 | 997 | ||||||
TrustCo Bank Corp. NY | 108 | 994 | ||||||
National Western Life Group, Inc. — Class A | 3 | 993 | ||||||
MTGE Investment Corp. REIT | 53 | 980 | ||||||
BancFirst Corp. | 19 | 972 | ||||||
OceanFirst Financial Corp. | 37 | 971 | ||||||
Capstead Mortgage Corp. REIT | 111 | 960 | ||||||
PJT Partners, Inc. — Class A | 21 | 958 | ||||||
Pennsylvania Real Estate Investment Trust REIT | 80 | 951 | ||||||
Getty Realty Corp. REIT | 35 | 951 | ||||||
Stock Yards Bancorp, Inc. | 25 | 943 | ||||||
Easterly Government Properties, Inc. REIT | 44 | 939 | ||||||
Flagstar Bancorp, Inc.* | 25 | 935 | ||||||
iStar, Inc. REIT* | 82 | 927 | ||||||
Meta Financial Group, Inc. | 10 | 926 | ||||||
Virtus Investment Partners, Inc. | 8 | 920 | ||||||
InfraREIT, Inc. | 49 | 910 |
86 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 2x STRATEGY FUND |
Shares | Value | |||||||
National Bank Holdings Corp. — Class A | 28 | $ | 908 | |||||
Washington Trust Bancorp, Inc. | 17 | 905 | ||||||
ConnectOne Bancorp, Inc. | 35 | 901 | ||||||
1st Source Corp. | 18 | 890 | ||||||
Granite Point Mortgage Trust, Inc. REIT | 50 | 887 | ||||||
Preferred Bank/Los Angeles CA | 15 | 882 | ||||||
Flushing Financial Corp. | 32 | 880 | ||||||
CoBiz Financial, Inc. | 44 | 880 | ||||||
TriCo Bancshares | 23 | 871 | ||||||
NorthStar Realty Europe Corp. REIT | 64 | 860 | ||||||
Northfield Bancorp, Inc. | 50 | 854 | ||||||
German American Bancorp, Inc. | 24 | 848 | ||||||
Community Trust Bancorp, Inc. | 18 | 848 | ||||||
Ambac Financial Group, Inc.* | 53 | 847 | ||||||
Univest Corporation of Pennsylvania | 30 | 842 | ||||||
Bryn Mawr Bank Corp. | 19 | 840 | ||||||
HomeStreet, Inc.* | 29 | 840 | ||||||
FBL Financial Group, Inc. — Class A | 12 | 836 | ||||||
Customers Bancorp, Inc.* | 32 | 832 | ||||||
Independence Realty Trust, Inc. REIT | 82 | 827 | ||||||
Diamond Hill Investment Group, Inc. | 4 | 827 | ||||||
Cass Information Systems, Inc. | 14 | 815 | ||||||
Armada Hoffler Properties, Inc. REIT | 52 | 808 | ||||||
Investors Real Estate Trust REIT | 142 | 807 | ||||||
Saul Centers, Inc. REIT | 13 | 803 | ||||||
New York Mortgage Trust, Inc. REIT | 130 | 802 | ||||||
Alexander’s, Inc. REIT | 2 | 792 | ||||||
Hersha Hospitality Trust REIT | 45 | 783 | ||||||
Federal Agricultural Mortgage Corp. — Class C | 10 | 782 | ||||||
Dime Community Bancshares, Inc. | 37 | 775 | ||||||
Guaranty Bancorp | 28 | 774 | ||||||
Bridge Bancorp, Inc. | 22 | 770 | ||||||
First of Long Island Corp. | 27 | 769 | ||||||
Kinsale Capital Group, Inc. | 17 | 765 | ||||||
Trupanion, Inc.* | 26 | 761 | ||||||
Urstadt Biddle Properties, Inc. — Class A REIT | 35 | 761 | ||||||
Camden National Corp. | 18 | 758 | ||||||
Oritani Financial Corp. | 46 | 754 | ||||||
Investment Technology Group, Inc. | 39 | 751 | ||||||
Preferred Apartment Communities, Inc. — Class A REIT | 37 | 749 | ||||||
New Senior Investment Group, Inc. REIT | 96 | 726 | ||||||
INTL FCStone, Inc.* | 17 | 723 | ||||||
Greenlight Capital Re Ltd. — Class A* | 35 | 704 | ||||||
Peapack Gladstone Financial Corp. | 20 | 700 | ||||||
Horizon Bancorp | 25 | 695 | ||||||
Altisource Residential Corp. REIT | 58 | 688 | ||||||
Opus Bank* | 24 | 655 | ||||||
Gladstone Commercial Corp. REIT | 31 | 653 | ||||||
Heritage Commerce Corp. | 42 | 643 | ||||||
Mercantile Bank Corp. | 18 | 637 | ||||||
Whitestone REIT — Class B | 44 | 634 | ||||||
Triumph Bancorp, Inc.* | 20 | 630 | ||||||
FB Financial Corp.* | 15 | 630 | ||||||
PHH Corp.* | 61 | 628 | ||||||
First Defiance Financial Corp. | 12 | 624 | ||||||
Live Oak Bancshares, Inc. | 26 | 620 | ||||||
Great Southern Bancorp, Inc. | 12 | 620 | ||||||
Peoples Bancorp, Inc. | 19 | 620 | ||||||
Forestar Group, Inc.* | 28 | 616 | ||||||
First Foundation, Inc.* | 33 | 612 | ||||||
Nationstar Mortgage Holdings, Inc.* | 33 | 611 | ||||||
AG Mortgage Investment Trust, Inc. REIT | 32 | 608 | ||||||
Ashford Hospitality Trust, Inc. REIT | 90 | 606 | ||||||
Greenhill & Company, Inc.1 | 31 | 605 | ||||||
CatchMark Timber Trust, Inc. — Class A REIT | 46 | 604 | ||||||
QCR Holdings, Inc. | 14 | 600 | ||||||
Anworth Mortgage Asset Corp. REIT | 110 | 598 | ||||||
TriState Capital Holdings, Inc.* | 26 | 598 | ||||||
Westwood Holdings Group, Inc. | 9 | 596 | ||||||
Cedar Realty Trust, Inc. REIT | 97 | 590 | ||||||
Marcus & Millichap, Inc.* | 18 | 587 | ||||||
Midland States Bancorp, Inc. | 18 | 585 | ||||||
Enova International, Inc.* | 38 | 578 | ||||||
Hamilton Lane, Inc. — Class A | 16 | 566 | ||||||
World Acceptance Corp.* | 7 | 565 | ||||||
Bancorp, Inc.* | 57 | 563 | ||||||
Blue Hills Bancorp, Inc. | 28 | 563 | ||||||
Community Healthcare Trust, Inc. REIT | 20 | 562 | ||||||
NexPoint Residential Trust, Inc. REIT | 20 | 559 | ||||||
Carolina Financial Corp. | 15 | 557 | ||||||
Maiden Holdings Ltd. | 83 | 548 | ||||||
Nicolet Bankshares, Inc.* | 10 | 547 | ||||||
First Community Bancshares, Inc. | 19 | 546 | ||||||
Fidelity Southern Corp. | 25 | 545 | ||||||
First Financial Corp. | 12 | 544 | ||||||
Bank of Marin Bancorp | 8 | 544 | ||||||
Heritage Insurance Holdings, Inc.1 | 30 | 541 | ||||||
CorEnergy Infrastructure Trust, Inc. REIT | 14 | 535 | ||||||
United Community Financial Corp. | 58 | 530 | ||||||
Financial Institutions, Inc. | 17 | 529 | ||||||
Waterstone Financial, Inc. | 31 | 529 | ||||||
Allegiance Bancshares, Inc.* | 14 | 527 | ||||||
Veritex Holdings, Inc.* | 19 | 524 | ||||||
State Auto Financial Corp. | 18 | 524 | ||||||
National Commerce Corp.* | 13 | 523 | ||||||
Bank Mutual Corp. | 49 | 522 | ||||||
UMH Properties, Inc. REIT | 35 | 521 | ||||||
R1 RCM, Inc.* | 117 | 516 | ||||||
Independent Bank Corp. | 23 | 514 | ||||||
Virtu Financial, Inc. — Class A1 | 28 | 512 | ||||||
Green Bancorp, Inc.* | 25 | 507 | ||||||
Access National Corp. | 18 | 501 | ||||||
HomeTrust Bancshares, Inc.* | 19 | 489 | ||||||
Bar Harbor Bankshares | 18 | 486 | ||||||
Republic First Bancorp, Inc.* | 57 | 482 | ||||||
OFG Bancorp | 51 | 479 | ||||||
Western Asset Mortgage Capital Corp. REIT | 48 | 478 | ||||||
Franklin Financial Network, Inc.* | 14 | 477 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 87 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 2x STRATEGY FUND |
Shares | Value | |||||||
Arrow Financial Corp. | 14 | $ | 475 | |||||
RMR Group, Inc. — Class A | 8 | 474 | ||||||
Orchid Island Capital, Inc. REIT | 50 | 464 | ||||||
First Mid-Illinois Bancshares, Inc. | 12 | 462 | ||||||
Equity Bancshares, Inc. — Class A* | 13 | 460 | ||||||
People’s Utah Bancorp | 15 | 455 | ||||||
West Bancorporation, Inc. | 18 | 453 | ||||||
Old Second Bancorp, Inc. | 33 | 450 | ||||||
CNB Financial Corp. | 17 | 446 | ||||||
City Office REIT, Inc. | 34 | 442 | ||||||
MidWestOne Financial Group, Inc. | 13 | 436 | ||||||
Farmers National Banc Corp. | 29 | 428 | ||||||
Cowen, Inc. — Class A* | 31 | 423 | ||||||
Atlantic Capital Bancshares, Inc.* | 24 | 422 | ||||||
First Connecticut Bancorp, Inc. | 16 | 418 | ||||||
Republic Bancorp, Inc. — Class A | 11 | 418 | ||||||
One Liberty Properties, Inc. REIT | 16 | 415 | ||||||
Hingham Institution for Savings | 2 | 414 | ||||||
United Insurance Holdings Corp. | 24 | 414 | ||||||
Clifton Bancorp, Inc. | 24 | 410 | ||||||
GAIN Capital Holdings, Inc. | 41 | 410 | ||||||
Farmers & Merchants Bancorp Incorporated/Archbold OH | 10 | 408 | ||||||
Citizens, Inc.*,1 | 55 | 404 | ||||||
PennyMac Financial Services, Inc. — Class A* | 18 | 402 | ||||||
Southern National Bancorp of Virginia, Inc. | 25 | 401 | ||||||
PCSB Financial Corp.* | 21 | 400 | ||||||
Ares Commercial Real Estate Corp. REIT | 31 | 400 | ||||||
Investors Title Co. | 2 | 397 | ||||||
Altisource Portfolio Solutions S.A.* | 14 | 392 | ||||||
Ocwen Financial Corp.* | 123 | 385 | ||||||
Dynex Capital, Inc. REIT | 54 | 379 | ||||||
Global Indemnity Ltd.* | 9 | 378 | ||||||
WashingtonFirst Bankshares, Inc. | 11 | 377 | ||||||
Redfin Corp.*,1 | 12 | 376 | ||||||
Enterprise Bancorp, Inc. | 11 | 375 | ||||||
Ladenburg Thalmann Financial Services, Inc. | 118 | 373 | ||||||
Peoples Financial Services Corp. | 8 | 373 | ||||||
Sierra Bancorp | 14 | 372 | ||||||
MedEquities Realty Trust, Inc. REIT | 33 | 370 | ||||||
National Bankshares, Inc. | 8 | 364 | ||||||
Health Insurance Innovations, Inc. — Class A* | 14 | 349 | ||||||
Western New England Bancorp, Inc. | 32 | 349 | ||||||
Farmers Capital Bank Corp. | 9 | 346 | ||||||
American National Bankshares, Inc. | 9 | 345 | ||||||
First Bancshares, Inc. | 10 | 342 | ||||||
Citizens & Northern Corp. | 14 | 336 | ||||||
On Deck Capital, Inc.* | 58 | 333 | ||||||
Southern First Bancshares, Inc.* | 8 | 330 | ||||||
Resource Capital Corp. REIT | 35 | 328 | ||||||
First Bancorp, Inc. | 12 | 327 | ||||||
Oppenheimer Holdings, Inc. — Class A | 12 | 322 | ||||||
Farmland Partners, Inc. REIT | 37 | 321 | ||||||
Arlington Asset Investment Corp. — Class A | 27 | 318 | ||||||
Consolidated-Tomoka Land Co. | 5 | 317 | ||||||
Summit Financial Group, Inc. | 12 | 316 | ||||||
Regional Management Corp.* | 12 | 316 | ||||||
eHealth, Inc.* | 18 | 313 | ||||||
FRP Holdings, Inc.* | 7 | 310 | ||||||
MutualFirst Financial, Inc. | 8 | 308 | ||||||
Sutherland Asset Management Corp. REIT | 20 | 303 | ||||||
Home Bancorp, Inc. | 7 | 303 | ||||||
Ashford Hospitality Prime, Inc. REIT | 31 | 302 | ||||||
Southern Missouri Bancorp, Inc. | 8 | 301 | ||||||
Macatawa Bank Corp. | 30 | 300 | ||||||
Capital City Bank Group, Inc. | 13 | 298 | ||||||
Old Line Bancshares, Inc. | 10 | 294 | ||||||
BSB Bancorp, Inc.* | 10 | 292 | ||||||
Sun Bancorp, Inc. | 12 | 292 | ||||||
HarborOne Bancorp, Inc.* | 15 | 287 | ||||||
EMC Insurance Group, Inc. | 10 | 287 | ||||||
Jernigan Capital, Inc. REIT1 | 15 | 285 | ||||||
Ames National Corp. | 10 | 278 | ||||||
Territorial Bancorp, Inc. | 9 | 278 | ||||||
Codorus Valley Bancorp, Inc. | 10 | 275 | ||||||
Cadence BanCorp* | 10 | 271 | ||||||
Northrim BanCorp, Inc. | 8 | 271 | ||||||
HCI Group, Inc. | 9 | 269 | ||||||
First Internet Bancorp | 7 | 267 | ||||||
Paragon Commercial Corp.* | 5 | 266 | ||||||
Civista Bancshares, Inc. | 12 | 264 | ||||||
Baldwin & Lyons, Inc. — Class B | 11 | 263 | ||||||
Bluerock Residential Growth REIT, Inc. | 26 | 263 | ||||||
BankFinancial Corp. | 17 | 261 | ||||||
KKR Real Estate Finance Trust, Inc. | 13 | 260 | ||||||
Safeguard Scientifics, Inc.* | 23 | 258 | ||||||
Great Ajax Corp. REIT | 18 | 249 | ||||||
TPG RE Finance Trust, Inc. REIT | 13 | 248 | ||||||
Atlas Financial Holdings, Inc.* | 12 | 247 | ||||||
Charter Financial Corp. | 14 | 246 | ||||||
Bear State Financial, Inc. | 24 | 245 | ||||||
Central Valley Community Bancorp | 12 | 242 | ||||||
Bankwell Financial Group, Inc. | 7 | 240 | ||||||
Century Bancorp, Inc. — Class A | 3 | 235 | ||||||
Cherry Hill Mortgage Investment Corp. REIT | 13 | 234 | ||||||
Shore Bancshares, Inc. | 14 | 234 | ||||||
Penns Woods Bancorp, Inc. | 5 | 233 | ||||||
C&F Financial Corp. | 4 | 232 | ||||||
Federated National Holding Co. | 14 | 232 | ||||||
Norwood Financial Corp. | 7 | 231 | ||||||
Orrstown Financial Services, Inc. | 9 | 227 | ||||||
MidSouth Bancorp, Inc. | 17 | 225 | ||||||
Marlin Business Services Corp. | 10 | 224 | ||||||
MBT Financial Corp. | 21 | 223 | ||||||
Premier Financial Bancorp, Inc. | 11 | 221 | ||||||
Howard Bancorp, Inc.* | 10 | 220 | ||||||
FNB Bancorp | 6 | 219 |
88 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 2x STRATEGY FUND |
Shares | Value | |||||||
Investar Holding Corp. | 9 | $ | 217 | |||||
Union Bankshares, Inc. | 4 | 212 | ||||||
Safety Income and Growth, Inc. REIT | 12 | 211 | ||||||
Evans Bancorp, Inc. | 5 | 209 | ||||||
Riverview Bancorp, Inc. | 24 | 208 | ||||||
Stratus Properties, Inc. | 7 | 208 | ||||||
Capstar Financial Holdings, Inc.* | 10 | 208 | ||||||
Bank of Commerce Holdings | 18 | 207 | ||||||
ACNB Corp. | 7 | 207 | ||||||
Sunshine Bancorp, Inc.* | 9 | 206 | ||||||
SI Financial Group, Inc. | 14 | 206 | ||||||
Reliant Bancorp, Inc. | 8 | 205 | ||||||
Entegra Financial Corp.* | 7 | 205 | ||||||
Associated Capital Group, Inc. — Class A | 6 | 205 | ||||||
LCNB Corp. | 10 | 205 | ||||||
NI Holdings, Inc.* | 12 | 204 | ||||||
Community Bankers Trust Corp.* | 25 | 204 | ||||||
Xenith Bankshares, Inc.* | 6 | 203 | ||||||
Pzena Investment Management, Inc. — Class A | 19 | 203 | ||||||
Ohio Valley Banc Corp. | 5 | 202 | ||||||
First Business Financial Services, Inc. | 9 | 199 | ||||||
First Northwest Bancorp* | 12 | 196 | ||||||
SmartFinancial, Inc.* | 9 | 195 | ||||||
Middlefield Banc Corp. | 4 | 193 | ||||||
Chemung Financial Corp. | 4 | 192 | ||||||
Independence Holding Co. | 7 | 192 | ||||||
Community Financial Corp. | 5 | 191 | ||||||
WMIH Corp.* | 225 | 191 | ||||||
Kingstone Companies, Inc. | 10 | 188 | ||||||
Timberland Bancorp, Inc. | 7 | 186 | ||||||
Northeast Bancorp | 8 | 185 | ||||||
Byline Bancorp, Inc.* | 8 | 184 | ||||||
Malvern Bancorp, Inc.* | 7 | 183 | ||||||
Unity Bancorp, Inc. | 9 | 178 | ||||||
Owens Realty Mortgage, Inc. REIT | 11 | 176 | ||||||
Prudential Bancorp, Inc. | 10 | 176 | ||||||
Donegal Group, Inc. — Class A | 10 | 173 | ||||||
Tiptree, Inc. — Class A | 29 | 173 | ||||||
Global Medical REIT, Inc. | 21 | 172 | ||||||
First Financial Northwest, Inc. | 11 | 171 | ||||||
Clipper Realty, Inc. REIT | 17 | 170 | ||||||
Hallmark Financial Services, Inc.* | 16 | 167 | ||||||
United Security Bancshares | 15 | 165 | ||||||
Two River Bancorp | 9 | 163 | ||||||
BCB Bancorp, Inc. | 11 | 159 | ||||||
Pacific Mercantile Bancorp* | 18 | 158 | ||||||
ESSA Bancorp, Inc. | 10 | 157 | ||||||
Peoples Bancorp of North Carolina, Inc. | 5 | 153 | ||||||
County Bancorp, Inc. | 5 | 149 | ||||||
GAMCO Investors, Inc. — Class A | 5 | 148 | ||||||
Trinity Place Holdings, Inc.* | 21 | 146 | ||||||
Parke Bancorp, Inc. | 7 | 144 | ||||||
Maui Land & Pineapple Company, Inc.* | 8 | 138 | ||||||
DNB Financial Corp. | 4 | 135 | ||||||
Crawford & Co. — Class B | 14 | 135 | ||||||
Provident Bancorp, Inc.* | 5 | 132 | ||||||
Provident Financial Holdings, Inc. | 7 | 129 | ||||||
Silvercrest Asset Management Group, Inc. — Class A | 8 | 128 | ||||||
Elevate Credit, Inc.* | 16 | 120 | ||||||
Ellington Residential Mortgage REIT | 10 | 120 | ||||||
Old Point Financial Corp. | 4 | 119 | ||||||
Impac Mortgage Holdings, Inc.* | 11 | 112 | ||||||
First Guaranty Bancshares, Inc. | 4 | 100 | ||||||
Greene County Bancorp, Inc. | 3 | 98 | ||||||
Guaranty Bancshares, Inc. | 3 | 92 | ||||||
Blue Capital Reinsurance Holdings Ltd. | 7 | 84 | ||||||
RBB Bancorp | 3 | 82 | ||||||
Transcontinental Realty Investors, Inc.* | 2 | 63 | ||||||
Oconee Federal Financial Corp. | 2 | 57 | ||||||
California First National Bancorp | 3 | 45 | ||||||
RAIT Financial Trust REIT | 107 | 40 | ||||||
Medley Management, Inc. — Class A | 6 | 39 | ||||||
Griffin Industrial Realty, Inc. | 1 | 37 | ||||||
Fifth Street Asset Management, Inc. | 8 | 10 | ||||||
Total Financial | 593,893 | |||||||
Consumer, Non-cyclical - 7.4% | ||||||||
Nektar Therapeutics* | 172 | 10,272 | ||||||
Bluebird Bio, Inc.* | 56 | 9,974 | ||||||
Exact Sciences Corp.* | 138 | 7,251 | ||||||
Sage Therapeutics, Inc.* | 44 | 7,247 | ||||||
Catalent, Inc.* | 147 | 6,039 | ||||||
HealthSouth Corp. | 115 | 5,682 | ||||||
PRA Health Sciences, Inc.* | 57 | 5,191 | ||||||
Snyder’s-Lance, Inc. | 100 | 5,008 | ||||||
Grand Canyon Education, Inc.* | 55 | 4,924 | ||||||
Insulet Corp.* | 68 | 4,692 | ||||||
LivaNova plc* | 57 | 4,555 | ||||||
Masimo Corp.* | 52 | 4,410 | ||||||
Healthcare Services Group, Inc. | 83 | 4,376 | ||||||
Chemed Corp. | 18 | 4,374 | ||||||
Cantel Medical Corp. | 42 | 4,321 | ||||||
Deluxe Corp. | 56 | 4,303 | ||||||
Brink’s Co. | 54 | 4,250 | ||||||
Molina Healthcare, Inc.* | 52 | 3,987 | ||||||
ICU Medical, Inc.* | 18 | 3,888 | ||||||
On Assignment, Inc.* | 60 | 3,856 | ||||||
Sarepta Therapeutics, Inc.* | 69 | 3,839 | ||||||
Avis Budget Group, Inc.* | 87 | 3,818 | ||||||
FibroGen, Inc.* | 77 | 3,650 | ||||||
Cimpress N.V.* | 30 | 3,596 | ||||||
Haemonetics Corp.* | 61 | 3,543 | ||||||
Integra LifeSciences Holdings Corp.* | 74 | 3,542 | ||||||
Neogen Corp.* | 43 | 3,535 | ||||||
NuVasive, Inc.* | 60 | 3,509 | ||||||
Darling Ingredients, Inc.* | 192 | 3,481 | ||||||
Clovis Oncology, Inc.* | 51 | 3,468 | ||||||
Blueprint Medicines Corp.* | 45 | 3,393 | ||||||
Globus Medical, Inc. — Class A* | 82 | 3,370 | ||||||
Ligand Pharmaceuticals, Inc. — Class B* | 24 | 3,286 | ||||||
Performance Food Group Co.* | 99 | 3,277 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 89 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 2x STRATEGY FUND |
Shares | Value | |||||||
Puma Biotechnology, Inc.* | 33 | $ | 3,262 | |||||
Avexis, Inc.* | 29 | 3,209 | ||||||
Penumbra, Inc.* | 34 | 3,199 | ||||||
Green Dot Corp. — Class A* | 53 | 3,194 | ||||||
Sanderson Farms, Inc. | 23 | 3,192 | ||||||
Portola Pharmaceuticals, Inc.* | 65 | 3,164 | ||||||
Helen of Troy Ltd.* | 32 | 3,083 | ||||||
Adtalem Global Education, Inc.* | 73 | 3,070 | ||||||
United Natural Foods, Inc.* | 60 | 2,956 | ||||||
Aaron’s, Inc. | 74 | 2,949 | ||||||
Lancaster Colony Corp. | 22 | 2,843 | ||||||
Halozyme Therapeutics, Inc.* | 138 | 2,796 | ||||||
Incorporated Research Holdings, Inc. — Class A* | 64 | 2,790 | ||||||
Horizon Pharma plc* | 191 | 2,789 | ||||||
Amicus Therapeutics, Inc.* | 193 | 2,777 | ||||||
Prestige Brands Holdings, Inc.* | 62 | 2,753 | ||||||
J&J Snack Foods Corp. | 18 | 2,733 | ||||||
Wright Medical Group N.V.* | 123 | 2,731 | ||||||
AMN Healthcare Services, Inc.* | 55 | 2,709 | ||||||
B&G Foods, Inc.1 | 77 | 2,707 | ||||||
HealthEquity, Inc.* | 58 | 2,706 | ||||||
Insmed, Inc.* | 86 | 2,682 | ||||||
Magellan Health, Inc.* | 27 | 2,607 | ||||||
Array BioPharma, Inc.* | 202 | 2,586 | ||||||
Vector Group Ltd. | 115 | 2,574 | ||||||
Myriad Genetics, Inc.* | 74 | 2,542 | ||||||
Halyard Health, Inc.* | 55 | 2,540 | ||||||
ABM Industries, Inc. | 66 | 2,490 | ||||||
Merit Medical Systems, Inc.* | 57 | 2,462 | ||||||
Korn/Ferry International | 59 | 2,441 | ||||||
Insperity, Inc. | 42 | 2,409 | ||||||
LendingTree, Inc.* | 7 | 2,383 | ||||||
Inogen, Inc.* | 20 | 2,382 | ||||||
Ironwood Pharmaceuticals, Inc. — Class A* | 157 | 2,353 | ||||||
Sotheby’s* | 45 | 2,322 | ||||||
Nevro Corp.* | 33 | 2,278 | ||||||
Aerie Pharmaceuticals, Inc.* | 38 | 2,271 | ||||||
Select Medical Holdings Corp.* | 125 | 2,206 | ||||||
Teladoc, Inc.*,1 | 63 | 2,196 | ||||||
Supernus Pharmaceuticals, Inc.* | 55 | 2,192 | ||||||
Loxo Oncology, Inc.* | 26 | 2,189 | ||||||
Medicines Co.* | 80 | 2,187 | ||||||
TriNet Group, Inc.* | 49 | 2,173 | ||||||
Ultragenyx Pharmaceutical, Inc.* | 46 | 2,133 | ||||||
AnaptysBio, Inc.* | 21 | 2,115 | ||||||
Monro, Inc. | 37 | 2,107 | ||||||
Pacira Pharmaceuticals, Inc.* | 46 | 2,100 | ||||||
FTI Consulting, Inc.* | 46 | 1,976 | ||||||
Matthews International Corp. — Class A | 37 | 1,954 | ||||||
Immunomedics, Inc.*,1 | 119 | 1,923 | ||||||
Corcept Therapeutics, Inc.* | 106 | 1,914 | ||||||
Boston Beer Company, Inc. — Class A* | 10 | 1,911 | ||||||
Travelport Worldwide Ltd. | 145 | 1,895 | ||||||
Bob Evans Farms, Inc. | 24 | 1,892 | ||||||
WD-40 Co. | 16 | 1,888 | ||||||
Cambrex Corp.* | 38 | 1,824 | ||||||
NxStage Medical, Inc.* | 75 | 1,817 | ||||||
Herc Holdings, Inc.* | 29 | 1,816 | ||||||
Emergent BioSolutions, Inc.* | 39 | 1,812 | ||||||
Fresh Del Monte Produce, Inc. | 38 | 1,812 | ||||||
NutriSystem, Inc. | 34 | 1,788 | ||||||
Amedisys, Inc.* | 33 | 1,739 | ||||||
Varex Imaging Corp.* | 43 | 1,727 | ||||||
Spectrum Pharmaceuticals, Inc.* | 91 | 1,724 | ||||||
HMS Holdings Corp.* | 98 | 1,661 | ||||||
Global Blood Therapeutics, Inc.* | 42 | 1,653 | ||||||
Prothena Corporation plc*,1 | 44 | 1,650 | ||||||
CONMED Corp. | 32 | 1,631 | ||||||
Integer Holdings Corp.* | 36 | 1,631 | ||||||
Acceleron Pharma, Inc.* | 38 | 1,613 | ||||||
Cal-Maine Foods, Inc.* | 36 | 1,600 | ||||||
Spark Therapeutics, Inc.*,1 | 31 | 1,594 | ||||||
Ignyta, Inc.* | 59 | 1,575 | ||||||
Sangamo Therapeutics, Inc.* | 96 | 1,574 | ||||||
Tivity Health, Inc.* | 43 | 1,572 | ||||||
Arena Pharmaceuticals, Inc.* | 46 | 1,563 | ||||||
Zogenix, Inc.* | 39 | 1,562 | ||||||
Repligen Corp.* | 43 | 1,560 | ||||||
MiMedx Group, Inc.*,1 | 123 | 1,551 | ||||||
Aimmune Therapeutics, Inc.* | 41 | 1,551 | ||||||
Central Garden & Pet Co. — Class A* | 41 | 1,546 | ||||||
ACCO Brands Corp.* | 126 | 1,537 | ||||||
Universal Corp. | 29 | 1,522 | ||||||
Calavo Growers, Inc. | 18 | 1,519 | ||||||
Natus Medical, Inc.* | 38 | 1,452 | ||||||
Tenet Healthcare Corp.* | 95 | 1,440 | ||||||
Weight Watchers International, Inc.* | 32 | 1,417 | ||||||
Impax Laboratories, Inc.* | 85 | 1,415 | ||||||
Paylocity Holding Corp.* | 30 | 1,415 | ||||||
Hertz Global Holdings, Inc.* | 64 | 1,414 | ||||||
Radius Health, Inc.* | 44 | 1,398 | ||||||
Quidel Corp.* | 32 | 1,387 | ||||||
Hostess Brands, Inc.* | 93 | 1,377 | ||||||
Theravance Biopharma, Inc.* | 49 | 1,367 | ||||||
Novocure Ltd.* | 67 | 1,353 | ||||||
TrueBlue, Inc.* | 49 | 1,348 | ||||||
Dynavax Technologies Corp.* | 72 | 1,346 | ||||||
Owens & Minor, Inc. | 70 | 1,322 | ||||||
McGrath RentCorp | 28 | 1,315 | ||||||
Coca-Cola Bottling Company Consolidated | 6 | 1,292 | ||||||
Abaxis, Inc. | 26 | 1,288 | ||||||
Viad Corp. | 23 | 1,274 | ||||||
National Beverage Corp. | 13 | 1,267 | ||||||
Innoviva, Inc.* | 89 | 1,263 | ||||||
Atrion Corp. | 2 | 1,261 | ||||||
Dermira, Inc.* | 45 | 1,251 | ||||||
Esperion Therapeutics, Inc.* | 19 | 1,251 | ||||||
OraSure Technologies, Inc.* | 66 | 1,245 | ||||||
Ensign Group, Inc. | 56 | 1,243 | ||||||
Dean Foods Co. | 106 | 1,225 |
90 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 2x STRATEGY FUND |
Shares | Value | |||||||
Editas Medicine, Inc.* | 39 | $ | 1,198 | |||||
Momenta Pharmaceuticals, Inc.* | 85 | 1,186 | ||||||
SpartanNash Co. | 44 | 1,174 | ||||||
Analogic Corp. | 14 | 1,172 | ||||||
Strayer Education, Inc. | 13 | 1,165 | ||||||
Foundation Medicine, Inc.* | 17 | 1,159 | ||||||
MGP Ingredients, Inc. | 15 | 1,153 | ||||||
Diplomat Pharmacy, Inc.* | 55 | 1,104 | ||||||
ICF International, Inc.* | 21 | 1,103 | ||||||
LHC Group, Inc.* | 18 | 1,103 | ||||||
TherapeuticsMD, Inc.*,1 | 182 | 1,099 | ||||||
Orthofix International N.V.* | 20 | 1,094 | ||||||
Acorda Therapeutics, Inc.* | 50 | 1,073 | ||||||
Navigant Consulting, Inc.* | 55 | 1,068 | ||||||
REGENXBIO, Inc.* | 32 | 1,064 | ||||||
Enanta Pharmaceuticals, Inc.* | 18 | 1,056 | ||||||
Huron Consulting Group, Inc.* | 26 | 1,052 | ||||||
USANA Health Sciences, Inc.* | 14 | 1,037 | ||||||
US Physical Therapy, Inc. | 14 | 1,011 | ||||||
Capella Education Co. | 13 | 1,006 | ||||||
Andersons, Inc. | 32 | 997 | ||||||
Omeros Corp.* | 51 | 991 | ||||||
Intersect ENT, Inc.* | 30 | 972 | ||||||
EVERTEC, Inc. | 71 | 969 | ||||||
Xencor, Inc.* | 44 | 965 | ||||||
Cardtronics plc — Class A* | 52 | 963 | ||||||
Heron Therapeutics, Inc.* | 53 | 959 | ||||||
BioTelemetry, Inc.* | 32 | 957 | ||||||
Kelly Services, Inc. — Class A | 35 | 954 | ||||||
Career Education Corp.* | 79 | 954 | ||||||
Kindred Healthcare, Inc. | 98 | 951 | ||||||
SUPERVALU, Inc.* | 44 | 950 | ||||||
Luminex Corp. | 48 | 946 | ||||||
Revance Therapeutics, Inc.* | 26 | 930 | ||||||
Retrophin, Inc.* | 44 | 927 | ||||||
CBIZ, Inc.* | 60 | 927 | ||||||
MyoKardia, Inc.* | 22 | 926 | ||||||
Anika Therapeutics, Inc.* | 17 | 917 | ||||||
Inter Parfums, Inc. | 21 | 913 | ||||||
AxoGen, Inc.* | 32 | 906 | ||||||
iRhythm Technologies, Inc.* | 16 | 897 | ||||||
Cardiovascular Systems, Inc.* | 37 | 877 | ||||||
Glaukos Corp.*,1 | 34 | 872 | ||||||
Alarm.com Holdings, Inc.* | 23 | 868 | ||||||
K2M Group Holdings, Inc.* | 48 | 864 | ||||||
National Healthcare Corp. | 14 | 853 | ||||||
Alder Biopharmaceuticals, Inc.* | 74 | 847 | ||||||
Medifast, Inc. | 12 | 838 | ||||||
Quad/Graphics, Inc. | 37 | 836 | ||||||
Almost Family, Inc.* | 15 | 830 | ||||||
Amphastar Pharmaceuticals, Inc.* | 43 | 827 | ||||||
Flexion Therapeutics, Inc.* | 33 | 826 | ||||||
Vanda Pharmaceuticals, Inc.* | 52 | 790 | ||||||
Genomic Health, Inc.* | 23 | 787 | ||||||
Accelerate Diagnostics, Inc.* | 30 | 786 | ||||||
Providence Service Corp.* | 13 | 771 | ||||||
RR Donnelley & Sons Co. | 82 | 763 | ||||||
Akebia Therapeutics, Inc.* | 51 | 758 | ||||||
STAAR Surgical Co.* | 48 | 744 | ||||||
Lannett Company, Inc.*,1 | 32 | 742 | ||||||
SP Plus Corp.* | 20 | 742 | ||||||
MacroGenics, Inc.* | 39 | 741 | ||||||
Phibro Animal Health Corp. — Class A | 22 | 737 | ||||||
Tootsie Roll Industries, Inc. | 20 | 728 | ||||||
CryoLife, Inc.* | 38 | 728 | ||||||
Assembly Biosciences, Inc.* | 16 | 724 | ||||||
Lantheus Holdings, Inc.* | 35 | 716 | ||||||
AngioDynamics, Inc.* | 43 | 715 | ||||||
RPX Corp. | 53 | 712 | ||||||
Kforce, Inc. | 28 | 707 | ||||||
Five Prime Therapeutics, Inc.* | 32 | 701 | ||||||
CytomX Therapeutics, Inc.* | 33 | 697 | ||||||
Textainer Group Holdings Ltd.* | 32 | 688 | ||||||
Meridian Bioscience, Inc. | 49 | 686 | ||||||
Cutera, Inc.* | 15 | 680 | ||||||
La Jolla Pharmaceutical Co.* | 21 | 676 | ||||||
AtriCure, Inc.* | 37 | 675 | ||||||
Triple-S Management Corp. — Class B* | 27 | 671 | ||||||
PTC Therapeutics, Inc.* | 39 | 651 | ||||||
Aclaris Therapeutics, Inc.* | 26 | 641 | ||||||
ZIOPHARM Oncology, Inc.* | 154 | 638 | ||||||
John B Sanfilippo & Son, Inc. | 10 | 633 | ||||||
ImmunoGen, Inc.* | 98 | 628 | ||||||
K12, Inc.* | 39 | 620 | ||||||
Invacare Corp. | 36 | 607 | ||||||
Epizyme, Inc.* | 48 | 602 | ||||||
Ennis, Inc. | 29 | 602 | ||||||
Exactech, Inc.* | 12 | 593 | ||||||
Synergy Pharmaceuticals, Inc.*,1 | 265 | 591 | ||||||
LSC Communications, Inc. | 39 | 591 | ||||||
CorVel Corp.* | 11 | 582 | ||||||
ANI Pharmaceuticals, Inc.* | 9 | 580 | ||||||
Intra-Cellular Therapies, Inc.* | 40 | 579 | ||||||
Adamas Pharmaceuticals, Inc.*,1 | 17 | 576 | ||||||
NeoGenomics, Inc.* | 65 | 576 | ||||||
Laureate Education, Inc. — Class A* | 42 | 570 | ||||||
Rigel Pharmaceuticals, Inc.* | 146 | 566 | ||||||
Heska Corp.* | 7 | 562 | ||||||
Everi Holdings, Inc.* | 74 | 558 | ||||||
AMAG Pharmaceuticals, Inc.* | 42 | 557 | ||||||
Rent-A-Center, Inc.1 | 50 | 555 | ||||||
Ingles Markets, Inc. — Class A | 16 | 554 | ||||||
Concert Pharmaceuticals, Inc.* | 21 | 543 | ||||||
LeMaitre Vascular, Inc. | 17 | 541 | ||||||
Heidrick & Struggles International, Inc. | 22 | 540 | ||||||
CAI International, Inc.* | 19 | 538 | ||||||
e.l.f. Beauty, Inc.*,1 | 24 | 535 | ||||||
Depomed, Inc.* | 66 | 531 | ||||||
Audentes Therapeutics, Inc.* | 17 | 531 | ||||||
Forrester Research, Inc. | 12 | 530 | ||||||
Atara Biotherapeutics, Inc.* | 29 | 525 | ||||||
Cross Country Healthcare, Inc.* | 41 | 523 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 91 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 2x STRATEGY FUND |
Shares | Value | |||||||
Barrett Business Services, Inc. | 8 | 516 | ||||||
Endologix, Inc.* | 96 | 514 | ||||||
Resources Connection, Inc. | 33 | 510 | ||||||
PDL BioPharma, Inc.* | 186 | 510 | ||||||
Sucampo Pharmaceuticals, Inc. — Class A* | 28 | 503 | ||||||
Paratek Pharmaceuticals, Inc.* | 28 | 501 | ||||||
Iovance Biotherapeutics, Inc.* | 62 | 496 | ||||||
Lexicon Pharmaceuticals, Inc.* | 50 | 494 | ||||||
Team, Inc.* | 33 | 492 | ||||||
WaVe Life Sciences Ltd.* | 14 | 491 | ||||||
Progenics Pharmaceuticals, Inc.* | 82 | 488 | ||||||
Eagle Pharmaceuticals, Inc.* | 9 | 481 | ||||||
Collegium Pharmaceutical, Inc.* | 26 | 480 | ||||||
American Public Education, Inc.*,1 | 19 | 476 | ||||||
Keryx Biopharmaceuticals, Inc.*,1 | 102 | 474 | ||||||
Chefs’ Warehouse, Inc.* | 23 | 472 | ||||||
Community Health Systems, Inc.* | 110 | 469 | ||||||
TG Therapeutics, Inc.* | 57 | 467 | ||||||
Central Garden & Pet Co.* | 12 | 467 | ||||||
Carriage Services, Inc. — Class A | 18 | 463 | ||||||
Madrigal Pharmaceuticals, Inc.* | 5 | 459 | ||||||
BioCryst Pharmaceuticals, Inc.* | 93 | 457 | ||||||
Amplify Snack Brands, Inc.* | 38 | 456 | ||||||
Weis Markets, Inc. | 11 | 455 | ||||||
CRA International, Inc. | 10 | 449 | ||||||
MoneyGram International, Inc.* | 34 | 448 | ||||||
Abeona Therapeutics, Inc.* | 28 | 444 | ||||||
B. Riley Financial, Inc. | 24 | 434 | ||||||
RadNet, Inc.* | 43 | 434 | ||||||
Hackett Group, Inc. | 27 | 424 | ||||||
Surmodics, Inc.* | 15 | 420 | ||||||
Achaogen, Inc.* | 39 | 419 | ||||||
National Research Corp. — Class A | 11 | 410 | ||||||
Cerus Corp.* | 121 | 409 | ||||||
Invitae Corp.* | 45 | 409 | ||||||
Novavax, Inc.* | 329 | 408 | ||||||
Stemline Therapeutics, Inc.* | 26 | 406 | ||||||
Accuray, Inc.*,1 | 94 | 404 | ||||||
Vectrus, Inc.* | 13 | 401 | ||||||
Celldex Therapeutics, Inc.* | 141 | 400 | ||||||
Cytokinetics, Inc.* | 49 | 399 | ||||||
BioScrip, Inc.*,1 | 136 | 396 | ||||||
Achillion Pharmaceuticals, Inc.* | 137 | 395 | ||||||
Capital Senior Living Corp.* | 29 | 391 | ||||||
Coherus Biosciences, Inc.* | 44 | 387 | ||||||
Inovio Pharmaceuticals, Inc.* | 93 | 384 | ||||||
Enzo Biochem, Inc.* | 47 | 383 | ||||||
Cara Therapeutics, Inc.*,1 | 31 | 380 | ||||||
Primo Water Corp.* | 30 | 377 | ||||||
Aduro Biotech, Inc.* | 50 | 375 | ||||||
Karyopharm Therapeutics, Inc.* | 39 | 374 | ||||||
Tejon Ranch Co.* | 18 | 374 | ||||||
Reata Pharmaceuticals, Inc. — Class A* | 13 | 368 | ||||||
Emerald Expositions Events, Inc. | 18 | 366 | ||||||
Tetraphase Pharmaceuticals, Inc.* | 58 | 365 | ||||||
Oxford Immunotec Global plc* | 26 | 363 | ||||||
Corbus Pharmaceuticals Holdings, Inc.*,1 | 51 | 362 | ||||||
Great Lakes Dredge & Dock Corp.* | 66 | 356 | ||||||
Cadiz, Inc.* | 24 | 342 | ||||||
Entellus Medical, Inc.*,1 | 14 | 341 | ||||||
Kura Oncology, Inc.* | 22 | 337 | ||||||
Antares Pharma, Inc.* | 168 | 334 | ||||||
Natera, Inc.* | 37 | 333 | ||||||
Catalyst Pharmaceuticals, Inc.* | 84 | 328 | ||||||
Intellia Therapeutics, Inc.* | 17 | 327 | ||||||
Rockwell Medical, Inc.* | 56 | 326 | ||||||
Utah Medical Products, Inc. | 4 | 326 | ||||||
ViewRay, Inc.* | 35 | 324 | ||||||
Biohaven Pharmaceutical Holding Company Ltd.* | 12 | 324 | ||||||
Farmer Brothers Co.* | 10 | 321 | ||||||
Pacific Biosciences of California, Inc.* | 119 | 314 | ||||||
Limoneira Co. | 14 | 313 | ||||||
Addus HomeCare Corp.* | 9 | 313 | ||||||
Geron Corp.* | 173 | 311 | ||||||
Civitas Solutions, Inc.* | 18 | 308 | ||||||
Revlon, Inc. — Class A* | 14 | 305 | ||||||
BioSpecifics Technologies Corp.* | 7 | 303 | ||||||
Pieris Pharmaceuticals, Inc.* | 40 | 302 | ||||||
Akcea Therapeutics, Inc.* | 17 | 295 | ||||||
Calithera Biosciences, Inc.* | 35 | 292 | ||||||
Medpace Holdings, Inc.* | 8 | 290 | ||||||
Tactile Systems Technology, Inc.* | 10 | 290 | ||||||
Care.com, Inc.* | 16 | 289 | ||||||
Craft Brew Alliance, Inc.* | 15 | 288 | ||||||
Voyager Therapeutics, Inc.* | 17 | 282 | ||||||
Agenus, Inc.* | 86 | 280 | ||||||
CSS Industries, Inc. | 10 | 279 | ||||||
Neos Therapeutics, Inc.* | 27 | 275 | ||||||
Fate Therapeutics, Inc.* | 45 | 275 | ||||||
Kindred Biosciences, Inc.* | 29 | 274 | ||||||
ServiceSource International, Inc.* | 88 | 272 | ||||||
Bellicum Pharmaceuticals, Inc.* | 32 | 269 | ||||||
Corium International, Inc.* | 28 | 269 | ||||||
Surgery Partners, Inc.* | 22 | 266 | ||||||
Idera Pharmaceuticals, Inc.* | 126 | 266 | ||||||
RTI Surgical, Inc.* | 64 | 262 | ||||||
Pulse Biosciences, Inc.* | 11 | 260 | ||||||
Collectors Universe, Inc. | 9 | 258 | ||||||
Ardelyx, Inc.* | 39 | 257 | ||||||
Chimerix, Inc.* | 55 | 255 | ||||||
MediciNova, Inc.* | 39 | 252 | ||||||
Aratana Therapeutics, Inc.* | 47 | 247 | ||||||
Seneca Foods Corp. — Class A* | 8 | 246 | ||||||
GenMark Diagnostics, Inc.* | 58 | 242 | ||||||
Sientra, Inc.* | 17 | 239 | ||||||
Acacia Research Corp.* | 58 | 235 | ||||||
Seres Therapeutics, Inc.* | 23 | 233 | ||||||
Protagonist Therapeutics, Inc.* | 11 | 229 | ||||||
Franklin Covey Co.* | 11 | 228 | ||||||
Edge Therapeutics, Inc.* | 24 | 225 |
92 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 2x STRATEGY FUND |
Shares | Value | |||||||
SEACOR Marine Holdings, Inc.* | 19 | $ | 222 | |||||
Smart & Final Stores, Inc.* | 26 | 222 | ||||||
Insys Therapeutics, Inc.*,1 | 23 | 221 | ||||||
Calyxt, Inc.* | 10 | 220 | ||||||
Athersys, Inc.* | 120 | 217 | ||||||
Jounce Therapeutics, Inc.*,1 | 17 | 217 | ||||||
Willdan Group, Inc.* | 9 | 215 | ||||||
NewLink Genetics Corp.* | 26 | 211 | ||||||
Village Super Market, Inc. — Class A | 9 | 206 | ||||||
Minerva Neurosciences, Inc.* | 33 | 200 | ||||||
Axovant Sciences Ltd.* | 37 | 195 | ||||||
American Renal Associates Holdings, Inc.* | 11 | 191 | ||||||
BioTime, Inc.* | 88 | 189 | ||||||
Strongbridge Biopharma plc* | 26 | 189 | ||||||
NanoString Technologies, Inc.* | 24 | 179 | ||||||
G1 Therapeutics, Inc.* | 9 | 179 | ||||||
Otonomy, Inc.* | 32 | 178 | ||||||
Veracyte, Inc.* | 27 | 176 | ||||||
Zynerba Pharmaceuticals, Inc.* | 14 | 175 | ||||||
Bridgepoint Education, Inc.*,1 | 21 | 174 | ||||||
Teligent, Inc.* | 48 | 174 | ||||||
Melinta Therapeutics, Inc.* | 11 | 174 | ||||||
Dova Pharmaceuticals, Inc.*,1 | 6 | 173 | ||||||
ChemoCentryx, Inc.* | 29 | 173 | ||||||
FONAR Corp.* | 7 | 170 | ||||||
Clearside Biomedical, Inc.* | 24 | 168 | ||||||
Kala Pharmaceuticals, Inc.* | 9 | 166 | ||||||
Information Services Group, Inc.* | 38 | 158 | ||||||
NantKwest, Inc.* | 35 | 157 | ||||||
Selecta Biosciences, Inc.* | 16 | 157 | ||||||
Fortress Biotech, Inc.* | 39 | 156 | ||||||
Organovo Holdings, Inc.* | 116 | 155 | ||||||
Merrimack Pharmaceuticals, Inc. | 15 | 154 | ||||||
Quotient Ltd.* | 31 | 153 | ||||||
Ascent Capital Group, Inc. — Class A* | 13 | 149 | ||||||
Cascadian Therapeutics, Inc.* | 40 | 148 | ||||||
Recro Pharma, Inc.* | 16 | 148 | ||||||
Durect Corp.* | 160 | 148 | ||||||
Miragen Therapeutics, Inc.* | 14 | 146 | ||||||
Nature’s Sunshine Products, Inc. | 12 | 139 | ||||||
Conatus Pharmaceuticals, Inc.* | 30 | 139 | ||||||
Syros Pharmaceuticals, Inc.* | 14 | 136 | ||||||
Anavex Life Sciences Corp.* | 42 | 135 | ||||||
BG Staffing, Inc. | 8 | 128 | ||||||
Athenex, Inc.* | 8 | 127 | ||||||
Turning Point Brands, Inc. | 6 | 127 | ||||||
Advaxis, Inc.* | 43 | 122 | ||||||
Natural Health Trends Corp.1 | 8 | 122 | ||||||
ARC Document Solutions, Inc.* | 47 | 120 | ||||||
Ra Pharmaceuticals, Inc.* | 14 | 119 | ||||||
Alico, Inc. | 4 | 118 | ||||||
AAC Holdings, Inc.* | 13 | 117 | ||||||
Ocular Therapeutix, Inc.* | 26 | 116 | ||||||
Nymox Pharmaceutical Corp.* | 35 | 116 | ||||||
ConforMIS, Inc.* | 47 | 112 | ||||||
VBI Vaccines, Inc.* | 26 | 111 | ||||||
Sienna Biopharmaceuticals, Inc.* | 6 | 109 | ||||||
Syndax Pharmaceuticals, Inc.* | 12 | 105 | ||||||
Trevena, Inc.* | 65 | 104 | ||||||
Corvus Pharmaceuticals, Inc.* | 10 | 104 | ||||||
Tocagen, Inc.* | 10 | 103 | ||||||
Liberty Tax, Inc. | 9 | 99 | ||||||
Curis, Inc.* | 135 | 95 | ||||||
Cambium Learning Group, Inc.* | 16 | 91 | ||||||
XBiotech, Inc.* | 23 | 91 | ||||||
Natural Grocers by Vitamin Cottage, Inc.* | 10 | 89 | ||||||
Viveve Medical, Inc.* | 17 | 84 | ||||||
Pendrell Corp. | 1 | 83 | ||||||
Versartis, Inc.* | 37 | 81 | ||||||
Immune Design Corp.* | 20 | 78 | ||||||
Asterias Biotherapeutics, Inc.* | 32 | 72 | ||||||
Matinas BioPharma Holdings, Inc.* | 61 | 71 | ||||||
Obalon Therapeutics, Inc.* | 10 | 66 | ||||||
Mersana Therapeutics, Inc.* | 4 | 66 | ||||||
Ovid therapeutics, Inc.* | 6 | 59 | ||||||
Novelion Therapeutics, Inc.* | 17 | 53 | ||||||
vTv Therapeutics, Inc. — Class A* | 8 | 48 | ||||||
Lifeway Foods, Inc.* | 6 | 48 | ||||||
Aileron Therapeutics, Inc.* | 4 | 42 | ||||||
Genocea Biosciences, Inc.* | 33 | 38 | ||||||
Genesis Healthcare, Inc.* | 44 | 34 | ||||||
Oncocyte Corp.* | 4 | 19 | ||||||
CPI Card Group, Inc. | 5 | 17 | ||||||
Total Consumer, Non-cyclical | 518,854 | |||||||
Industrial - 5.2% | ||||||||
Curtiss-Wright Corp. | 53 | 6,458 | ||||||
Knight-Swift Transportation Holdings, Inc. | 147 | 6,427 | ||||||
EMCOR Group, Inc. | 69 | 5,641 | ||||||
Littelfuse, Inc. | 26 | 5,143 | ||||||
Woodward, Inc. | 62 | 4,746 | ||||||
SYNNEX Corp. | 34 | 4,622 | ||||||
Kennametal, Inc. | 94 | 4,550 | ||||||
Louisiana-Pacific Corp.* | 171 | 4,491 | ||||||
Cree, Inc.* | 115 | 4,271 | ||||||
KLX, Inc.* | 60 | 4,095 | ||||||
Tech Data Corp.* | 41 | 4,017 | ||||||
John Bean Technologies Corp. | 36 | 3,989 | ||||||
Summit Materials, Inc. — Class A* | 126 | 3,962 | ||||||
Dycom Industries, Inc.* | 35 | 3,900 | ||||||
Trinseo S.A. | 53 | 3,848 | ||||||
MasTec, Inc.* | 78 | 3,818 | ||||||
Belden, Inc. | 49 | 3,781 | ||||||
Barnes Group, Inc. | 59 | 3,733 | ||||||
Trex Company, Inc.* | 34 | 3,685 | ||||||
EnerSys | 52 | 3,621 | ||||||
Generac Holdings, Inc.* | 72 | 3,565 | ||||||
RBC Bearings, Inc.* | 27 | 3,413 | ||||||
Rogers Corp.* | 21 | 3,400 | ||||||
Golar LNG Ltd. | 112 | 3,339 | ||||||
II-VI, Inc.* | 71 | 3,334 | ||||||
Hillenbrand, Inc. | 74 | 3,308 | ||||||
KBR, Inc. | 165 | 3,272 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 93 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 2x STRATEGY FUND |
Shares | Value | |||||||
Vishay Intertechnology, Inc. | 157 | $ | 3,258 | |||||
Tetra Tech, Inc. | 67 | 3,226 | ||||||
Moog, Inc. — Class A* | 37 | 3,213 | ||||||
TopBuild Corp.* | 42 | 3,181 | ||||||
Rexnord Corp.* | 121 | 3,148 | ||||||
Advanced Energy Industries, Inc.* | 46 | 3,104 | ||||||
JELD-WEN Holding, Inc.* | 78 | 3,071 | ||||||
Applied Industrial Technologies, Inc. | 45 | 3,064 | ||||||
MSA Safety, Inc. | 39 | 3,023 | ||||||
Proto Labs, Inc.* | 29 | 2,987 | ||||||
Granite Construction, Inc. | 46 | 2,918 | ||||||
Sanmina Corp.* | 86 | 2,838 | ||||||
GATX Corp. | 45 | 2,797 | ||||||
Simpson Manufacturing Company, Inc. | 48 | 2,756 | ||||||
Itron, Inc.* | 40 | 2,728 | ||||||
Universal Forest Products, Inc. | 70 | 2,633 | ||||||
Masonite International Corp.* | 34 | 2,521 | ||||||
Watts Water Technologies, Inc. — Class A | 33 | 2,506 | ||||||
Aerojet Rocketdyne Holdings, Inc.* | 80 | 2,496 | ||||||
Franklin Electric Company, Inc. | 54 | 2,479 | ||||||
Builders FirstSource, Inc.* | 113 | 2,462 | ||||||
Plexus Corp.* | 40 | 2,429 | ||||||
Mueller Industries, Inc. | 66 | 2,338 | ||||||
Worthington Industries, Inc. | 53 | 2,335 | ||||||
SPX FLOW, Inc.* | 49 | 2,330 | ||||||
Covanta Holding Corp. | 137 | 2,315 | ||||||
KapStone Paper and Packaging Corp. | 101 | 2,292 | ||||||
Mueller Water Products, Inc. — Class A | 180 | 2,255 | ||||||
EnPro Industries, Inc. | 24 | 2,244 | ||||||
Esterline Technologies Corp.* | 30 | 2,241 | ||||||
Werner Enterprises, Inc. | 56 | 2,164 | ||||||
Exponent, Inc. | 30 | 2,133 | ||||||
American Woodmark Corp.* | 16 | 2,084 | ||||||
Saia, Inc.* | 29 | 2,052 | ||||||
Brady Corp. — Class A | 54 | 2,047 | ||||||
Albany International Corp. — Class A | 33 | 2,028 | ||||||
Forward Air Corp. | 35 | 2,010 | ||||||
Patrick Industries, Inc.* | 29 | 1,979 | ||||||
Chicago Bridge & Iron Company N.V. | 118 | 1,905 | ||||||
Novanta, Inc.* | 38 | 1,900 | ||||||
Kaman Corp. | 32 | 1,883 | ||||||
Greif, Inc. — Class A | 31 | 1,878 | ||||||
Comfort Systems USA, Inc. | 43 | 1,877 | ||||||
Boise Cascade Co. | 46 | 1,835 | ||||||
Hub Group, Inc. — Class A* | 38 | 1,820 | ||||||
Sun Hydraulics Corp. | 28 | 1,811 | ||||||
AAON, Inc. | 49 | 1,798 | ||||||
Actuant Corp. — Class A | 70 | 1,771 | ||||||
Harsco Corp.* | 94 | 1,753 | ||||||
ESCO Technologies, Inc. | 29 | 1,747 | ||||||
Benchmark Electronics, Inc.* | 59 | 1,717 | ||||||
General Cable Corp. | 58 | 1,717 | ||||||
Cubic Corp. | 29 | 1,709 | ||||||
TTM Technologies, Inc.* | 108 | 1,692 | ||||||
Chart Industries, Inc.* | 36 | 1,687 | ||||||
Methode Electronics, Inc. | 42 | 1,684 | ||||||
Altra Industrial Motion Corp. | 33 | 1,663 | ||||||
Greenbrier Companies, Inc.1 | 31 | 1,652 | ||||||
Axon Enterprise, Inc.* | 61 | 1,616 | ||||||
Atlas Air Worldwide Holdings, Inc.* | 27 | 1,584 | ||||||
Badger Meter, Inc. | 33 | 1,577 | ||||||
Air Transport Services Group, Inc.* | 67 | 1,550 | ||||||
SPX Corp.* | 49 | 1,538 | ||||||
AZZ, Inc. | 30 | 1,533 | ||||||
Standex International Corp. | 15 | 1,528 | ||||||
Tennant Co. | 21 | 1,526 | ||||||
Triumph Group, Inc. | 56 | 1,523 | ||||||
Knowles Corp.* | 103 | 1,510 | ||||||
US Concrete, Inc.* | 18 | 1,506 | ||||||
Matson, Inc. | 50 | 1,492 | ||||||
Apogee Enterprises, Inc. | 32 | 1,463 | ||||||
Astec Industries, Inc. | 25 | 1,462 | ||||||
Manitowoc Company, Inc.* | 37 | 1,456 | ||||||
AAR Corp. | 37 | 1,454 | ||||||
Raven Industries, Inc. | 42 | 1,443 | ||||||
TriMas Corp.* | 52 | 1,391 | ||||||
Federal Signal Corp. | 69 | 1,386 | ||||||
Aerovironment, Inc.* | 24 | 1,348 | ||||||
Heartland Express, Inc. | 56 | 1,307 | ||||||
Continental Building Products, Inc.* | 46 | 1,295 | ||||||
OSI Systems, Inc.* | 20 | 1,288 | ||||||
Primoris Services Corp. | 47 | 1,278 | ||||||
US Ecology, Inc. | 25 | 1,275 | ||||||
Alamo Group, Inc. | 11 | 1,242 | ||||||
Fabrinet* | 43 | 1,234 | ||||||
Gibraltar Industries, Inc.* | 37 | 1,221 | ||||||
Advanced Disposal Services, Inc.* | 51 | 1,221 | ||||||
Briggs & Stratton Corp. | 48 | 1,218 | ||||||
Milacron Holdings Corp.* | 63 | 1,206 | ||||||
Kadant, Inc. | 12 | 1,205 | ||||||
Multi-Color Corp. | 16 | 1,197 | ||||||
Fitbit, Inc. — Class A* | 204 | 1,165 | ||||||
Encore Wire Corp. | 23 | 1,119 | ||||||
Sturm Ruger & Company, Inc. | 20 | 1,117 | ||||||
Tutor Perini Corp.* | 44 | 1,115 | ||||||
ArcBest Corp. | 31 | 1,108 | ||||||
Schneider National, Inc. — Class B | 38 | 1,085 | ||||||
Ship Finance International Ltd. | 69 | 1,070 | ||||||
GasLog Ltd. | 48 | 1,068 | ||||||
Lindsay Corp. | 12 | 1,058 | ||||||
Astronics Corp.* | 25 | 1,037 | ||||||
Casella Waste Systems, Inc. — Class A* | 45 | 1,036 | ||||||
Hyster-Yale Materials Handling, Inc. | 12 | 1,022 | ||||||
Columbus McKinnon Corp. | 25 | 999 | ||||||
Aegion Corp. — Class A* | 39 | 992 | ||||||
CIRCOR International, Inc. | 20 | 974 | ||||||
Lydall, Inc.* | 19 | 964 | ||||||
Chase Corp. | 8 | 964 | ||||||
Advanced Drainage Systems, Inc. | 40 | 954 | ||||||
CTS Corp. | 37 | 953 | ||||||
GoPro, Inc. — Class A*,1 | 125 | 946 | ||||||
PGT Innovations, Inc.* | 56 | 944 |
94 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 2x STRATEGY FUND |
Shares | Value | |||||||
FARO Technologies, Inc.* | 20 | $ | 940 | |||||
Quanex Building Products Corp. | 40 | 936 | ||||||
AVX Corp. | 53 | 917 | ||||||
Marten Transport Ltd. | 45 | 913 | ||||||
NCI Building Systems, Inc.* | 47 | 907 | ||||||
Echo Global Logistics, Inc.* | 32 | 896 | ||||||
Kratos Defense & Security Solutions, Inc.* | 84 | 890 | ||||||
NN, Inc. | 32 | 883 | ||||||
Evoqua Water Technologies Corp.* | 37 | 877 | ||||||
Control4 Corp.* | 29 | 863 | ||||||
Global Brass & Copper Holdings, Inc. | 26 | 861 | ||||||
Atkore International Group, Inc.* | 38 | 815 | ||||||
KEMET Corp.* | 54 | 813 | ||||||
American Outdoor Brands Corp.* | 63 | 809 | ||||||
Applied Optoelectronics, Inc.*,1 | 21 | 794 | ||||||
Electro Scientific Industries, Inc.* | 37 | 793 | ||||||
Argan, Inc. | 17 | 765 | ||||||
Scorpio Tankers, Inc. | 247 | 753 | ||||||
Keane Group, Inc.*,1 | 39 | 741 | ||||||
Stoneridge, Inc.* | 31 | 709 | ||||||
TimkenSteel Corp.* | 46 | 699 | ||||||
Griffon Corp. | 34 | 692 | ||||||
MYR Group, Inc.* | 19 | 679 | ||||||
Gorman-Rupp Co. | 21 | 655 | ||||||
International Seaways, Inc.* | 34 | 628 | ||||||
National Presto Industries, Inc. | 6 | 597 | ||||||
Insteel Industries, Inc. | 21 | 595 | ||||||
ZAGG, Inc.* | 32 | 590 | ||||||
SunPower Corp. — Class A*,1 | 70 | 590 | ||||||
Teekay Corp. | 63 | 587 | ||||||
Tredegar Corp. | 30 | 576 | ||||||
Caesarstone Ltd.* | 26 | 572 | ||||||
YRC Worldwide, Inc.* | 39 | 561 | ||||||
Kimball Electronics, Inc.* | 30 | 548 | ||||||
DXP Enterprises, Inc.* | 18 | 532 | ||||||
Myers Industries, Inc. | 27 | 526 | ||||||
Ichor Holdings Ltd.* | 21 | 517 | ||||||
Scorpio Bulkers, Inc. | 68 | 503 | ||||||
Mesa Laboratories, Inc. | 4 | 497 | ||||||
Mistras Group, Inc.* | 21 | 493 | ||||||
Sterling Construction Company, Inc.* | 30 | 488 | ||||||
NV5 Global, Inc.* | 9 | 487 | ||||||
VSE Corp. | 10 | 484 | ||||||
Ply Gem Holdings, Inc.* | 26 | 481 | ||||||
Park-Ohio Holdings Corp. | 10 | 460 | ||||||
Armstrong Flooring, Inc.* | 27 | 457 | ||||||
Haynes International, Inc. | 14 | 449 | ||||||
Park Electrochemical Corp. | 22 | 432 | ||||||
NVE Corp. | 5 | 430 | ||||||
Energous Corp.* | 22 | 428 | ||||||
Greif, Inc. — Class B | 6 | 416 | ||||||
Frontline Ltd. | 89 | 409 | ||||||
Covenant Transportation Group, Inc. — Class A*,1 | 14 | 402 | ||||||
DMC Global, Inc. | 16 | 401 | ||||||
Vicor Corp.* | 19 | 397 | ||||||
Heritage-Crystal Clean, Inc.* | 17 | 370 | ||||||
Energy Recovery, Inc.* | 42 | 368 | ||||||
Gener8 Maritime, Inc.* | 55 | 364 | ||||||
DHT Holdings, Inc. | 98 | 352 | ||||||
Daseke, Inc.* | 24 | 343 | ||||||
Ducommun, Inc.* | 12 | 341 | ||||||
Hurco Companies, Inc. | 8 | 338 | ||||||
American Railcar Industries, Inc. | 8 | 333 | ||||||
Costamare, Inc. | 57 | 329 | ||||||
GP Strategies Corp.* | 14 | 325 | ||||||
Babcock & Wilcox Enterprises, Inc.* | 57 | 324 | ||||||
Vishay Precision Group, Inc.* | 12 | 302 | ||||||
LB Foster Co. — Class A* | 11 | 299 | ||||||
Nordic American Tankers Ltd. | 117 | 288 | ||||||
Powell Industries, Inc. | 10 | 287 | ||||||
Bel Fuse, Inc. — Class B | 11 | 277 | ||||||
Roadrunner Transportation Systems, Inc.* | 35 | 270 | ||||||
Twin Disc, Inc.* | 10 | 266 | ||||||
Allied Motion Technologies, Inc. | 8 | 265 | ||||||
Ardmore Shipping Corp.* | 33 | 264 | ||||||
Layne Christensen Co.* | 21 | 264 | ||||||
Hudson Technologies, Inc.* | 43 | 261 | ||||||
Sparton Corp.* | 11 | 254 | ||||||
Orion Group Holdings, Inc.* | 32 | 251 | ||||||
Forterra, Inc.* | 22 | 244 | ||||||
Hardinge, Inc. | 14 | 244 | ||||||
FreightCar America, Inc. | 14 | 239 | ||||||
Teekay Tankers Ltd. — Class A | 170 | 238 | ||||||
Universal Logistics Holdings, Inc. | 10 | 238 | ||||||
Olympic Steel, Inc. | 11 | 236 | ||||||
Advanced Emissions Solutions, Inc. | 24 | 232 | ||||||
Graham Corp. | 11 | 230 | ||||||
LSB Industries, Inc.* | 25 | 219 | ||||||
Hill International, Inc.* | 40 | 218 | ||||||
Dorian LPG Ltd.* | 26 | 215 | ||||||
Omega Flex, Inc. | 3 | 214 | ||||||
Northwest Pipe Co.* | 11 | 211 | ||||||
Radiant Logistics, Inc.* | 44 | 202 | ||||||
AquaVenture Holdings Ltd.* | 13 | 202 | ||||||
Fluidigm Corp.* | 34 | 200 | ||||||
LSI Industries, Inc. | 29 | 200 | ||||||
Eagle Bulk Shipping, Inc.* | 44 | 197 | ||||||
Iteris, Inc.* | 28 | 195 | ||||||
UFP Technologies, Inc.* | 7 | 195 | ||||||
Safe Bulkers, Inc.* | 57 | 184 | ||||||
Eastern Co. | 7 | 183 | ||||||
CECO Environmental Corp. | 35 | 180 | ||||||
Core Molding Technologies, Inc. | 8 | 174 | ||||||
Lawson Products, Inc.* | 7 | 173 | ||||||
IES Holdings, Inc.* | 10 | 172 | ||||||
Pure Cycle Corp.* | 20 | 167 | ||||||
Intevac, Inc.* | 23 | 157 | ||||||
Gencor Industries, Inc.* | 9 | 149 | ||||||
Overseas Shipholding Group, Inc. — Class A* | 53 | 145 | ||||||
MicroVision, Inc.* | 88 | 143 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 95 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 2x STRATEGY FUND |
Shares | Value | |||||||
NL Industries, Inc.* | 10 | $ | 143 | |||||
Ampco-Pittsburgh Corp. | 11 | 136 | ||||||
Navios Maritime Holdings, Inc.* | 104 | 125 | ||||||
Napco Security Technologies, Inc.* | 14 | 123 | ||||||
CyberOptics Corp.* | 8 | 120 | ||||||
Genco Shipping & Trading Ltd.* | 9 | 120 | ||||||
Navios Maritime Acquisition Corp. | 97 | 108 | ||||||
Willis Lease Finance Corp.* | 4 | 100 | ||||||
Willbros Group, Inc.* | 52 | 74 | ||||||
Akoustis Technologies, Inc.* | 10 | 62 | ||||||
Revolution Lighting Technologies, Inc.* | 14 | 46 | ||||||
Aqua Metals, Inc.* | 19 | 40 | ||||||
Total Industrial | 363,237 | |||||||
Consumer, Cyclical - 4.2% | ||||||||
Dana, Inc. | 170 | 5,442 | ||||||
Beacon Roofing Supply, Inc.* | 77 | 4,910 | ||||||
Five Below, Inc.* | 63 | 4,178 | ||||||
Texas Roadhouse, Inc. — Class A | 78 | 4,109 | ||||||
FirstCash, Inc. | 56 | 3,777 | ||||||
Churchill Downs, Inc. | 16 | 3,723 | ||||||
LCI Industries | 28 | 3,640 | ||||||
Tenneco, Inc. | 62 | 3,629 | ||||||
American Eagle Outfitters, Inc. | 190 | 3,572 | ||||||
ILG, Inc. | 124 | 3,531 | ||||||
Marriott Vacations Worldwide Corp. | 26 | 3,515 | ||||||
Wolverine World Wide, Inc. | 110 | 3,507 | ||||||
Cracker Barrel Old Country Store, Inc.1 | 22 | 3,496 | ||||||
Planet Fitness, Inc. — Class A* | 99 | 3,428 | ||||||
Boyd Gaming Corp. | 97 | 3,400 | ||||||
Jack in the Box, Inc. | 34 | 3,336 | ||||||
Steven Madden Ltd.* | 69 | 3,222 | ||||||
SkyWest, Inc. | 60 | 3,186 | ||||||
Scientific Games Corp. — Class A* | 62 | 3,181 | ||||||
KB Home | 99 | 3,163 | ||||||
TRI Pointe Group, Inc.* | 175 | 3,136 | ||||||
Penn National Gaming, Inc.* | 99 | 3,102 | ||||||
SiteOne Landscape Supply, Inc.* | 40 | 3,068 | ||||||
Lithia Motors, Inc. — Class A | 27 | 3,067 | ||||||
Deckers Outdoor Corp.* | 37 | 2,969 | ||||||
UniFirst Corp. | 18 | 2,968 | ||||||
Ollie’s Bargain Outlet Holdings, Inc.* | 55 | 2,929 | ||||||
Big Lots, Inc. | 52 | 2,920 | ||||||
Children’s Place, Inc. | 20 | 2,907 | ||||||
Buffalo Wild Wings, Inc.* | 18 | 2,814 | ||||||
Herman Miller, Inc. | 70 | 2,804 | ||||||
Red Rock Resorts, Inc. — Class A | 80 | 2,699 | ||||||
Dave & Buster’s Entertainment, Inc.* | 48 | 2,648 | ||||||
Anixter International, Inc.* | 33 | 2,508 | ||||||
Cheesecake Factory, Inc.1 | 52 | 2,505 | ||||||
Hawaiian Holdings, Inc. | 62 | 2,471 | ||||||
iRobot Corp.*,1 | 32 | 2,454 | ||||||
Cooper-Standard Holdings, Inc.* | 20 | 2,450 | ||||||
Navistar International Corp.* | 57 | 2,444 | ||||||
Columbia Sportswear Co. | 34 | 2,444 | ||||||
Meritor, Inc.* | 99 | 2,322 | ||||||
Bloomin’ Brands, Inc. | 108 | 2,305 | ||||||
Meritage Homes Corp.* | 45 | 2,304 | ||||||
Brinker International, Inc. | 58 | 2,253 | ||||||
PriceSmart, Inc. | 26 | 2,239 | ||||||
Allegiant Travel Co. — Class A | 14 | 2,166 | ||||||
Cooper Tire & Rubber Co. | 61 | 2,156 | ||||||
Office Depot, Inc. | 597 | 2,113 | ||||||
Winnebago Industries, Inc. | 37 | 2,057 | ||||||
Taylor Morrison Home Corp. — Class A* | 83 | 2,031 | ||||||
Pinnacle Entertainment, Inc.* | 62 | 2,029 | ||||||
Caesars Entertainment Corp.* | 159 | 2,011 | ||||||
RH* | 23 | 1,983 | ||||||
HNI Corp. | 51 | 1,967 | ||||||
American Axle & Manufacturing Holdings, Inc.* | 114 | 1,941 | ||||||
BMC Stock Holdings, Inc.* | 76 | 1,923 | ||||||
Installed Building Products, Inc.* | 25 | 1,899 | ||||||
Dorman Products, Inc.* | 31 | 1,895 | ||||||
G-III Apparel Group Ltd.* | 51 | 1,881 | ||||||
Triton International Ltd.* | 50 | 1,872 | ||||||
Interface, Inc. — Class A | 73 | 1,836 | ||||||
Papa John’s International, Inc. | 32 | 1,796 | ||||||
Eldorado Resorts, Inc.* | 54 | 1,790 | ||||||
Rush Enterprises, Inc. — Class A* | 35 | 1,778 | ||||||
Sleep Number Corp.* | 47 | 1,767 | ||||||
Mobile Mini, Inc. | 51 | 1,759 | ||||||
La Quinta Holdings, Inc.* | 95 | 1,754 | ||||||
La-Z-Boy, Inc. | 56 | 1,747 | ||||||
Group 1 Automotive, Inc. | 24 | 1,703 | ||||||
Core-Mark Holding Company, Inc. | 53 | 1,674 | ||||||
MDC Holdings, Inc. | 52 | 1,658 | ||||||
Camping World Holdings, Inc. — Class A | 37 | 1,655 | ||||||
Caleres, Inc. | 49 | 1,641 | ||||||
DSW, Inc. — Class A | 76 | 1,627 | ||||||
Fox Factory Holding Corp.* | 41 | 1,593 | ||||||
HSN, Inc. | 38 | 1,533 | ||||||
Cavco Industries, Inc.* | 10 | 1,526 | ||||||
Steelcase, Inc. — Class A | 100 | 1,520 | ||||||
Callaway Golf Co. | 109 | 1,518 | ||||||
IMAX Corp.* | 65 | 1,505 | ||||||
H&E Equipment Services, Inc. | 37 | 1,504 | ||||||
LGI Homes, Inc.* | 20 | 1,501 | ||||||
Wabash National Corp. | 68 | 1,476 | ||||||
Oxford Industries, Inc. | 19 | 1,429 | ||||||
Abercrombie & Fitch Co. — Class A | 80 | 1,394 | ||||||
Gentherm, Inc.* | 43 | 1,365 | ||||||
Asbury Automotive Group, Inc.* | 21 | 1,344 | ||||||
Chico’s FAS, Inc. | 151 | 1,332 | ||||||
Sonic Corp.1 | 47 | 1,292 | ||||||
Knoll, Inc. | 56 | 1,290 | ||||||
Wingstop, Inc. | 33 | 1,286 | ||||||
Belmond Ltd. — Class A* | 104 | 1,274 | ||||||
Tailored Brands, Inc. | 57 | 1,244 | ||||||
Guess?, Inc.1 | 70 | 1,182 | ||||||
Modine Manufacturing Co.* | 58 | 1,172 | ||||||
GMS, Inc.* | 31 | 1,167 | ||||||
J.C. Penney Company, Inc.* | 363 | 1,147 |
96 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 2x STRATEGY FUND |
Shares | Value | |||||||
Shake Shack, Inc. — Class A* | 26 | $ | 1,123 | |||||
Standard Motor Products, Inc. | 25 | 1,123 | ||||||
International Speedway Corp. — Class A | 28 | 1,116 | ||||||
Crocs, Inc.*,1 | 86 | 1,087 | ||||||
SeaWorld Entertainment, Inc.*,1 | 79 | 1,072 | ||||||
PetMed Express, Inc. | 23 | 1,047 | ||||||
ScanSource, Inc.* | 29 | 1,038 | ||||||
Denny’s Corp.* | 77 | 1,019 | ||||||
DineEquity, Inc. | 20 | 1,015 | ||||||
Lumber Liquidators Holdings, Inc.* | 32 | 1,004 | ||||||
Douglas Dynamics, Inc. | 26 | 983 | ||||||
AMC Entertainment Holdings, Inc. — Class A1 | 65 | 981 | ||||||
Vista Outdoor, Inc.* | 67 | 976 | ||||||
M/I Homes, Inc.* | 28 | 963 | ||||||
Dillard’s, Inc. — Class A1 | 16 | 961 | ||||||
Express, Inc.* | 90 | 913 | ||||||
BJ’s Restaurants, Inc. | 24 | 874 | ||||||
National Vision Holdings, Inc.* | 21 | 853 | ||||||
Red Robin Gourmet Burgers, Inc.* | 15 | 846 | ||||||
William Lyon Homes — Class A* | 28 | 814 | ||||||
Buckle, Inc.1 | 34 | 807 | ||||||
Ethan Allen Interiors, Inc. | 28 | 801 | ||||||
Liberty TripAdvisor Holdings, Inc. — Class A* | 84 | 792 | ||||||
Kimball International, Inc. — Class B | 42 | 784 | ||||||
Ruth’s Hospitality Group, Inc. | 35 | 758 | ||||||
Universal Electronics, Inc.* | 16 | 756 | ||||||
Titan International, Inc. | 58 | 747 | ||||||
Conn’s, Inc.* | 21 | 747 | ||||||
Genesco, Inc.* | 22 | 715 | ||||||
Tower International, Inc. | 23 | 703 | ||||||
EZCORP, Inc. — Class A* | 57 | 695 | ||||||
Beazer Homes USA, Inc.* | 36 | 692 | ||||||
Century Communities, Inc.* | 22 | 684 | ||||||
Malibu Boats, Inc. — Class A* | 23 | 684 | ||||||
Finish Line, Inc. — Class A | 46 | 668 | ||||||
Unifi, Inc.* | 18 | 646 | ||||||
Spartan Motors, Inc. | 40 | 630 | ||||||
Regis Corp.* | 41 | 630 | ||||||
Marcus Corp. | 22 | 602 | ||||||
Movado Group, Inc. | 18 | 580 | ||||||
Fiesta Restaurant Group, Inc.* | 30 | 570 | ||||||
Acushnet Holdings Corp. | 27 | 569 | ||||||
Sonic Automotive, Inc. — Class A | 30 | 554 | ||||||
Hooker Furniture Corp. | 13 | 552 | ||||||
MarineMax, Inc.* | 29 | 548 | ||||||
Monarch Casino & Resort, Inc.* | 12 | 538 | ||||||
Chuy’s Holdings, Inc.* | 19 | 533 | ||||||
Freshpet, Inc.* | 28 | 531 | ||||||
Motorcar Parts of America, Inc.* | 21 | 525 | ||||||
Haverty Furniture Companies, Inc. | 22 | 498 | ||||||
Carrols Restaurant Group, Inc.* | 41 | 498 | ||||||
National CineMedia, Inc. | 72 | 494 | ||||||
Hibbett Sports, Inc.* | 24 | 490 | ||||||
REV Group, Inc. | 15 | 488 | ||||||
Hovnanian Enterprises, Inc. — Class A* | 144 | 482 | ||||||
Wesco Aircraft Holdings, Inc.* | 65 | 481 | ||||||
Ascena Retail Group, Inc.* | 202 | 475 | ||||||
Del Taco Restaurants, Inc.* | 39 | 473 | ||||||
Barnes & Noble, Inc. | 70 | 469 | ||||||
Nautilus, Inc.* | 35 | 467 | ||||||
MCBC Holdings, Inc.* | 21 | 467 | ||||||
Zumiez, Inc.*,1 | 22 | 458 | ||||||
Bassett Furniture Industries, Inc. | 12 | 451 | ||||||
Citi Trends, Inc. | 17 | 450 | ||||||
Party City Holdco, Inc.* | 32 | 446 | ||||||
Cato Corp. — Class A | 28 | 446 | ||||||
Titan Machinery, Inc.* | 21 | 445 | ||||||
Tile Shop Holdings, Inc. | 46 | 442 | ||||||
Systemax, Inc. | 13 | 433 | ||||||
Superior Industries International, Inc. | 29 | 431 | ||||||
Flexsteel Industries, Inc. | 9 | 421 | ||||||
Biglari Holdings, Inc.* | 1 | 414 | ||||||
Essendant, Inc. | 44 | 408 | ||||||
Horizon Global Corp.* | 29 | 407 | ||||||
Drive Shack, Inc.* | 73 | 404 | ||||||
Culp, Inc. | 12 | 402 | ||||||
Fossil Group, Inc.*,1 | 51 | 396 | ||||||
Pier 1 Imports, Inc. | 95 | 393 | ||||||
Golden Entertainment, Inc.* | 12 | 392 | ||||||
Winmark Corp. | 3 | 388 | ||||||
Zoe’s Kitchen, Inc.* | 23 | 385 | ||||||
Del Frisco’s Restaurant Group, Inc.* | 25 | 381 | ||||||
Veritiv Corp.* | 13 | 376 | ||||||
Perry Ellis International, Inc.* | 15 | 376 | ||||||
Daktronics, Inc. | 41 | 374 | ||||||
Johnson Outdoors, Inc. — Class A | 6 | 373 | ||||||
PC Connection, Inc. | 14 | 367 | ||||||
Barnes & Noble Education, Inc.* | 44 | 363 | ||||||
America’s Car-Mart, Inc.* | 8 | 357 | ||||||
Shoe Carnival, Inc. | 13 | 348 | ||||||
Miller Industries, Inc. | 13 | 335 | ||||||
PICO Holdings, Inc.* | 26 | 333 | ||||||
Potbelly Corp.* | 27 | 332 | ||||||
Francesca’s Holdings Corp.* | 44 | 322 | ||||||
Reading International, Inc. — Class A* | 19 | 317 | ||||||
Commercial Vehicle Group, Inc.* | 29 | 310 | ||||||
Green Brick Partners, Inc.* | 26 | 294 | ||||||
GNC Holdings, Inc. — Class A* | 79 | 292 | ||||||
Nexeo Solutions, Inc.* | 32 | 291 | ||||||
Eros International plc* | 30 | 290 | ||||||
Rush Enterprises, Inc. — Class B* | 6 | 289 | ||||||
Vera Bradley, Inc.* | 23 | 280 | ||||||
RCI Hospitality Holdings, Inc. | 10 | 280 | ||||||
Sportsman’s Warehouse Holdings, Inc.*,1 | 42 | 278 | ||||||
Superior Uniform Group, Inc. | 10 | 267 | ||||||
Foundation Building Materials, Inc.* | 17 | 251 | ||||||
Speedway Motorsports, Inc. | 13 | 245 | ||||||
Bojangles’, Inc.* | 20 | 236 | ||||||
AV Homes, Inc.* | 14 | 233 | ||||||
Boot Barn Holdings, Inc.* | 14 | 233 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 97 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 2x STRATEGY FUND |
Shares | Value | |||||||
Habit Restaurants, Inc. — Class A* | 24 | $ | 229 | |||||
El Pollo Loco Holdings, Inc.* | 23 | 228 | ||||||
Nathan’s Famous, Inc. | 3 | 226 | ||||||
Lindblad Expeditions Holdings, Inc.* | 23 | 225 | ||||||
Tilly’s, Inc. — Class A | 15 | 221 | ||||||
Century Casinos, Inc.* | 24 | 219 | ||||||
Kirkland’s, Inc.* | 18 | 215 | ||||||
Weyco Group, Inc. | 7 | 208 | ||||||
Lifetime Brands, Inc. | 12 | 198 | ||||||
Red Lion Hotels Corp.* | 20 | 197 | ||||||
Duluth Holdings, Inc. — Class B* | 11 | 196 | ||||||
Libbey, Inc. | 26 | 196 | ||||||
Clarus Corp.* | 24 | 188 | ||||||
Huttig Building Products, Inc.* | 28 | 186 | ||||||
Big 5 Sporting Goods Corp. | 24 | 182 | ||||||
At Home Group, Inc.* | 6 | 182 | ||||||
New Home Company, Inc.* | 14 | 175 | ||||||
PetIQ, Inc.* | 8 | 175 | ||||||
Fred’s, Inc. — Class A | 42 | 170 | ||||||
Delta Apparel, Inc.* | 8 | 161 | ||||||
EnviroStar, Inc.1 | 4 | 160 | ||||||
Escalade, Inc. | 13 | 160 | ||||||
Blue Bird Corp.* | 8 | 159 | ||||||
Build-A-Bear Workshop, Inc. — Class A* | 16 | 147 | ||||||
J Alexander’s Holdings, Inc.* | 15 | 145 | ||||||
VOXX International Corp. — Class A* | 23 | 129 | ||||||
Hamilton Beach Brands Holding Co. — Class A | 5 | 128 | ||||||
Fogo De Chao, Inc.* | 11 | 128 | ||||||
Gaia, Inc.* | 10 | 124 | ||||||
Castle Brands, Inc.* | 101 | 123 | ||||||
PCM, Inc.* | 12 | 119 | ||||||
Marine Products Corp. | 9 | 115 | ||||||
J. Jill, Inc.* | 14 | 109 | ||||||
Empire Resorts, Inc.* | 4 | 108 | ||||||
Vitamin Shoppe, Inc.* | 24 | 106 | ||||||
Container Store Group, Inc.* | 19 | 90 | ||||||
Sequential Brands Group, Inc.* | 46 | 82 | ||||||
Iconix Brand Group, Inc.* | 59 | 76 | ||||||
Noodles & Co.* | 13 | 68 | ||||||
Sears Holdings Corp.* | 14 | 50 | ||||||
Inspired Entertainment, Inc.* | 5 | 49 | ||||||
CompX International, Inc. | 2 | 27 | ||||||
Total Consumer, Cyclical | 294,823 | |||||||
Technology - 3.5% | ||||||||
EPAM Systems, Inc.* | 57 | 6,123 | ||||||
MKS Instruments, Inc. | 62 | 5,859 | ||||||
Aspen Technology, Inc.* | 88 | 5,826 | ||||||
Fair Isaac Corp. | 35 | 5,362 | ||||||
MAXIMUS, Inc. | 74 | 5,297 | ||||||
Blackbaud, Inc. | 56 | 5,291 | ||||||
Monolithic Power Systems, Inc. | 47 | 5,281 | ||||||
Entegris, Inc. | 166 | 5,055 | ||||||
Integrated Device Technology, Inc.* | 157 | 4,668 | ||||||
Paycom Software, Inc.* | 58 | 4,659 | ||||||
Nutanix, Inc. — Class A* | 123 | 4,339 | ||||||
Silicon Laboratories, Inc.* | 49 | 4,327 | ||||||
Medidata Solutions, Inc.* | 65 | 4,119 | ||||||
j2 Global, Inc. | 54 | 4,052 | ||||||
Cirrus Logic, Inc.* | 76 | 3,941 | ||||||
Science Applications International Corp. | 51 | 3,905 | ||||||
CACI International, Inc. — Class A* | 29 | 3,838 | ||||||
HubSpot, Inc.* | 40 | 3,536 | ||||||
Lumentum Holdings, Inc.* | 71 | 3,472 | ||||||
2U, Inc.* | 51 | 3,290 | ||||||
Allscripts Healthcare Solutions, Inc.* | 212 | 3,085 | ||||||
ACI Worldwide, Inc.* | 136 | 3,083 | ||||||
NetScout Systems, Inc.* | 101 | 3,075 | ||||||
RealPage, Inc.* | 69 | 3,057 | ||||||
Verint Systems, Inc.* | 73 | 3,055 | ||||||
Mercury Systems, Inc.* | 54 | 2,773 | ||||||
Cabot Microelectronics Corp. | 29 | 2,728 | ||||||
Convergys Corp. | 110 | 2,585 | ||||||
Semtech Corp.* | 75 | 2,565 | ||||||
Envestnet, Inc.* | 51 | 2,542 | ||||||
Acxiom Corp.* | 91 | 2,508 | ||||||
Power Integrations, Inc.1 | 33 | 2,427 | ||||||
CommVault Systems, Inc.* | 46 | 2,415 | ||||||
Progress Software Corp. | 55 | 2,341 | ||||||
VeriFone Systems, Inc.* | 130 | 2,302 | ||||||
ExlService Holdings, Inc.* | 38 | 2,293 | ||||||
Ambarella, Inc.* | 38 | 2,233 | ||||||
Ebix, Inc. | 28 | 2,219 | ||||||
Qualys, Inc.* | 37 | 2,196 | ||||||
Callidus Software, Inc.* | 76 | 2,177 | ||||||
Cornerstone OnDemand, Inc.* | 61 | 2,155 | ||||||
Box, Inc. — Class A* | 96 | 2,058 | ||||||
Omnicell, Inc.* | 42 | 2,037 | ||||||
New Relic, Inc.* | 35 | 2,022 | ||||||
Pegasystems, Inc. | 42 | 1,980 | ||||||
BroadSoft, Inc.* | 36 | 1,976 | ||||||
Brooks Automation, Inc. | 80 | 1,908 | ||||||
Cloudera, Inc.* | 112 | 1,850 | ||||||
MaxLinear, Inc. — Class A* | 70 | 1,849 | ||||||
Rambus, Inc.* | 127 | 1,806 | ||||||
Inphi Corp.* | 49 | 1,793 | ||||||
Pure Storage, Inc. — Class A* | 109 | 1,729 | ||||||
Twilio, Inc. — Class A* | 73 | 1,723 | ||||||
CSG Systems International, Inc. | 39 | 1,709 | ||||||
Insight Enterprises, Inc.* | 42 | 1,608 | ||||||
Synaptics, Inc.* | 40 | 1,598 | ||||||
Bottomline Technologies de, Inc.* | 46 | 1,595 | ||||||
Electronics for Imaging, Inc.* | 54 | 1,595 | ||||||
MACOM Technology Solutions Holdings, Inc.*,1 | 47 | 1,529 | ||||||
Five9, Inc.* | 61 | 1,518 | ||||||
ManTech International Corp. — Class A | 30 | 1,506 | ||||||
MINDBODY, Inc. — Class A* | 49 | 1,492 | ||||||
Sykes Enterprises, Inc.* | 46 | 1,447 | ||||||
MicroStrategy, Inc. — Class A* | 11 | 1,444 | ||||||
Diebold Nixdorf, Inc.1 | 88 | 1,439 | ||||||
Virtusa Corp.* | 32 | 1,410 |
98 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 2x STRATEGY FUND |
Shares | Value | |||||||
Xperi Corp. | 57 | $ | 1,391 | |||||
Cotiviti Holdings, Inc.* | 43 | 1,385 | ||||||
FormFactor, Inc.* | 84 | 1,315 | ||||||
Diodes, Inc.* | 45 | 1,290 | ||||||
Amkor Technology, Inc.* | 120 | 1,206 | ||||||
Monotype Imaging Holdings, Inc. | 49 | 1,181 | ||||||
Stratasys Ltd.*,1 | 59 | 1,178 | ||||||
CEVA, Inc.* | 25 | 1,154 | ||||||
Hortonworks, Inc.* | 57 | 1,146 | ||||||
Cray, Inc.* | 47 | 1,137 | ||||||
Coupa Software, Inc.* | 36 | 1,124 | ||||||
Varonis Systems, Inc.* | 23 | 1,117 | ||||||
3D Systems Corp.*,1 | 127 | 1,097 | ||||||
Inovalon Holdings, Inc. — Class A* | 73 | 1,095 | ||||||
MTS Systems Corp. | 19 | 1,020 | ||||||
Axcelis Technologies, Inc.* | 35 | 1,004 | ||||||
Vocera Communications, Inc.* | 32 | 967 | ||||||
Super Micro Computer, Inc.* | 45 | 942 | ||||||
SPS Commerce, Inc.* | 19 | 923 | ||||||
Ultra Clean Holdings, Inc.* | 38 | 877 | ||||||
Syntel, Inc.* | 38 | 874 | ||||||
Rudolph Technologies, Inc.* | 36 | 860 | ||||||
Quality Systems, Inc.* | 62 | 842 | ||||||
Lattice Semiconductor Corp.* | 144 | 832 | ||||||
Instructure, Inc.* | 25 | 828 | ||||||
Barracuda Networks, Inc.* | 30 | 825 | ||||||
PROS Holdings, Inc.* | 31 | 820 | ||||||
Veeco Instruments, Inc.* | 54 | 802 | ||||||
Silver Spring Networks, Inc.* | 49 | 796 | ||||||
Evolent Health, Inc. — Class A*,1 | 61 | 750 | ||||||
Donnelley Financial Solutions, Inc.* | 38 | 741 | ||||||
IXYS Corp.* | 30 | 719 | ||||||
LivePerson, Inc.* | 62 | 713 | ||||||
Carbonite, Inc.* | 28 | 703 | ||||||
Cohu, Inc. | 32 | 702 | ||||||
Nanometrics, Inc.* | 28 | 698 | ||||||
Alteryx, Inc. — Class A* | 27 | 682 | ||||||
CommerceHub, Inc.* | 33 | 679 | ||||||
Photronics, Inc.* | 78 | 665 | ||||||
MuleSoft, Inc. — Class A* | 28 | 651 | ||||||
TeleTech Holdings, Inc. | 16 | 644 | ||||||
Xcerra Corp.* | 62 | 607 | ||||||
Workiva, Inc.* | 28 | 599 | ||||||
Engility Holdings, Inc.* | 21 | 596 | ||||||
Blackline, Inc.* | 18 | 590 | ||||||
Apptio, Inc. — Class A* | 25 | 588 | ||||||
Everbridge, Inc.* | 19 | 565 | ||||||
Actua Corp.* | 35 | 546 | ||||||
Bazaarvoice, Inc.* | 98 | 534 | ||||||
InnerWorkings, Inc.* | 53 | 532 | ||||||
USA Technologies, Inc.* | 54 | 526 | ||||||
PDF Solutions, Inc.* | 33 | 518 | ||||||
Benefitfocus, Inc.*,1 | 18 | 486 | ||||||
Unisys Corp.* | 59 | 481 | ||||||
Impinj, Inc.* | 21 | 473 | ||||||
Glu Mobile, Inc.* | 122 | 444 | ||||||
Synchronoss Technologies, Inc.* | 49 | 438 | ||||||
Digimarc Corp.* | 12 | 434 | ||||||
Ribbon Communications, Inc.* | 56 | 433 | ||||||
QAD, Inc. — Class A | 11 | 427 | ||||||
Model N, Inc.* | 27 | 425 | ||||||
Presidio, Inc.* | 22 | 422 | ||||||
Computer Programs & Systems, Inc. | 13 | 391 | ||||||
AXT, Inc.* | 44 | 383 | ||||||
Appfolio, Inc. — Class A* | 9 | 373 | ||||||
American Software, Inc. — Class A | 31 | 361 | ||||||
pdvWireless, Inc.* | 11 | 353 | ||||||
CommerceHub, Inc.* | 16 | 352 | ||||||
Alpha & Omega Semiconductor Ltd.* | 21 | 344 | ||||||
KeyW Holding Corp.*,1 | 56 | 329 | ||||||
Mitek Systems, Inc.* | 36 | 322 | ||||||
DSP Group, Inc.* | 25 | 313 | ||||||
Tabula Rasa HealthCare, Inc.* | 11 | 309 | ||||||
Digi International, Inc.* | 32 | 306 | ||||||
Sigma Designs, Inc.* | 43 | 299 | ||||||
Brightcove, Inc.* | 40 | 284 | ||||||
Castlight Health, Inc. — Class B* | 74 | 278 | ||||||
MobileIron, Inc.* | 64 | 250 | ||||||
Rosetta Stone, Inc.* | 20 | 249 | ||||||
Maxwell Technologies, Inc.* | 42 | 242 | ||||||
Immersion Corp.*,1 | 34 | 240 | ||||||
SMART Global Holdings, Inc.* | 7 | 236 | ||||||
Pixelworks, Inc.* | 37 | 234 | ||||||
Kopin Corp.* | 72 | 230 | ||||||
Agilysys, Inc.* | 18 | 221 | ||||||
Avid Technology, Inc.* | 40 | 216 | ||||||
Simulations Plus, Inc. | 13 | 209 | ||||||
EMCORE Corp.* | 31 | 200 | ||||||
Upland Software, Inc.* | 9 | 195 | ||||||
Quantum Corp.* | 34 | 191 | ||||||
Amber Road, Inc.* | 23 | 169 | ||||||
Park City Group, Inc.* | 15 | 143 | ||||||
GSI Technology, Inc.* | 17 | 135 | ||||||
StarTek, Inc.* | 12 | 120 | ||||||
ExOne Co.* | 13 | 109 | ||||||
Cogint, Inc.* | 23 | 101 | ||||||
SecureWorks Corp. — Class A*,1 | 9 | 80 | ||||||
Veritone, Inc.* | 3 | 70 | ||||||
NantHealth, Inc.* | 21 | 64 | ||||||
Eastman Kodak Co.* | 19 | 59 | ||||||
Radisys Corp.* | 43 | 43 | ||||||
Tintri, Inc.* | 8 | 41 | ||||||
Majesco* | 7 | 38 | ||||||
Total Technology | 246,796 | |||||||
Communications - 2.1% | ||||||||
GrubHub, Inc.* | 101 | 7,252 | ||||||
ViaSat, Inc.*,1 | 62 | 4,641 | ||||||
Proofpoint, Inc.* | 51 | 4,529 | ||||||
Nexstar Media Group, Inc. — Class A | 53 | 4,145 | ||||||
Zendesk, Inc.* | 113 | 3,824 | ||||||
Yelp, Inc. — Class A* | 91 | 3,818 | ||||||
Stamps.com, Inc.* | 19 | 3,572 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 99 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 2x STRATEGY FUND |
Shares | Value | |||||||
RingCentral, Inc. — Class A* | 73 | $ | 3,533 | |||||
Ciena Corp.* | 164 | 3,433 | ||||||
Sinclair Broadcast Group, Inc. — Class A | 85 | 3,217 | ||||||
InterDigital, Inc. | 40 | 3,046 | ||||||
Meredith Corp. | 46 | 3,038 | ||||||
Etsy, Inc.* | 135 | 2,761 | ||||||
New York Times Co. — Class A | 147 | 2,719 | ||||||
Finisar Corp.* | 132 | 2,686 | ||||||
Cars.com, Inc.*,1 | 84 | 2,423 | ||||||
Vonage Holdings Corp.* | 233 | 2,370 | ||||||
Viavi Solutions, Inc.* | 268 | 2,342 | ||||||
NETGEAR, Inc.* | 38 | 2,233 | ||||||
Cogent Communications Holdings, Inc. | 49 | 2,220 | ||||||
Straight Path Communications, Inc. — Class B* | 12 | 2,182 | ||||||
Time, Inc. | 116 | 2,140 | ||||||
TiVo Corp. | 137 | 2,137 | ||||||
Groupon, Inc. — Class A* | 395 | 2,015 | ||||||
Shutterfly, Inc.* | 39 | 1,940 | ||||||
Ubiquiti Networks, Inc.*,1 | 27 | 1,918 | ||||||
Plantronics, Inc. | 38 | 1,914 | ||||||
Chegg, Inc.* | 112 | 1,828 | ||||||
Shenandoah Telecommunications Co. | 54 | 1,825 | ||||||
GTT Communications, Inc.* | 36 | 1,690 | ||||||
Extreme Networks, Inc.* | 128 | 1,603 | ||||||
Entercom Communications Corp. — Class A | 146 | 1,577 | ||||||
Gannett Company, Inc. | 134 | 1,553 | ||||||
Imperva, Inc.* | 39 | 1,548 | ||||||
8x8, Inc.* | 102 | 1,438 | ||||||
MSG Networks, Inc. — Class A* | 70 | 1,417 | ||||||
World Wrestling Entertainment, Inc. — Class A | 46 | 1,407 | ||||||
Q2 Holdings, Inc.* | 37 | 1,363 | ||||||
Oclaro, Inc.* | 194 | 1,308 | ||||||
Scholastic Corp. | 32 | 1,284 | ||||||
Trade Desk, Inc. — Class A*,1 | 28 | 1,280 | ||||||
NIC, Inc. | 75 | 1,245 | ||||||
Gray Television, Inc.* | 73 | 1,223 | ||||||
Overstock.com, Inc.* | 19 | 1,214 | ||||||
General Communication, Inc. — Class A* | 31 | 1,210 | ||||||
Iridium Communications, Inc.* | 98 | 1,156 | ||||||
ePlus, Inc.* | 15 | 1,128 | ||||||
Houghton Mifflin Harcourt Co.* | 121 | 1,125 | ||||||
ADTRAN, Inc. | 57 | 1,103 | ||||||
Blucora, Inc.* | 49 | 1,083 | ||||||
Infinera Corp.* | 170 | 1,076 | ||||||
EW Scripps Co. — Class A* | 68 | 1,063 | ||||||
Quotient Technology, Inc.* | 87 | 1,022 | ||||||
Cincinnati Bell, Inc.* | 49 | 1,022 | ||||||
New Media Investment Group, Inc. | 60 | 1,007 | ||||||
Boingo Wireless, Inc.* | 43 | 967 | ||||||
Web.com Group, Inc.* | 44 | 959 | ||||||
Consolidated Communications Holdings, Inc. | 76 | 926 | ||||||
Shutterstock, Inc.* | 21 | 904 | ||||||
Liberty Media Corporation-Liberty Braves — Class C* | 40 | 889 | ||||||
TrueCar, Inc.* | 79 | 885 | ||||||
CalAmp Corp.* | 40 | 857 | ||||||
Acacia Communications, Inc.*,1 | 22 | 797 | ||||||
ORBCOMM, Inc.* | 78 | 794 | ||||||
Perficient, Inc.* | 41 | 782 | ||||||
Gogo, Inc.*,1 | 67 | 756 | ||||||
ATN International, Inc. | 13 | 718 | ||||||
Tucows, Inc. — Class A* | 10 | 701 | ||||||
Globalstar, Inc.* | 533 | 698 | ||||||
HealthStream, Inc.* | 30 | 695 | ||||||
Loral Space & Communications, Inc.* | 15 | 661 | ||||||
MDC Partners, Inc. — Class A* | 65 | 634 | ||||||
Frontier Communications Corp. | 91 | 615 | ||||||
Comtech Telecommunications Corp. | 27 | 597 | ||||||
Endurance International Group Holdings, Inc.* | 67 | 563 | ||||||
Entravision Communications Corp. — Class A | 77 | 551 | ||||||
XO Group, Inc.* | 29 | 535 | ||||||
VASCO Data Security International, Inc.* | 35 | 487 | ||||||
Daily Journal Corp.* | 2 | 460 | ||||||
Central European Media Enterprises Ltd. — Class A* | 97 | 451 | ||||||
Rapid7, Inc.* | 24 | 448 | ||||||
A10 Networks, Inc.* | 57 | 440 | ||||||
Windstream Holdings, Inc. | 222 | 411 | ||||||
Limelight Networks, Inc.* | 88 | 388 | ||||||
tronc, Inc.* | 22 | 387 | ||||||
Harmonic, Inc.* | 92 | 386 | ||||||
Okta, Inc.* | 15 | 384 | ||||||
Spok Holdings, Inc. | 24 | 376 | ||||||
Internap Corp.* | 23 | 361 | ||||||
QuinStreet, Inc.* | 43 | 360 | ||||||
1-800-Flowers.com, Inc. — Class A* | 30 | 321 | ||||||
TechTarget, Inc.* | 22 | 306 | ||||||
Carvana Co.* | 16 | 306 | ||||||
Quantenna Communications, Inc.* | 25 | 305 | ||||||
Calix, Inc.* | 51 | 303 | ||||||
Lands’ End, Inc.* | 15 | 293 | ||||||
HC2 Holdings, Inc.* | 47 | 280 | ||||||
Zix Corp.* | 62 | 272 | ||||||
Liberty Media Corporation-Liberty Braves — Class A* | 12 | 265 | ||||||
ChannelAdvisor Corp.* | 29 | 261 | ||||||
WideOpenWest, Inc.* | 24 | 254 | ||||||
NeoPhotonics Corp.* | 38 | 250 | ||||||
Reis, Inc. | 11 | 227 | ||||||
Ooma, Inc.* | 19 | 227 | ||||||
RigNet, Inc.* | 15 | 224 | ||||||
VirnetX Holding Corp.* | 60 | 222 | ||||||
Meet Group, Inc.* | 78 | 220 | ||||||
Hawaiian Telcom Holdco, Inc.* | 7 | 216 | ||||||
Aerohive Networks, Inc.* | 37 | 216 | ||||||
Preformed Line Products Co. | 3 | 213 |
100 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 2x STRATEGY FUND |
Shares | Value | |||||||
IDT Corp. — Class B* | 20 | $ | 212 | |||||
Hemisphere Media Group, Inc.* | 18 | 208 | ||||||
Telenav, Inc.* | 36 | 198 | ||||||
Clear Channel Outdoor Holdings, Inc. — Class A | 42 | 193 | ||||||
KVH Industries, Inc.* | 18 | 186 | ||||||
Yext, Inc.* | 14 | 168 | ||||||
Saga Communications, Inc. — Class A | 4 | 162 | ||||||
Clearfield, Inc.* | 13 | 159 | ||||||
Liquidity Services, Inc.* | 30 | 146 | ||||||
FTD Companies, Inc.* | 20 | 144 | ||||||
Intelsat S.A.* | 42 | 142 | ||||||
Leaf Group Ltd.* | 14 | 139 | ||||||
Global Eagle Entertainment, Inc.* | 59 | 135 | ||||||
Corindus Vascular Robotics, Inc.* | 117 | 118 | ||||||
DHI Group, Inc.* | 56 | 106 | ||||||
Rubicon Project, Inc.* | 52 | 97 | ||||||
RealNetworks, Inc.* | 28 | 96 | ||||||
Beasley Broadcast Group, Inc. — Class A | 6 | 80 | ||||||
Townsquare Media, Inc. — Class A* | 10 | 77 | ||||||
Salem Media Group, Inc. — Class A | 14 | 63 | ||||||
Ominto, Inc.*,1 | 16 | 54 | ||||||
Value Line, Inc. | 1 | 19 | ||||||
Total Communications | 148,752 | |||||||
Energy - 1.3% | ||||||||
PDC Energy, Inc.* | 77 | 3,970 | ||||||
Matador Resources Co.* | 104 | 3,237 | ||||||
Delek US Holdings, Inc. | 91 | 3,179 | ||||||
Ensco plc — Class A | 498 | 2,943 | ||||||
Callon Petroleum Co.* | 236 | 2,867 | ||||||
Peabody Energy Corp.* | 72 | 2,835 | ||||||
Arch Coal, Inc. — Class A | 25 | 2,329 | ||||||
SemGroup Corp. — Class A | 77 | 2,325 | ||||||
Oasis Petroleum, Inc.* | 276 | 2,321 | ||||||
SRC Energy, Inc.* | 272 | 2,320 | ||||||
McDermott International, Inc.* | 330 | 2,171 | ||||||
Rowan Companies plc — Class A* | 136 | 2,130 | ||||||
Dril-Quip, Inc.* | 44 | 2,099 | ||||||
Ultra Petroleum Corp.* | 228 | 2,066 | ||||||
Carrizo Oil & Gas, Inc.* | 91 | 1,936 | ||||||
C&J Energy Services, Inc.* | 55 | 1,841 | ||||||
Pattern Energy Group, Inc.1 | 83 | 1,784 | ||||||
MRC Global, Inc.* | 103 | 1,743 | ||||||
Superior Energy Services, Inc.* | 177 | 1,705 | ||||||
Oil States International, Inc.* | 60 | 1,698 | ||||||
Diamond Offshore Drilling, Inc.*,1 | 76 | 1,413 | ||||||
NOW, Inc.* | 125 | 1,379 | ||||||
ProPetro Holding Corp.* | 66 | 1,331 | ||||||
Unit Corp.* | 60 | 1,320 | ||||||
Noble Corporation plc* | 285 | 1,288 | ||||||
Helix Energy Solutions Group, Inc.* | 165 | 1,244 | ||||||
Forum Energy Technologies, Inc.* | 80 | 1,244 | ||||||
Exterran Corp.* | 38 | 1,195 | ||||||
Halcon Resources Corp.* | 151 | 1,143 | ||||||
Jagged Peak Energy, Inc.*,1 | 66 | 1,041 | ||||||
WildHorse Resource Development Corp.*,1 | 56 | 1,031 | ||||||
Denbury Resources, Inc.* | 462 | 1,021 | ||||||
Warrior Met Coal, Inc. | 38 | 956 | ||||||
California Resources Corp.* | 49 | 953 | ||||||
Thermon Group Holdings, Inc.* | 38 | 899 | ||||||
SunCoke Energy, Inc.* | 75 | 899 | ||||||
SEACOR Holdings, Inc.* | 19 | 878 | ||||||
SandRidge Energy, Inc.* | 41 | 864 | ||||||
Archrock, Inc. | 81 | 850 | ||||||
Newpark Resources, Inc.* | 98 | 843 | ||||||
Ring Energy, Inc.* | 57 | 792 | ||||||
Resolute Energy Corp.*,1 | 25 | 787 | ||||||
Green Plains, Inc. | 45 | 758 | ||||||
Stone Energy Corp.* | 22 | 707 | ||||||
Par Pacific Holdings, Inc.* | 36 | 694 | ||||||
CVR Energy, Inc. | 18 | 670 | ||||||
Tellurian, Inc.* | 66 | 643 | ||||||
Bonanza Creek Energy, Inc.* | 23 | 635 | ||||||
Penn Virginia Corp.* | 16 | 626 | ||||||
TerraForm Power, Inc. — Class A | 52 | 622 | ||||||
Plug Power, Inc.* | 261 | 616 | ||||||
Sunrun, Inc.* | 99 | 584 | ||||||
REX American Resources Corp.* | 7 | 580 | ||||||
TETRA Technologies, Inc.* | 134 | 572 | ||||||
Select Energy Services, Inc. — Class A* | 31 | 565 | ||||||
Matrix Service Co.* | 31 | 552 | ||||||
Renewable Energy Group, Inc.* | 44 | 519 | ||||||
Bristow Group, Inc. | 37 | 498 | ||||||
Basic Energy Services, Inc.* | 20 | 469 | ||||||
Bill Barrett Corp.* | 88 | 451 | ||||||
Sanchez Energy Corp.* | 83 | 441 | ||||||
Abraxas Petroleum Corp.* | 176 | 433 | ||||||
FutureFuel Corp. | 29 | 409 | ||||||
Frank’s International N.V. | 58 | 386 | ||||||
Cloud Peak Energy, Inc.* | 86 | 383 | ||||||
Panhandle Oil and Gas, Inc. — Class A | 18 | 370 | ||||||
Natural Gas Services Group, Inc.* | 14 | 367 | ||||||
W&T Offshore, Inc.* | 110 | 364 | ||||||
Clean Energy Fuels Corp.* | 160 | 325 | ||||||
Trecora Resources* | 23 | 310 | ||||||
Flotek Industries, Inc.* | 65 | 303 | ||||||
CARBO Ceramics, Inc.*,1 | 27 | 275 | ||||||
Pioneer Energy Services Corp.* | 88 | 268 | ||||||
Solaris Oilfield Infrastructure, Inc. — Class A* | 12 | 257 | ||||||
Nabors Industries Ltd. | 37 | 253 | ||||||
Lilis Energy, Inc.* | 49 | 250 | ||||||
Era Group, Inc.* | 23 | 248 | ||||||
Eclipse Resources Corp.* | 103 | 247 | ||||||
TPI Composites, Inc.* | 12 | 245 | ||||||
SilverBow Resources, Inc.* | 8 | 238 | ||||||
Earthstone Energy, Inc. — Class A* | 22 | 234 | ||||||
Pacific Ethanol, Inc.* | 49 | 223 | ||||||
Midstates Petroleum Company, Inc.* | 13 | 216 | ||||||
Gulf Island Fabrication, Inc. | 16 | 215 | ||||||
Gastar Exploration, Inc.* | 204 | 214 | ||||||
Energy XXI Gulf Coast, Inc.* | 35 | 201 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 101 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 2x STRATEGY FUND |
Shares | Value | |||||||
Evolution Petroleum Corp. | 29 | $ | 199 | |||||
Geospace Technologies Corp.* | 15 | 195 | ||||||
NCS Multistage Holdings, Inc.* | 13 | 192 | ||||||
NACCO Industries, Inc. — Class A | 5 | 188 | ||||||
Mammoth Energy Services, Inc.* | 9 | 177 | ||||||
Independence Contract Drilling, Inc.* | 40 | 159 | ||||||
Parker Drilling Co.* | 157 | 157 | ||||||
PHI, Inc.* | 13 | 150 | ||||||
Approach Resources, Inc.* | 50 | 148 | ||||||
Key Energy Services, Inc.* | 12 | 141 | ||||||
Contango Oil & Gas Co.* | 28 | 132 | ||||||
Vivint Solar, Inc.* | 30 | 121 | ||||||
Hallador Energy Co. | 18 | 109 | ||||||
EP Energy Corp. — Class A* | 46 | 109 | ||||||
Isramco, Inc.* | 1 | 105 | ||||||
Adams Resources & Energy, Inc. | 2 | 87 | ||||||
Jones Energy, Inc. — Class A* | 58 | 64 | ||||||
Ramaco Resources, Inc.* | 7 | 48 | ||||||
Ranger Energy Services, Inc.* | 5 | 46 | ||||||
Westmoreland Coal Co.* | 22 | 27 | ||||||
Rosehill Resources, Inc.* | 3 | 24 | ||||||
Total Energy | 91,884 | |||||||
Basic Materials - 1.3% | ||||||||
PolyOne Corp. | 94 | 4,089 | ||||||
Sensient Technologies Corp. | 52 | 3,804 | ||||||
Ingevity Corp.* | 50 | 3,524 | ||||||
Allegheny Technologies, Inc.* | 145 | 3,500 | ||||||
HB Fuller Co. | 59 | 3,178 | ||||||
US Silica Holdings, Inc. | 96 | 3,126 | ||||||
Balchem Corp. | 37 | 2,982 | ||||||
Commercial Metals Co. | 136 | 2,900 | ||||||
Compass Minerals International, Inc.1 | 40 | 2,890 | ||||||
Carpenter Technology Corp. | 55 | 2,805 | ||||||
Minerals Technologies, Inc. | 40 | 2,754 | ||||||
GCP Applied Technologies, Inc.* | 84 | 2,680 | ||||||
Cleveland-Cliffs, Inc.* | 349 | 2,516 | ||||||
Ferro Corp.* | 99 | 2,335 | ||||||
Quaker Chemical Corp. | 15 | 2,262 | ||||||
Kaiser Aluminum Corp. | 20 | 2,137 | ||||||
Tronox Ltd. — Class A | 103 | 2,113 | ||||||
AK Steel Holding Corp.* | 367 | 2,077 | ||||||
Innospec, Inc. | 28 | 1,977 | ||||||
Stepan Co. | 24 | 1,895 | ||||||
Hecla Mining Co. | 459 | 1,822 | ||||||
Neenah Paper, Inc. | 19 | 1,722 | ||||||
Kraton Corp.* | 35 | 1,686 | ||||||
Coeur Mining, Inc.* | 212 | 1,590 | ||||||
Schweitzer-Mauduit International, Inc. | 35 | 1,588 | ||||||
AdvanSix, Inc.* | 35 | 1,472 | ||||||
Calgon Carbon Corp. | 59 | 1,257 | ||||||
A. Schulman, Inc. | 33 | 1,229 | ||||||
Koppers Holdings, Inc.* | 24 | 1,222 | ||||||
Deltic Timber Corp. | 13 | 1,190 | ||||||
Century Aluminum Co.* | 58 | 1,139 | ||||||
Materion Corp. | 23 | 1,118 | ||||||
Schnitzer Steel Industries, Inc. — Class A | 32 | 1,072 | ||||||
PH Glatfelter Co. | 50 | 1,072 | ||||||
Innophos Holdings, Inc. | 22 | 1,028 | ||||||
Rayonier Advanced Materials, Inc. | 50 | 1,023 | ||||||
Fairmount Santrol Holdings, Inc.*,1 | 181 | 947 | ||||||
Clearwater Paper Corp.* | 19 | 862 | ||||||
CSW Industrials, Inc.* | 17 | 781 | ||||||
KMG Chemicals, Inc. | 11 | 727 | ||||||
Verso Corp. — Class A* | 40 | 703 | ||||||
Kronos Worldwide, Inc. | 26 | 670 | ||||||
American Vanguard Corp. | 33 | 648 | ||||||
PQ Group Holdings, Inc.* | 34 | 559 | ||||||
Klondex Mines Ltd.* | 205 | 535 | ||||||
Intrepid Potash, Inc.* | 111 | 528 | ||||||
OMNOVA Solutions, Inc.* | 50 | 500 | ||||||
Codexis, Inc.* | 48 | 401 | ||||||
Landec Corp.* | 31 | 391 | ||||||
Hawkins, Inc. | 11 | 387 | ||||||
Aceto Corp. | 34 | 351 | ||||||
Uranium Energy Corp.* | 160 | 283 | ||||||
Gold Resource Corp. | 62 | 273 | ||||||
Oil-Dri Corporation of America | 6 | 249 | ||||||
Smart Sand, Inc.* | 25 | 216 | ||||||
Ryerson Holding Corp.* | 19 | 198 | ||||||
AgroFresh Solutions, Inc.* | 26 | 192 | ||||||
Valhi, Inc. | 29 | 179 | ||||||
United States Lime & Minerals, Inc. | 2 | 154 | ||||||
Shiloh Industries, Inc.* | 16 | 131 | ||||||
Orchids Paper Products Co.1 | 10 | 128 | ||||||
Total Basic Materials | 87,767 | |||||||
Utilities - 1.2% | ||||||||
IDACORP, Inc. | 59 | 5,390 | ||||||
WGL Holdings, Inc. | 59 | 5,065 | ||||||
Portland General Electric Co. | 104 | 4,740 | ||||||
ONE Gas, Inc. | 62 | 4,542 | ||||||
Southwest Gas Holdings, Inc. | 56 | 4,507 | ||||||
ALLETE, Inc. | 60 | 4,462 | ||||||
Spire, Inc. | 55 | 4,133 | ||||||
New Jersey Resources Corp. | 100 | 4,020 | ||||||
Avista Corp. | 75 | 3,862 | ||||||
PNM Resources, Inc. | 93 | 3,762 | ||||||
Black Hills Corp. | 62 | 3,727 | ||||||
NorthWestern Corp. | 57 | 3,403 | ||||||
Ormat Technologies, Inc. | 46 | 2,942 | ||||||
South Jersey Industries, Inc. | 93 | 2,904 | ||||||
El Paso Electric Co. | 47 | 2,601 | ||||||
MGE Energy, Inc. | 41 | 2,587 | ||||||
California Water Service Group | 57 | 2,585 | ||||||
American States Water Co. | 43 | 2,490 | ||||||
Otter Tail Corp. | 46 | 2,045 | ||||||
Northwest Natural Gas Co. | 33 | 1,968 | ||||||
Dynegy, Inc.* | 130 | 1,540 | ||||||
Chesapeake Utilities Corp. | 18 | 1,414 | ||||||
NRG Yield, Inc. — Class C | 74 | 1,399 | ||||||
SJW Group | 20 | 1,277 | ||||||
NRG Yield, Inc. — Class A | 42 | 792 | ||||||
Connecticut Water Service, Inc. | 13 | 746 |
102 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 2x STRATEGY FUND |
Shares | Value | |||||||
Unitil Corp. | 16 | $ | 730 | |||||
Middlesex Water Co. | 18 | 718 | ||||||
York Water Co. | 15 | 509 | ||||||
Artesian Resources Corp. — Class A | 9 | 347 | ||||||
Atlantic Power Corp.* | 133 | 313 | ||||||
RGC Resources, Inc. | 8 | 217 | ||||||
Consolidated Water Company Ltd. | 17 | 214 | ||||||
Ameresco, Inc. — Class A* | 22 | 189 | ||||||
Spark Energy, Inc. — Class A | 13 | 161 | ||||||
Global Water Resources, Inc. | 12 | 112 | ||||||
Genie Energy Ltd. — Class B | 15 | 65 | ||||||
Total Utilities | 82,478 | |||||||
Diversified - 0.0% | ||||||||
HRG Group, Inc.* | 140 | 2,373 | ||||||
Government - 0.0% | ||||||||
Banco Latinoamericano de Comercio Exterior S.A. — Class E | 35 | 942 | ||||||
Total Common Stocks | ||||||||
(Cost $2,238,295) | 2,431,799 | |||||||
WARRANTS†† - 0.0% | ||||||||
Imperial Holdings, Inc.* | ||||||||
$10.75, 10/06/19 | 1 | — | ||||||
Total Warrants | ||||||||
(Cost $—) | — | |||||||
RIGHTS††† - 0.0% | ||||||||
Omthera Pharmaceuticals, Inc. | ||||||||
Expires 12/31/20*,7 | 10 | — | ||||||
Tobira Therapeutics, Inc. | ||||||||
Expires 11/02/18*,7 | 7 | — | ||||||
Dyax Corp. | ||||||||
Expires 03/06/18*,7 | 106 | — | ||||||
Nexstar Media Group, Inc. | ||||||||
Expires 01/18/19*,7 | 207 | — | ||||||
Total Rights | ||||||||
(Cost $—) | — | |||||||
MUTUAL FUNDS† - 39.0% | ||||||||
Guggenheim Strategy Fund I2 | 65,048 | 1,630,101 | ||||||
Guggenheim Strategy Fund II2 | 44,680 | 1,117,448 | ||||||
Total Mutual Funds | ||||||||
(Cost $2,744,920) | 2,747,549 | |||||||
Face Amount | ||||||||
REPURCHASE AGREEMENTS††,3 - 29.3% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/184 | $ | 1,344,184 | 1,344,184 | |||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/184 | 717,395 | 717,395 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $2,061,579) | 2,061,579 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,5 - 0.9% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%6 | 63,092 | 63,092 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $63,092) | 63,092 | |||||||
Total Investments - 103.8% | ||||||||
(Cost $7,107,886) | $ | 7,304,019 | ||||||
Other Assets & Liabilities, net - (3.8)% | (264,219 | ) | ||||||
Total Net Assets - 100.0% | $ | 7,039,800 |
Futures Contracts | ||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Value and Unrealized Loss | ||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||
Russell 2000 Index Mini Futures Contracts | 21 | Mar 2018 | $ | 1,613,955 | $ | (2,205 | ) |
Total Return Swap Agreements | ||||||||||||||||||||||
Counterparty | Index | Financing Rate Pay (Receive) | Payment Frequency | Maturity Date | Units | Notional Amount | Value and Unrealized Loss | |||||||||||||||
OTC Equity Index Swap Agreements†† | ||||||||||||||||||||||
BNP Paribas | Russell 2000 Index | 1.57 | % | At Maturity | 01/29/18 | 320 | $ | 490,739 | $ | (2,693 | ) | |||||||||||
Barclays Bank plc | Russell 2000 Index | 1.48 | % | At Maturity | 01/30/18 | 759 | 1,165,978 | (10,186 | ) | |||||||||||||
Goldman Sachs International | Russell 2000 Index | 1.33 | % | At Maturity | 01/29/18 | 5,495 | 8,436,859 | (48,213 | ) | |||||||||||||
$ | 10,093,576 | $ | (61,092 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 103 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 2x STRATEGY FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
††† | Value determined based on Level 3 inputs — See Note 4. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 7. |
2 | Affiliated issuer. |
3 | Repurchase Agreements — See Note 6. |
4 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2017. |
5 | Securities lending collateral — See Note 7. |
6 | Rate indicated is the 7 day yield as of December 31, 2017. |
7 | Security was fair valued by the Valuation Committee at December 31, 2017. The total market value of fair valued securities amounts to $0, (cost $0) or 0.0% of total net assets. |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Common Stocks | $ | 2,431,799 | $ | — | $ | — | $ | — | $ | — | $ | 2,431,799 | ||||||||||||
Mutual Funds | 2,747,549 | — | — | — | — | 2,747,549 | ||||||||||||||||||
Repurchase Agreements | — | — | 2,061,579 | — | — | 2,061,579 | ||||||||||||||||||
Rights | — | — | — | — | — | ** | — | |||||||||||||||||
Securities Lending Collateral | 63,092 | — | — | — | — | 63,092 | ||||||||||||||||||
Warrants | — | — | — | ** | — | — | — | |||||||||||||||||
Total Assets | $ | 5,242,440 | $ | — | $ | 2,061,579 | $ | — | $ | — | $ | 7,304,019 | ||||||||||||
Investments in Securities (Liabilities) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Equity Futures Contracts | $ | — | $ | 2,205 | $ | — | $ | — | $ | — | $ | 2,205 | ||||||||||||
Equity Index Swap Agreements | — | — | — | 61,092 | — | 61,092 | ||||||||||||||||||
Total Liabilities | $ | — | $ | 2,205 | $ | — | $ | 61,092 | $ | — | $ | 63,297 |
* | Other financial instruments include futures contracts and swaps, which are reported as unrealized gain/loss at period end. |
** | Security has a market value of $0. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
104 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
RUSSELL 2000® 2x STRATEGY FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a portfolio company of a fund, or control of or by, or common control under GI, result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act.
The Fund may invest in the underlying series of the Guggenheim Strategy Funds Trust consisting of Guggenheim Strategy Fund I, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III (collectively, the “Cash Management Funds”), open-end management investment companies managed by GI. The Cash Management Funds, which launched on March 11, 2014, are offered as cash management options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Cash Management Funds pay no investment management fees. The Cash Management Funds’ annual report on Form N-CSR dated September 30, 2017, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180417000715/gug72218.htm.
Transactions during the year ended December 31, 2017, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value 12/31/16 | Additions | Reductions | Realized Gain (Loss) | Change in Unrealized | Value 12/31/17 | Shares 12/31/17 | Investment Income | Capital Gain Distributions |
Mutual Funds | |||||||||
Guggenheim Strategy Fund I | $ 436,793 | $ 9,967,476 | $ (8,775,000) | $ 1,765 | $ (933) | $ 1,630,101 | 65,048 | $ 26,817 | $ 616 |
Guggenheim Strategy Fund II | 353,725 | 6,111,184 | (5,350,000) | 1,585 | 954 | 1,117,448 | 44,680 | 20,888 | 302 |
$ 790,518 | $ 16,078,660 | $ (14,125,000) | $ 3,350 | $ 21 | $ 2,747,549 | $ 47,705 | $ 918 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 105 |
RUSSELL 2000® 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2017 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $60,144 of securities loaned (cost $2,301,387) | $ | 2,494,891 | ||
Investments in affiliated issuers, at value (cost $2,744,920) | 2,747,549 | |||
Repurchase agreements, at value (cost $2,061,579) | 2,061,579 | |||
Segregated cash with broker | 339,000 | |||
Receivables: | ||||
Fund shares sold | 52,776 | |||
Swap settlement | 10,276 | |||
Dividends | 7,125 | |||
Interest | 242 | |||
Securities lending income | 161 | |||
Total assets | 7,713,599 | |||
Liabilities: | ||||
Overdraft due to custodian bank | 5,101 | |||
Unrealized depreciation on swap agreements | 61,092 | |||
Payable for: | ||||
Securities purchased | 503,637 | |||
Return of securities loaned | 63,092 | |||
Variation margin | 12,449 | |||
Management fees | 5,152 | |||
Transfer agent and administrative fees | 1,431 | |||
Investor service fees | 1,431 | |||
Fund shares redeemed | 899 | |||
Portfolio accounting fees | 573 | |||
Miscellaneous | 18,942 | |||
Total liabilities | 673,799 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 7,039,800 | ||
Net assets consist of: | ||||
Paid in capital | $ | 6,503,851 | ||
Accumulated net investment loss | (15 | ) | ||
Accumulated net realized gain on investments | 403,128 | |||
Net unrealized appreciation on investments | 132,836 | |||
Net assets | $ | 7,039,800 | ||
Capital shares outstanding | 30,001 | |||
Net asset value per share | $ | 234.65 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $7) | $ | 21,940 | ||
Dividends from securities of affiliated issuers | 47,705 | |||
Interest | 13,822 | |||
Income from securities lending, net | 1,429 | |||
Total investment income | 84,896 | |||
Expenses: | ||||
Management fees | 53,813 | |||
Investor service fees | 14,948 | |||
Transfer agent and administrative fees | 14,948 | |||
Professional fees | 8,682 | |||
Portfolio accounting fees | 5,979 | |||
Custodian fees | 1,038 | |||
Trustees’ fees* | 666 | |||
Line of credit fees | 58 | |||
Miscellaneous | 7,769 | |||
Total expenses | 107,901 | |||
Net investment loss | (23,005 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 378,822 | |||
Investments in affiliated issuers | 3,350 | |||
Swap agreements | 805,123 | |||
Futures contracts | 84,825 | |||
Distributions received from affiliated investment company shares | 918 | |||
Net realized gain | 1,273,038 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (133,019 | ) | ||
Investments in affiliated issuers | 21 | |||
Swap agreements | (119,122 | ) | ||
Futures contracts | (1,989 | ) | ||
Net change in unrealized appreciation (depreciation) | (254,109 | ) | ||
Net realized and unrealized gain | 1,018,929 | |||
Net increase in net assets resulting from operations | $ | 995,924 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
106 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RUSSELL 2000® 2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (23,005 | ) | $ | (33,078 | ) | ||
Net realized gain on investments | 1,273,038 | 1,695,224 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (254,109 | ) | 193,861 | |||||
Net increase in net assets resulting from operations | 995,924 | 1,856,007 | ||||||
Distributions to shareholders from: | ||||||||
Net realized gains | (219,611 | ) | — | |||||
Total distributions to shareholders | (219,611 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 87,748,901 | 113,812,849 | ||||||
Distributions reinvested | 219,611 | — | ||||||
Cost of shares redeemed | (87,451,791 | ) | (112,691,802 | ) | ||||
Net increase from capital share transactions | 516,721 | 1,121,047 | ||||||
Net increase in net assets | 1,293,034 | 2,977,054 | ||||||
Net assets: | ||||||||
Beginning of year | 5,746,766 | 2,769,712 | ||||||
End of year | $ | 7,039,800 | $ | 5,746,766 | ||||
Accumulated net investment loss at end of year | $ | (15 | ) | $ | (252 | ) | ||
Capital share activity: | ||||||||
Shares sold | 443,643 | 706,410 | ||||||
Shares issued from reinvestment of distributions | 1,079 | — | ||||||
Shares redeemed | (444,510 | ) | (696,448 | ) | ||||
Net increase in shares | 212 | 9,962 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 107 |
RUSSELL 2000® 2x STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 192.92 | $ | 139.69 | $ | 180.03 | $ | 262.78 | $ | 141.50 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.79 | ) | (1.11 | ) | (1.73 | ) | (2.53 | ) | (1.63 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 50.24 | 54.34 | (17.40 | ) | 11.64 | 122.91 | ||||||||||||||
Total from investment operations | 49.45 | 53.23 | (19.13 | ) | 9.11 | 121.28 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (7.72 | ) | — | (21.21 | ) | (91.86 | ) | — | ||||||||||||
Total distributions | (7.72 | ) | — | (21.21 | ) | (91.86 | ) | — | ||||||||||||
Net asset value, end of period | $ | 234.65 | $ | 192.92 | $ | 139.69 | $ | 180.03 | $ | 262.78 | ||||||||||
Total Returnb | 26.26 | % | 38.11 | % | (13.15 | %) | 5.17 | % | 85.72 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 7,040 | $ | 5,747 | $ | 2,770 | $ | 5,528 | $ | 5,196 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.38 | %) | (0.74 | %) | (1.00 | %) | (1.07 | %) | (0.86 | %) | ||||||||||
Total expensesc | 1.80 | % | 1.77 | % | 1.70 | % | 1.77 | % | 1.75 | % | ||||||||||
Portfolio turnover rate | 525 | % | 1,125 | % | 327 | % | 360 | % | 80 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
108 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
RUSSELL 2000® 1.5x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that correlate, before fees and expenses, to the performance of a specific benchmark for small-cap securities on a daily basis. The Fund’s current benchmark is 150% of the Russell 2000® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2017, Russell 2000® 1.5x Strategy Fund maintained a daily correlation of over 99% to its benchmark of 150% of the daily price movement of the Russell 2000 Index. Russell 2000® 1.5x Strategy Fund returned 20.01%, while the Russell 2000 Index returned 14.65% over the same time period.
Among sectors, the biggest performance contributors to the underlying index during the period were Health Care and Information Technology. The only sector detracting from return was Energy; Telecommunications Services contributed least.
Nektar Therapeutics, Kite Pharma, Inc., and bluebird bio, Inc. were the largest contributors to performance of the underlying index for the year. U.S. Silica Holdings, Inc., Oasis Petroleum, Inc., and Cardtronics plc Class A were the leading detractors from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes.
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 6 of this report.
Performance displayed represents past performance, which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 109 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments or investments in Guggenheim Strategy Funds Trust mutual funds. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: October 1, 2001
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund I | 28.5% |
Guggenheim Strategy Fund II | 28.0% |
Nektar Therapeutics | 0.1% |
Bluebird Bio, Inc. | 0.1% |
Exact Sciences Corp. | 0.1% |
GrubHub, Inc. | 0.1% |
Sage Therapeutics, Inc. | 0.1% |
Knight-Swift Transportation Holdings, Inc. | 0.1% |
EPAM Systems, Inc. | 0.1% |
Curtiss-Wright Corp. | 0.1% |
Top Ten Total | 57.3% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments.
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Russell 2000® 1.5x Strategy Fund | 20.01% | 18.67% | 8.47% |
Russell 2000 Index | 14.65% | 17.20% | 10.82% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell 2000 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
110 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
RUSSELL 2000® 1.5x STRATEGY FUND |
Shares | Value | |||||||
COMMON STOCKS† - 24.7% | ||||||||
Financial - 6.1% | ||||||||
Sterling Bancorp | 230 | $ | 5,658 | |||||
MGIC Investment Corp.* | 396 | 5,588 | ||||||
Primerica, Inc. | 50 | 5,078 | ||||||
Wintrust Financial Corp. | 61 | 5,025 | ||||||
Umpqua Holdings Corp. | 238 | 4,950 | ||||||
Radian Group, Inc. | 234 | 4,823 | ||||||
Texas Capital Bancshares, Inc.* | 54 | 4,801 | ||||||
Hancock Holding Co. | 91 | 4,504 | ||||||
CNO Financial Group, Inc. | 182 | 4,494 | ||||||
Gramercy Property Trust REIT | 163 | 4,346 | ||||||
Stifel Financial Corp. | 72 | 4,288 | ||||||
Healthcare Realty Trust, Inc. REIT | 132 | 4,240 | ||||||
IBERIABANK Corp. | 54 | 4,185 | ||||||
Cousins Properties, Inc. REIT | 449 | 4,153 | ||||||
Chemical Financial Corp. | 77 | 4,117 | ||||||
First Industrial Realty Trust, Inc. REIT | 128 | 4,028 | ||||||
RLJ Lodging Trust REIT | 183 | 4,021 | ||||||
Sunstone Hotel Investors, Inc. REIT | 242 | 4,000 | ||||||
Home BancShares, Inc. | 169 | 3,929 | ||||||
MB Financial, Inc. | 88 | 3,918 | ||||||
Evercore, Inc. — Class A | 43 | 3,870 | ||||||
Investors Bancorp, Inc. | 278 | 3,859 | ||||||
Essent Group Ltd.* | 87 | 3,778 | ||||||
United Bankshares, Inc. | 107 | 3,718 | ||||||
Selective Insurance Group, Inc. | 62 | 3,639 | ||||||
UMB Financial Corp. | 49 | 3,524 | ||||||
Physicians Realty Trust REIT | 193 | 3,472 | ||||||
Cathay General Bancorp | 82 | 3,458 | ||||||
LaSalle Hotel Properties REIT | 123 | 3,453 | ||||||
Columbia Banking System, Inc. | 78 | 3,388 | ||||||
Fulton Financial Corp. | 186 | 3,329 | ||||||
South State Corp. | 38 | 3,312 | ||||||
Glacier Bancorp, Inc. | 84 | 3,309 | ||||||
EastGroup Properties, Inc. REIT1 | 37 | 3,270 | ||||||
Washington Federal, Inc. | 95 | 3,254 | ||||||
Ryman Hospitality Properties, Inc. REIT | 47 | 3,244 | ||||||
National Health Investors, Inc. REIT | 43 | 3,241 | ||||||
First Citizens BancShares, Inc. — Class A | 8 | 3,224 | ||||||
Ellie Mae, Inc.* | 36 | 3,218 | ||||||
Sabra Health Care REIT, Inc. | 171 | 3,210 | ||||||
GEO Group, Inc. REIT | 133 | 3,139 | ||||||
Valley National Bancorp | 277 | 3,108 | ||||||
First Financial Bankshares, Inc.1 | 68 | 3,063 | ||||||
Kemper Corp. | 42 | 2,894 | ||||||
BancorpSouth Bank | 92 | 2,893 | ||||||
American Equity Investment Life Holding Co. | 93 | 2,858 | ||||||
Community Bank System, Inc. | 53 | 2,849 | ||||||
Education Realty Trust, Inc. REIT | 80 | 2,794 | ||||||
Pebblebrook Hotel Trust REIT | 74 | 2,751 | ||||||
STAG Industrial, Inc. REIT | 100 | 2,733 | ||||||
QTS Realty Trust, Inc. — Class A REIT | 50 | 2,708 | ||||||
Urban Edge Properties REIT | 106 | 2,702 | ||||||
WageWorks, Inc.* | 43 | 2,666 | ||||||
First Midwest Bancorp, Inc. | 111 | 2,665 | ||||||
PS Business Parks, Inc. REIT | 21 | 2,627 | ||||||
CVB Financial Corp. | 111 | 2,615 | ||||||
Washington Real Estate Investment Trust REIT | 84 | 2,614 | ||||||
Hope Bancorp, Inc. | 140 | 2,555 | ||||||
Old National Bancorp | 145 | 2,530 | ||||||
Great Western Bancorp, Inc. | 63 | 2,507 | ||||||
Xenia Hotels & Resorts, Inc. REIT | 116 | 2,504 | ||||||
RLI Corp. | 41 | 2,487 | ||||||
Acadia Realty Trust REIT | 89 | 2,435 | ||||||
DiamondRock Hospitality Co. REIT | 215 | 2,427 | ||||||
Enstar Group Ltd.* | 12 | 2,409 | ||||||
International Bancshares Corp. | 59 | 2,342 | ||||||
Trustmark Corp. | 73 | 2,326 | ||||||
Retail Opportunity Investments Corp. REIT | 116 | 2,314 | ||||||
Simmons First National Corp. — Class A | 40 | 2,284 | ||||||
Lexington Realty Trust REIT | 234 | 2,258 | ||||||
Kennedy-Wilson Holdings, Inc. | 128 | 2,221 | ||||||
Rexford Industrial Realty, Inc. REIT | 76 | 2,216 | ||||||
Potlatch Corp. REIT | 44 | 2,196 | ||||||
Invesco Mortgage Capital, Inc. REIT | 122 | 2,175 | ||||||
United Community Banks, Inc. | 77 | 2,167 | ||||||
ServisFirst Bancshares, Inc. | 51 | 2,117 | ||||||
Mack-Cali Realty Corp. REIT | 98 | 2,113 | ||||||
LegacyTexas Financial Group, Inc. | 50 | 2,110 | ||||||
Bank of NT Butterfield & Son Ltd. | 58 | 2,105 | ||||||
Blackhawk Network Holdings, Inc.* | 59 | 2,103 | ||||||
Apollo Commercial Real Estate Finance, Inc. REIT | 114 | 2,103 | ||||||
Independent Bank Corp. | 29 | 2,026 | ||||||
Hilltop Holdings, Inc. | 79 | 2,001 | ||||||
Banner Corp. | 36 | 1,984 | ||||||
Waddell & Reed Financial, Inc. — Class A | 88 | 1,966 | ||||||
BofI Holding, Inc.*,1 | 65 | 1,944 | ||||||
Horace Mann Educators Corp. | 44 | 1,940 | ||||||
Renasant Corp. | 47 | 1,922 | ||||||
Argo Group International Holdings Ltd. | 31 | 1,911 | ||||||
Eagle Bancorp, Inc.* | 33 | 1,911 | ||||||
Financial Engines, Inc. | 63 | 1,909 | ||||||
HFF, Inc. — Class A | 39 | 1,897 | ||||||
Artisan Partners Asset Management, Inc. — Class A | 48 | 1,896 | ||||||
Terreno Realty Corp. REIT | 54 | 1,893 | ||||||
FCB Financial Holdings, Inc. — Class A* | 37 | 1,880 | ||||||
TowneBank | 61 | 1,876 | ||||||
LTC Properties, Inc. REIT | 43 | 1,873 | ||||||
Government Properties Income Trust REIT | 101 | 1,873 | ||||||
WesBanco, Inc. | 46 | 1,870 | ||||||
Capitol Federal Financial, Inc. | 139 | 1,864 | ||||||
First Merchants Corp. | 44 | 1,851 | ||||||
Ameris Bancorp | 38 | 1,832 | ||||||
Provident Financial Services, Inc. | 67 | 1,807 | ||||||
Kite Realty Group Trust REIT | 89 | 1,744 | ||||||
First Financial Bancorp | 66 | 1,739 | ||||||
Select Income REIT | 69 | 1,734 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 111 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 1.5x STRATEGY FUND |
Shares | Value | |||||||
Chesapeake Lodging Trust REIT | 64 | $ | 1,734 | |||||
Northwest Bancshares, Inc. | 102 | 1,706 | ||||||
Summit Hotel Properties, Inc. REIT | 112 | 1,706 | ||||||
Union Bankshares Corp. | 47 | 1,700 | ||||||
Four Corners Property Trust, Inc. REIT | 66 | 1,696 | ||||||
NBT Bancorp, Inc. | 46 | 1,693 | ||||||
American Assets Trust, Inc. REIT | 44 | 1,683 | ||||||
Pacific Premier Bancorp, Inc.* | 42 | 1,680 | ||||||
Genworth Financial, Inc. — Class A* | 540 | 1,679 | ||||||
PRA Group, Inc.* | 50 | 1,660 | ||||||
Moelis & Co. — Class A | 34 | 1,649 | ||||||
Westamerica Bancorporation | 27 | 1,608 | ||||||
WSFS Financial Corp. | 33 | 1,579 | ||||||
WisdomTree Investments, Inc. | 125 | 1,569 | ||||||
Employers Holdings, Inc. | 35 | 1,554 | ||||||
Berkshire Hills Bancorp, Inc. | 42 | 1,537 | ||||||
Agree Realty Corp. REIT | 29 | 1,492 | ||||||
First Commonwealth Financial Corp. | 104 | 1,489 | ||||||
Global Net Lease, Inc. REIT | 72 | 1,482 | ||||||
CenterState Bank Corp. | 57 | 1,467 | ||||||
Park National Corp. | 14 | 1,456 | ||||||
Washington Prime Group, Inc. REIT | 202 | 1,438 | ||||||
S&T Bancorp, Inc. | 36 | 1,433 | ||||||
Walker & Dunlop, Inc.* | 30 | 1,425 | ||||||
Third Point Reinsurance Ltd.* | 97 | 1,421 | ||||||
LendingClub Corp.* | 342 | 1,412 | ||||||
Quality Care Properties, Inc. REIT* | 102 | 1,409 | ||||||
Heartland Financial USA, Inc. | 26 | 1,395 | ||||||
Piper Jaffray Cos. | 16 | 1,380 | ||||||
Boston Private Financial Holdings, Inc. | 89 | 1,375 | ||||||
OM Asset Management plc | 82 | 1,374 | ||||||
Alexander & Baldwin, Inc. REIT | 49 | 1,359 | ||||||
CareTrust REIT, Inc. REIT | 81 | 1,358 | ||||||
Monmouth Real Estate Investment Corp. REIT | 75 | 1,335 | ||||||
Kearny Financial Corp. | 92 | 1,329 | ||||||
CYS Investments, Inc. REIT | 163 | 1,309 | ||||||
Tompkins Financial Corp. | 16 | 1,302 | ||||||
Brookline Bancorp, Inc. | 82 | 1,287 | ||||||
Independent Bank Group, Inc. | 19 | 1,284 | ||||||
National Storage Affiliates Trust REIT | 47 | 1,281 | ||||||
Hannon Armstrong Sustainable Infrastructure Capital, Inc. REIT | 53 | 1,275 | ||||||
Infinity Property & Casualty Corp. | 12 | 1,272 | ||||||
Lakeland Financial Corp. | 26 | 1,261 | ||||||
Ramco-Gershenson Properties Trust REIT | 84 | 1,237 | ||||||
Beneficial Bancorp, Inc. | 75 | 1,234 | ||||||
AMERISAFE, Inc. | 20 | 1,232 | ||||||
Redwood Trust, Inc. REIT | 83 | 1,230 | ||||||
Franklin Street Properties Corp. REIT | 114 | 1,224 | ||||||
State Bank Financial Corp. | 41 | 1,223 | ||||||
Aircastle Ltd. | 52 | 1,216 | ||||||
Safety Insurance Group, Inc. | 15 | 1,206 | ||||||
Nelnet, Inc. — Class A | 22 | 1,205 | ||||||
First Busey Corp. | 40 | 1,198 | ||||||
Houlihan Lokey, Inc. | 26 | 1,181 | ||||||
First Interstate BancSystem, Inc. — Class A | 29 | 1,161 | ||||||
PennyMac Mortgage Investment Trust REIT | 72 | 1,157 | ||||||
Cannae Holdings, Inc.* | 67 | 1,141 | ||||||
Cohen & Steers, Inc. | 24 | 1,135 | ||||||
Seacoast Banking Corporation of Florida* | 45 | 1,134 | ||||||
ARMOUR Residential REIT, Inc. | 43 | 1,106 | ||||||
Encore Capital Group, Inc.* | 26 | 1,095 | ||||||
Seritage Growth Properties REIT | 27 | 1,092 | ||||||
Ladder Capital Corp. — Class A REIT | 80 | 1,090 | ||||||
Enterprise Financial Services Corp. | 24 | 1,084 | ||||||
City Holding Co. | 16 | 1,080 | ||||||
Navigators Group, Inc. | 22 | 1,071 | ||||||
First BanCorp*,1 | 207 | 1,056 | ||||||
NMI Holdings, Inc. — Class A* | 62 | 1,054 | ||||||
Meridian Bancorp, Inc. | 51 | 1,051 | ||||||
United Fire Group, Inc. | 23 | 1,048 | ||||||
National General Holdings Corp. | 53 | 1,041 | ||||||
Tier REIT, Inc. | 51 | 1,040 | ||||||
CBL & Associates Properties, Inc. REIT1 | 182 | 1,030 | ||||||
Meta Financial Group, Inc. | 11 | 1,019 | ||||||
Sandy Spring Bancorp, Inc. | 26 | 1,015 | ||||||
Hanmi Financial Corp. | 33 | 1,002 | ||||||
James River Group Holdings Ltd. | 25 | 1,000 | ||||||
MBIA, Inc.*,1 | 135 | 988 | ||||||
Heritage Financial Corp. | 32 | 986 | ||||||
Central Pacific Financial Corp. | 33 | 984 | ||||||
MainSource Financial Group, Inc. | 27 | 980 | ||||||
Southside Bancshares, Inc. | 29 | 977 | ||||||
Universal Health Realty Income Trust REIT | 13 | 976 | ||||||
Stewart Information Services Corp. | 23 | 973 | ||||||
St. Joe Co.* | 53 | 957 | ||||||
First Bancorp | 27 | 953 | ||||||
United Financial Bancorp, Inc. | 54 | 953 | ||||||
Banc of California, Inc.1 | 46 | 950 | ||||||
Lakeland Bancorp, Inc. | 49 | 943 | ||||||
AmTrust Financial Services, Inc.1 | 93 | 937 | ||||||
Chatham Lodging Trust REIT | 41 | 933 | ||||||
RE/MAX Holdings, Inc. — Class A | 19 | 921 | ||||||
BancFirst Corp. | 18 | 921 | ||||||
TrustCo Bank Corp. NY | 100 | 920 | ||||||
PJT Partners, Inc. — Class A | 20 | 912 | ||||||
National Bank Holdings Corp. — Class A | 28 | 908 | ||||||
MTGE Investment Corp. REIT | 49 | 906 | ||||||
Universal Insurance Holdings, Inc. | 33 | 903 | ||||||
Getty Realty Corp. REIT | 33 | 896 | ||||||
Capstead Mortgage Corp. REIT | 103 | 891 | ||||||
1st Source Corp. | 18 | 890 | ||||||
Pennsylvania Real Estate Investment Trust REIT | 74 | 880 | ||||||
Easterly Government Properties, Inc. REIT | 41 | 875 | ||||||
TriCo Bancshares | 23 | 871 | ||||||
Stock Yards Bancorp, Inc. | 23 | 867 | ||||||
OceanFirst Financial Corp. | 33 | 866 | ||||||
Flagstar Bancorp, Inc.* | 23 | 861 | ||||||
Washington Trust Bancorp, Inc. | 16 | 852 | ||||||
ConnectOne Bancorp, Inc. | 33 | 850 |
112 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 1.5x STRATEGY FUND |
Shares | Value | |||||||
iStar, Inc. REIT* | 75 | $ | 847 | |||||
InfraREIT, Inc. | 45 | 836 | ||||||
Preferred Bank/Los Angeles CA | 14 | 823 | ||||||
CoBiz Financial, Inc. | 41 | 820 | ||||||
Granite Point Mortgage Trust, Inc. REIT | 46 | 816 | ||||||
Virtus Investment Partners, Inc. | 7 | 805 | ||||||
Community Trust Bancorp, Inc. | 17 | 801 | ||||||
Flushing Financial Corp. | 29 | 798 | ||||||
Bryn Mawr Bank Corp. | 18 | 796 | ||||||
NorthStar Realty Europe Corp. REIT | 59 | 792 | ||||||
Alexander’s, Inc. REIT | 2 | 792 | ||||||
Northfield Bancorp, Inc. | 46 | 786 | ||||||
Univest Corporation of Pennsylvania | 28 | 785 | ||||||
Ambac Financial Group, Inc.* | 49 | 783 | ||||||
HomeStreet, Inc.* | 27 | 782 | ||||||
Customers Bancorp, Inc.* | 30 | 780 | ||||||
German American Bancorp, Inc. | 22 | 777 | ||||||
Independence Realty Trust, Inc. REIT | 75 | 757 | ||||||
Cass Information Systems, Inc. | 13 | 757 | ||||||
New York Mortgage Trust, Inc. REIT | 121 | 747 | ||||||
Armada Hoffler Properties, Inc. REIT | 48 | 745 | ||||||
Carolina Financial Corp. | 20 | 743 | ||||||
First of Long Island Corp. | 26 | 741 | ||||||
Saul Centers, Inc. REIT | 12 | 741 | ||||||
Investors Real Estate Trust REIT | 129 | 733 | ||||||
Hersha Hospitality Trust REIT | 42 | 731 | ||||||
Kinsale Capital Group, Inc. | 16 | 720 | ||||||
Dime Community Bancshares, Inc. | 34 | 712 | ||||||
Preferred Apartment Communities, Inc. — Class A REIT | 35 | 709 | ||||||
Oritani Financial Corp. | 43 | 705 | ||||||
Federal Agricultural Mortgage Corp. — Class C | 9 | 704 | ||||||
Trupanion, Inc.* | 24 | 702 | ||||||
Bridge Bancorp, Inc. | 20 | 700 | ||||||
FBL Financial Group, Inc. — Class A | 10 | 696 | ||||||
Guaranty Bancorp | 25 | 691 | ||||||
INTL FCStone, Inc.* | 16 | 681 | ||||||
Camden National Corp. | 16 | 674 | ||||||
Urstadt Biddle Properties, Inc. — Class A REIT | 31 | 674 | ||||||
Investment Technology Group, Inc. | 35 | 674 | ||||||
New Senior Investment Group, Inc. REIT | 89 | 673 | ||||||
Greenlight Capital Re Ltd. — Class A* | 33 | 663 | ||||||
National Western Life Group, Inc. — Class A | 2 | 662 | ||||||
Altisource Residential Corp. REIT | 54 | 640 | ||||||
Horizon Bancorp | 23 | 639 | ||||||
Mercantile Bank Corp. | 18 | 637 | ||||||
Peapack Gladstone Financial Corp. | 18 | 630 | ||||||
Diamond Hill Investment Group, Inc. | 3 | 620 | ||||||
Great Southern Bancorp, Inc. | 12 | 620 | ||||||
Gladstone Commercial Corp. REIT | 29 | 611 | ||||||
Opus Bank* | 22 | 601 | ||||||
Heritage Commerce Corp. | 39 | 597 | ||||||
Westwood Holdings Group, Inc. | 9 | 596 | ||||||
FB Financial Corp.* | 14 | 588 | ||||||
PHH Corp.* | 57 | 587 | ||||||
Marcus & Millichap, Inc.* | 18 | 587 | ||||||
Greenhill & Company, Inc. | 30 | 585 | ||||||
Midland States Bancorp, Inc. | 18 | 585 | ||||||
First Foundation, Inc.* | 31 | 575 | ||||||
Nationstar Mortgage Holdings, Inc.* | 31 | 574 | ||||||
Live Oak Bancshares, Inc. | 24 | 572 | ||||||
AG Mortgage Investment Trust, Inc. REIT | 30 | 570 | ||||||
Triumph Bancorp, Inc.* | 18 | 567 | ||||||
Whitestone REIT — Class B | 39 | 562 | ||||||
Ashford Hospitality Trust, Inc. REIT | 83 | 559 | ||||||
QCR Holdings, Inc. | 13 | 557 | ||||||
Anworth Mortgage Asset Corp. REIT | 102 | 555 | ||||||
Peoples Bancorp, Inc. | 17 | 555 | ||||||
TriState Capital Holdings, Inc.* | 24 | 552 | ||||||
Cedar Realty Trust, Inc. REIT | 89 | 541 | ||||||
CatchMark Timber Trust, Inc. — Class A REIT | 41 | 538 | ||||||
Bancorp, Inc.* | 54 | 534 | ||||||
Enova International, Inc.* | 35 | 532 | ||||||
NexPoint Residential Trust, Inc. REIT | 19 | 531 | ||||||
Hamilton Lane, Inc. — Class A | 15 | 531 | ||||||
State Auto Financial Corp. | 18 | 524 | ||||||
Blue Hills Bancorp, Inc. | 26 | 523 | ||||||
First Defiance Financial Corp. | 10 | 520 | ||||||
First Community Bancshares, Inc. | 18 | 517 | ||||||
Maiden Holdings Ltd. | 77 | 508 | ||||||
Community Healthcare Trust, Inc. REIT | 18 | 506 | ||||||
Heritage Insurance Holdings, Inc. | 28 | 505 | ||||||
Fidelity Southern Corp. | 23 | 501 | ||||||
First Financial Corp. | 11 | 499 | ||||||
CorEnergy Infrastructure Trust, Inc. REIT | 13 | 497 | ||||||
Virtu Financial, Inc. — Class A1 | 27 | 494 | ||||||
Nicolet Bankshares, Inc.* | 9 | 493 | ||||||
Independent Bank Corp. | 22 | 492 | ||||||
Bank Mutual Corp. | 46 | 490 | ||||||
World Acceptance Corp.* | 6 | 484 | ||||||
United Community Financial Corp. | 53 | 484 | ||||||
National Commerce Corp.* | 12 | 483 | ||||||
UMH Properties, Inc. REIT | 32 | 477 | ||||||
R1 RCM, Inc.* | 108 | 476 | ||||||
Bank of Marin Bancorp | 7 | 476 | ||||||
Veritex Holdings, Inc.* | 17 | 469 | ||||||
Green Bancorp, Inc.* | 23 | 467 | ||||||
Financial Institutions, Inc. | 15 | 466 | ||||||
HomeTrust Bancshares, Inc.* | 18 | 464 | ||||||
Forestar Group, Inc.* | 21 | 462 | ||||||
Waterstone Financial, Inc. | 27 | 460 | ||||||
People’s Utah Bancorp | 15 | 454 | ||||||
PacWest Bancorp | 9 | 454 | ||||||
West Bancorporation, Inc. | 18 | 453 | ||||||
Allegiance Bancshares, Inc.* | 12 | 452 | ||||||
Access National Corp. | 16 | 445 | ||||||
Franklin Financial Network, Inc.* | 13 | 443 | ||||||
Republic First Bancorp, Inc.* | 52 | 439 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 113 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 1.5x STRATEGY FUND |
Shares | Value | |||||||
Western Asset Mortgage Capital Corp. REIT | 44 | $ | 438 | |||||
OFG Bancorp | 46 | 432 | ||||||
Bar Harbor Bankshares | 16 | 432 | ||||||
Orchid Island Capital, Inc. REIT | 46 | 427 | ||||||
First Mid-Illinois Bancshares, Inc. | 11 | 424 | ||||||
Old Second Bancorp, Inc. | 31 | 423 | ||||||
CNB Financial Corp. | 16 | 420 | ||||||
City Office, Inc. REIT | 32 | 416 | ||||||
RMR Group, Inc. — Class A | 7 | 415 | ||||||
One Liberty Properties, Inc. REIT | 16 | 415 | ||||||
Farmers National Banc Corp. | 28 | 413 | ||||||
WashingtonFirst Bankshares, Inc. | 12 | 411 | ||||||
Arrow Financial Corp. | 12 | 407 | ||||||
MidWestOne Financial Group, Inc. | 12 | 402 | ||||||
GAIN Capital Holdings, Inc. | 40 | 400 | ||||||
Investors Title Co. | 2 | 397 | ||||||
First Connecticut Bancorp, Inc. | 15 | 392 | ||||||
Equity Bancshares, Inc. — Class A* | 11 | 390 | ||||||
Atlantic Capital Bancshares, Inc.* | 22 | 387 | ||||||
PCSB Financial Corp.* | 20 | 381 | ||||||
Republic Bancorp, Inc. — Class A | 10 | 380 | ||||||
PennyMac Financial Services, Inc. — Class A* | 17 | 380 | ||||||
United Insurance Holdings Corp. | 22 | 380 | ||||||
Global Indemnity Ltd* | 9 | 378 | ||||||
Redfin Corp.*,1 | 12 | 376 | ||||||
Ares Commercial Real Estate Corp. REIT | 29 | 374 | ||||||
Southern National Bancorp of Virginia, Inc. | 23 | 369 | ||||||
Cowen, Inc. — Class A* | 27 | 369 | ||||||
Farmers & Merchants Bancorp Incorporated/Archbold OH | 9 | 367 | ||||||
Citizens, Inc.*,1 | 49 | 360 | ||||||
Ocwen Financial Corp.* | 115 | 360 | ||||||
Clifton Bancorp, Inc. | 21 | 359 | ||||||
Ladenburg Thalmann Financial Services, Inc. | 110 | 348 | ||||||
Sierra Bancorp | 13 | 345 | ||||||
American National Bankshares, Inc. | 9 | 345 | ||||||
Dynex Capital, Inc. REIT | 49 | 343 | ||||||
First Bancshares, Inc. | 10 | 342 | ||||||
Enterprise Bancorp, Inc. | 10 | 340 | ||||||
MedEquities Realty Trust, Inc. REIT | 30 | 337 | ||||||
Altisource Portfolio Solutions S.A.*,1 | 12 | 336 | ||||||
Western New England Bancorp, Inc. | 30 | 327 | ||||||
Peoples Financial Services Corp. | 7 | 326 | ||||||
National Bankshares, Inc. | 7 | 318 | ||||||
Summit Financial Group, Inc. | 12 | 316 | ||||||
eHealth, Inc.* | 18 | 313 | ||||||
FRP Holdings, Inc.* | 7 | 310 | ||||||
Resource Capital Corp. REIT | 33 | 309 | ||||||
Farmers Capital Bank Corp. | 8 | 308 | ||||||
On Deck Capital, Inc.* | 53 | 304 | ||||||
First Bancorp, Inc. | 11 | 300 | ||||||
Health Insurance Innovations, Inc. — Class A* | 12 | 299 | ||||||
Farmland Partners, Inc. REIT | 34 | 295 | ||||||
BSB Bancorp, Inc.* | 10 | 293 | ||||||
Regional Management Corp.* | 11 | 289 | ||||||
Southern First Bancshares, Inc.* | 7 | 289 | ||||||
Citizens & Northern Corp. | 12 | 288 | ||||||
Sutherland Asset Management Corp. REIT | 19 | 288 | ||||||
Arlington Asset Investment Corp. — Class A | 24 | 283 | ||||||
Macatawa Bank Corp. | 28 | 280 | ||||||
Capital City Bank Group, Inc. | 12 | 275 | ||||||
Ashford Hospitality Prime, Inc. REIT | 28 | 272 | ||||||
HarborOne Bancorp, Inc.* | 14 | 268 | ||||||
Oppenheimer Holdings, Inc. — Class A | 10 | 268 | ||||||
Sun Bancorp, Inc. | 11 | 267 | ||||||
First Internet Bancorp | 7 | 267 | ||||||
Jernigan Capital, Inc. REIT1 | 14 | 266 | ||||||
Old Line Bancshares, Inc. | 9 | 265 | ||||||
Union Bankshares, Inc. | 5 | 265 | ||||||
Southern Missouri Bancorp, Inc. | 7 | 263 | ||||||
Home Bancorp, Inc. | 6 | 259 | ||||||
EMC Insurance Group, Inc. | 9 | 258 | ||||||
Consolidated-Tomoka Land Co. | 4 | 254 | ||||||
Bluerock Residential Growth REIT, Inc. | 25 | 253 | ||||||
Ames National Corp. | 9 | 251 | ||||||
Great Ajax Corp. REIT | 18 | 249 | ||||||
Codorus Valley Bancorp, Inc. | 9 | 248 | ||||||
Territorial Bancorp, Inc. | 8 | 247 | ||||||
Safeguard Scientifics, Inc.* | 22 | 246 | ||||||
Cadence BanCorp* | 9 | 244 | ||||||
Baldwin & Lyons, Inc. — Class B | 10 | 239 | ||||||
HCI Group, Inc. | 8 | 239 | ||||||
Northrim BanCorp, Inc. | 7 | 237 | ||||||
Century Bancorp, Inc. — Class A | 3 | 235 | ||||||
Shore Bancshares, Inc. | 14 | 234 | ||||||
Penns Woods Bancorp, Inc. | 5 | 233 | ||||||
MutualFirst Financial, Inc. | 6 | 231 | ||||||
BankFinancial Corp. | 15 | 230 | ||||||
TPG RE Finance Trust, Inc. REIT | 12 | 229 | ||||||
Charter Financial Corp. | 13 | 228 | ||||||
Atlas Financial Holdings, Inc.* | 11 | 226 | ||||||
Bear State Financial, Inc. | 22 | 225 | ||||||
Marlin Business Services Corp. | 10 | 224 | ||||||
Central Valley Community Bancorp | 11 | 222 | ||||||
KKR Real Estate Finance Trust, Inc. | 11 | 220 | ||||||
Civista Bancshares, Inc. | 10 | 220 | ||||||
FNB Bancorp | 6 | 219 | ||||||
Investar Holding Corp. | 9 | 217 | ||||||
Cherry Hill Mortgage Investment Corp. REIT | 12 | 216 | ||||||
Paragon Commercial Corp.* | 4 | 213 | ||||||
Evans Bancorp, Inc. | 5 | 209 | ||||||
Hingham Institution for Savings | 1 | 207 | ||||||
ACNB Corp. | 7 | 207 | ||||||
Bankwell Financial Group, Inc. | 6 | 206 | ||||||
Entegra Financial Corp.* | 7 | 205 | ||||||
LCNB Corp. | 10 | 204 | ||||||
NI Holdings, Inc.* | 12 | 204 |
114 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 1.5x STRATEGY FUND |
Shares | Value | |||||||
Xenith Bankshares, Inc.* | 6 | $ | 203 | |||||
Orrstown Financial Services, Inc. | 8 | 202 | ||||||
MBT Financial Corp. | 19 | 201 | ||||||
Premier Financial Bancorp, Inc. | 10 | 201 | ||||||
Riverview Bancorp, Inc. | 23 | 199 | ||||||
First Business Financial Services, Inc. | 9 | 199 | ||||||
Federated National Holding Co. | 12 | 199 | ||||||
MidSouth Bancorp, Inc. | 15 | 199 | ||||||
Howard Bancorp, Inc.* | 9 | 198 | ||||||
Norwood Financial Corp. | 6 | 198 | ||||||
Community Bankers Trust Corp.* | 24 | 196 | ||||||
Bank of Commerce Holdings | 17 | 195 | ||||||
Safety Income and Growth, Inc. REIT | 11 | 193 | ||||||
Pzena Investment Management, Inc. — Class A | 18 | 192 | ||||||
Community Financial Corp. | 5 | 191 | ||||||
Kingstone Companies, Inc. | 10 | 188 | ||||||
Capstar Financial Holdings, Inc.* | 9 | 187 | ||||||
Timberland Bancorp, Inc. | 7 | 186 | ||||||
Northeast Bancorp | 8 | 185 | ||||||
Sunshine Bancorp, Inc.* | 8 | 184 | ||||||
Malvern Bancorp, Inc.* | 7 | 183 | ||||||
Reliant Bancorp, Inc. | 7 | 179 | ||||||
First Northwest Bancorp* | 11 | 179 | ||||||
County Bancorp, Inc. | 6 | 179 | ||||||
Stratus Properties, Inc. | 6 | 178 | ||||||
WMIH Corp.* | 208 | 177 | ||||||
SI Financial Group, Inc. | 12 | 176 | ||||||
Owens Realty Mortgage, Inc. REIT | 11 | 176 | ||||||
C&F Financial Corp. | 3 | 174 | ||||||
SmartFinancial, Inc.* | 8 | 174 | ||||||
Associated Capital Group, Inc. — Class A | 5 | 171 | ||||||
Independence Holding Co. | 6 | 165 | ||||||
Ohio Valley Banc Corp. | 4 | 162 | ||||||
Byline Bancorp, Inc.* | 7 | 161 | ||||||
Tiptree, Inc. — Class A | 27 | 161 | ||||||
Clipper Realty, Inc. REIT | 16 | 160 | ||||||
Prudential Bancorp, Inc. | 9 | 158 | ||||||
Unity Bancorp, Inc. | 8 | 158 | ||||||
ESSA Bancorp, Inc. | 10 | 157 | ||||||
Hallmark Financial Services, Inc.* | 15 | 156 | ||||||
Global Medical REIT, Inc. | 19 | 156 | ||||||
Donegal Group, Inc. — Class A | 9 | 156 | ||||||
United Security Bancshares | 14 | 154 | ||||||
Peoples Bancorp of North Carolina, Inc. | 5 | 153 | ||||||
GAMCO Investors, Inc. — Class A | 5 | 148 | ||||||
Two River Bancorp | 8 | 145 | ||||||
BCB Bancorp, Inc. | 10 | 145 | ||||||
Middlefield Banc Corp. | 3 | 145 | ||||||
Silvercrest Asset Management Group, Inc. — Class A | 9 | 144 | ||||||
Chemung Financial Corp. | 3 | 144 | ||||||
Pacific Mercantile Bancorp* | 16 | 140 | ||||||
First Financial Northwest, Inc. | 9 | 140 | ||||||
Trinity Place Holdings, Inc.* | 20 | 139 | ||||||
Provident Bancorp, Inc.* | 5 | 132 | ||||||
Greene County Bancorp, Inc. | 4 | 130 | ||||||
Crawford & Co. — Class B | 13 | 125 | ||||||
First Guaranty Bancshares, Inc. | 5 | 125 | ||||||
Parke Bancorp, Inc. | 6 | 123 | ||||||
Maui Land & Pineapple Company, Inc.* | 7 | 121 | ||||||
Elevate Credit, Inc.* | 16 | 121 | ||||||
Ellington Residential Mortgage REIT | 10 | 120 | ||||||
Old Point Financial Corp. | 4 | 119 | ||||||
Impac Mortgage Holdings, Inc.* | 11 | 112 | ||||||
Provident Financial Holdings, Inc. | 6 | 110 | ||||||
DNB Financial Corp. | 3 | 101 | ||||||
Blue Capital Reinsurance Holdings Ltd. | 6 | 72 | ||||||
Transcontinental Realty Investors, Inc.* | 2 | 63 | ||||||
Guaranty Bancshares, Inc. | 2 | 61 | ||||||
Oconee Federal Financial Corp. | 2 | 57 | ||||||
Medley Management, Inc. — Class A | 6 | 39 | ||||||
RAIT Financial Trust REIT | 99 | 37 | ||||||
Griffin Industrial Realty, Inc. | 1 | 37 | ||||||
California First National Bancorp | 2 | 30 | ||||||
RBB Bancorp | 1 | 27 | ||||||
First Horizon National Corp. | 1 | 12 | ||||||
Fifth Street Asset Management, Inc. | 7 | 9 | ||||||
Total Financial | 548,983 | |||||||
Consumer, Non-cyclical - 5.3% | ||||||||
Nektar Therapeutics* | 159 | 9,495 | ||||||
Bluebird Bio, Inc.* | 52 | 9,261 | ||||||
Exact Sciences Corp.* | 126 | 6,620 | ||||||
Sage Therapeutics, Inc.* | 40 | 6,588 | ||||||
Catalent, Inc.* | 135 | 5,546 | ||||||
HealthSouth Corp. | 105 | 5,188 | ||||||
PRA Health Sciences, Inc.* | 52 | 4,736 | ||||||
Snyder’s-Lance, Inc. | 93 | 4,658 | ||||||
Grand Canyon Education, Inc.* | 50 | 4,476 | ||||||
Insulet Corp.* | 64 | 4,416 | ||||||
Chemed Corp. | 18 | 4,374 | ||||||
Cantel Medical Corp. | 40 | 4,115 | ||||||
LivaNova plc* | 51 | 4,076 | ||||||
Deluxe Corp. | 53 | 4,073 | ||||||
Masimo Corp.* | 48 | 4,070 | ||||||
Healthcare Services Group, Inc. | 77 | 4,059 | ||||||
Brink’s Co. | 49 | 3,856 | ||||||
Molina Healthcare, Inc.* | 47 | 3,604 | ||||||
Sarepta Therapeutics, Inc.* | 64 | 3,561 | ||||||
Avis Budget Group, Inc.* | 81 | 3,554 | ||||||
On Assignment, Inc.* | 54 | 3,471 | ||||||
ICU Medical, Inc.* | 16 | 3,456 | ||||||
FibroGen, Inc.* | 72 | 3,413 | ||||||
Neogen Corp.* | 40 | 3,288 | ||||||
Integra LifeSciences Holdings Corp.* | 68 | 3,254 | ||||||
Darling Ingredients, Inc.* | 177 | 3,209 | ||||||
Clovis Oncology, Inc.* | 47 | 3,196 | ||||||
Haemonetics Corp.* | 55 | 3,194 | ||||||
Blueprint Medicines Corp.* | 42 | 3,167 | ||||||
Globus Medical, Inc. — Class A* | 76 | 3,124 | ||||||
Cimpress N.V.* | 26 | 3,117 | ||||||
NuVasive, Inc.* | 53 | 3,100 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 115 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 1.5x STRATEGY FUND |
Shares | Value | |||||||
Puma Biotechnology, Inc.* | 31 | $ | 3,064 | |||||
Sanderson Farms, Inc. | 22 | 3,053 | ||||||
Green Dot Corp. — Class A* | 50 | 3,013 | ||||||
Ligand Pharmaceuticals, Inc. — Class B* | 22 | 3,013 | ||||||
Performance Food Group Co.* | 91 | 3,012 | ||||||
Penumbra, Inc.* | 31 | 2,917 | ||||||
Helen of Troy Ltd.* | 30 | 2,891 | ||||||
Avexis, Inc.* | 26 | 2,877 | ||||||
Portola Pharmaceuticals, Inc.* | 59 | 2,872 | ||||||
Adtalem Global Education, Inc.* | 67 | 2,817 | ||||||
Aaron’s, Inc. | 69 | 2,750 | ||||||
United Natural Foods, Inc.* | 53 | 2,611 | ||||||
Halozyme Therapeutics, Inc.* | 128 | 2,593 | ||||||
Lancaster Colony Corp. | 20 | 2,584 | ||||||
Horizon Pharma plc* | 176 | 2,570 | ||||||
Amicus Therapeutics, Inc.* | 178 | 2,561 | ||||||
Prestige Brands Holdings, Inc.* | 57 | 2,531 | ||||||
Incorporated Research Holdings, Inc. — Class A* | 58 | 2,529 | ||||||
HealthEquity, Inc.* | 54 | 2,520 | ||||||
AMN Healthcare Services, Inc.* | 51 | 2,512 | ||||||
Magellan Health, Inc.* | 26 | 2,510 | ||||||
Wright Medical Group N.V.* | 113 | 2,509 | ||||||
B&G Foods, Inc.1 | 71 | 2,496 | ||||||
Insmed, Inc.* | 80 | 2,494 | ||||||
J&J Snack Foods Corp. | 16 | 2,429 | ||||||
Myriad Genetics, Inc.* | 70 | 2,404 | ||||||
LendingTree, Inc.* | 7 | 2,383 | ||||||
Array BioPharma, Inc.* | 186 | 2,381 | ||||||
Vector Group Ltd. | 105 | 2,350 | ||||||
Merit Medical Systems, Inc.* | 53 | 2,290 | ||||||
Korn/Ferry International | 55 | 2,276 | ||||||
ABM Industries, Inc. | 60 | 2,263 | ||||||
Halyard Health, Inc.* | 49 | 2,263 | ||||||
Insperity, Inc. | 38 | 2,179 | ||||||
Ironwood Pharmaceuticals, Inc. — Class A* | 145 | 2,174 | ||||||
Inogen, Inc.* | 18 | 2,143 | ||||||
Loxo Oncology, Inc.* | 25 | 2,105 | ||||||
Aerie Pharmaceuticals, Inc.* | 35 | 2,091 | ||||||
Sotheby’s* | 40 | 2,064 | ||||||
Teladoc, Inc.*,1 | 59 | 2,056 | ||||||
Medicines Co.* | 75 | 2,051 | ||||||
Select Medical Holdings Corp.* | 116 | 2,047 | ||||||
Nevro Corp.* | 29 | 2,002 | ||||||
Supernus Pharmaceuticals, Inc.* | 50 | 1,992 | ||||||
TriNet Group, Inc.* | 44 | 1,951 | ||||||
Ultragenyx Pharmaceutical, Inc.* | 42 | 1,948 | ||||||
Monro, Inc. | 34 | 1,936 | ||||||
Pacira Pharmaceuticals, Inc.* | 42 | 1,917 | ||||||
AnaptysBio, Inc.* | 19 | 1,914 | ||||||
FTI Consulting, Inc.* | 42 | 1,804 | ||||||
Matthews International Corp. — Class A | 34 | 1,795 | ||||||
WD-40 Co. | 15 | 1,770 | ||||||
Corcept Therapeutics, Inc.* | 98 | 1,770 | ||||||
Immunomedics, Inc.*,1 | 109 | 1,761 | ||||||
Travelport Worldwide Ltd. | 134 | 1,751 | ||||||
Boston Beer Company, Inc. — Class A* | 9 | 1,720 | ||||||
NxStage Medical, Inc.* | 70 | 1,696 | ||||||
Varex Imaging Corp.* | 42 | 1,687 | ||||||
NutriSystem, Inc. | 32 | 1,683 | ||||||
Cambrex Corp.* | 35 | 1,680 | ||||||
Emergent BioSolutions, Inc.* | 36 | 1,673 | ||||||
Fresh Del Monte Produce, Inc. | 35 | 1,669 | ||||||
Bob Evans Farms, Inc. | 21 | 1,655 | ||||||
Amedisys, Inc.* | 31 | 1,634 | ||||||
Herc Holdings, Inc.* | 26 | 1,628 | ||||||
Spectrum Pharmaceuticals, Inc.* | 85 | 1,611 | ||||||
Prothena Corporation plc*,1 | 42 | 1,575 | ||||||
Global Blood Therapeutics, Inc.* | 40 | 1,574 | ||||||
HMS Holdings Corp.* | 91 | 1,542 | ||||||
CONMED Corp. | 30 | 1,529 | ||||||
Calavo Growers, Inc.1 | 18 | 1,519 | ||||||
Integer Holdings Corp.* | 33 | 1,495 | ||||||
Spark Therapeutics, Inc.*,1 | 29 | 1,491 | ||||||
Sangamo Therapeutics, Inc.* | 90 | 1,476 | ||||||
Cal-Maine Foods, Inc.* | 33 | 1,467 | ||||||
Repligen Corp.* | 40 | 1,451 | ||||||
Acceleron Pharma, Inc.* | 34 | 1,443 | ||||||
Zogenix, Inc.* | 36 | 1,442 | ||||||
Ignyta, Inc.* | 54 | 1,442 | ||||||
Aimmune Therapeutics, Inc.* | 38 | 1,437 | ||||||
Central Garden & Pet Co. — Class A* | 38 | 1,433 | ||||||
ACCO Brands Corp.* | 117 | 1,427 | ||||||
Arena Pharmaceuticals, Inc.* | 42 | 1,427 | ||||||
Tivity Health, Inc.* | 39 | 1,425 | ||||||
MiMedx Group, Inc.*,1 | 113 | 1,425 | ||||||
Paylocity Holding Corp.* | 29 | 1,368 | ||||||
Universal Corp. | 26 | 1,365 | ||||||
Quidel Corp.* | 31 | 1,344 | ||||||
Natus Medical, Inc.* | 35 | 1,337 | ||||||
Impax Laboratories, Inc.* | 80 | 1,332 | ||||||
Weight Watchers International, Inc.* | 30 | 1,328 | ||||||
Tenet Healthcare Corp.* | 87 | 1,319 | ||||||
Hertz Global Holdings, Inc.* | 59 | 1,304 | ||||||
Hostess Brands, Inc.* | 87 | 1,289 | ||||||
Radius Health, Inc.* | 40 | 1,271 | ||||||
Theravance Biopharma, Inc.* | 45 | 1,255 | ||||||
Novocure Ltd.* | 62 | 1,252 | ||||||
Owens & Minor, Inc. | 66 | 1,246 | ||||||
Dynavax Technologies Corp.* | 66 | 1,234 | ||||||
Viad Corp. | 22 | 1,219 | ||||||
TrueBlue, Inc.* | 44 | 1,210 | ||||||
Esperion Therapeutics, Inc.* | 18 | 1,185 | ||||||
McGrath RentCorp | 25 | 1,175 | ||||||
Analogic Corp. | 14 | 1,172 | ||||||
OraSure Technologies, Inc.* | 62 | 1,169 | ||||||
National Beverage Corp. | 12 | 1,169 | ||||||
Ensign Group, Inc. | 52 | 1,154 | ||||||
Innoviva, Inc.* | 81 | 1,149 | ||||||
Dean Foods Co. | 99 | 1,145 | ||||||
Dermira, Inc.* | 41 | 1,140 |
116 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 1.5x STRATEGY FUND |
Shares | Value | |||||||
Abaxis, Inc. | 23 | $ | 1,139 | |||||
Editas Medicine, Inc.* | 37 | 1,137 | ||||||
Momenta Pharmaceuticals, Inc.* | 80 | 1,116 | ||||||
LHC Group, Inc.* | 18 | 1,103 | ||||||
MGP Ingredients, Inc. | 14 | 1,076 | ||||||
Coca-Cola Bottling Company Consolidated | 5 | 1,076 | ||||||
SpartanNash Co. | 40 | 1,067 | ||||||
Diplomat Pharmacy, Inc.* | 52 | 1,044 | ||||||
Orthofix International N.V.* | 19 | 1,039 | ||||||
Foundation Medicine, Inc.* | 15 | 1,023 | ||||||
TherapeuticsMD, Inc.*,1 | 167 | 1,009 | ||||||
Acorda Therapeutics, Inc.* | 47 | 1,008 | ||||||
Capella Education Co. | 13 | 1,006 | ||||||
Enanta Pharmaceuticals, Inc.* | 17 | 998 | ||||||
ICF International, Inc.* | 19 | 998 | ||||||
Navigant Consulting, Inc.* | 51 | 990 | ||||||
Strayer Education, Inc. | 11 | 985 | ||||||
Huron Consulting Group, Inc.* | 24 | 971 | ||||||
REGENXBIO, Inc.* | 29 | 964 | ||||||
Intersect ENT, Inc.* | 29 | 940 | ||||||
US Physical Therapy, Inc. | 13 | 939 | ||||||
BioTelemetry, Inc.* | 31 | 927 | ||||||
Cardtronics plc — Class A* | 50 | 926 | ||||||
Omeros Corp.* | 47 | 913 | ||||||
Kelly Services, Inc. — Class A | 33 | 900 | ||||||
Xencor, Inc.* | 41 | 899 | ||||||
USANA Health Sciences, Inc.* | 12 | 889 | ||||||
EVERTEC, Inc. | 65 | 887 | ||||||
Kindred Healthcare, Inc. | 90 | 873 | ||||||
Andersons, Inc. | 28 | 872 | ||||||
Career Education Corp.* | 72 | 870 | ||||||
Heron Therapeutics, Inc.* | 48 | 869 | ||||||
SUPERVALU, Inc.* | 40 | 864 | ||||||
Retrophin, Inc.* | 41 | 864 | ||||||
Anika Therapeutics, Inc.* | 16 | 863 | ||||||
Revance Therapeutics, Inc.* | 24 | 858 | ||||||
CBIZ, Inc.* | 55 | 850 | ||||||
Luminex Corp. | 43 | 847 | ||||||
MyoKardia, Inc.* | 20 | 842 | ||||||
iRhythm Technologies, Inc.* | 15 | 841 | ||||||
Medifast, Inc. | 12 | 838 | ||||||
Alarm.com Holdings, Inc.* | 22 | 830 | ||||||
AxoGen, Inc.* | 29 | 821 | ||||||
Cardiovascular Systems, Inc.* | 34 | 805 | ||||||
K2M Group Holdings, Inc.* | 44 | 792 | ||||||
Alder Biopharmaceuticals, Inc.* | 69 | 790 | ||||||
Inter Parfums, Inc. | 18 | 782 | ||||||
Glaukos Corp.*,1 | 30 | 770 | ||||||
Accelerate Diagnostics, Inc.* | 29 | 760 | ||||||
Quad/Graphics, Inc. | 33 | 746 | ||||||
SP Plus Corp.* | 20 | 742 | ||||||
National Healthcare Corp. | 12 | 731 | ||||||
Amphastar Pharmaceuticals, Inc.* | 38 | 731 | ||||||
Flexion Therapeutics, Inc.* | 29 | 726 | ||||||
Almost Family, Inc.* | 13 | 720 | ||||||
Genomic Health, Inc.* | 21 | 718 | ||||||
PTC Therapeutics, Inc.* | 43 | 717 | ||||||
Vanda Pharmaceuticals, Inc.* | 47 | 714 | ||||||
Providence Service Corp.* | 12 | 712 | ||||||
RR Donnelley & Sons Co. | 76 | 707 | ||||||
Akebia Therapeutics, Inc.* | 47 | 699 | ||||||
Lannett Company, Inc.*,1 | 30 | 696 | ||||||
MacroGenics, Inc.* | 36 | 684 | ||||||
STAAR Surgical Co.* | 44 | 682 | ||||||
Assembly Biosciences, Inc.* | 15 | 679 | ||||||
Phibro Animal Health Corp. — Class A | 20 | 670 | ||||||
Kforce, Inc. | 26 | 657 | ||||||
Tootsie Roll Industries, Inc. | 18 | 655 | ||||||
CytomX Therapeutics, Inc.* | 31 | 654 | ||||||
Lantheus Holdings, Inc.* | 32 | 654 | ||||||
CryoLife, Inc.* | 34 | 651 | ||||||
AngioDynamics, Inc.* | 39 | 649 | ||||||
RPX Corp. | 48 | 645 | ||||||
Five Prime Therapeutics, Inc.* | 29 | 636 | ||||||
Cutera, Inc.* | 14 | 635 | ||||||
Atrion Corp. | 1 | 631 | ||||||
Textainer Group Holdings Ltd.* | 29 | 624 | ||||||
Triple-S Management Corp. — Class B* | 25 | 621 | ||||||
AtriCure, Inc.* | 34 | 620 | ||||||
Meridian Bioscience, Inc. | 44 | 616 | ||||||
La Jolla Pharmaceutical Co.* | 19 | 611 | ||||||
Invacare Corp. | 36 | 607 | ||||||
Aclaris Therapeutics, Inc.* | 24 | 592 | ||||||
ZIOPHARM Oncology, Inc.* | 142 | 588 | ||||||
ImmunoGen, Inc.* | 91 | 583 | ||||||
CorVel Corp.* | 11 | 582 | ||||||
ANI Pharmaceuticals, Inc.* | 9 | 580 | ||||||
K12, Inc.* | 36 | 572 | ||||||
John B Sanfilippo & Son, Inc. | 9 | 569 | ||||||
Heska Corp.* | 7 | 561 | ||||||
Ennis, Inc. | 27 | 560 | ||||||
Ingles Markets, Inc. — Class A | 16 | 554 | ||||||
Epizyme, Inc.* | 44 | 552 | ||||||
LSC Communications, Inc. | 36 | 545 | ||||||
Exactech, Inc.* | 11 | 544 | ||||||
Synergy Pharmaceuticals, Inc.*,1 | 243 | 542 | ||||||
NeoGenomics, Inc.* | 60 | 532 | ||||||
Rigel Pharmaceuticals, Inc.* | 135 | 524 | ||||||
Intra-Cellular Therapies, Inc.* | 36 | 521 | ||||||
Everi Holdings, Inc.* | 69 | 520 | ||||||
Laureate Education, Inc. — Class A* | 38 | 515 | ||||||
Rent-A-Center, Inc.1 | 46 | 511 | ||||||
LeMaitre Vascular, Inc. | 16 | 509 | ||||||
Adamas Pharmaceuticals, Inc.*,1 | 15 | 508 | ||||||
Depomed, Inc.* | 63 | 507 | ||||||
Atara Biotherapeutics, Inc.* | 28 | 507 | ||||||
Audentes Therapeutics, Inc.* | 16 | 500 | ||||||
Concert Pharmaceuticals, Inc.* | 19 | 492 | ||||||
e.l.f. Beauty, Inc.*,1 | 22 | 491 | ||||||
AMAG Pharmaceuticals, Inc.* | 37 | 490 | ||||||
Forrester Research, Inc. | 11 | 486 | ||||||
Eagle Pharmaceuticals, Inc.* | 9 | 481 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 117 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 1.5x STRATEGY FUND |
Shares | Value | |||||||
Team, Inc.* | 32 | $ | 477 | |||||
Endologix, Inc.* | 89 | 476 | ||||||
Cross Country Healthcare, Inc.* | 37 | 472 | ||||||
PDL BioPharma, Inc.* | 171 | 469 | ||||||
Sucampo Pharmaceuticals, Inc. — Class A* | 26 | 467 | ||||||
Heidrick & Struggles International, Inc. | 19 | 466 | ||||||
Paratek Pharmaceuticals, Inc.* | 26 | 465 | ||||||
Lexicon Pharmaceuticals, Inc.* | 47 | 464 | ||||||
Resources Connection, Inc. | 30 | 464 | ||||||
Collegium Pharmaceutical, Inc.* | 25 | 461 | ||||||
Progenics Pharmaceuticals, Inc.* | 77 | 458 | ||||||
WaVe Life Sciences Ltd.* | 13 | 456 | ||||||
Iovance Biotherapeutics, Inc.* | 57 | 456 | ||||||
CAI International, Inc.* | 16 | 453 | ||||||
Barrett Business Services, Inc. | 7 | 451 | ||||||
Chefs’ Warehouse, Inc.* | 22 | 451 | ||||||
Community Health Systems, Inc.* | 103 | 439 | ||||||
Keryx Biopharmaceuticals, Inc.*,1 | 94 | 437 | ||||||
TG Therapeutics, Inc.* | 53 | 435 | ||||||
Central Garden & Pet Co.* | 11 | 428 | ||||||
Abeona Therapeutics, Inc.* | 27 | 428 | ||||||
BioCryst Pharmaceuticals, Inc.* | 87 | 427 | ||||||
American Public Education, Inc.*,1 | 17 | 426 | ||||||
Hackett Group, Inc. | 27 | 424 | ||||||
Amplify Snack Brands, Inc.* | 35 | 420 | ||||||
Surmodics, Inc.* | 15 | 420 | ||||||
Weis Markets, Inc. | 10 | 414 | ||||||
Carriage Services, Inc. — Class A | 16 | 411 | ||||||
Invitae Corp.* | 45 | 409 | ||||||
MoneyGram International, Inc.* | 31 | 409 | ||||||
CRA International, Inc. | 9 | 405 | ||||||
RadNet, Inc.* | 40 | 404 | ||||||
B. Riley Financial, Inc. | 22 | 398 | ||||||
Achaogen, Inc.* | 36 | 387 | ||||||
Accuray, Inc.*,1 | 88 | 378 | ||||||
Novavax, Inc.* | 303 | 376 | ||||||
Stemline Therapeutics, Inc.* | 24 | 374 | ||||||
National Research Corp. — Class A | 10 | 373 | ||||||
Celldex Therapeutics, Inc.* | 131 | 372 | ||||||
Cerus Corp.* | 110 | 372 | ||||||
Vectrus, Inc.* | 12 | 370 | ||||||
Madrigal Pharmaceuticals, Inc.* | 4 | 367 | ||||||
Cytokinetics, Inc.* | 45 | 367 | ||||||
Emerald Expositions Events, Inc. | 18 | 366 | ||||||
Achillion Pharmaceuticals, Inc.* | 127 | 366 | ||||||
BioScrip, Inc.*,1 | 125 | 364 | ||||||
Coherus Biosciences, Inc.* | 41 | 361 | ||||||
Enzo Biochem, Inc.* | 44 | 359 | ||||||
Karyopharm Therapeutics, Inc.* | 37 | 355 | ||||||
Inovio Pharmaceuticals, Inc.* | 86 | 355 | ||||||
Cara Therapeutics, Inc.*,1 | 29 | 355 | ||||||
Capital Senior Living Corp.* | 26 | 351 | ||||||
Aduro Biotech, Inc.* | 46 | 345 | ||||||
Corbus Pharmaceuticals Holdings, Inc.*,1 | 48 | 341 | ||||||
Tetraphase Pharmaceuticals, Inc.* | 54 | 340 | ||||||
Reata Pharmaceuticals, Inc. — Class A* | 12 | 340 | ||||||
Primo Water Corp.* | 27 | 340 | ||||||
Oxford Immunotec Global plc* | 24 | 335 | ||||||
Great Lakes Dredge & Dock Corp.* | 62 | 335 | ||||||
Tejon Ranch Co.* | 16 | 332 | ||||||
Utah Medical Products, Inc. | 4 | 326 | ||||||
Civitas Solutions, Inc.* | 19 | 325 | ||||||
Entellus Medical, Inc.*,1 | 13 | 317 | ||||||
Cadiz, Inc.* | 22 | 314 | ||||||
Antares Pharma, Inc.* | 154 | 306 | ||||||
Kura Oncology, Inc.* | 20 | 306 | ||||||
ViewRay, Inc.* | 33 | 306 | ||||||
BioSpecifics Technologies Corp.* | 7 | 303 | ||||||
Rockwell Medical, Inc.* | 52 | 303 | ||||||
Catalyst Pharmaceuticals, Inc.* | 77 | 301 | ||||||
Biohaven Pharmaceutical Holding Company Ltd.* | 11 | 297 | ||||||
Natera, Inc.* | 33 | 297 | ||||||
Pacific Biosciences of California, Inc.* | 111 | 293 | ||||||
Limoneira Co. | 13 | 291 | ||||||
Medpace Holdings, Inc.* | 8 | 290 | ||||||
Tactile Systems Technology, Inc.* | 10 | 290 | ||||||
Farmer Brothers Co.* | 9 | 289 | ||||||
Intellia Therapeutics, Inc.* | 15 | 288 | ||||||
Geron Corp.* | 160 | 288 | ||||||
Pieris Pharmaceuticals, Inc.* | 37 | 279 | ||||||
Addus HomeCare Corp.* | 8 | 278 | ||||||
CSS Industries, Inc. | 10 | 278 | ||||||
Akcea Therapeutics, Inc.* | 16 | 278 | ||||||
Calithera Biosciences, Inc.* | 33 | 276 | ||||||
Revlon, Inc. — Class A* | 12 | 262 | ||||||
Agenus, Inc.* | 80 | 261 | ||||||
Neos Therapeutics, Inc.* | 25 | 255 | ||||||
Surgery Partners, Inc.* | 21 | 254 | ||||||
ServiceSource International, Inc.* | 82 | 253 | ||||||
Care.com, Inc.* | 14 | 253 | ||||||
Fate Therapeutics, Inc.* | 41 | 251 | ||||||
Corium International, Inc.* | 26 | 250 | ||||||
Craft Brew Alliance, Inc.* | 13 | 250 | ||||||
Voyager Therapeutics, Inc.* | 15 | 249 | ||||||
Kindred Biosciences, Inc.* | 26 | 246 | ||||||
Idera Pharmaceuticals, Inc.* | 116 | 245 | ||||||
Bellicum Pharmaceuticals, Inc.* | 29 | 244 | ||||||
RTI Surgical, Inc.* | 58 | 238 | ||||||
Ardelyx, Inc.* | 36 | 238 | ||||||
Pulse Biosciences, Inc.* | 10 | 236 | ||||||
Seres Therapeutics, Inc.* | 23 | 233 | ||||||
Chimerix, Inc.* | 50 | 231 | ||||||
Aratana Therapeutics, Inc.* | 44 | 231 | ||||||
Collectors Universe, Inc. | 8 | 229 | ||||||
MediciNova, Inc.* | 35 | 226 | ||||||
GenMark Diagnostics, Inc.* | 54 | 225 | ||||||
Seneca Foods Corp. — Class A* | 7 | 215 | ||||||
Acacia Research Corp.* | 53 | 215 | ||||||
Smart & Final Stores, Inc.* | 25 | 214 | ||||||
Sientra, Inc.* | 15 | 211 |
118 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 1.5x STRATEGY FUND |
Shares | Value | |||||||
SEACOR Marine Holdings, Inc.* | 18 | $ | 211 | |||||
Protagonist Therapeutics, Inc.* | 10 | 208 | ||||||
Franklin Covey Co.* | 10 | 207 | ||||||
Athersys, Inc.* | 110 | 199 | ||||||
Calyxt, Inc.* | 9 | 198 | ||||||
Edge Therapeutics, Inc.* | 21 | 197 | ||||||
Willdan Group, Inc.* | 8 | 192 | ||||||
American Renal Associates Holdings, Inc.* | 11 | 191 | ||||||
Jounce Therapeutics, Inc.*,1 | 15 | 191 | ||||||
Minerva Neurosciences, Inc.* | 31 | 188 | ||||||
NewLink Genetics Corp.* | 23 | 187 | ||||||
Village Super Market, Inc. — Class A | 8 | 183 | ||||||
Axovant Sciences Ltd.* | 34 | 179 | ||||||
BioTime, Inc.* | 82 | 176 | ||||||
Strongbridge Biopharma plc* | 24 | 174 | ||||||
Veracyte, Inc.* | 26 | 170 | ||||||
Otonomy, Inc.* | 30 | 167 | ||||||
Kala Pharmaceuticals, Inc.* | 9 | 166 | ||||||
Bridgepoint Education, Inc.*,1 | 20 | 166 | ||||||
NanoString Technologies, Inc.* | 22 | 164 | ||||||
Clearside Biomedical, Inc.* | 23 | 161 | ||||||
Teligent, Inc.* | 44 | 160 | ||||||
G1 Therapeutics, Inc.* | 8 | 159 | ||||||
Melinta Therapeutics, Inc.* | 10 | 158 | ||||||
ChemoCentryx, Inc.* | 26 | 155 | ||||||
Zynerba Pharmaceuticals, Inc.* | 12 | 150 | ||||||
NantKwest, Inc.* | 33 | 148 | ||||||
Selecta Biosciences, Inc.* | 15 | 147 | ||||||
FONAR Corp.* | 6 | 146 | ||||||
Information Services Group, Inc.* | 35 | 146 | ||||||
Dova Pharmaceuticals, Inc.*,1 | 5 | 144 | ||||||
Quotient Ltd.* | 29 | 144 | ||||||
Merrimack Pharmaceuticals, Inc. | 14 | 144 | ||||||
Organovo Holdings, Inc.* | 107 | 143 | ||||||
Fortress Biotech, Inc.* | 35 | 140 | ||||||
Recro Pharma, Inc.* | 15 | 139 | ||||||
Ascent Capital Group, Inc. — Class A* | 12 | 138 | ||||||
Cascadian Therapeutics, Inc.* | 37 | 137 | ||||||
Durect Corp.* | 148 | 136 | ||||||
Syros Pharmaceuticals, Inc.* | 14 | 136 | ||||||
Miragen Therapeutics, Inc.* | 13 | 136 | ||||||
Conatus Pharmaceuticals, Inc.* | 28 | 129 | ||||||
Anavex Life Sciences Corp.* | 40 | 129 | ||||||
Nature’s Sunshine Products, Inc. | 11 | 127 | ||||||
Insys Therapeutics, Inc.*,1 | 13 | 125 | ||||||
Natural Health Trends Corp.1 | 8 | 122 | ||||||
AAC Holdings, Inc.* | 13 | 117 | ||||||
BG Staffing, Inc. | 7 | 112 | ||||||
Athenex, Inc.* | 7 | 111 | ||||||
Advaxis, Inc.* | 39 | 111 | ||||||
Ra Pharmaceuticals, Inc.* | 13 | 110 | ||||||
ARC Document Solutions, Inc.* | 43 | 110 | ||||||
Ocular Therapeutix, Inc.* | 24 | 107 | ||||||
Pendrell Corp. | 1 | 106 | ||||||
Turning Point Brands, Inc. | 5 | 106 | ||||||
Nymox Pharmaceutical Corp.* | 32 | 106 | ||||||
ConforMIS, Inc.* | 43 | 102 | ||||||
VBI Vaccines, Inc.* | 23 | 98 | ||||||
Trevena, Inc.* | 61 | 98 | ||||||
Syndax Pharmaceuticals, Inc.* | 11 | 96 | ||||||
Corvus Pharmaceuticals, Inc.* | 9 | 93 | ||||||
Tocagen, Inc.* | 9 | 92 | ||||||
Sienna Biopharmaceuticals, Inc.* | 5 | 91 | ||||||
Natural Grocers by Vitamin Cottage, Inc.* | 10 | 89 | ||||||
Alico, Inc. | 3 | 88 | ||||||
Curis, Inc.* | 125 | 88 | ||||||
Cambium Learning Group, Inc.* | 15 | 85 | ||||||
Viveve Medical, Inc.* | 16 | 80 | ||||||
Versartis, Inc.* | 36 | 79 | ||||||
XBiotech, Inc.* | 20 | 79 | ||||||
Liberty Tax, Inc. | 7 | 77 | ||||||
Immune Design Corp.* | 18 | 70 | ||||||
Asterias Biotherapeutics, Inc.* | 29 | 65 | ||||||
Matinas BioPharma Holdings, Inc.* | 56 | 65 | ||||||
Obalon Therapeutics, Inc.* | 9 | 59 | ||||||
Novelion Therapeutics, Inc.* | 16 | 50 | ||||||
Ovid therapeutics, Inc.* | 5 | 49 | ||||||
vTv Therapeutics, Inc. — Class A* | 8 | 48 | ||||||
Lifeway Foods, Inc.* | 5 | 40 | ||||||
Genocea Biosciences, Inc.* | 30 | 35 | ||||||
Mersana Therapeutics, Inc.* | 2 | 33 | ||||||
Genesis Healthcare, Inc.* | 40 | 31 | ||||||
Aileron Therapeutics, Inc.* | 2 | 21 | ||||||
Oncocyte Corp.* | 4 | 19 | ||||||
CPI Card Group, Inc. | 5 | 17 | ||||||
Total Consumer, Non-cyclical | 478,085 | |||||||
Industrial - 3.7% | ||||||||
Knight-Swift Transportation Holdings, Inc. | 135 | 5,902 | ||||||
Curtiss-Wright Corp. | 47 | 5,727 | ||||||
EMCOR Group, Inc. | 64 | 5,232 | ||||||
Littelfuse, Inc. | 25 | 4,945 | ||||||
Woodward, Inc. | 57 | 4,363 | ||||||
SYNNEX Corp. | 31 | 4,214 | ||||||
Kennametal, Inc. | 87 | 4,212 | ||||||
Louisiana-Pacific Corp.* | 156 | 4,097 | ||||||
Cree, Inc.* | 105 | 3,900 | ||||||
KLX, Inc.* | 56 | 3,822 | ||||||
John Bean Technologies Corp. | 34 | 3,767 | ||||||
Tech Data Corp.* | 38 | 3,723 | ||||||
Summit Materials, Inc. — Class A* | 117 | 3,679 | ||||||
Dycom Industries, Inc.* | 32 | 3,566 | ||||||
Belden, Inc. | 46 | 3,550 | ||||||
MasTec, Inc.* | 72 | 3,524 | ||||||
Trex Company, Inc.* | 32 | 3,468 | ||||||
Trinseo S.A. | 47 | 3,412 | ||||||
Barnes Group, Inc. | 53 | 3,353 | ||||||
Generac Holdings, Inc.* | 67 | 3,318 | ||||||
Rogers Corp.* | 20 | 3,238 | ||||||
EnerSys | 46 | 3,203 | ||||||
Golar LNG Ltd. | 104 | 3,100 | ||||||
II-VI, Inc.* | 66 | 3,099 | ||||||
Hillenbrand, Inc. | 69 | 3,084 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 119 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 1.5x STRATEGY FUND |
Shares | Value | |||||||
RBC Bearings, Inc.* | 24 | $ | 3,034 | |||||
TopBuild Corp.* | 40 | 3,030 | ||||||
Vishay Intertechnology, Inc. | 146 | 3,030 | ||||||
KBR, Inc. | 151 | 2,994 | ||||||
Moog, Inc. — Class A* | 34 | 2,953 | ||||||
Rexnord Corp.* | 113 | 2,940 | ||||||
Tetra Tech, Inc. | 61 | 2,937 | ||||||
Advanced Energy Industries, Inc.* | 43 | 2,902 | ||||||
JELD-WEN Holding, Inc.* | 71 | 2,795 | ||||||
Granite Construction, Inc. | 43 | 2,728 | ||||||
Applied Industrial Technologies, Inc. | 40 | 2,724 | ||||||
MSA Safety, Inc. | 35 | 2,713 | ||||||
Proto Labs, Inc.* | 26 | 2,678 | ||||||
Sanmina Corp.* | 81 | 2,673 | ||||||
Simpson Manufacturing Company, Inc. | 45 | 2,583 | ||||||
GATX Corp. | 41 | 2,549 | ||||||
Itron, Inc.* | 36 | 2,455 | ||||||
Masonite International Corp.* | 33 | 2,447 | ||||||
Universal Forest Products, Inc. | 65 | 2,445 | ||||||
Aerojet Rocketdyne Holdings, Inc.* | 76 | 2,371 | ||||||
Franklin Electric Company, Inc. | 50 | 2,295 | ||||||
Builders FirstSource, Inc.* | 104 | 2,266 | ||||||
Watts Water Technologies, Inc. — Class A | 29 | 2,203 | ||||||
Mueller Industries, Inc. | 61 | 2,161 | ||||||
EnPro Industries, Inc. | 23 | 2,151 | ||||||
KapStone Paper and Packaging Corp. | 94 | 2,133 | ||||||
Covanta Holding Corp. | 126 | 2,130 | ||||||
Plexus Corp.* | 35 | 2,125 | ||||||
Worthington Industries, Inc. | 48 | 2,115 | ||||||
SPX FLOW, Inc.* | 44 | 2,092 | ||||||
Esterline Technologies Corp.* | 28 | 2,092 | ||||||
Mueller Water Products, Inc. — Class A | 166 | 2,080 | ||||||
Saia, Inc.* | 28 | 1,981 | ||||||
Werner Enterprises, Inc. | 51 | 1,971 | ||||||
American Woodmark Corp.* | 15 | 1,954 | ||||||
Exponent, Inc. | 27 | 1,920 | ||||||
Albany International Corp. — Class A | 31 | 1,905 | ||||||
Forward Air Corp. | 33 | 1,896 | ||||||
Brady Corp. — Class A | 50 | 1,895 | ||||||
Patrick Industries, Inc.* | 27 | 1,875 | ||||||
Comfort Systems USA, Inc. | 40 | 1,746 | ||||||
Chicago Bridge & Iron Company N.V. | 108 | 1,743 | ||||||
Kaman Corp. | 29 | 1,706 | ||||||
Novanta, Inc.* | 34 | 1,700 | ||||||
ESCO Technologies, Inc. | 28 | 1,687 | ||||||
Hub Group, Inc. — Class A* | 35 | 1,676 | ||||||
Boise Cascade Co. | 42 | 1,676 | ||||||
Cubic Corp. | 28 | 1,651 | ||||||
Actuant Corp. — Class A | 65 | 1,644 | ||||||
Greif, Inc. — Class A | 27 | 1,636 | ||||||
Harsco Corp.* | 87 | 1,623 | ||||||
Sun Hydraulics Corp. | 25 | 1,617 | ||||||
AAON, Inc. | 44 | 1,615 | ||||||
Greenbrier Companies, Inc.1 | 30 | 1,599 | ||||||
General Cable Corp. | 53 | 1,569 | ||||||
Methode Electronics, Inc. | 39 | 1,564 | ||||||
TTM Technologies, Inc.* | 99 | 1,551 | ||||||
Chart Industries, Inc.* | 33 | 1,546 | ||||||
Benchmark Electronics, Inc.* | 53 | 1,542 | ||||||
Altra Industrial Motion Corp. | 30 | 1,512 | ||||||
Axon Enterprise, Inc.* | 57 | 1,510 | ||||||
AZZ, Inc. | 29 | 1,482 | ||||||
Air Transport Services Group, Inc.* | 64 | 1,481 | ||||||
Atlas Air Worldwide Holdings, Inc.* | 25 | 1,466 | ||||||
SPX Corp.* | 46 | 1,444 | ||||||
Triumph Group, Inc. | 53 | 1,442 | ||||||
Badger Meter, Inc. | 30 | 1,434 | ||||||
Apogee Enterprises, Inc. | 31 | 1,418 | ||||||
Knowles Corp.* | 95 | 1,393 | ||||||
Tennant Co. | 19 | 1,380 | ||||||
AAR Corp. | 35 | 1,375 | ||||||
Matson, Inc. | 46 | 1,373 | ||||||
Astec Industries, Inc. | 23 | 1,346 | ||||||
Raven Industries, Inc. | 39 | 1,340 | ||||||
US Concrete, Inc.* | 16 | 1,338 | ||||||
Manitowoc Company, Inc.* | 34 | 1,338 | ||||||
Standex International Corp. | 13 | 1,324 | ||||||
TriMas Corp.* | 49 | 1,311 | ||||||
OSI Systems, Inc.* | 20 | 1,288 | ||||||
Federal Signal Corp. | 64 | 1,286 | ||||||
Alamo Group, Inc. | 11 | 1,242 | ||||||
Aerovironment, Inc.* | 22 | 1,235 | ||||||
Kadant, Inc. | 12 | 1,205 | ||||||
Continental Building Products, Inc.* | 42 | 1,182 | ||||||
US Ecology, Inc. | 23 | 1,173 | ||||||
Briggs & Stratton Corp. | 46 | 1,167 | ||||||
Heartland Express, Inc. | 50 | 1,167 | ||||||
Primoris Services Corp. | 42 | 1,142 | ||||||
Milacron Holdings Corp.* | 59 | 1,129 | ||||||
Advanced Disposal Services, Inc.* | 47 | 1,125 | ||||||
Multi-Color Corp. | 15 | 1,123 | ||||||
Gibraltar Industries, Inc.* | 34 | 1,122 | ||||||
Fabrinet* | 38 | 1,091 | ||||||
Fitbit, Inc. — Class A* | 189 | 1,079 | ||||||
Encore Wire Corp. | 22 | 1,070 | ||||||
Sturm Ruger & Company, Inc. | 19 | 1,061 | ||||||
Tutor Perini Corp.* | 40 | 1,014 | ||||||
Ship Finance International Ltd. | 65 | 1,007 | ||||||
ArcBest Corp. | 28 | 1,001 | ||||||
Schneider National, Inc. — Class B | 35 | 1,000 | ||||||
Lindsay Corp. | 11 | 970 | ||||||
Casella Waste Systems, Inc. — Class A* | 42 | 967 | ||||||
Chase Corp. | 8 | 964 | ||||||
GasLog Ltd. | 43 | 957 | ||||||
Astronics Corp.* | 23 | 954 | ||||||
Hyster-Yale Materials Handling, Inc. | 11 | 937 | ||||||
Advanced Drainage Systems, Inc. | 39 | 930 | ||||||
Columbus McKinnon Corp. | 23 | 920 | ||||||
Lydall, Inc.* | 18 | 913 | ||||||
CTS Corp. | 35 | 901 | ||||||
Aegion Corp. — Class A* | 35 | 890 | ||||||
GoPro, Inc. — Class A*,1 | 116 | 878 |
120 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 1.5x STRATEGY FUND |
Shares | Value | |||||||
CIRCOR International, Inc. | 18 | $ | 876 | |||||
Quanex Building Products Corp. | 37 | 866 | ||||||
AVX Corp. | 50 | 865 | ||||||
PGT Innovations, Inc.* | 51 | 859 | ||||||
Marten Transport Ltd. | 42 | 853 | ||||||
NCI Building Systems, Inc.* | 43 | 830 | ||||||
Evoqua Water Technologies Corp.* | 34 | 806 | ||||||
Kratos Defense & Security Solutions, Inc.* | 76 | 805 | ||||||
NN, Inc. | 29 | 800 | ||||||
FARO Technologies, Inc.* | 17 | 799 | ||||||
Echo Global Logistics, Inc.* | 28 | 784 | ||||||
Control4 Corp.* | 26 | 774 | ||||||
Atkore International Group, Inc.* | 36 | 772 | ||||||
Global Brass & Copper Holdings, Inc. | 23 | 761 | ||||||
American Outdoor Brands Corp.* | 59 | 758 | ||||||
Applied Optoelectronics, Inc.*,1 | 20 | 756 | ||||||
KEMET Corp.* | 49 | 738 | ||||||
Electro Scientific Industries, Inc.* | 34 | 729 | ||||||
Scorpio Tankers, Inc. | 229 | 698 | ||||||
Stoneridge, Inc.* | 30 | 686 | ||||||
Argan, Inc. | 15 | 675 | ||||||
Keane Group, Inc.*,1 | 35 | 665 | ||||||
TimkenSteel Corp.* | 43 | 653 | ||||||
Griffon Corp. | 31 | 631 | ||||||
MYR Group, Inc.* | 17 | 607 | ||||||
Gorman-Rupp Co. | 19 | 593 | ||||||
International Seaways, Inc.* | 31 | 572 | ||||||
Insteel Industries, Inc. | 20 | 566 | ||||||
Caesarstone Ltd.* | 25 | 550 | ||||||
SunPower Corp. — Class A*,1 | 65 | 548 | ||||||
Kimball Electronics, Inc.* | 30 | 547 | ||||||
Teekay Corp. | 58 | 541 | ||||||
Tredegar Corp. | 28 | 538 | ||||||
ZAGG, Inc.* | 29 | 535 | ||||||
YRC Worldwide, Inc.* | 35 | 503 | ||||||
DXP Enterprises, Inc.* | 17 | 503 | ||||||
National Presto Industries, Inc. | 5 | 497 | ||||||
Greif, Inc. — Class B | 7 | 485 | ||||||
Scorpio Bulkers, Inc. | 65 | 481 | ||||||
Myers Industries, Inc. | 24 | 468 | ||||||
Ichor Holdings Ltd.* | 19 | 467 | ||||||
Haynes International, Inc. | 14 | 449 | ||||||
Ply Gem Holdings, Inc.* | 24 | 444 | ||||||
Sterling Construction Company, Inc.* | 27 | 440 | ||||||
VSE Corp. | 9 | 436 | ||||||
NV5 Global, Inc.* | 8 | 433 | ||||||
NVE Corp. | 5 | 430 | ||||||
Armstrong Flooring, Inc.* | 25 | 423 | ||||||
Mistras Group, Inc.* | 18 | 422 | ||||||
Park-Ohio Holdings Corp. | 9 | 414 | ||||||
Covenant Transportation Group, Inc. — Class A*,1 | 14 | 402 | ||||||
Park Electrochemical Corp. | 20 | 393 | ||||||
Energous Corp.* | 20 | 389 | ||||||
Frontline Ltd. | 84 | 386 | ||||||
Vicor Corp.* | 18 | 376 | ||||||
DMC Global, Inc. | 15 | 376 | ||||||
Mesa Laboratories, Inc. | 3 | 373 | ||||||
Energy Recovery, Inc.* | 39 | 341 | ||||||
American Railcar Industries, Inc. | 8 | 333 | ||||||
Gener8 Maritime, Inc.* | 50 | 331 | ||||||
Heritage-Crystal Clean, Inc.* | 15 | 326 | ||||||
GP Strategies Corp.* | 14 | 325 | ||||||
DHT Holdings, Inc. | 90 | 323 | ||||||
Daseke, Inc.* | 22 | 314 | ||||||
Ducommun, Inc.* | 11 | 313 | ||||||
Costamare, Inc. | 53 | 306 | ||||||
Babcock & Wilcox Enterprises, Inc.* | 52 | 295 | ||||||
Vishay Precision Group, Inc.* | 11 | 277 | ||||||
Nordic American Tankers Ltd. | 108 | 266 | ||||||
Teekay Tankers Ltd. — Class A | 188 | 263 | ||||||
Powell Industries, Inc. | 9 | 258 | ||||||
Roadrunner Transportation Systems, Inc.* | 33 | 254 | ||||||
Sparton Corp.* | 11 | 254 | ||||||
Hurco Companies, Inc. | 6 | 253 | ||||||
Bel Fuse, Inc. — Class B | 10 | 252 | ||||||
Layne Christensen Co.* | 20 | 251 | ||||||
LB Foster Co. — Class A* | 9 | 244 | ||||||
Ardmore Shipping Corp.* | 30 | 240 | ||||||
Twin Disc, Inc.* | 9 | 239 | ||||||
Hudson Technologies, Inc.* | 39 | 237 | ||||||
Allied Motion Technologies, Inc. | 7 | 232 | ||||||
Dorian LPG Ltd.* | 28 | 230 | ||||||
Orion Group Holdings, Inc.* | 29 | 227 | ||||||
Hardinge, Inc. | 13 | 226 | ||||||
Advanced Emissions Solutions, Inc. | 23 | 222 | ||||||
FreightCar America, Inc. | 13 | 222 | ||||||
Forterra, Inc.* | 20 | 222 | ||||||
Olympic Steel, Inc. | 10 | 215 | ||||||
Omega Flex, Inc. | 3 | 214 | ||||||
Universal Logistics Holdings, Inc. | 9 | 214 | ||||||
Graham Corp. | 10 | 209 | ||||||
AquaVenture Holdings Ltd.* | 13 | 202 | ||||||
Hill International, Inc.* | 37 | 202 | ||||||
LSB Industries, Inc.* | 23 | 201 | ||||||
UFP Technologies, Inc.* | 7 | 194 | ||||||
Northwest Pipe Co.* | 10 | 192 | ||||||
Fluidigm Corp.* | 32 | 188 | ||||||
Eagle Bulk Shipping, Inc.* | 42 | 188 | ||||||
Iteris, Inc.* | 26 | 181 | ||||||
Radiant Logistics, Inc.* | 39 | 179 | ||||||
LSI Industries, Inc. | 26 | 179 | ||||||
Core Molding Technologies, Inc. | 8 | 174 | ||||||
Lawson Products, Inc.* | 7 | 173 | ||||||
CECO Environmental Corp. | 33 | 169 | ||||||
Safe Bulkers, Inc.* | 52 | 168 | ||||||
Eastern Co. | 6 | 157 | ||||||
IES Holdings, Inc.* | 9 | 155 | ||||||
Pure Cycle Corp.* | 18 | 150 | ||||||
Gencor Industries, Inc.* | 9 | 149 | ||||||
Intevac, Inc.* | 21 | 144 | ||||||
MicroVision, Inc.* | 81 | 132 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 121 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 1.5x STRATEGY FUND |
Shares | Value | |||||||
Overseas Shipholding Group, Inc. — Class A* | 48 | $ | 132 | |||||
NL Industries, Inc.* | 9 | 128 | ||||||
Navios Maritime Holdings, Inc.* | 96 | 115 | ||||||
Napco Security Technologies, Inc.* | 13 | 114 | ||||||
Ampco-Pittsburgh Corp. | 9 | 112 | ||||||
Genco Shipping & Trading Ltd.* | 8 | 107 | ||||||
CyberOptics Corp.* | 7 | 105 | ||||||
Willis Lease Finance Corp.* | 4 | 100 | ||||||
Navios Maritime Acquisition Corp. | 88 | 98 | ||||||
Willbros Group, Inc.* | 47 | 67 | ||||||
Akoustis Technologies, Inc.* | 10 | 62 | ||||||
Revolution Lighting Technologies, Inc.* | 13 | 43 | ||||||
Aqua Metals, Inc.* | 18 | 39 | ||||||
Total Industrial | 335,260 | |||||||
Consumer, Cyclical - 3.0% | ||||||||
Dana, Inc. | 156 | 4,994 | ||||||
Beacon Roofing Supply, Inc.* | 71 | 4,527 | ||||||
Five Below, Inc.* | 59 | 3,913 | ||||||
Texas Roadhouse, Inc. — Class A | 72 | 3,793 | ||||||
Churchill Downs, Inc. | 15 | 3,490 | ||||||
FirstCash, Inc. | 51 | 3,440 | ||||||
Tenneco, Inc. | 58 | 3,395 | ||||||
LCI Industries | 26 | 3,380 | ||||||
Cracker Barrel Old Country Store, Inc.1 | 21 | 3,337 | ||||||
ILG, Inc. | 115 | 3,275 | ||||||
American Eagle Outfitters, Inc. | 174 | 3,271 | ||||||
Wolverine World Wide, Inc. | 102 | 3,252 | ||||||
Planet Fitness, Inc. — Class A* | 92 | 3,186 | ||||||
Boyd Gaming Corp. | 90 | 3,155 | ||||||
Marriott Vacations Worldwide Corp. | 23 | 3,110 | ||||||
Jack in the Box, Inc. | 31 | 3,041 | ||||||
Steven Madden Ltd.* | 64 | 2,989 | ||||||
Scientific Games Corp. — Class A* | 58 | 2,975 | ||||||
TRI Pointe Group, Inc.* | 162 | 2,903 | ||||||
KB Home | 90 | 2,876 | ||||||
Penn National Gaming, Inc.* | 91 | 2,851 | ||||||
Lithia Motors, Inc. — Class A | 25 | 2,840 | ||||||
SkyWest, Inc. | 53 | 2,814 | ||||||
SiteOne Landscape Supply, Inc.* | 36 | 2,761 | ||||||
Deckers Outdoor Corp.* | 34 | 2,729 | ||||||
Ollie’s Bargain Outlet Holdings, Inc.* | 51 | 2,716 | ||||||
Big Lots, Inc. | 48 | 2,695 | ||||||
Buffalo Wild Wings, Inc.* | 17 | 2,658 | ||||||
UniFirst Corp. | 16 | 2,638 | ||||||
Children’s Place, Inc. | 18 | 2,616 | ||||||
Herman Miller, Inc. | 65 | 2,603 | ||||||
Dave & Buster’s Entertainment, Inc.* | 45 | 2,483 | ||||||
Red Rock Resorts, Inc. — Class A | 73 | 2,463 | ||||||
Cooper-Standard Holdings, Inc.* | 20 | 2,450 | ||||||
Cheesecake Factory, Inc.1 | 49 | 2,361 | ||||||
Anixter International, Inc.* | 31 | 2,356 | ||||||
Navistar International Corp.* | 54 | 2,315 | ||||||
Hawaiian Holdings, Inc. | 57 | 2,271 | ||||||
Columbia Sportswear Co. | 31 | 2,228 | ||||||
Bloomin’ Brands, Inc. | 102 | 2,177 | ||||||
Meritage Homes Corp.* | 42 | 2,150 | ||||||
iRobot Corp.*,1 | 28 | 2,148 | ||||||
Meritor, Inc.* | 90 | 2,111 | ||||||
PriceSmart, Inc. | 24 | 2,066 | ||||||
Brinker International, Inc. | 52 | 2,020 | ||||||
Cooper Tire & Rubber Co. | 57 | 2,015 | ||||||
Allegiant Travel Co. — Class A | 13 | 2,012 | ||||||
Office Depot, Inc. | 551 | 1,951 | ||||||
Winnebago Industries, Inc. | 34 | 1,890 | ||||||
Taylor Morrison Home Corp. — Class A* | 77 | 1,884 | ||||||
Caesars Entertainment Corp.* | 147 | 1,860 | ||||||
Dorman Products, Inc.* | 30 | 1,834 | ||||||
Pinnacle Entertainment, Inc.* | 56 | 1,833 | ||||||
Installed Building Products, Inc.* | 24 | 1,823 | ||||||
HNI Corp. | 47 | 1,813 | ||||||
RH* | 21 | 1,810 | ||||||
BMC Stock Holdings, Inc.* | 71 | 1,796 | ||||||
American Axle & Manufacturing Holdings, Inc.* | 105 | 1,788 | ||||||
Triton International Ltd.* | 47 | 1,760 | ||||||
G-III Apparel Group Ltd.* | 46 | 1,697 | ||||||
Interface, Inc. — Class A | 67 | 1,685 | ||||||
Papa John’s International, Inc. | 30 | 1,683 | ||||||
Sleep Number Corp.* | 44 | 1,654 | ||||||
La Quinta Holdings, Inc.* | 89 | 1,643 | ||||||
Rush Enterprises, Inc. — Class A* | 32 | 1,626 | ||||||
Eldorado Resorts, Inc.* | 49 | 1,624 | ||||||
La-Z-Boy, Inc. | 52 | 1,622 | ||||||
Mobile Mini, Inc. | 47 | 1,621 | ||||||
Core-Mark Holding Company, Inc. | 49 | 1,547 | ||||||
Caleres, Inc. | 46 | 1,540 | ||||||
MDC Holdings, Inc. | 48 | 1,530 | ||||||
Camping World Holdings, Inc. — Class A | 34 | 1,521 | ||||||
DSW, Inc. — Class A | 71 | 1,520 | ||||||
Group 1 Automotive, Inc. | 21 | 1,490 | ||||||
Fox Factory Holding Corp.* | 37 | 1,437 | ||||||
Steelcase, Inc. — Class A | 93 | 1,414 | ||||||
IMAX Corp.* | 61 | 1,412 | ||||||
Callaway Golf Co. | 101 | 1,407 | ||||||
H&E Equipment Services, Inc. | 34 | 1,382 | ||||||
Cavco Industries, Inc.* | 9 | 1,373 | ||||||
HSN, Inc. | 34 | 1,372 | ||||||
Wabash National Corp. | 63 | 1,367 | ||||||
LGI Homes, Inc.* | 18 | 1,351 | ||||||
Abercrombie & Fitch Co. — Class A | 74 | 1,290 | ||||||
Asbury Automotive Group, Inc.* | 20 | 1,280 | ||||||
Oxford Industries, Inc. | 17 | 1,278 | ||||||
Gentherm, Inc.* | 39 | 1,238 | ||||||
Chico’s FAS, Inc. | 138 | 1,217 | ||||||
Wingstop, Inc. | 31 | 1,208 | ||||||
Knoll, Inc. | 52 | 1,198 | ||||||
Belmond Ltd. — Class A* | 97 | 1,188 | ||||||
Sonic Corp.1 | 43 | 1,182 | ||||||
Tailored Brands, Inc. | 53 | 1,157 | ||||||
Guess?, Inc.1 | 65 | 1,097 | ||||||
GMS, Inc.* | 29 | 1,092 |
122 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 1.5x STRATEGY FUND |
Shares | Value | |||||||
International Speedway Corp. — Class A | 27 | $ | 1,076 | |||||
J.C. Penney Company, Inc.* | 334 | 1,055 | ||||||
Modine Manufacturing Co.* | 52 | 1,050 | ||||||
Shake Shack, Inc. — Class A* | 24 | 1,037 | ||||||
Standard Motor Products, Inc. | 23 | 1,033 | ||||||
Crocs, Inc.* | 80 | 1,011 | ||||||
SeaWorld Entertainment, Inc.*,1 | 73 | 991 | ||||||
DineEquity, Inc. | 19 | 964 | ||||||
PetMed Express, Inc. | 21 | 955 | ||||||
Denny’s Corp.* | 72 | 953 | ||||||
Douglas Dynamics, Inc. | 25 | 945 | ||||||
Lumber Liquidators Holdings, Inc.* | 30 | 942 | ||||||
ScanSource, Inc.* | 26 | 931 | ||||||
Dillard’s, Inc. — Class A1 | 15 | 901 | ||||||
M/I Homes, Inc.* | 26 | 894 | ||||||
AMC Entertainment Holdings, Inc. — Class A1 | 59 | 891 | ||||||
Vista Outdoor, Inc.* | 61 | 889 | ||||||
Express, Inc.* | 83 | 842 | ||||||
BJ’s Restaurants, Inc. | 22 | 801 | ||||||
Red Robin Gourmet Burgers, Inc.* | 14 | 790 | ||||||
REV Group, Inc. | 24 | 781 | ||||||
Ethan Allen Interiors, Inc. | 27 | 772 | ||||||
National Vision Holdings, Inc.* | 19 | 772 | ||||||
Kimball International, Inc. — Class B | 40 | 747 | ||||||
Liberty TripAdvisor Holdings, Inc. — Class A* | 79 | 744 | ||||||
Buckle, Inc.1 | 31 | 736 | ||||||
William Lyon Homes — Class A* | 25 | 727 | ||||||
Conn’s, Inc.* | 20 | 711 | ||||||
Universal Electronics, Inc.* | 15 | 709 | ||||||
Titan International, Inc. | 54 | 695 | ||||||
Tower International, Inc. | 22 | 672 | ||||||
Ruth’s Hospitality Group, Inc. | 31 | 671 | ||||||
Beazer Homes USA, Inc.* | 34 | 653 | ||||||
Genesco, Inc.* | 20 | 650 | ||||||
EZCORP, Inc. — Class A* | 53 | 647 | ||||||
Finish Line, Inc. — Class A | 43 | 625 | ||||||
Malibu Boats, Inc. — Class A* | 21 | 624 | ||||||
Century Communities, Inc.* | 20 | 622 | ||||||
Unifi, Inc.* | 17 | 610 | ||||||
Spartan Motors, Inc. | 37 | 583 | ||||||
Regis Corp.* | 37 | 568 | ||||||
Marcus Corp. | 20 | 547 | ||||||
Monarch Casino & Resort, Inc.* | 12 | 538 | ||||||
Fiesta Restaurant Group, Inc.* | 28 | 532 | ||||||
Motorcar Parts of America, Inc.* | 21 | 525 | ||||||
Sonic Automotive, Inc. — Class A | 28 | 517 | ||||||
Movado Group, Inc. | 16 | 515 | ||||||
MarineMax, Inc.* | 27 | 510 | ||||||
Hooker Furniture Corp. | 12 | 509 | ||||||
Acushnet Holdings Corp. | 24 | 506 | ||||||
Chuy’s Holdings, Inc.* | 18 | 505 | ||||||
Freshpet, Inc.* | 26 | 493 | ||||||
Hibbett Sports, Inc.* | 23 | 469 | ||||||
Carrols Restaurant Group, Inc.* | 38 | 462 | ||||||
National CineMedia, Inc. | 67 | 460 | ||||||
Haverty Furniture Companies, Inc. | 20 | 453 | ||||||
Hovnanian Enterprises, Inc. — Class A* | 134 | 449 | ||||||
Wesco Aircraft Holdings, Inc.* | 60 | 444 | ||||||
Ascena Retail Group, Inc.* | 186 | 437 | ||||||
Barnes & Noble, Inc. | 65 | 435 | ||||||
Systemax, Inc. | 13 | 433 | ||||||
Nautilus, Inc.* | 32 | 427 | ||||||
Del Taco Restaurants, Inc.* | 35 | 424 | ||||||
Titan Machinery, Inc.* | 20 | 423 | ||||||
MCBC Holdings, Inc.* | 19 | 422 | ||||||
Flexsteel Industries, Inc. | 9 | 421 | ||||||
Zumiez, Inc.*,1 | 20 | 417 | ||||||
Biglari Holdings, Inc.* | 1 | 414 | ||||||
Cato Corp. — Class A | 26 | 414 | ||||||
Bassett Furniture Industries, Inc. | 11 | 414 | ||||||
Party City Holdco, Inc.* | 29 | 405 | ||||||
Tile Shop Holdings, Inc. | 42 | 403 | ||||||
America’s Car-Mart, Inc.* | 9 | 402 | ||||||
Citi Trends, Inc. | 15 | 397 | ||||||
Winmark Corp. | 3 | 388 | ||||||
Superior Industries International, Inc. | 26 | 386 | ||||||
Horizon Global Corp.* | 27 | 379 | ||||||
Veritiv Corp.* | 13 | 376 | ||||||
Essendant, Inc. | 40 | 371 | ||||||
Drive Shack, Inc.* | 67 | 370 | ||||||
Culp, Inc. | 11 | 369 | ||||||
Fossil Group, Inc.*,1 | 47 | 365 | ||||||
Pier 1 Imports, Inc. | 88 | 364 | ||||||
Golden Entertainment, Inc.* | 11 | 359 | ||||||
Daktronics, Inc. | 39 | 356 | ||||||
Del Frisco’s Restaurant Group, Inc.* | 23 | 351 | ||||||
Shoe Carnival, Inc. | 13 | 348 | ||||||
Zoe’s Kitchen, Inc.* | 20 | 334 | ||||||
Barnes & Noble Education, Inc.* | 40 | 330 | ||||||
Perry Ellis International, Inc.* | 13 | 326 | ||||||
PC Connection, Inc. | 12 | 315 | ||||||
Johnson Outdoors, Inc. — Class A | 5 | 310 | ||||||
Miller Industries, Inc. | 12 | 310 | ||||||
Reading International, Inc. — Class A* | 18 | 301 | ||||||
Potbelly Corp.* | 24 | 295 | ||||||
PICO Holdings, Inc.* | 23 | 294 | ||||||
Francesca’s Holdings Corp.* | 40 | 292 | ||||||
Rush Enterprises, Inc. — Class B* | 6 | 289 | ||||||
Commercial Vehicle Group, Inc.* | 27 | 289 | ||||||
Green Brick Partners, Inc.* | 25 | 283 | ||||||
RCI Hospitality Holdings, Inc. | 10 | 280 | ||||||
GNC Holdings, Inc. — Class A*,1 | 73 | 269 | ||||||
Vera Bradley, Inc.* | 22 | 268 | ||||||
Eros International plc* | 27 | 261 | ||||||
Sportsman’s Warehouse Holdings, Inc.*,1 | 39 | 258 | ||||||
Nexeo Solutions, Inc.* | 28 | 255 | ||||||
Speedway Motorsports, Inc. | 13 | 245 | ||||||
Superior Uniform Group, Inc. | 9 | 240 | ||||||
Foundation Building Materials, Inc.* | 16 | 237 | ||||||
Bojangles’, Inc.* | 20 | 236 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 123 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 1.5x STRATEGY FUND |
Shares | Value | |||||||
Nathan’s Famous, Inc. | 3 | $ | 226 | |||||
Tilly’s, Inc. — Class A | 15 | 221 | ||||||
El Pollo Loco Holdings, Inc.* | 22 | 218 | ||||||
AV Homes, Inc.* | 13 | 217 | ||||||
Boot Barn Holdings, Inc.* | 13 | 216 | ||||||
Century Casinos, Inc.* | 23 | 210 | ||||||
Weyco Group, Inc. | 7 | 208 | ||||||
Lindblad Expeditions Holdings, Inc.* | 21 | 206 | ||||||
Habit Restaurants, Inc. — Class A* | 21 | 201 | ||||||
PetIQ, Inc.* | 9 | 197 | ||||||
Kirkland’s, Inc.* | 16 | 191 | ||||||
Blue Bird Corp.* | 9 | 179 | ||||||
Duluth Holdings, Inc. — Class B* | 10 | 178 | ||||||
Libbey, Inc. | 23 | 173 | ||||||
Clarus Corp.* | 22 | 173 | ||||||
Red Lion Hotels Corp.* | 17 | 167 | ||||||
Big 5 Sporting Goods Corp. | 22 | 167 | ||||||
Huttig Building Products, Inc.* | 25 | 166 | ||||||
Lifetime Brands, Inc. | 10 | 165 | ||||||
New Home Company, Inc.* | 13 | 163 | ||||||
EnviroStar, Inc.1 | 4 | 160 | ||||||
Fred’s, Inc. — Class A | 39 | 158 | ||||||
At Home Group, Inc.* | 5 | 152 | ||||||
Escalade, Inc. | 12 | 148 | ||||||
Delta Apparel, Inc.* | 7 | 141 | ||||||
J Alexander’s Holdings, Inc.* | 14 | 136 | ||||||
Build-A-Bear Workshop, Inc. — Class A* | 14 | 129 | ||||||
Hamilton Beach Brands Holding Co. — Class A | 5 | 128 | ||||||
VOXX International Corp. — Class A* | 21 | 118 | ||||||
Fogo De Chao, Inc.* | 10 | 116 | ||||||
Castle Brands, Inc.* | 95 | 116 | ||||||
Marine Products Corp. | 9 | 115 | ||||||
Gaia, Inc.* | 9 | 112 | ||||||
PCM, Inc.* | 11 | 109 | ||||||
Empire Resorts, Inc.* | 4 | 108 | ||||||
Vitamin Shoppe, Inc.* | 24 | 106 | ||||||
J. Jill, Inc.* | 13 | 101 | ||||||
Container Store Group, Inc.* | 17 | 81 | ||||||
Sequential Brands Group, Inc.* | 43 | 77 | ||||||
Iconix Brand Group, Inc.* | 53 | 68 | ||||||
Noodles & Co.* | 13 | 68 | ||||||
Sears Holdings Corp.* | 14 | 50 | ||||||
Inspired Entertainment, Inc.* | 5 | 49 | ||||||
CompX International, Inc. | 2 | 27 | ||||||
Total Consumer, Cyclical | 272,940 | |||||||
Technology - 2.5% | ||||||||
EPAM Systems, Inc.* | 54 | 5,801 | ||||||
MKS Instruments, Inc. | 58 | 5,481 | ||||||
Aspen Technology, Inc.* | 81 | 5,362 | ||||||
Fair Isaac Corp. | 33 | 5,056 | ||||||
MAXIMUS, Inc. | 70 | 5,011 | ||||||
Blackbaud, Inc. | 51 | 4,819 | ||||||
Monolithic Power Systems, Inc. | 42 | 4,719 | ||||||
Entegris, Inc. | 153 | 4,659 | ||||||
Integrated Device Technology, Inc.* | 145 | 4,311 | ||||||
Paycom Software, Inc.* | 52 | 4,177 | ||||||
Nutanix, Inc. — Class A* | 114 | 4,022 | ||||||
Medidata Solutions, Inc.* | 62 | 3,929 | ||||||
Silicon Laboratories, Inc.* | 44 | 3,885 | ||||||
j2 Global, Inc. | 50 | 3,751 | ||||||
Science Applications International Corp. | 47 | 3,599 | ||||||
Cirrus Logic, Inc.* | 69 | 3,578 | ||||||
CACI International, Inc. — Class A* | 26 | 3,441 | ||||||
Lumentum Holdings, Inc.* | 66 | 3,227 | ||||||
HubSpot, Inc.* | 36 | 3,182 | ||||||
2U, Inc.* | 47 | 3,032 | ||||||
ACI Worldwide, Inc.* | 126 | 2,856 | ||||||
Allscripts Healthcare Solutions, Inc.* | 196 | 2,852 | ||||||
Verint Systems, Inc.* | 68 | 2,846 | ||||||
RealPage, Inc.* | 64 | 2,835 | ||||||
NetScout Systems, Inc.* | 93 | 2,832 | ||||||
Mercury Systems, Inc.* | 51 | 2,619 | ||||||
Cabot Microelectronics Corp. | 27 | 2,540 | ||||||
Semtech Corp.* | 71 | 2,428 | ||||||
Convergys Corp. | 100 | 2,350 | ||||||
Envestnet, Inc.* | 47 | 2,343 | ||||||
Acxiom Corp.* | 85 | 2,343 | ||||||
Power Integrations, Inc.1 | 31 | 2,280 | ||||||
Progress Software Corp. | 52 | 2,214 | ||||||
CommVault Systems, Inc.* | 42 | 2,205 | ||||||
VeriFone Systems, Inc.* | 120 | 2,125 | ||||||
ExlService Holdings, Inc.* | 35 | 2,112 | ||||||
Ebix, Inc. | 26 | 2,060 | ||||||
Ambarella, Inc.* | 35 | 2,056 | ||||||
Callidus Software, Inc.* | 70 | 2,005 | ||||||
Cornerstone OnDemand, Inc.* | 56 | 1,978 | ||||||
Qualys, Inc.* | 33 | 1,958 | ||||||
Omnicell, Inc.* | 39 | 1,892 | ||||||
Pegasystems, Inc. | 40 | 1,886 | ||||||
New Relic, Inc.* | 32 | 1,849 | ||||||
Box, Inc. — Class A* | 87 | 1,837 | ||||||
BroadSoft, Inc.* | 33 | 1,812 | ||||||
Brooks Automation, Inc. | 74 | 1,765 | ||||||
Cloudera, Inc.* | 104 | 1,718 | ||||||
MaxLinear, Inc. — Class A* | 65 | 1,717 | ||||||
Rambus, Inc.* | 117 | 1,664 | ||||||
Inphi Corp.* | 45 | 1,647 | ||||||
Twilio, Inc. — Class A*,1 | 68 | 1,605 | ||||||
Pure Storage, Inc. — Class A* | 101 | 1,602 | ||||||
CSG Systems International, Inc. | 35 | 1,534 | ||||||
Synaptics, Inc.* | 38 | 1,518 | ||||||
Electronics for Imaging, Inc.* | 51 | 1,506 | ||||||
Bottomline Technologies de, Inc.* | 42 | 1,457 | ||||||
Insight Enterprises, Inc.* | 38 | 1,455 | ||||||
MicroStrategy, Inc. — Class A* | 11 | 1,444 | ||||||
MACOM Technology Solutions Holdings, Inc.*,1 | 44 | 1,432 | ||||||
ManTech International Corp. — Class A | 28 | 1,405 | ||||||
Five9, Inc.* | 56 | 1,393 | ||||||
MINDBODY, Inc. — Class A* | 45 | 1,370 | ||||||
Diebold Nixdorf, Inc. | 82 | 1,341 |
124 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 1.5x STRATEGY FUND |
Shares | Value | |||||||
Sykes Enterprises, Inc.* | 42 | $ | 1,321 | |||||
Virtusa Corp.* | 29 | 1,278 | ||||||
Xperi Corp. | 52 | 1,269 | ||||||
Cotiviti Holdings, Inc.* | 39 | 1,256 | ||||||
FormFactor, Inc.* | 77 | 1,205 | ||||||
Diodes, Inc.* | 40 | 1,147 | ||||||
Amkor Technology, Inc.* | 109 | 1,096 | ||||||
Hortonworks, Inc.* | 54 | 1,086 | ||||||
Stratasys Ltd.*,1 | 54 | 1,078 | ||||||
CEVA, Inc.* | 23 | 1,061 | ||||||
Monotype Imaging Holdings, Inc. | 44 | 1,060 | ||||||
Inovalon Holdings, Inc. — Class A* | 69 | 1,035 | ||||||
Coupa Software, Inc.* | 33 | 1,030 | ||||||
3D Systems Corp.*,1 | 118 | 1,019 | ||||||
Cray, Inc.* | 42 | 1,016 | ||||||
Varonis Systems, Inc.* | 20 | 971 | ||||||
MTS Systems Corp. | 18 | 967 | ||||||
Axcelis Technologies, Inc.* | 33 | 947 | ||||||
Vocera Communications, Inc.* | 30 | 907 | ||||||
Super Micro Computer, Inc.* | 42 | 879 | ||||||
SPS Commerce, Inc.* | 18 | 875 | ||||||
Ultra Clean Holdings, Inc.* | 36 | 831 | ||||||
Syntel, Inc.* | 36 | 828 | ||||||
Rudolph Technologies, Inc.* | 34 | 813 | ||||||
Quality Systems, Inc.* | 58 | 788 | ||||||
Instructure, Inc.* | 23 | 761 | ||||||
Veeco Instruments, Inc.* | 51 | 757 | ||||||
Lattice Semiconductor Corp.* | 131 | 757 | ||||||
PROS Holdings, Inc.* | 28 | 741 | ||||||
Barracuda Networks, Inc.* | 26 | 715 | ||||||
Silver Spring Networks, Inc.* | 44 | 714 | ||||||
Evolent Health, Inc. — Class A*,1 | 58 | 713 | ||||||
Donnelley Financial Solutions, Inc.* | 35 | 682 | ||||||
LivePerson, Inc.* | 59 | 679 | ||||||
Carbonite, Inc.* | 27 | 678 | ||||||
Nanometrics, Inc.* | 26 | 648 | ||||||
IXYS Corp.* | 27 | 647 | ||||||
CommerceHub, Inc.* | 31 | 638 | ||||||
Cohu, Inc. | 29 | 637 | ||||||
Alteryx, Inc. — Class A* | 25 | 632 | ||||||
Photronics, Inc.* | 72 | 614 | ||||||
MuleSoft, Inc. — Class A* | 26 | 605 | ||||||
TeleTech Holdings, Inc. | 15 | 604 | ||||||
Blackline, Inc.* | 18 | 590 | ||||||
Workiva, Inc.* | 27 | 578 | ||||||
Engility Holdings, Inc.* | 20 | 567 | ||||||
Everbridge, Inc.* | 19 | 565 | ||||||
Xcerra Corp.* | 57 | 558 | ||||||
Apptio, Inc. — Class A* | 23 | 541 | ||||||
Actua Corp.* | 33 | 515 | ||||||
Benefitfocus, Inc.*,1 | 18 | 486 | ||||||
Bazaarvoice, Inc.* | 89 | 485 | ||||||
InnerWorkings, Inc.* | 48 | 481 | ||||||
USA Technologies, Inc.* | 49 | 478 | ||||||
PDF Solutions, Inc.* | 30 | 471 | ||||||
QAD, Inc. — Class A | 12 | 466 | ||||||
Unisys Corp.* | 54 | 440 | ||||||
Impinj, Inc.*,1 | 19 | 428 | ||||||
Glu Mobile, Inc.* | 112 | 408 | ||||||
Presidio, Inc.* | 21 | 403 | ||||||
Synchronoss Technologies, Inc.* | 45 | 402 | ||||||
Ribbon Communications, Inc.* | 51 | 394 | ||||||
Model N, Inc.* | 25 | 394 | ||||||
Appfolio, Inc. — Class A* | 9 | 373 | ||||||
Digimarc Corp.* | 10 | 361 | ||||||
Computer Programs & Systems, Inc. | 12 | 361 | ||||||
American Software, Inc. — Class A | 30 | 349 | ||||||
AXT, Inc.* | 40 | 348 | ||||||
CommerceHub, Inc.* | 15 | 330 | ||||||
Alpha & Omega Semiconductor Ltd.* | 20 | 327 | ||||||
pdvWireless, Inc.* | 10 | 321 | ||||||
KeyW Holding Corp.*,1 | 52 | 305 | ||||||
Mitek Systems, Inc.* | 33 | 295 | ||||||
DSP Group, Inc.* | 23 | 288 | ||||||
Sigma Designs, Inc.* | 41 | 285 | ||||||
Tabula Rasa HealthCare, Inc.* | 10 | 281 | ||||||
Digi International, Inc.* | 28 | 267 | ||||||
Brightcove, Inc.* | 37 | 263 | ||||||
Castlight Health, Inc. — Class B* | 69 | 259 | ||||||
Rosetta Stone, Inc.* | 19 | 237 | ||||||
SMART Global Holdings, Inc.* | 7 | 236 | ||||||
MobileIron, Inc.* | 60 | 234 | ||||||
Maxwell Technologies, Inc.* | 38 | 219 | ||||||
Immersion Corp.*,1 | 31 | 219 | ||||||
Pixelworks, Inc.* | 34 | 215 | ||||||
Kopin Corp.* | 66 | 211 | ||||||
Agilysys, Inc.* | 16 | 196 | ||||||
Upland Software, Inc.* | 9 | 195 | ||||||
Simulations Plus, Inc. | 12 | 193 | ||||||
Avid Technology, Inc.* | 35 | 189 | ||||||
EMCORE Corp.* | 29 | 187 | ||||||
Quantum Corp.* | 30 | 169 | ||||||
Amber Road, Inc.* | 21 | 154 | ||||||
Park City Group, Inc.* | 14 | 134 | ||||||
GSI Technology, Inc.* | 15 | 119 | ||||||
StarTek, Inc.* | 11 | 110 | ||||||
ExOne Co.* | 12 | 101 | ||||||
Cogint, Inc.* | 22 | 97 | ||||||
SecureWorks Corp. — Class A*,1 | 9 | 80 | ||||||
Veritone, Inc.* | 3 | 70 | ||||||
NantHealth, Inc.* | 19 | 58 | ||||||
Eastman Kodak Co.* | 18 | 56 | ||||||
Radisys Corp.* | 39 | 39 | ||||||
Majesco* | 6 | 32 | ||||||
Tintri, Inc.* | 4 | 20 | ||||||
Total Technology | 228,146 | |||||||
Communications - 1.5% | ||||||||
GrubHub, Inc.* | 92 | 6,606 | ||||||
ViaSat, Inc.*,1 | 57 | 4,266 | ||||||
Proofpoint, Inc.* | 46 | 4,085 | ||||||
Nexstar Media Group, Inc. — Class A | 48 | 3,754 | ||||||
Zendesk, Inc.* | 105 | 3,553 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 125 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 1.5x STRATEGY FUND |
Shares | Value | |||||||
Yelp, Inc. — Class A* | 84 | $ | 3,525 | |||||
RingCentral, Inc. — Class A* | 67 | 3,243 | ||||||
Stamps.com, Inc.* | 17 | 3,196 | ||||||
Ciena Corp.* | 152 | 3,181 | ||||||
Sinclair Broadcast Group, Inc. — Class A | 77 | 2,914 | ||||||
InterDigital, Inc. | 38 | 2,894 | ||||||
Meredith Corp. | 42 | 2,774 | ||||||
Etsy, Inc.* | 125 | 2,556 | ||||||
New York Times Co. — Class A | 136 | 2,516 | ||||||
Finisar Corp.* | 122 | 2,483 | ||||||
Cars.com, Inc.*,1 | 77 | 2,221 | ||||||
Vonage Holdings Corp.* | 215 | 2,187 | ||||||
Viavi Solutions, Inc.* | 245 | 2,141 | ||||||
NETGEAR, Inc.* | 34 | 1,998 | ||||||
Cogent Communications Holdings, Inc. | 44 | 1,993 | ||||||
Time, Inc. | 108 | 1,993 | ||||||
TiVo Corp. | 126 | 1,966 | ||||||
Groupon, Inc. — Class A* | 366 | 1,867 | ||||||
Straight Path Communications, Inc. — Class B* | 10 | 1,818 | ||||||
Shutterfly, Inc.* | 36 | 1,791 | ||||||
Plantronics, Inc. | 35 | 1,763 | ||||||
Shenandoah Telecommunications Co. | 51 | 1,724 | ||||||
Ubiquiti Networks, Inc.*,1 | 24 | 1,705 | ||||||
Chegg, Inc.* | 102 | 1,665 | ||||||
GTT Communications, Inc.* | 33 | 1,549 | ||||||
Extreme Networks, Inc.* | 118 | 1,477 | ||||||
Entercom Communications Corp. — Class A | 135 | 1,458 | ||||||
Gannett Company, Inc. | 124 | 1,437 | ||||||
Imperva, Inc.* | 36 | 1,429 | ||||||
8x8, Inc.* | 95 | 1,339 | ||||||
MSG Networks, Inc. — Class A* | 65 | 1,316 | ||||||
World Wrestling Entertainment, Inc. — Class A | 41 | 1,254 | ||||||
Q2 Holdings, Inc.* | 33 | 1,216 | ||||||
Overstock.com, Inc.* | 19 | 1,214 | ||||||
Oclaro, Inc.* | 179 | 1,206 | ||||||
Scholastic Corp. | 30 | 1,203 | ||||||
Trade Desk, Inc. — Class A*,1 | 26 | 1,189 | ||||||
Gray Television, Inc.* | 70 | 1,172 | ||||||
NIC, Inc. | 70 | 1,162 | ||||||
General Communication, Inc. — Class A* | 28 | 1,093 | ||||||
Iridium Communications, Inc.* | 91 | 1,074 | ||||||
ePlus, Inc.* | 14 | 1,053 | ||||||
Houghton Mifflin Harcourt Co.* | 112 | 1,042 | ||||||
Blucora, Inc.* | 46 | 1,017 | ||||||
ADTRAN, Inc. | 51 | 987 | ||||||
Infinera Corp.* | 155 | 981 | ||||||
EW Scripps Co. — Class A* | 62 | 969 | ||||||
Cincinnati Bell, Inc.* | 45 | 938 | ||||||
Quotient Technology, Inc.* | 78 | 916 | ||||||
Web.com Group, Inc.* | 42 | 916 | ||||||
New Media Investment Group, Inc. | 54 | 906 | ||||||
Boingo Wireless, Inc.* | 39 | 877 | ||||||
Consolidated Communications Holdings, Inc. | 71 | 866 | ||||||
Shutterstock, Inc.* | 20 | 861 | ||||||
Liberty Media Corporation-Liberty Braves — Class C* | 37 | 822 | ||||||
TrueCar, Inc.* | 73 | 818 | ||||||
CalAmp Corp.* | 37 | 793 | ||||||
ORBCOMM, Inc.* | 73 | 743 | ||||||
Tucows, Inc. — Class A* | 10 | 700 | ||||||
Gogo, Inc.*,1 | 62 | 699 | ||||||
Acacia Communications, Inc.*,1 | 19 | 688 | ||||||
Perficient, Inc.* | 36 | 686 | ||||||
ATN International, Inc. | 12 | 663 | ||||||
Globalstar, Inc.* | 497 | 651 | ||||||
HealthStream, Inc.* | 28 | 648 | ||||||
Loral Space & Communications, Inc.* | 14 | 617 | ||||||
MDC Partners, Inc. — Class A* | 61 | 595 | ||||||
Frontier Communications Corp. | 86 | 581 | ||||||
Comtech Telecommunications Corp. | 24 | 531 | ||||||
Endurance International Group Holdings, Inc.* | 63 | 529 | ||||||
Entravision Communications Corp. — Class A | 72 | 515 | ||||||
XO Group, Inc.* | 26 | 480 | ||||||
VASCO Data Security International, Inc.* | 32 | 445 | ||||||
Central European Media Enterprises Ltd. — Class A* | 89 | 414 | ||||||
Rapid7, Inc.* | 22 | 410 | ||||||
A10 Networks, Inc.* | 53 | 409 | ||||||
Windstream Holdings, Inc. | 205 | 379 | ||||||
tronc, Inc.* | 21 | 369 | ||||||
Harmonic, Inc.* | 86 | 361 | ||||||
Okta, Inc.* | 14 | 359 | ||||||
Limelight Networks, Inc.* | 81 | 357 | ||||||
Internap Corp.* | 21 | 330 | ||||||
Spok Holdings, Inc. | 21 | 329 | ||||||
QuinStreet, Inc.* | 39 | 327 | ||||||
TechTarget, Inc.* | 22 | 306 | ||||||
1-800-Flowers.com, Inc. — Class A* | 28 | 300 | ||||||
Carvana Co.* | 15 | 287 | ||||||
Calix, Inc.* | 47 | 280 | ||||||
Lands’ End, Inc.* | 14 | 274 | ||||||
Quantenna Communications, Inc.* | 22 | 268 | ||||||
HC2 Holdings, Inc.* | 45 | 268 | ||||||
ChannelAdvisor Corp.* | 28 | 252 | ||||||
Zix Corp.* | 57 | 250 | ||||||
WideOpenWest, Inc.* | 22 | 233 | ||||||
Daily Journal Corp.* | 1 | 230 | ||||||
Ooma, Inc.* | 19 | 227 | ||||||
NeoPhotonics Corp.* | 34 | 224 | ||||||
Liberty Media Corporation-Liberty Braves — Class A* | 10 | 220 | ||||||
Hawaiian Telcom Holdco, Inc.* | 7 | 216 | ||||||
Preformed Line Products Co. | 3 | 213 | ||||||
IDT Corp. — Class B* | 20 | 212 | ||||||
RigNet, Inc.* | 14 | 209 |
126 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 1.5x STRATEGY FUND |
Shares | Value | |||||||
Reis, Inc. | 10 | $ | 206 | |||||
Meet Group, Inc.* | 73 | 206 | ||||||
Saga Communications, Inc. — Class A | 5 | 202 | ||||||
VirnetX Holding Corp.* | 54 | 200 | ||||||
Aerohive Networks, Inc.* | 34 | 198 | ||||||
Hemisphere Media Group, Inc.* | 17 | 196 | ||||||
Telenav, Inc.* | 33 | 182 | ||||||
KVH Industries, Inc.* | 17 | 176 | ||||||
Clear Channel Outdoor Holdings, Inc. — Class A | 38 | 175 | ||||||
Yext, Inc.* | 14 | 168 | ||||||
Clearfield, Inc.* | 13 | 159 | ||||||
Liquidity Services, Inc.* | 28 | 136 | ||||||
Intelsat S.A.* | 39 | 132 | ||||||
FTD Companies, Inc.* | 18 | 129 | ||||||
Global Eagle Entertainment, Inc.* | 54 | 124 | ||||||
Leaf Group Ltd.* | 12 | 119 | ||||||
Corindus Vascular Robotics, Inc.* | 107 | 108 | ||||||
DHI Group, Inc.* | 53 | 101 | ||||||
RealNetworks, Inc.* | 27 | 92 | ||||||
Rubicon Project, Inc.* | 47 | 88 | ||||||
Townsquare Media, Inc. — Class A* | 10 | 77 | ||||||
Beasley Broadcast Group, Inc. — Class A | 5 | 67 | ||||||
Salem Media Group, Inc. — Class A | 13 | 59 | ||||||
Ominto, Inc.*,1 | 15 | 51 | ||||||
Maxar Technologies Ltd. | 1 | 26 | ||||||
Value Line, Inc. | 1 | 19 | ||||||
Total Communications | 136,608 | |||||||
Energy - 0.9% | ||||||||
PDC Energy, Inc.* | 71 | 3,660 | ||||||
Matador Resources Co.* | 96 | 2,988 | ||||||
Delek US Holdings, Inc. | 84 | 2,935 | ||||||
Ensco plc — Class A | 459 | 2,713 | ||||||
Peabody Energy Corp.* | 67 | 2,638 | ||||||
Callon Petroleum Co.* | 217 | 2,637 | ||||||
Arch Coal, Inc. — Class A | 24 | 2,236 | ||||||
SemGroup Corp. — Class A | 72 | 2,174 | ||||||
SRC Energy, Inc.* | 250 | 2,132 | ||||||
Oasis Petroleum, Inc.* | 252 | 2,119 | ||||||
McDermott International, Inc.* | 305 | 2,007 | ||||||
Rowan Companies plc — Class A* | 126 | 1,973 | ||||||
Ultra Petroleum Corp.* | 211 | 1,912 | ||||||
Dril-Quip, Inc.* | 40 | 1,908 | ||||||
Carrizo Oil & Gas, Inc.* | 83 | 1,766 | ||||||
C&J Energy Services, Inc.* | 50 | 1,674 | ||||||
MRC Global, Inc.* | 96 | 1,624 | ||||||
Pattern Energy Group, Inc.1 | 75 | 1,612 | ||||||
Superior Energy Services, Inc.* | 164 | 1,579 | ||||||
Oil States International, Inc.* | 54 | 1,528 | ||||||
Diamond Offshore Drilling, Inc.*,1 | 70 | 1,301 | ||||||
NOW, Inc.* | 115 | 1,268 | ||||||
ProPetro Holding Corp.* | 61 | 1,230 | ||||||
Unit Corp.* | 55 | 1,210 | ||||||
Noble Corporation plc* | 263 | 1,189 | ||||||
Forum Energy Technologies, Inc.* | 75 | 1,166 | ||||||
Helix Energy Solutions Group, Inc.* | 152 | 1,146 | ||||||
Exterran Corp.* | 34 | 1,069 | ||||||
Halcon Resources Corp.* | 139 | 1,052 | ||||||
Jagged Peak Energy, Inc.* | 62 | 978 | ||||||
WildHorse Resource Development Corp.*,1 | 52 | 957 | ||||||
Denbury Resources, Inc.* | 428 | 946 | ||||||
California Resources Corp.* | 46 | 894 | ||||||
Warrior Met Coal, Inc. | 35 | 880 | ||||||
SunCoke Energy, Inc.* | 70 | 839 | ||||||
SEACOR Holdings, Inc.* | 18 | 832 | ||||||
Thermon Group Holdings, Inc.* | 34 | 805 | ||||||
Archrock, Inc. | 76 | 798 | ||||||
Newpark Resources, Inc.* | 91 | 783 | ||||||
SandRidge Energy, Inc.* | 37 | 780 | ||||||
Ring Energy, Inc.* | 53 | 737 | ||||||
Resolute Energy Corp.*,1 | 23 | 724 | ||||||
Green Plains, Inc. | 42 | 708 | ||||||
Stone Energy Corp.* | 21 | 675 | ||||||
Par Pacific Holdings, Inc.* | 35 | 675 | ||||||
CVR Energy, Inc. | 17 | 633 | ||||||
Bonanza Creek Energy, Inc.* | 22 | 607 | ||||||
Tellurian, Inc.* | 61 | 594 | ||||||
Penn Virginia Corp.* | 15 | 587 | ||||||
TerraForm Power, Inc. — Class A | 48 | 574 | ||||||
Plug Power, Inc.* | 240 | 566 | ||||||
Sunrun, Inc.* | 91 | 537 | ||||||
TETRA Technologies, Inc.* | 124 | 530 | ||||||
Select Energy Services, Inc. — Class A* | 28 | 511 | ||||||
Matrix Service Co.* | 28 | 498 | ||||||
REX American Resources Corp.* | 6 | 497 | ||||||
Renewable Energy Group, Inc.* | 41 | 484 | ||||||
Bristow Group, Inc. | 35 | 471 | ||||||
Basic Energy Services, Inc.* | 20 | 469 | ||||||
Bill Barrett Corp.* | 82 | 421 | ||||||
Sanchez Energy Corp.* | 76 | 404 | ||||||
Abraxas Petroleum Corp.* | 163 | 401 | ||||||
FutureFuel Corp. | 27 | 381 | ||||||
Panhandle Oil and Gas, Inc. — Class A | 18 | 370 | ||||||
Natural Gas Services Group, Inc.* | 14 | 367 | ||||||
Cloud Peak Energy, Inc.* | 80 | 356 | ||||||
Frank’s International N.V. | 53 | 352 | ||||||
W&T Offshore, Inc.* | 101 | 334 | ||||||
Trecora Resources* | 22 | 297 | ||||||
Clean Energy Fuels Corp.* | 146 | 296 | ||||||
Flotek Industries, Inc.* | 59 | 275 | ||||||
Pioneer Energy Services Corp.* | 83 | 253 | ||||||
CARBO Ceramics, Inc.*,1 | 24 | 244 | ||||||
Lilis Energy, Inc.* | 47 | 240 | ||||||
SilverBow Resources, Inc.* | 8 | 238 | ||||||
Solaris Oilfield Infrastructure, Inc. — Class A* | 11 | 236 | ||||||
Era Group, Inc.* | 21 | 226 | ||||||
Nabors Industries Ltd. | 33 | 225 | ||||||
TPI Composites, Inc.* | 11 | 225 | ||||||
Eclipse Resources Corp.* | 93 | 223 | ||||||
Earthstone Energy, Inc. — Class A* | 20 | 213 | ||||||
Pacific Ethanol, Inc.* | 46 | 209 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 127 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 1.5x STRATEGY FUND |
Shares | Value | |||||||
Midstates Petroleum Company, Inc.* | 12 | $ | 199 | |||||
Gastar Exploration, Inc.* | 188 | 197 | ||||||
Gulf Island Fabrication, Inc. | 14 | 188 | ||||||
Evolution Petroleum Corp. | 27 | 185 | ||||||
Energy XXI Gulf Coast, Inc.* | 32 | 184 | ||||||
Geospace Technologies Corp.* | 14 | 182 | ||||||
Mammoth Energy Services, Inc.* | 9 | 177 | ||||||
NCS Multistage Holdings, Inc.* | 11 | 162 | ||||||
NACCO Industries, Inc. — Class A | 4 | 151 | ||||||
PHI, Inc.* | 13 | 150 | ||||||
Parker Drilling Co.* | 144 | 144 | ||||||
Independence Contract Drilling, Inc.* | 36 | 143 | ||||||
Approach Resources, Inc.*,1 | 46 | 136 | ||||||
Key Energy Services, Inc.* | 11 | 130 | ||||||
Contango Oil & Gas Co.* | 26 | 122 | ||||||
Vivint Solar, Inc.* | 28 | 113 | ||||||
Hallador Energy Co. | 18 | 110 | ||||||
EP Energy Corp. — Class A* | 41 | 97 | ||||||
Adams Resources & Energy, Inc. | 2 | 87 | ||||||
Jones Energy, Inc. — Class A* | 53 | 58 | ||||||
Ramaco Resources, Inc.* | 6 | 41 | ||||||
Rosehill Resources, Inc.* | 3 | 24 | ||||||
Westmoreland Coal Co.* | 19 | 23 | ||||||
Ranger Energy Services, Inc.* | 2 | 19 | ||||||
Cobalt International Energy, Inc.* | 1 | 1 | ||||||
Total Energy | 84,824 | |||||||
Basic Materials - 0.9% | ||||||||
PolyOne Corp. | 88 | 3,828 | ||||||
Sensient Technologies Corp. | 48 | 3,511 | ||||||
Allegheny Technologies, Inc.* | 133 | 3,211 | ||||||
Ingevity Corp.* | 45 | 3,171 | ||||||
US Silica Holdings, Inc. | 88 | 2,865 | ||||||
HB Fuller Co. | 53 | 2,855 | ||||||
Balchem Corp. | 34 | 2,740 | ||||||
Minerals Technologies, Inc. | 39 | 2,685 | ||||||
Compass Minerals International, Inc. | 37 | 2,673 | ||||||
Commercial Metals Co. | 125 | 2,665 | ||||||
Carpenter Technology Corp. | 49 | 2,498 | ||||||
GCP Applied Technologies, Inc.* | 78 | 2,488 | ||||||
Cleveland-Cliffs, Inc.* | 320 | 2,307 | ||||||
Ferro Corp.* | 90 | 2,123 | ||||||
Quaker Chemical Corp. | 14 | 2,111 | ||||||
Tronox Ltd. — Class A | 95 | 1,949 | ||||||
AK Steel Holding Corp.* | 340 | 1,924 | ||||||
Innospec, Inc. | 27 | 1,906 | ||||||
Kaiser Aluminum Corp. | 17 | 1,817 | ||||||
Hecla Mining Co. | 424 | 1,683 | ||||||
Stepan Co. | 21 | 1,658 | ||||||
Neenah Paper, Inc. | 18 | 1,632 | ||||||
Kraton Corp.* | 32 | 1,542 | ||||||
Coeur Mining, Inc.* | 196 | 1,470 | ||||||
Schweitzer-Mauduit International, Inc. | 32 | 1,451 | ||||||
AdvanSix, Inc.* | 32 | 1,346 | ||||||
Calgon Carbon Corp. | 55 | 1,172 | ||||||
Koppers Holdings, Inc.* | 23 | 1,171 | ||||||
A. Schulman, Inc. | 31 | 1,155 | ||||||
Deltic Timber Corp. | 12 | 1,099 | ||||||
Materion Corp. | 22 | 1,069 | ||||||
Century Aluminum Co.* | 54 | 1,061 | ||||||
PH Glatfelter Co. | 46 | 986 | ||||||
Innophos Holdings, Inc. | 21 | 981 | ||||||
Rayonier Advanced Materials, Inc. | 46 | 941 | ||||||
Schnitzer Steel Industries, Inc. — Class A | 28 | 938 | ||||||
Fairmount Santrol Holdings, Inc.*,1 | 167 | 873 | ||||||
Clearwater Paper Corp.* | 18 | 817 | ||||||
CSW Industrials, Inc.* | 15 | 689 | ||||||
KMG Chemicals, Inc. | 10 | 661 | ||||||
Kronos Worldwide, Inc. | 25 | 644 | ||||||
Verso Corp. — Class A* | 36 | 633 | ||||||
American Vanguard Corp. | 31 | 609 | ||||||
PQ Group Holdings, Inc.* | 31 | 510 | ||||||
Klondex Mines Ltd.* | 191 | 499 | ||||||
Intrepid Potash, Inc.* | 102 | 486 | ||||||
OMNOVA Solutions, Inc.* | 46 | 460 | ||||||
Codexis, Inc.* | 44 | 367 | ||||||
Landec Corp.* | 29 | 365 | ||||||
Hawkins, Inc. | 10 | 352 | ||||||
Aceto Corp. | 31 | 320 | ||||||
Uranium Energy Corp.* | 146 | 259 | ||||||
Gold Resource Corp. | 55 | 242 | ||||||
Oil-Dri Corporation of America | 5 | 208 | ||||||
Smart Sand, Inc.* | 23 | 199 | ||||||
Ryerson Holding Corp.* | 17 | 177 | ||||||
Valhi, Inc. | 28 | 173 | ||||||
AgroFresh Solutions, Inc.* | 23 | 170 | ||||||
United States Lime & Minerals, Inc. | 2 | 154 | ||||||
Orchids Paper Products Co.1 | 10 | 128 | ||||||
Shiloh Industries, Inc.* | 15 | 123 | ||||||
Total Basic Materials | 80,800 | |||||||
Utilities - 0.8% | ||||||||
IDACORP, Inc. | 55 | 5,025 | ||||||
WGL Holdings, Inc. | 55 | 4,721 | ||||||
Portland General Electric Co. | 97 | 4,421 | ||||||
ONE Gas, Inc. | 56 | 4,102 | ||||||
ALLETE, Inc. | 55 | 4,090 | ||||||
Southwest Gas Holdings, Inc. | 50 | 4,024 | ||||||
Spire, Inc. | 51 | 3,833 | ||||||
New Jersey Resources Corp. | 93 | 3,739 | ||||||
Avista Corp. | 70 | 3,604 | ||||||
PNM Resources, Inc. | 87 | 3,519 | ||||||
Black Hills Corp. | 58 | 3,486 | ||||||
NorthWestern Corp. | 52 | 3,104 | ||||||
Ormat Technologies, Inc. | 43 | 2,750 | ||||||
South Jersey Industries, Inc. | 86 | 2,686 | ||||||
El Paso Electric Co. | 44 | 2,436 | ||||||
MGE Energy, Inc. | 37 | 2,335 | ||||||
California Water Service Group | 51 | 2,313 | ||||||
American States Water Co. | 38 | 2,201 | ||||||
Otter Tail Corp. | 42 | 1,867 | ||||||
Northwest Natural Gas Co. | 30 | 1,789 | ||||||
Dynegy, Inc.* | 119 | 1,410 | ||||||
Chesapeake Utilities Corp. | 17 | 1,335 |
128 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 1.5x STRATEGY FUND |
Shares | Value | |||||||
NRG Yield, Inc. — Class C | 68 | $ | 1,285 | |||||
SJW Group | 18 | 1,149 | ||||||
Unitil Corp. | 16 | 730 | ||||||
NRG Yield, Inc. — Class A | 37 | 698 | ||||||
Connecticut Water Service, Inc. | 12 | 689 | ||||||
Middlesex Water Co. | 17 | 678 | ||||||
York Water Co. | 14 | 475 | ||||||
Artesian Resources Corp. — Class A | 8 | 308 | ||||||
Atlantic Power Corp.* | 124 | 292 | ||||||
RGC Resources, Inc. | 7 | 190 | ||||||
Consolidated Water Company Ltd. | 15 | 189 | ||||||
Ameresco, Inc. — Class A* | 20 | 172 | ||||||
Spark Energy, Inc. — Class A | 13 | 161 | ||||||
Global Water Resources, Inc. | 11 | 103 | ||||||
Genie Energy Ltd. — Class B | 15 | 65 | ||||||
Total Utilities | 75,974 | |||||||
Diversified - 0.0% | ||||||||
HRG Group, Inc.* | 128 | 2,170 | ||||||
Government - 0.0% | ||||||||
Banco Latinoamericano de Comercio Exterior S.A. — Class E | 33 | 888 | ||||||
Total Common Stocks | ||||||||
(Cost $1,879,718) | 2,244,678 | |||||||
WARRANTS†† - 0.0% | ||||||||
Imperial Holdings, Inc. | ||||||||
$10.75, 10/06/19 | 2 | — | ||||||
Total Warrants | ||||||||
(Cost $—) | — | |||||||
RIGHTS††† - 0.0% | ||||||||
Omthera Pharmaceuticals, Inc. | ||||||||
Expires 12/31/20*,7 | 37 | — | ||||||
Tobira Therapeutics, Inc. | ||||||||
Expires 11/02/18*,7 | 8 | — | ||||||
Dyax Corp. | ||||||||
Expires 03/06/18*,7 | 406 | — | ||||||
Nexstar Media Group, Inc. | ||||||||
Expires 01/18/19*,7 | 132 | — | ||||||
Total Rights | ||||||||
(Cost $—) | — | |||||||
MUTUAL FUNDS† - 56.5% | ||||||||
Guggenheim Strategy Fund I2 | 103,151 | 2,584,967 | ||||||
Guggenheim Strategy Fund II2 | 101,408 | 2,536,218 | ||||||
Total Mutual Funds | ||||||||
(Cost $5,114,527) | 5,121,185 | |||||||
Face Amount | ||||||||
REPURCHASE AGREEMENTS††,3 - 23.3% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/184 | $ | 1,380,211 | 1,380,211 | |||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/184 | 736,623 | 736,623 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $2,116,834) | 2,116,834 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,5 - 0.7% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%6 | 59,190 | 59,190 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $59,190) | 59,190 | |||||||
Total Investments - 105.2% | ||||||||
(Cost $9,170,269) | $ | 9,541,887 | ||||||
Other Assets & Liabilities, net - (5.2)% | (472,321 | ) | ||||||
Total Net Assets - 100.0% | $ | 9,069,566 |
Futures Contracts | ||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Value and Unrealized Loss | ||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||
Russell 2000 Index Mini Futures Contracts | 33 | Mar 2018 | $ | 2,536,215 | $ | (1,912 | ) |
Total Return Swap Agreements | ||||||||||||||||||||||
Counterparty | Index | Financing Rate Pay (Receive) | Payment Frequency | Maturity Date | Units | Notional Amount | Value and Unrealized Loss | |||||||||||||||
OTC Equity Index Swap Agreements†† | ||||||||||||||||||||||
BNP Paribas | Russell 2000 Index | 1.57 | % | At Maturity | 01/29/18 | 631 | $ | 968,487 | $ | (3,119 | ) | |||||||||||
Barclays Bank plc | Russell 2000 Index | 1.48 | % | At Maturity | 01/30/18 | 710 | 1,090,961 | (9,531 | ) | |||||||||||||
Goldman Sachs International | Russell 2000 Index | 1.33 | % | At Maturity | 01/29/18 | 4,414 | 6,777,262 | (38,465 | ) | |||||||||||||
$ | 8,836,710 | $ | (51,115 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 129 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
RUSSELL 2000® 1.5x STRATEGY FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
††† | Value determined based on Level 3 inputs — See Note 4. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 7. |
2 | Affiliated issuer. |
3 | Repurchase Agreements — See Note 6. |
4 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2017. |
5 | Securities lending collateral — See Note 7. |
6 | Rate indicated is the 7 day yield as of December 31, 2017. |
7 | Security was fair valued by the Valuation Committee at December 31, 2017. The total market value of fair valued securities amounts to $0, (cost $0) or 0.0% of total net assets |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Common Stocks | $ | 2,244,678 | $ | — | $ | — | $ | — | $ | — | $ | 2,244,678 | ||||||||||||
Mutual Funds | 5,121,185 | — | — | — | — | 5,121,185 | ||||||||||||||||||
Repurchase Agreements | — | — | 2,116,834 | — | — | 2,116,834 | ||||||||||||||||||
Rights | — | — | — | — | — | ** | — | |||||||||||||||||
Securities Lending Collateral | 59,190 | — | — | — | — | 59,190 | ||||||||||||||||||
Warrants | — | — | — | ** | — | — | — | |||||||||||||||||
Total Assets | $ | 7,425,053 | $ | — | $ | 2,116,834 | $ | — | �� | $ | — | $ | 9,541,887 | |||||||||||
Investments in Securities (Liabilities) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Equity Futures Contracts | $ | — | $ | 1,912 | $ | — | $ | — | $ | — | $ | 1,912 | ||||||||||||
Equity Index Swap Agreements | — | — | — | 51,115 | — | 51,115 | ||||||||||||||||||
Total Liabilities | $ | — | $ | 1,912 | $ | — | $ | 51,115 | $ | — | $ | 53,027 |
* | Other financial instruments include futures contracts and swaps, which are reported as unrealized gain/loss at period end. |
** | Security has a market value of $0. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
130 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
RUSSELL 2000® 1.5x STRATEGY FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a portfolio company of a fund, or control of or by, or common control under GI, result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act.
The Fund may invest in the underlying series of the Guggenheim Strategy Funds Trust consisting of Guggenheim Strategy Fund I, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III (collectively, the “Cash Management Funds”), open-end management investment companies managed by GI. The Cash Management Funds, which launched on March 11, 2014, are offered as cash management options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Cash Management Funds pay no investment management fees. The Cash Management Funds’ annual report on Form N-CSR dated September 30, 2017, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180417000715/gug72218.htm.
Transactions during the year ended December 31, 2017, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value 12/31/16 | Additions | Reductions | Realized Gain | Change in Unrealized | Value 12/31/17 | Shares 12/31/17 | Investment Income | Capital Gain Distributions |
Mutual Funds | |||||||||
Guggenheim Strategy Fund I | $ 2,686,213 | $ 7,442,116 | $ (7,550,000) | $ 12,502 | $ (5,864) | $ 2,584,967 | 103,151 | $ 51,146 | $ 1,034 |
Guggenheim Strategy Fund II | 1,715,006 | 4,016,150 | (3,200,000) | 354 | 4,708 | 2,536,218 | 101,408 | 54,947 | 1,178 |
$ 4,401,219 | $ 11,458,266 | $ (10,750,000) | $ 12,856 | $ (1,156) | $ 5,121,185 | $ 106,093 | $ 2,212 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 131 |
RUSSELL 2000® 1.5x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2017 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $56,433 of securities loaned (cost $1,938,908) | $ | 2,303,868 | ||
Investments in affiliated issuers, at value (cost $5,114,527) | 5,121,185 | |||
Repurchase agreements, at value (cost $2,116,834) | 2,116,834 | |||
Segregated cash with broker | 374,400 | |||
Receivables: | ||||
Securities sold | 2,000,000 | |||
Swap settlement | 46,336 | |||
Dividends | 12,985 | |||
Fund shares sold | 7,971 | |||
Interest | 248 | |||
Securities lending income | 171 | |||
Total assets | 11,983,998 | |||
Liabilities: | ||||
Overdraft due to custodian bank | 64,847 | |||
Unrealized depreciation on swap agreements | 51,115 | |||
Payable for: | ||||
Fund shares redeemed | 2,672,487 | |||
Return of securities loaned | 59,190 | |||
Variation margin | 19,949 | |||
Securities purchased | 9,818 | |||
Management fees | 7,933 | |||
Transfer agent and administrative fees | 2,204 | |||
Investor service fees | 2,204 | |||
Portfolio accounting fees | 881 | |||
Miscellaneous | 23,804 | |||
Total liabilities | 2,914,432 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 9,069,566 | ||
Net assets consist of: | ||||
Paid in capital | $ | 8,371,237 | ||
Accumulated net investment loss | (486 | ) | ||
Accumulated net realized gain on investments | 380,224 | |||
Net unrealized appreciation on investments | 318,591 | |||
Net assets | $ | 9,069,566 | ||
Capital shares outstanding | 121,602 | |||
Net asset value per share | $ | 74.58 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $8) | $ | 21,100 | ||
Dividends from securities of affiliated issuers | 106,093 | |||
Interest | 18,686 | |||
Income from securities lending, net | 1,461 | |||
Total investment income | 147,340 | |||
Expenses: | ||||
Management fees | 83,176 | |||
Investor service fees | 23,104 | |||
Transfer agent and administrative fees | 23,104 | |||
Professional fees | 14,038 | |||
Portfolio accounting fees | 9,242 | |||
Custodian fees | 1,656 | |||
Trustees’ fees* | 1,193 | |||
Line of credit fees | 56 | |||
Miscellaneous | 11,230 | |||
Total expenses | 166,799 | |||
Net investment loss | (19,459 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 212,401 | |||
Investments in affiliated issuers | 12,856 | |||
Swap agreements | 864,508 | |||
Futures contracts | 23,035 | |||
Distributions received from affiliated investment company shares | 2,212 | |||
Net realized gain | 1,115,012 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 40,907 | |||
Investments in affiliated issuers | (1,156 | ) | ||
Swap agreements | (115,203 | ) | ||
Futures contracts | (1,479 | ) | ||
Net change in unrealized appreciation (depreciation) | (76,931 | ) | ||
Net realized and unrealized gain | 1,038,081 | |||
Net increase in net assets resulting from operations | $ | 1,018,622 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
132 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RUSSELL 2000® 1.5x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (19,459 | ) | $ | (69,145 | ) | ||
Net realized gain on investments | 1,115,012 | 2,311,837 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (76,931 | ) | (470,029 | ) | ||||
Net increase in net assets resulting from operations | 1,018,622 | 1,772,663 | ||||||
Distributions to shareholders from: | ||||||||
Net realized gains | (283,182 | ) | — | |||||
Total distributions to shareholders | (283,182 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 64,226,025 | 159,558,034 | ||||||
Distributions reinvested | 283,182 | — | ||||||
Cost of shares redeemed | (65,934,245 | ) | (157,913,117 | ) | ||||
Net increase (decrease) from capital share transactions | (1,425,038 | ) | 1,644,917 | |||||
Net increase (decrease) in net assets | (689,598 | ) | 3,417,580 | |||||
Net assets: | ||||||||
Beginning of year | 9,759,164 | 6,341,584 | ||||||
End of year | $ | 9,069,566 | $ | 9,759,164 | ||||
Accumulated net investment loss at end of year | $ | (486 | ) | $ | (278 | ) | ||
Capital share activity: | ||||||||
Shares sold | 947,877 | 3,060,642 | ||||||
Shares issued from reinvestment of distributions | 4,237 | — | ||||||
Shares redeemed | (982,925 | ) | (3,037,377 | ) | ||||
Net increase (decrease) in shares | (30,811 | ) | 23,265 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 133 |
RUSSELL 2000® 1.5x STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 64.03 | $ | 49.10 | $ | 53.99 | $ | 51.77 | $ | 32.64 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.14 | ) | (.38 | ) | (.46 | ) | (.48 | ) | (.34 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 12.71 | 15.31 | (4.43 | ) | 2.70 | 19.47 | ||||||||||||||
Total from investment operations | 12.57 | 14.93 | (4.89 | ) | 2.22 | 19.13 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (2.02 | ) | — | — | — | — | ||||||||||||||
Total distributions | (2.02 | ) | — | — | — | — | ||||||||||||||
Net asset value, end of period | $ | 74.58 | $ | 64.03 | $ | 49.10 | $ | 53.99 | $ | 51.77 | ||||||||||
Total Returnb | 20.01 | % | 30.41 | % | (9.08 | %) | 4.29 | % | 58.56 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 9,070 | $ | 9,759 | $ | 6,342 | $ | 11,085 | $ | 12,521 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.21 | %) | (0.74 | %) | (0.84 | %) | (0.94 | %) | (0.80 | %) | ||||||||||
Total expensesc | 1.80 | % | 1.77 | % | 1.70 | % | 1.76 | % | 1.74 | % | ||||||||||
Portfolio turnover rate | 234 | % | 1,198 | % | 406 | % | 624 | % | 352 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
134 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
INVERSE RUSSELL 2000® STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is the inverse (opposite) of the performance of the Russell 2000® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2017, Inverse Russell 2000® Strategy Fund maintained a daily correlation of over 99% to its benchmark of -100% of the daily price movement of the Russell 2000 Index. Inverse Russell 2000® Strategy Fund returned -13.49% while the Russell 2000 Index returned 14.65% over the same time period.
Among sectors, the biggest performance contributors to the underlying index during the period were Health Care and Information Technology. The only sector detracting from return was Energy; Telecommunications Services contributed least.
Nektar Therapeutics, Kite Pharma, Inc., and bluebird bio, Inc. were the largest contributors to performance of the underlying index for the year. U.S. Silica Holdings, Inc., Oasis Petroleum, Inc., and Cardtronics plc Class A were the leading detractors from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and not for hedging purposes.
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 6 of this report.
Performance displayed represents past performance, which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 135 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments or investments in Guggenheim Strategy Funds Trust mutual funds. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: May 3, 2004
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 33.1% |
Guggenheim Strategy Fund I | 22.1% |
Total | 55.2% |
“Largest Holdings” excludes any temporary cash or derivative investments.
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Inverse Russell 2000® Strategy Fund | (13.49%) | (15.33%) | (14.89%) |
Russell 2000 Index | 14.65% | 17.20% | 10.82% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell 2000 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
136 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
INVERSE RUSSELL 2000® STRATEGY FUND |
Shares | Value | |||||||
MUTUAL FUNDS† - 55.2% | ||||||||
Guggenheim Strategy Fund II1 | 12,213 | $ | 305,436 | |||||
Guggenheim Strategy Fund I1 | 8,168 | 204,695 | ||||||
Total Mutual Funds | ||||||||
(Cost $506,374) | 510,131 | |||||||
Face Amount | ||||||||
FEDERAL AGENCY NOTES†† - 21.7% | ||||||||
Federal Farm Credit Bank2 | ||||||||
1.43% (1 Month USD LIBOR + 0.02%) due 01/08/183 | $ | 100,000 | 100,003 | |||||
1.41% (1 Month USD LIBOR + 0.04%) due 01/02/183 | 100,000 | 100,000 | ||||||
Total Federal Farm Credit Bank | 200,003 | |||||||
Total Federal Agency Notes | ||||||||
(Cost $200,003) | 200,003 | |||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 16.2% | ||||||||
Federal Home Loan Bank2 | ||||||||
1.26% due 01/05/184,5 | 100,000 | 99,986 | ||||||
Fannie Mae6 | ||||||||
1.26% due 01/12/184,5 | 50,000 | 49,981 | ||||||
Total Federal Agency Discount Notes | ||||||||
(Cost $149,967) | 149,967 | |||||||
REPURCHASE AGREEMENTS††,7 - 6.0% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/188 | 35,993 | 35,993 | ||||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/188 | 19,210 | 19,210 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $55,203) | 55,203 | |||||||
Total Investments - 99.1% | ||||||||
(Cost $911,547) | $ | 915,304 | ||||||
Other Assets & Liabilities, net - 0.9% | 8,091 | |||||||
Total Net Assets - 100.0% | $ | 923,395 |
Futures Contracts | ||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Value and Unrealized Loss | ||||||||||
Equity Futures Contracts Sold Short† | ||||||||||||||
Russell 2000 Index Mini Futures Contracts | 1 | Mar 2018 | $ | 76,855 | $ | (666 | ) |
Total Return Swap Agreements | ||||||||||||||||||||||
Counterparty | Index | Financing Rate Pay (Receive) | Payment Frequency | Maturity Date | Units | Notional Amount | Value and Unrealized Gain | |||||||||||||||
OTC Equity Index Swap Agreements Sold Short†† | ||||||||||||||||||||||
Barclays Bank plc | Russell 2000 Index | (0.98 | %) | At Maturity | 01/30/18 | 403 | $ | 618,781 | $ | 5,406 | ||||||||||||
BNP Paribas | Russell 2000 Index | (1.07 | %) | At Maturity | 01/26/18 | 90 | 138,554 | 760 | ||||||||||||||
Goldman Sachs International | Russell 2000 Index | (1.03 | %) | At Maturity | 01/26/18 | 60 | 91,389 | 519 | ||||||||||||||
$ | 848,724 | $ | 6,685 |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | The issuer operates under a Congressional charter; its securities are neither issued nor guaranteed by the U.S. Government. |
3 | Variable rate security. The rate indicated is the rate effective at December 31, 2017. In some instances, the underlying reference rate shown was below the minimum rate earned by the security or has been adjusted by a predetermined factor. The settlement status of a position may also impact the effective rate indicated. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | Zero coupon rate security. |
6 | On September 7, 2008, the issuer was placed in conservatorship by the Federal Housing Finance Agency (FHFA). As conservator, the FHFA has full powers to control the assets and operations of the firm. |
7 | Repurchase Agreements — See Note 6. |
8 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2017. |
LIBOR — London Interbank Offered Rate | |
USD — United States Dollar | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 137 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
INVERSE RUSSELL 2000® STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Equity Index Swap Agreements | $ | — | $ | — | $ | — | $ | 6,685 | $ | — | $ | 6,685 | ||||||||||||
Federal Agency Discount Notes | — | — | 149,967 | — | — | 149,967 | ||||||||||||||||||
Federal Agency Notes | — | — | 200,003 | — | — | 200,003 | ||||||||||||||||||
Mutual Funds | 510,131 | — | — | — | — | 510,131 | ||||||||||||||||||
Repurchase Agreements | — | — | 55,203 | — | — | 55,203 | ||||||||||||||||||
Total Assets | $ | 510,131 | $ | — | $ | 405,173 | $ | 6,685 | $ | — | $ | 921,989 | ||||||||||||
Investments in Securities (Liabilities) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Equity Futures Contracts | $ | — | $ | 666 | $ | — | $ | — | $ | — | $ | 666 |
* | Other financial instruments include futures contracts and swaps, which are reported as unrealized gain/loss at period end. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a portfolio company of a fund, or control of or by, or common control under GI, result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act.
The Fund may invest in the underlying series of the Guggenheim Strategy Funds Trust consisting of Guggenheim Strategy Fund I, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III (collectively, the “Cash Management Funds”), open-end management investment companies managed by GI. The Cash Management Funds, which launched on March 11, 2014, are offered as cash management options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Cash Management Funds pay no investment management fees. The Cash Management Funds’ annual report on Form N-CSR dated September 30, 2017, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180417000715/gug72218.htm.
Transactions during the year ended December 31, 2017, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value 12/31/16 | Additions | Reductions | Realized Gain | Change in Unrealized | Value 12/31/17 | Shares 12/31/17 | Investment Income | Capital Gain Distributions |
Mutual Funds | |||||||||
Guggenheim Strategy Fund I | $ 981,217 | $ 4,050,412 | $ (4,830,000) | $ 4,033 | $ (967) | $ 204,695 | 8,168 | $ 10,369 | $ 115 |
Guggenheim Strategy Fund II | 1,083,270 | 2,294,168 | (3,075,000) | 2,788 | 210 | 305,436 | 12,213 | 14,067 | 200 |
$ 2,064,487 | $ 6,344,580 | $ (7,905,000) | $ 6,821 | $ (757) | $ 510,131 | $ 24,436 | $ 315 |
138 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE RUSSELL 2000® STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2017 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $349,970) | $ | 349,970 | ||
Investments in affiliated issuers, at value (cost $506,374) | 510,131 | |||
Repurchase agreements, at value (cost $55,203) | 55,203 | |||
Segregated cash with broker | 112,950 | |||
Unrealized appreciation on swap agreements | 6,685 | |||
Receivables: | ||||
Dividends | 1,122 | |||
Fund shares sold | 954 | |||
Variation margin | 625 | |||
Interest | 264 | |||
Total assets | 1,037,904 | |||
Liabilities: | ||||
Payable for: | ||||
Securities purchased | 101,142 | |||
Fund shares redeemed | 11,766 | |||
Management fees | 917 | |||
Transfer agent and administrative fees | 255 | |||
Investor service fees | 255 | |||
Portfolio accounting fees | 102 | |||
Swap settlement | 72 | |||
Total liabilities | 114,509 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 923,395 | ||
Net assets consist of: | ||||
Paid in capital | $ | 7,520,647 | ||
Undistributed net investment income | — | |||
Accumulated net realized loss on investments | (6,607,028 | ) | ||
Net unrealized appreciation on investments | 9,776 | |||
Net assets | $ | 923,395 | ||
Capital shares outstanding | 15,028 | |||
Net asset value per share | $ | 61.44 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 24,436 | ||
Interest | 14,116 | |||
Total investment income | 38,552 | |||
Expenses: | ||||
Management fees | 32,727 | |||
Investor service fees | 9,091 | |||
Transfer agent and administrative fees | 9,091 | |||
Professional fees | 4,437 | |||
Portfolio accounting fees | 3,636 | |||
Custodian fees | 660 | |||
Trustees’ fees* | 543 | |||
Line of credit fees | 2 | |||
Miscellaneous | 5,341 | |||
Total expenses | 65,528 | |||
Net investment loss | (26,976 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 11 | |||
Investments in affiliated issuers | 6,821 | |||
Swap agreements | (731,955 | ) | ||
Futures contracts | 9,846 | |||
Distributions received from affiliated investment company shares | 315 | |||
Net realized loss | (714,962 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in affiliated issuers | (757 | ) | ||
Swap agreements | (103,410 | ) | ||
Futures contracts | (3,015 | ) | ||
Net change in unrealized appreciation (depreciation) | (107,182 | ) | ||
Net realized and unrealized loss | (822,144 | ) | ||
Net decrease in net assets resulting from operations | $ | (849,120 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 139 |
INVERSE RUSSELL 2000® STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (26,976 | ) | $ | (78,459 | ) | ||
Net realized loss on investments | (714,962 | ) | (2,646,045 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | (107,182 | ) | 47,137 | |||||
Net decrease in net assets resulting from operations | (849,120 | ) | (2,677,367 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 59,108,576 | 174,319,856 | ||||||
Cost of shares redeemed | (69,646,127 | ) | (166,281,376 | ) | ||||
Net increase (decrease) from capital share transactions | (10,537,551 | ) | 8,038,480 | |||||
Net increase (decrease) in net assets | (11,386,671 | ) | 5,361,113 | |||||
Net assets: | ||||||||
Beginning of year | 12,310,066 | 6,948,953 | ||||||
End of year | $ | 923,395 | $ | 12,310,066 | ||||
Undistributed net investment income at end of year | $ | — | $ | — | ||||
Capital share activity: | ||||||||
Shares sold | 864,931 | 2,047,265 | * | |||||
Shares redeemed | (1,023,191 | ) | (1,951,950 | )* | ||||
Net increase (decrease) in shares | (158,260 | ) | 95,315 |
* | Capital share activity for the period presented through December 31, 2016, has been restated to reflect a 1:3 reverse share split effective December 1, 2016 — See Note 11. |
140 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE RUSSELL 2000® STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016d | Year Ended December 31, 2015d | Year Ended December 31, 2014d,e | Year Ended December 31, 2013d,e | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 71.04 | $ | 89.12 | $ | 89.01 | $ | 97.61 | $ | 141.19 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.51 | ) | (.35 | ) | (1.20 | ) | (1.44 | ) | (1.98 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | (9.09 | ) | (17.73 | ) | 1.31 | (7.16 | ) | (41.60 | ) | |||||||||||
Total from investment operations | (9.60 | ) | (18.08 | ) | .11 | (8.60 | ) | (43.58 | ) | |||||||||||
Net asset value, end of period | $ | 61.44 | $ | 71.04 | $ | 89.12 | $ | 89.01 | $ | 97.61 | ||||||||||
Total Returnb | (13.49 | %) | (20.28 | %) | 0.10 | % | (8.85 | %) | (30.85 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 923 | $ | 12,310 | $ | 6,949 | $ | 1,592 | $ | 2,066 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.74 | %) | (1.14 | %) | (1.39 | %) | (1.50 | %) | (1.69 | %) | ||||||||||
Total expensesc | 1.80 | % | 1.75 | % | 1.71 | % | 1.76 | % | 1.74 | % | ||||||||||
Portfolio turnover rate | 445 | % | 1,160 | % | 452 | % | 415 | % | — |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Reverse share split — Per share amounts for periods presented through December 31, 2016, have been restated to reflect a 1:3 reverse share split effective December 1, 2016 — See Note 11. |
e | Reverse share split — Per share amounts for periods presented through December 31, 2014, have been restated to reflect a 1:3 reverse share split effective January 24, 2014. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 141 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
DOW 2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is 200% of the performance of the Dow Jones Industrial Average® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2017, Dow 2x Strategy Fund maintained a daily correlation of over 99% to its benchmark of 200% of the daily price movement of the Dow Jones Industrial Average Index. Dow 2x Strategy Fund gained 58.51% while the Dow Jones Industrial Average Index returned 28.11% over the same time period.
The Industrials and Financials sectors contributed the most to performance of the underlying index during the year. No sector detracted. The Telecommunications Services and Energy sectors contributed the least to performance for the year.
Boeing Co., United Health Group, Inc., and Caterpillar, Inc. contributed the most to performance of the underlying index for the year. Top detractors to performance of the underlying index for the year were General Electric Co., International Business Machines Corp., and Exxon Mobil Corp.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes.
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 6 of this report.
Performance displayed represents past performance, which is no guarantee of future results.
142 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments or investments in Guggenheim Strategy Funds Trust mutual funds. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: May 3, 2004
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 29.8% |
Guggenheim Strategy Fund I | 29.3% |
Boeing Co. | 1.4% |
Goldman Sachs Group, Inc. | 1.2% |
3M Co. | 1.1% |
UnitedHealth Group, Inc. | 1.0% |
Home Depot, Inc. | 0.9% |
McDonald’s Corp. | 0.8% |
Apple, Inc. | 0.8% |
Caterpillar, Inc. | 0.7% |
Top Ten Total | 67.0% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments.
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Dow 2x Strategy Fund | 58.51% | 30.41% | 12.15% |
Dow Jones Industrial Average Index | 28.11% | 16.37% | 9.28% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Dow Jones Industrial Average Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 143 |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
DOW 2x STRATEGY FUND |
Shares | Value | |||||||
COMMON STOCKS† - 16.9% | ||||||||
Industrial - 3.9% | ||||||||
Boeing Co. | 1,095 | $ | 322,926 | |||||
3M Co. | 1,095 | 257,730 | ||||||
Caterpillar, Inc. | 1,095 | 172,550 | ||||||
United Technologies Corp. | 1,095 | 139,689 | ||||||
General Electric Co. | 1,095 | 19,108 | ||||||
Total Industrial | 912,003 | |||||||
Financial - 3.4% | ||||||||
Goldman Sachs Group, Inc. | 1,095 | 278,962 | ||||||
Travelers Companies, Inc. | 1,095 | 148,526 | ||||||
Visa, Inc. — Class A | 1,095 | 124,852 | ||||||
JPMorgan Chase & Co. | 1,095 | 117,100 | ||||||
American Express Co. | 1,095 | 108,744 | ||||||
Total Financial | 778,184 | |||||||
Consumer, Non-cyclical - 2.8% | ||||||||
UnitedHealth Group, Inc. | 1,095 | 241,404 | ||||||
Johnson & Johnson | 1,095 | 152,993 | ||||||
Procter & Gamble Co. | 1,095 | 100,609 | ||||||
Merck & Company, Inc. | 1,095 | 61,616 | ||||||
Coca-Cola Co. | 1,095 | 50,238 | ||||||
Pfizer, Inc. | 1,095 | 39,661 | ||||||
Total Consumer, Non-cyclical | 646,521 | |||||||
Consumer, Cyclical - 2.5% | ||||||||
Home Depot, Inc. | 1,095 | 207,535 | ||||||
McDonald’s Corp. | 1,095 | 188,472 | ||||||
Wal-Mart Stores, Inc. | 1,095 | 108,131 | ||||||
Nike, Inc. — Class B | 1,095 | 68,492 | ||||||
Total Consumer, Cyclical | 572,630 | |||||||
Technology - 2.1% | ||||||||
Apple, Inc. | 1,095 | 185,307 | ||||||
International Business Machines Corp. | 1,095 | 167,995 | ||||||
Microsoft Corp. | 1,095 | 93,666 | ||||||
Intel Corp. | 1,095 | 50,545 | ||||||
Total Technology | 497,513 | |||||||
Energy - 1.0% | ||||||||
Chevron Corp. | 1,095 | 137,083 | ||||||
Exxon Mobil Corp. | 1,095 | 91,586 | ||||||
Total Energy | 228,669 | |||||||
Communications - 0.9% | ||||||||
Walt Disney Co. | 1,095 | 117,723 | ||||||
Verizon Communications, Inc. | 1,095 | 57,958 | ||||||
Cisco Systems, Inc. | 1,095 | 41,939 | ||||||
Total Communications | 217,620 | |||||||
Basic Materials - 0.3% | ||||||||
DowDuPont, Inc. | 1,095 | 77,986 | ||||||
Total Common Stocks | ||||||||
(Cost $3,307,785) | 3,931,126 | |||||||
MUTUAL FUNDS† - 59.1% | ||||||||
Guggenheim Strategy Fund II1 | 278,034 | 6,953,642 | ||||||
Guggenheim Strategy Fund I1 | 272,912 | 6,839,170 | ||||||
Total Mutual Funds | ||||||||
(Cost $13,773,548) | 13,792,812 | |||||||
Face Amount | ||||||||
U.S. TREASURY BILLS†† - 10.7% | ||||||||
U.S Treasury Bills | ||||||||
1.26% due 03/01/182,3,4 | $ | 2,500,000 | 2,494,875 | |||||
Total U.S. Treasury Bills | ||||||||
(Cost $2,494,751) | 2,494,875 | |||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 4.3% | ||||||||
Federal Home Loan Bank5 | ||||||||
1.05% due 01/02/183,4 | 1,000,000 | 999,971 | ||||||
Total Federal Agency Discount Notes | ||||||||
(Cost $999,971) | 999,971 | |||||||
REPURCHASE AGREEMENTS††,6 - 8.4% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/182 | 1,281,049 | 1,281,049 | ||||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/182 | 683,700 | 683,700 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $1,964,749) | 1,964,749 | |||||||
Total Investments - 99.4% | ||||||||
(Cost $22,540,804) | $ | 23,183,533 | ||||||
Other Assets & Liabilities, net - 0.6% | 135,452 | |||||||
Total Net Assets - 100.0% | $ | 23,318,985 |
144 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
DOW 2x STRATEGY FUND |
Futures Contracts | ||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Value and Unrealized Gain | ||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||
Dow Jones Industrial Average Index Mini Futures Contracts | 27 | Mar 2018 | $ | 3,340,305 | $ | 50,721 |
Total Return Swap Agreements | ||||||||||||||||||||||
Counterparty | Index | Financing Rate Pay (Receive) | Payment Frequency | Maturity Date | Units | Notional Amount | Value and Unrealized Loss | |||||||||||||||
OTC Equity Index Swap Agreements†† | ||||||||||||||||||||||
BNP Paribas | Dow Jones Industrial Average Index | 2.07 | % | At Maturity | 01/26/18 | 296 | $ | 7,310,529 | $ | (16,290 | ) | |||||||||||
Barclays Bank plc | Dow Jones Industrial Average Index | 1.98 | % | At Maturity | 01/30/18 | 1,299 | 32,099,652 | (153,608 | ) | |||||||||||||
$ | 39,410,181 | $ | (169,898 | ) |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2017. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | Zero coupon rate security. |
5 | The issuer operates under a Congressional charter; its securities are neither issued nor guaranteed by the U.S. Government. |
6 | Repurchase Agreements — See Note 6. |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 145 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
DOW 2x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Common Stocks | $ | 3,931,126 | $ | — | $ | — | $ | — | $ | — | $ | 3,931,126 | ||||||||||||
Equity Futures Contracts | — | 50,721 | — | — | — | 50,721 | ||||||||||||||||||
Federal Agency Discount Notes | — | — | 999,971 | — | — | 999,971 | ||||||||||||||||||
Mutual Funds | 13,792,812 | — | — | — | — | 13,792,812 | ||||||||||||||||||
Repurchase Agreements | — | — | 1,964,749 | — | — | 1,964,749 | ||||||||||||||||||
U.S. Treasury Bills | — | — | 2,494,875 | — | — | 2,494,875 | ||||||||||||||||||
Total Assets | $ | 17,723,938 | $ | 50,721 | $ | 5,459,595 | $ | — | $ | — | $ | 23,234,254 | ||||||||||||
Investments in Securities (Liabilities) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Equity Index Swap Agreements | $ | — | $ | — | $ | — | $ | 169,898 | $ | — | $ | 169,898 |
* | Other financial instruments include futures contracts and swaps, which are reported as unrealized gain/loss at period end. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a portfolio company of a fund, or control of or by, or common control under GI, result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act.
The Fund may invest in the underlying series of the Guggenheim Strategy Funds Trust consisting of Guggenheim Strategy Fund I, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III (collectively, the “Cash Management Funds”), open-end management investment companies managed by GI. The Cash Management Funds, which launched on March 11, 2014, are offered as cash management options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Cash Management Funds pay no investment management fees. The Cash Management Funds’ annual report on Form N-CSR dated September 30, 2017, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180417000715/gug72218.htm.
Transactions during the year ended December 31, 2017, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value 12/31/16 | Additions | Reductions | Realized Gain | Change in Unrealized | Value 12/31/17 | Shares 12/31/17 | Investment Income | Capital Gain Distributions |
Mutual Funds | |||||||||
Guggenheim Strategy Fund I | $ 3,024,513 | $ 9,114,417 | $ (5,300,000) | $ 603 | $ (363) | $ 6,839,170 | 272,912 | $ 91,440 | $ 2,889 |
Guggenheim Strategy Fund II | 2,135,182 | 5,517,440 | (700,000) | 178 | 842 | 6,953,642 | 278,034 | 103,613 | 3,699 |
$ 5,159,695 | $ 14,631,857 | $ (6,000,000) | $ 781 | $ 479 | $ 13,792,812 | $ 195,053 | $ 6,588 |
146 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
DOW 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2017 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $6,802,507) | $ | 7,425,972 | ||
Investments in affiliated issuers, at value (cost $13,773,548) | 13,792,812 | |||
Repurchase agreements, at value (cost $1,964,749) | 1,964,749 | |||
Segregated cash with broker | 482,853 | |||
Receivables: | ||||
Swap settlement | 890,170 | |||
Fund shares sold | 233,468 | |||
Dividends | 25,044 | |||
Interest | 230 | |||
Total assets | 24,815,298 | |||
Liabilities: | ||||
Overdraft due to custodian bank | 899,280 | |||
Unrealized depreciation on swap agreements | 169,898 | |||
Payable for: | ||||
Fund shares redeemed | 331,314 | |||
Securities purchased | 23,530 | |||
Management fees | 17,195 | |||
Variation margin | 6,762 | |||
Transfer agent and administrative fees | 4,776 | |||
Investor service fees | 4,776 | |||
Portfolio accounting fees | 1,910 | |||
Miscellaneous | 36,872 | |||
Total liabilities | 1,496,313 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 23,318,985 | ||
Net assets consist of: | ||||
Paid in capital | $ | 19,285,580 | ||
Undistributed net investment income | 31,658 | |||
Accumulated net realized gain on investments | 3,478,195 | |||
Net unrealized appreciation on investments | 523,552 | |||
Net assets | $ | 23,318,985 | ||
Capital shares outstanding | 136,017 | |||
Net asset value per share | $ | 171.44 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 127,741 | ||
Dividends from securities of affiliated issuers | 195,053 | |||
Interest | 20,963 | |||
Income from securities lending, net | 33 | |||
Total investment income | 343,790 | |||
Expenses: | ||||
Management fees | 154,863 | |||
Investor service fees | 43,018 | |||
Transfer agent and administrative fees | 43,018 | |||
Professional fees | 24,274 | |||
Portfolio accounting fees | 17,207 | |||
Custodian fees | 2,799 | |||
Trustees’ fees* | 1,798 | |||
Line of credit fees | 793 | |||
Miscellaneous | 24,362 | |||
Total expenses | 312,132 | |||
Net investment income | 31,658 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 1,094,972 | |||
Investments in affiliated issuers | 781 | |||
Swap agreements | 6,636,973 | |||
Futures contracts | 382,392 | |||
Distributions received from affiliated investment company shares | 6,588 | |||
Net realized gain | 8,121,706 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (182,068 | ) | ||
Investments in affiliated issuers | 479 | |||
Swap agreements | (296,226 | ) | ||
Futures contracts | 57,566 | |||
Net change in unrealized appreciation (depreciation) | (420,249 | ) | ||
Net realized and unrealized gain | 7,701,457 | |||
Net increase in net assets resulting from operations | $ | 7,733,115 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 147 |
DOW 2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 31,658 | $ | 8,701 | ||||
Net realized gain on investments | 8,121,706 | 2,169,590 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (420,249 | ) | 76,271 | |||||
Net increase in net assets resulting from operations | 7,733,115 | 2,254,562 | ||||||
Distributions to shareholders from: | ||||||||
Net investment income | (8,701 | ) | — | |||||
Net realized gains | (303,555 | ) | — | |||||
Total distributions to shareholders | (312,256 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 101,953,788 | 118,726,201 | ||||||
Distributions reinvested | 312,256 | — | ||||||
Cost of shares redeemed | (102,877,419 | ) | (126,376,553 | ) | ||||
Net decrease from capital share transactions | (611,375 | ) | (7,650,352 | ) | ||||
Net increase (decrease) in net assets | 6,809,484 | (5,395,790 | ) | |||||
Net assets: | ||||||||
Beginning of year | 16,509,501 | 21,905,291 | ||||||
End of year | $ | 23,318,985 | $ | 16,509,501 | ||||
Undistributed net investment income at end of year | $ | 31,658 | $ | 8,701 | ||||
Capital share activity: | ||||||||
Shares sold | 783,548 | 1,351,880 | ||||||
Shares issued from reinvestment of distributions | 2,407 | — | ||||||
Shares redeemed | (799,910 | ) | (1,462,002 | ) | ||||
Net decrease in shares | (13,955 | ) | (110,122 | ) |
148 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
DOW 2x STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 110.08 | $ | 84.22 | $ | 112.60 | $ | 169.97 | $ | 104.48 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .25 | .06 | (.06 | ) | (.40 | ) | (.40 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | 63.43 | 25.80 | (2.89 | ) | 27.20 | 65.89 | ||||||||||||||
Total from investment operations | 63.68 | 25.86 | (2.95 | ) | 26.80 | 65.49 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.06 | ) | — | — | — | — | ||||||||||||||
Net realized gains | (2.26 | ) | — | (25.43 | ) | (84.17 | ) | — | ||||||||||||
Total distributions | (2.32 | ) | — | (25.43 | ) | (84.17 | ) | — | ||||||||||||
Net asset value, end of period | $ | 171.44 | $ | 110.08 | $ | 84.22 | $ | 112.60 | $ | 169.97 | ||||||||||
Total Returnb | 58.51 | % | 30.72 | % | (4.22 | %) | 16.80 | % | 62.70 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 23,319 | $ | 16,510 | $ | 21,905 | $ | 19,978 | $ | 23,727 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.18 | % | 0.07 | % | (0.06 | %) | (0.25 | %) | (0.29 | %) | ||||||||||
Total expensesc | 1.81 | % | 1.77 | % | 1.72 | % | 1.76 | % | 1.72 | % | ||||||||||
Portfolio turnover rate | 256 | % | 361 | % | 212 | % | 227 | % | 518 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 149 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
INVERSE DOW 2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is 200% of the inverse (opposite) of the performance of the Dow Jones Industrial Average® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2017, Inverse Dow 2x Strategy Fund maintained a daily correlation of over 99% to its benchmark of -200% of the daily price movement of the Dow Jones Industrial Average Index. Inverse Dow 2x Strategy Fund returned -38.95% while the Dow Jones Industrial Average Index returned 28.11% over the same time period.
The Industrials and Financials sectors contributed the most to performance of the underlying index during the year. No sector detracted. The Telecommunications Services and Energy sectors contributed the least to performance for the year.
Boeing Co., United Health Group, Inc., and Caterpillar, Inc. contributed the most to performance of the underlying index for the year. Top detractors to performance of the underlying index for the year were General Electric Co., International Business Machines Corp., and Exxon Mobil Corp.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes.
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 6 of this report.
Performance displayed represents past performance, which is no guarantee of future results.
150 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments or investments in Guggenheim Strategy Funds Trust mutual funds. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: May 3, 2004
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 26.8% |
Guggenheim Strategy Fund I | 24.1% |
Total | 50.9% |
“Largest Holdings” excludes any temporary cash or derivative investments.
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Inverse Dow 2x Strategy Fund | (38.95%) | (29.56%) | (24.42%) |
Dow Jones Industrial Average Index | 28.11% | 16.37% | 9.28% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Dow Jones Industrial Average Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 151 |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
INVERSE DOW 2x STRATEGY FUND |
Shares | Value | |||||||
MUTUAL FUNDS† - 50.9% | ||||||||
Guggenheim Strategy Fund II1 | 39,702 | $ | 992,937 | |||||
Guggenheim Strategy Fund I1 | 35,608 | 892,337 | ||||||
Total Mutual Funds | ||||||||
(Cost $1,885,556) | 1,885,274 | |||||||
Face Amount | ||||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 9.5% | ||||||||
Fannie Mae2 | ||||||||
1.26% due 01/12/183,4 | $ | 250,000 | 249,904 | |||||
Federal Home Loan Bank5 | ||||||||
1.26% due 01/05/183,4 | 100,000 | 99,986 | ||||||
Total Federal Agency Discount Notes | ||||||||
(Cost $349,890) | 349,890 | |||||||
FEDERAL AGENCY NOTES†† - 8.1% | ||||||||
Federal Farm Credit Bank5 | ||||||||
1.43% (1 Month USD LIBOR + 0.02%) due 01/08/186 | 200,000 | 200,006 |
1.41% (1 Month USD LIBOR + 0.04%) due 01/02/186 | 100,000 | 100,000 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $300,006) | 300,006 | |||||||
REPURCHASE AGREEMENTS††,7 - 13.7% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/188 | 329,737 | 329,737 | ||||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/188 | 175,982 | 175,982 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $505,719) | 505,719 | |||||||
Total Investments - 82.2% | ||||||||
(Cost $3,041,171) | $ | 3,040,889 | ||||||
Other Assets & Liabilities, net - 17.8% | 658,088 | |||||||
Total Net Assets - 100.0% | $ | 3,698,977 |
Total Return Swap Agreements | ||||||||||||||||||||||
Counterparty | Index | Financing Rate Pay (Receive) | Payment Frequency | Maturity Date | Units | Notional Amount | Value and Unrealized Gain | |||||||||||||||
OTC Equity Index Swap Agreements Sold Short†† | ||||||||||||||||||||||
BNP Paribas | Dow Jones Industrial Average Index | (1.57 | %) | At Maturity | 01/29/18 | 243 | $ | 6,001,974 | $ | 11,201 | ||||||||||||
Barclays Bank plc | Dow Jones Industrial Average Index | (1.73 | %) | At Maturity | 01/30/18 | 55 | 1,367,479 | 6,544 | ||||||||||||||
$ | 7,369,453 | $ | 17,745 |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | On September 7, 2008, the issuer was placed in conservatorship by the Federal Housing Finance Agency (FHFA). As conservator, the FHFA has full powers to control the assets and operations of the firm. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | Zero coupon rate security. |
5 | The issuer operates under a Congressional charter; its securities are neither issued nor guaranteed by the U.S. Government. |
6 | Variable rate security. The rate indicated is the rate effective at December 31, 2017. In some instances, the underlying reference rate shown was below the minimum rate earned by the security or has been adjusted by a predetermined factor. The settlement status of a position may also impact the effective rate indicated. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
7 | Repurchase Agreements — See Note 6. |
8 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2017. LIBOR — London Interbank Offered Rate |
plc — Public Limited Company | |
USD — United States Dollar | |
See Sector Classification in Other Information section. |
152 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
INVERSE DOW 2x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | |||||||||||||||
Equity Index Swap Agreements | $ | — | $ | — | $ | 17,745 | $ | — | $ | 17,745 | ||||||||||
Federal Agency Discount Notes | — | 349,890 | — | — | 349,890 | |||||||||||||||
Federal Agency Notes | — | 300,006 | — | — | 300,006 | |||||||||||||||
Mutual Funds | 1,885,274 | — | — | — | 1,885,274 | |||||||||||||||
Repurchase Agreements | — | 505,719 | — | — | 505,719 | |||||||||||||||
Total Assets | $ | 1,885,274 | $ | 1,155,615 | $ | 17,745 | $ | — | $ | 3,058,634 |
* | Other financial instruments include swaps, which are reported as unrealized gain/loss at period end. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a portfolio company of a fund, or control of or by, or common control under GI, result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act.
The Fund may invest in the underlying series of the Guggenheim Strategy Funds Trust consisting of Guggenheim Strategy Fund I, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III (collectively, the “Cash Management Funds”), open-end management investment companies managed by GI. The Cash Management Funds, which launched on March 11, 2014, are offered as cash management options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Cash Management Funds pay no investment management fees. The Cash Management Funds’ annual report on Form N-CSR dated September 30, 2017, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180417000715/gug72218.htm.
Transactions during the year ended December 31, 2017, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value 12/31/16 | Additions | Reductions | Realized Gain | Change in Unrealized | Value 12/31/17 | Shares 12/31/17 | Investment Income | Capital Gain Distributions |
Mutual Funds | |||||||||
Guggenheim Strategy Fund I | $ 502,923 | $ 8,035,955 | $ (7,650,000) | $ 7,428 | $ (3,969) | $ 892,337 | 35,608 | $ 15,785 | $ 167 |
Guggenheim Strategy Fund II | 505,039 | 5,534,786 | (5,050,000) | 6,450 | (3,338) | 992,937 | 39,702 | 14,580 | 208 |
$ 1,007,962 | $ 13,570,741 | $ (12,700,000) | $ 13,878 | $ (7,307) | $ 1,885,274 | $ 30,365 | $ 375 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 153 |
INVERSE DOW 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2017 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $649,896) | $ | 649,896 | ||
Investments in affiliated issuers, at value (cost $1,885,556) | 1,885,274 | |||
Repurchase agreements, at value (cost $505,719) | 505,719 | |||
Segregated cash with broker | 180,000 | |||
Unrealized appreciation on swap agreements | 17,745 | |||
Receivables: | ||||
Fund shares sold | 467,383 | |||
Dividends | 1,974 | |||
Swap settlement | 1,197 | |||
Interest | 367 | |||
Variation margin | 45 | |||
Total assets | 3,709,600 | |||
Liabilities: | ||||
Payable for: | ||||
Management fees | 2,299 | |||
Securities purchased | 2,067 | |||
Licensing fees | 1,540 | |||
Legal fees | 673 | |||
Transfer agent and administrative fees | 639 | |||
Investor service fees | 639 | |||
Portfolio accounting fees | 255 | |||
Miscellaneous | 2,511 | |||
Total liabilities | 10,623 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 3,698,977 | ||
Net assets consist of: | ||||
Paid in capital | $ | 21,707,820 | ||
Undistributed net investment income | — | |||
Accumulated net realized loss on investments | (18,026,306 | ) | ||
Net unrealized appreciation on investments | 17,463 | |||
Net assets | $ | 3,698,977 | ||
Capital shares outstanding | 91,522 | |||
Net asset value per share | $ | 40.42 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 30,365 | ||
Interest | 17,739 | |||
Total investment income | 48,104 | |||
Expenses: | ||||
Management fees | 35,281 | |||
Investor service fees | 9,800 | |||
Transfer agent and administrative fees | 9,800 | |||
Professional fees | 5,019 | |||
Portfolio accounting fees | 3,920 | |||
Custodian fees | 752 | |||
Trustees’ fees* | 653 | |||
Line of credit fees | 24 | |||
Miscellaneous | 5,780 | |||
Total expenses | 71,029 | |||
Net investment loss | (22,925 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | (9 | ) | ||
Investments in affiliated issuers | 13,878 | |||
Swap agreements | (1,803,424 | ) | ||
Futures contracts | (175,809 | ) | ||
Distributions received from affiliated company shares | 375 | |||
Net realized loss | (1,964,989 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 152 | |||
Investments in affiliated issuers | (7,307 | ) | ||
Swap agreements | (23,459 | ) | ||
Futures contracts | (1,706 | ) | ||
Net change in unrealized appreciation (depreciation) | (32,320 | ) | ||
Net realized and unrealized loss | (1,997,309 | ) | ||
Net decrease in net assets resulting from operations | $ | (2,020,234 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
154 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE DOW 2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (22,925 | ) | $ | (57,234 | ) | ||
Net realized loss on investments | (1,964,989 | ) | (2,440,681 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | (32,320 | ) | (39,418 | ) | ||||
Net decrease in net assets resulting from operations | (2,020,234 | ) | (2,537,333 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 88,085,116 | 133,889,240 | ||||||
Cost of shares redeemed | (85,769,402 | ) | (133,004,925 | ) | ||||
Net increase from capital share transactions | 2,315,714 | 884,315 | ||||||
Net increase (decrease) in net assets | 295,480 | (1,653,018 | ) | |||||
Net assets: | ||||||||
Beginning of year | 3,403,497 | 5,056,515 | ||||||
End of year | $ | 3,698,977 | $ | 3,403,497 | ||||
Undistributed net investment income at end of year | $ | — | $ | — | ||||
Capital share activity: | ||||||||
Shares sold | 1,601,378 | 1,552,526 | * | |||||
Shares redeemed | (1,561,252 | ) | (1,554,860 | )* | ||||
Net increase (decrease) in shares | 40,126 | (2,334 | )* |
* | Capital share activity for the period ended December 31, 2016, has been restated to reflect a 1:3 reverse share split effective December 1, 2016 — See Note 11. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 155 |
INVERSE DOW 2x STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016e | Year Ended December 31, 2015e | Year Ended December 31, 2014d,e | Year Ended December 31, 2013d,e | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 66.22 | $ | 94.11 | $ | 102.38 | $ | 130.67 | $ | 233.06 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.32 | ) | (.25 | ) | (1.50 | ) | (1.80 | ) | (2.82 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | (25.48 | ) | (27.64 | ) | (6.77 | ) | (26.49 | ) | (99.57 | ) | ||||||||||
Total from investment operations | (25.80 | ) | (27.89 | ) | (8.27 | ) | (28.29 | ) | (102.39 | ) | ||||||||||
Net asset value, end of period | $ | 40.42 | $ | 66.22 | $ | 94.11 | $ | 102.38 | $ | 130.67 | ||||||||||
Total Returnb | (38.95 | %) | (29.65 | %) | (8.03 | %) | (21.77 | %) | (43.89 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 3,699 | $ | 3,403 | $ | 5,057 | $ | 2,305 | $ | 2,577 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.58 | %) | (0.84 | %) | (1.52 | %) | (1.51 | %) | (1.67 | %) | ||||||||||
Total expensesc | 1.81 | % | 1.77 | % | 1.72 | % | 1.77 | % | 1.72 | % | ||||||||||
Portfolio turnover rate | 915 | % | 642 | % | 270 | % | 247 | % | — |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Reverse share split — Per share amounts for the periods presented through December 31, 2014, have been restated to reflect a 1:10 reverse share split effective January 24, 2014. |
e | Reverse share split — Per share amounts for the periods presented through December 31, 2016, have been restated to reflect a 1:3 reverse share split effective December 1, 2016 — See Note 11. |
156 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that correspond, before fees and expenses, to a benchmark for U.S. Government securities on a daily basis. The Fund’s current benchmark is 120% of the daily price movement of the Long Treasury Bond. The Long Treasury Bond is the U.S. Treasury bond with the longest maturity, which is currently 30 years. The price movement of the Long Treasury Bond is based on the daily price change of the most recently issued Long Treasury Bond. The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2017, the Government Long Bond 1.2x Strategy Fund returned 9.64%.
The daily price movement of the Long Treasury Bond was 6.50% for 2017.
The return of a comparison index, the Bloomberg Barclays Long Treasury Bond Index, was 8.53%.
As prices of long-term Treasury bonds rose over 2017, their yields fell, from 3.07% to 2.74%. The yield curve flattened over the period, as the Fed hiked the short-term fed funds rate by a quarter point on three occasions in 2017 in the face of low inflation.
Long-bond yields rose early in the period, along with the pro-growth agenda of the new Trump administration, but fell mid-year after legislative complexities set in. The top long-bond yield for the year occurred in January when it reached 3.19%, and the low was in September when it reached 2.66%. Over 2017, the 30-10 year Treasury spread fell to 0.34 percentage point, ending near the lowest since the financial crisis and indicating at least some market skepticism about a prolonged bout of growth and inflation.
Derivatives in the Fund are used to provide additional exposure to composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes.
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 6 of this report.
Performance displayed represents past performance, which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 157 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments or investments in Guggenheim Strategy Funds Trust mutual funds. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: August 18, 1997
The Fund invests principally in U.S. Government securities and in derivative investments such as futures contracts.
Largest Holdings (% of Total Net Assets) | |
U.S. Treasury Bond | 30.2% |
Guggenheim Strategy Fund II | 21.6% |
Guggenheim Strategy Fund I | 13.8% |
Total | 65.6% |
“Largest Holdings” excludes any temporary cash or derivative investments.
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Government Long Bond 1.2x Strategy Fund | 9.64% | 2.69% | 6.16% |
Daily Price Movement of Long Treasury Bond** | 6.50% | 0.12% | 2.67% |
Bloomberg Barclays Long Treasury Bond Index | 8.53% | 3.48% | 6.55% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Bloomberg Barclays Long Treasury Bond Index and the Daily Price Movement of Long Treasury Bond are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
** | Does not reflect any interest. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies |
158 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND |
Shares | Value | |||||||
MUTUAL FUNDS† - 35.4% | ||||||||
Guggenheim Strategy Fund II1 | 100,467 | $ | 2,512,682 | |||||
Guggenheim Strategy Fund I1 | 64,126 | 1,606,986 | ||||||
Total Mutual Funds | ||||||||
(Cost $4,107,503) | 4,119,668 | |||||||
Face Amount | ||||||||
U.S. GOVERNMENT SECURITIES†† - 30.2% | ||||||||
U.S. Treasury Bond | ||||||||
2.75% due 11/15/47 | $ | 3,500,000 | 3,506,015 | |||||
Total U.S. Government Securities | ||||||||
(Cost $3,453,499) | 3,506,015 | |||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 10.8% | ||||||||
Fannie Mae2 | ||||||||
1.26% due 01/12/183,4 | 500,000 | 499,807 | ||||||
Federal Home Loan Bank5 | ||||||||
1.26% due 01/10/183,4 | 452,000 | 451,858 | ||||||
Federal Farm Credit Bank5 | ||||||||
1.27% due 01/24/183,4 | 300,000 | 299,757 | ||||||
Total Federal Agency Discount Notes | ||||||||
(Cost $1,251,422) | 1,251,422 | |||||||
REPURCHASE AGREEMENTS††,6 - 13.1% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | 993,806 | 993,806 | ||||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 530,398 | 530,398 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $1,524,204) | 1,524,204 | |||||||
Total Investments - 89.5% | ||||||||
(Cost $10,336,628) | $ | 10,401,309 | ||||||
Other Assets & Liabilities, net - 10.5% | 1,216,057 | |||||||
Total Net Assets - 100.0% | $ | 11,617,366 |
Futures Contracts | ||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Value and Unrealized Gain | ||||||||||
Interest Rate Futures Contracts Purchased† | ||||||||||||||
U.S. Treasury Ultra Long Bond Futures Contracts | 64 | Mar 2018 | $ | 10,732,000 | $ | 105,492 |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | On September 7, 2008, the issuer was placed in conservatorship by the Federal Housing Finance Agency (FHFA). As conservator, the FHFA has full powers to control the assets and operations of the firm. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | Zero coupon rate security. |
5 | The issuer operates under a Congressional charter; its securities are neither issued nor guaranteed by the U.S. Government. |
6 | Repurchase Agreements — See Note 6. |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 159 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | |||||||||||||||
Federal Agency Discount Notes | $ | — | $ | — | $ | 1,251,422 | $ | — | $ | 1,251,422 | ||||||||||
Interest Rate Futures Contracts | — | 105,492 | — | — | 105,492 | |||||||||||||||
Mutual Funds | 4,119,668 | — | — | — | 4,119,668 | |||||||||||||||
Repurchase Agreements | — | — | 1,524,204 | — | 1,524,204 | |||||||||||||||
U.S. Government Securities | — | — | 3,506,015 | — | 3,506,015 | |||||||||||||||
Total Assets | $ | 4,119,668 | $ | 105,492 | $ | 6,281,641 | $ | — | $ | 10,506,801 |
* | Other financial instruments include futures contracts, which are reported as unrealized gain/loss at period end. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a portfolio company of a fund, or control of or by, or common control under GI, result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act.
The Fund may invest in the underlying series of the Guggenheim Strategy Funds Trust consisting of Guggenheim Strategy Fund I, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III (collectively, the “Cash Management Funds”), open-end management investment companies managed by GI. The Cash Management Funds, which launched on March 11, 2014, are offered as cash management options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Cash Management Funds pay no investment management fees. The Cash Management Funds’ annual report on Form N-CSR dated September 30, 2017, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180417000715/gug72218.htm.
Transactions during the year ended December 31, 2017, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value 12/31/16 | Additions | Reductions | Realized Gain | Change in Unrealized | Value 12/31/17 | Shares 12/31/17 | Investment Income | Capital Gain Distributions |
Mutual Funds | |||||||||
Guggenheim Strategy Fund I | $ 2,439,945 | $ 9,666,422 | $ (10,500,000) | $ 9,402 | $ (8,783) | $ 1,606,986 | 64,126 | $ 35,636 | $ 1,137 |
Guggenheim Strategy Fund II | 2,752,226 | 3,507,478 | (3,750,000) | 1,275 | 1,703 | 2,512,682 | 100,467 | 56,330 | 1,603 |
$ 5,192,171 | $ 13,173,900 | $ (14,250,000) | $ 10,677 | $ (7,080) | $ 4,119,668 | $ 91,966 | $ 2,740 |
160 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2017 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $4,704,921) | $ | 4,757,437 | ||
Investments in affiliated issuers, at value (cost $4,107,503) | 4,119,668 | |||
Repurchase agreements, at value (cost $1,524,204) | 1,524,204 | |||
Segregated cash with broker | 236,800 | |||
Receivables: | ||||
Fund shares sold | 1,063,262 | |||
Securities sold | 200,344 | |||
Variation margin | 30,000 | |||
Interest | 14,111 | |||
Dividends | 9,705 | |||
Total assets | 11,955,531 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 299,541 | |||
Securities purchased | 9,497 | |||
Management fees | 5,991 | |||
Investor service fees | 2,995 | |||
Transfer agent and administrative fees | 2,396 | |||
Portfolio accounting fees | 1,198 | |||
Miscellaneous | 16,547 | |||
Total liabilities | 338,165 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 11,617,366 | ||
Net assets consist of: | ||||
Paid in capital | $ | 22,664,652 | ||
Undistributed net investment income | 145 | |||
Accumulated net realized loss on investments | (11,217,604 | ) | ||
Net unrealized appreciation on investments | 170,173 | |||
Net assets | $ | 11,617,366 | ||
Capital shares outstanding | 365,488 | |||
Net asset value per share | $ | 31.79 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 91,966 | ||
Interest | 299,686 | |||
Total investment income | 391,652 | |||
Expenses: | ||||
Management fees | 77,039 | |||
Investor service fees | 38,519 | |||
Transfer agent and administrative fees | 30,816 | |||
Professional fees | 17,175 | |||
Portfolio accounting fees | 15,408 | |||
Custodian fees | 2,977 | |||
Trustees’ fees* | 2,547 | |||
Line of credit fees | 458 | |||
Miscellaneous | 16,123 | |||
Total expenses | 201,062 | |||
Net investment income | 190,590 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 668,253 | |||
Investments in affiliated issuers | 10,677 | |||
Futures contracts | 315,884 | |||
Distributions received from affiliated investment company shares | 2,740 | |||
Net realized gain | 997,554 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (104,858 | ) | ||
Investments in affiliated issuers | (7,080 | ) | ||
Futures contracts | (119,999 | ) | ||
Net change in unrealized appreciation (depreciation) | (231,937 | ) | ||
Net realized and unrealized gain | 765,617 | |||
Net increase in net assets resulting from operations | $ | 956,207 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 161 |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 190,590 | $ | 269,702 | ||||
Net realized gain on investments | 997,554 | 2,266,961 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (231,937 | ) | 352,721 | |||||
Net increase in net assets resulting from operations | 956,207 | 2,889,384 | ||||||
Distributions to shareholders from: | ||||||||
Net investment income | (190,445 | ) | (274,658 | ) | ||||
Total distributions to shareholders | (190,445 | ) | (274,658 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 305,778,361 | 278,368,167 | ||||||
Distributions reinvested | 190,445 | 274,658 | ||||||
Cost of shares redeemed | (312,241,675 | ) | (281,504,905 | ) | ||||
Net decrease from capital share transactions | (6,272,869 | ) | (2,862,080 | ) | ||||
Net decrease in net assets | (5,507,107 | ) | (247,354 | ) | ||||
Net assets: | ||||||||
Beginning of year | 17,124,473 | 17,371,827 | ||||||
End of year | $ | 11,617,366 | $ | 17,124,473 | ||||
Undistributed net investment income at end of year | $ | 145 | $ | — | ||||
Capital share activity: | ||||||||
Shares sold | 9,987,452 | 8,684,767 | ||||||
Shares issued from reinvestment of distributions | 6,217 | 8,403 | ||||||
Shares redeemed | (10,211,356 | ) | (8,694,237 | ) | ||||
Net decrease in shares | (217,687 | ) | (1,067 | ) |
162 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014d | Year Ended December 31, 2013d | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 29.36 | $ | 29.73 | $ | 45.27 | $ | 33.88 | $ | 45.61 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .38 | .31 | .32 | .29 | .33 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 2.43 | (.38 | ) | (3.29 | ) | 11.38 | (8.52 | ) | ||||||||||||
Total from investment operations | 2.81 | (.07 | ) | (2.97 | ) | 11.67 | (8.19 | ) | ||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.38 | ) | (.30 | ) | (.31 | ) | (.28 | ) | (.33 | ) | ||||||||||
Net realized gains | — | — | (12.26 | ) | — | (3.21 | ) | |||||||||||||
Total distributions | (.38 | ) | (.30 | ) | (12.57 | ) | (.28 | ) | (3.54 | ) | ||||||||||
Net asset value, end of period | $ | 31.79 | $ | 29.36 | $ | 29.73 | $ | 45.27 | $ | 33.88 | ||||||||||
Total Returnb | 9.64 | % | (0.33 | %) | (5.09 | %) | 34.67 | % | (18.25 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 11,617 | $ | 17,124 | $ | 17,372 | $ | 28,003 | $ | 9,994 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.24 | % | 0.93 | % | 0.86 | % | 0.72 | % | 0.78 | % | ||||||||||
Total expensesc | 1.30 | % | 1.25 | % | 1.21 | % | 1.26 | % | 1.24 | % | ||||||||||
Portfolio turnover rate | 2,055 | % | 1,386 | % | 1,800 | % | 1,763 | % | 3,661 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Reverse share split — Per share amounts for the periods presented through December 31, 2014, have been restated to reflect a 1:3 reverse share split effective January 24, 2014. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 163 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND
OBJECTIVE: Seeks to provide total returns that inversely correlate, before fees and expenses, to the price movements of a benchmark for U.S. Treasury debt instruments or futures contract on a specified debt instrument on a daily basis. The Fund’s current benchmark is the inverse (opposite) of the daily price movement of the Long Treasury Bond. The Long Treasury Bond is the U.S. Treasury bond with the longest maturity, which is currently 30 years. The price movement of the Long Treasury Bond is based on the daily price change of the most recently issued Long Treasury Bond. The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2017, the Inverse Government Long Bond Strategy Fund returned -8.89%.
The daily price movement of the Long Treasury Bond was 6.50% for 2017.
The return of a comparison index, the Bloomberg Barclays Long Treasury Bond Index, was 8.53%.
As prices of long-term Treasury bonds rose over 2017, their yields fell, from 3.07% to 2.74%. The yield curve flattened over the period, as the Fed hiked the short-term fed funds rate by a quarter point on three occasions in 2017 in the face of low inflation.
Long-bond yields rose early in the period, along with the pro-growth agenda of the new Trump administration, but fell mid-year after legislative complexities set in. The top long-bond yield for the year occurred in January when it reached 3.19%, and the low was in September when it reached 2.66%. Over 2017, the 30-10 year Treasury spread fell to 0.34 percentage point, ending near the lowest since the financial crisis and indicating at least some market skepticism about a prolonged bout of growth and inflation.
Derivatives in the Fund are used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes.
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 6 of this report.
Performance displayed represents past performance, which is no guarantee of future results.
164 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments or investments in Guggenheim Strategy Funds Trust mutual funds. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: May 1, 2003
The Fund invests principally in short sales and derivative investments such as futures contracts.
Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 32.9% |
Guggenheim Strategy Fund I | 26.5% |
Total | 59.4% |
“Largest Holdings” excludes any temporary cash or derivative investments.
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Inverse Government Long Bond Strategy Fund | (8.89%) | (5.44%) | (9.75%) |
Daily Price Movement of Long Treasury Bond** | 6.50% | 0.12% | 2.67% |
Bloomberg Barclays Long Treasury Bond Index | 8.53% | 3.48% | 6.55% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Bloomberg Barclays Long Treasury Bond Index and Daily Price Movement of Long Treasury Bond are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
** | Does not reflect interest. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 165 |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND |
Shares | Value | |||||||
MUTUAL FUNDS† - 59.4% | ||||||||
Guggenheim Strategy Fund II1 | 61,499 | $ | 1,538,100 | |||||
Guggenheim Strategy Fund I1 | 49,444 | 1,239,073 | ||||||
Total Mutual Funds | ||||||||
(Cost $2,766,270) | 2,777,173 | |||||||
Face Amount | ||||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 17.1% | ||||||||
Federal Home Loan Bank2 | ||||||||
1.26% due 01/05/183,4 | $ | 200,000 | 199,972 | |||||
1.26% due 01/02/183,4 | 100,000 | 99,996 | ||||||
1.30% due 01/12/183,4 | 100,000 | 99,960 | ||||||
1.30% due 01/23/183,4 | 100,000 | 99,921 | ||||||
Total Federal Home Loan Bank | 499,849 | |||||||
Fannie Mae5 | ||||||||
1.26% due 01/12/183,4 | 300,000 | 299,885 | ||||||
Total Federal Agency Discount Notes | ||||||||
(Cost $799,734) | 799,734 | |||||||
FEDERAL AGENCY NOTES†† - 10.7% | ||||||||
Federal Farm Credit Bank2 | ||||||||
1.43% (1 Month USD LIBOR + 0.02%) due 01/08/186 | 350,000 | 350,009 | ||||||
1.41% (1 Month USD LIBOR + 0.04%) due 01/02/186 | 150,000 | 150,002 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $500,012) | 500,011 | |||||||
REPURCHASE AGREEMENTS†† - 99.0% | ||||||||
Individual Repurchase Agreements7 | ||||||||
Barclays Capital issued 12/29/17 at (1.2)% due 01/02/18 (secured by a U.S. Treasury Bond, at a rate of 2.75% and maturing 11/15/47 as collateral, with a value of $2,806,020) to be repurchased at $2,751,367 | 2,751,000 | 2,751,000 | ||||||
Mizuho Financial Group, Inc. issued 12/29/17 at (1.3)% due 01/02/18 (secured by a U.S. Treasury Bond, at a rate of 2.75% and maturing 11/15/47 as collateral, with a value of $1,202,699) to be repurchased at $1,179,287 | 1,179,116 | 1,179,116 | ||||||
Joint Repurchase Agreements8 | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | 456,623 | 456,623 | ||||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 243,701 | 243,701 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $4,630,440) | 4,630,440 | |||||||
Total Investments - 186.2% | ||||||||
(Cost $8,696,456) | $ | 8,707,358 | ||||||
U.S. Government Securities Sold Short†† - (81.4)% | ||||||||
U.S. Treasury Bond | ||||||||
2.75% due 11/15/47 | 3,800,000 | (3,806,531 | ) | |||||
Total U.S. Government Securities Sold Short | ||||||||
(Proceeds $3,796,425) | (3,806,531 | ) | ||||||
Other Assets & Liabilities, net - (4.8)% | (224,686 | ) | ||||||
Total Net Assets - 100.0% | $ | 4,676,141 |
Futures Contracts | ||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Value and Unrealized Loss | ||||||||||
Interest Rate Futures Contracts Sold Short† | ||||||||||||||
U.S. Treasury Ultra Long Bond Futures Contracts | 6 | Mar 2018 | $ | 1,006,125 | $ | (6,885 | ) |
166 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | The issuer operates under a Congressional charter; its securities are neither issued nor guaranteed by the U.S. Government. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | Zero coupon rate security. |
5 | On September 7, 2008, the issuer was placed in conservatorship by the Federal Housing Finance Agency (FHFA). As conservator, the FHFA has full powers to control the assets and operations of the firm. |
6 | Variable rate security. Rate indicated is rate effective at December 31, 2017. In some instances, the underlying reference rate shown was below the minimum rate earned by the security or has been adjusted by a predetermined factor. The settlement status of a position may also impact the effective rate indicated. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
7 | All or a portion of this security is pledged as short security collateral at December 31, 2017. |
8 | Repurchase Agreements — See Note 6. |
LIBOR — London Interbank Offered Rate | |
USD — United States Dollar | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | |||||||||||||||
Federal Agency Discount Notes | $ | — | $ | — | $ | 799,734 | $ | — | $ | 799,734 | ||||||||||
Federal Agency Notes | — | — | 500,011 | — | 500,011 | |||||||||||||||
Mutual Funds | 2,777,173 | — | — | — | 2,777,173 | |||||||||||||||
Repurchase Agreements | — | — | 4,630,440 | — | 4,630,440 | |||||||||||||||
Total Assets | $ | 2,777,173 | $ | — | $ | 5,930,185 | $ | — | $ | 8,707,358 | ||||||||||
Investments in Securities (Liabilities) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | |||||||||||||||
Interest Rate Futures Contracts | $ | — | $ | 6,885 | $ | — | $ | — | $ | 6,885 | ||||||||||
U.S. Government Securities | — | — | 3,806,531 | — | 3,806,531 | |||||||||||||||
Total Liabilities | $ | — | $ | 6,885 | $ | 3,806,531 | $ | — | $ | 3,813,416 |
* | Other financial instruments include futures contracts, which are reported as unrealized gain/loss at period end. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 167 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a portfolio company of a fund, or control of or by, or common control under GI, result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act.
The Fund may invest in the underlying series of the Guggenheim Strategy Funds Trust consisting of Guggenheim Strategy Fund I, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III (collectively, the “Cash Management Funds”), open-end management investment companies managed by GI. The Cash Management Funds, which launched on March 11, 2014, are offered as cash management options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Cash Management Funds pay no investment management fees. The Cash Management Funds’ annual report on Form N-CSR dated September 30, 2017, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180417000715/gug72218.htm.
Transactions during the year ended December 31, 2017, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value 12/31/16 | Additions | Reductions | Realized Gain | Change in Unrealized | Value 12/31/17 | Shares 12/31/17 | Investment Income | Capital Gain Distributions |
Mutual Funds | |||||||||
Guggenheim Strategy Fund I | $ 1,040,281 | $ 4,345,511 | $ (4,150,000) | $ 8,983 | $ (5,702) | $ 1,239,073 | 49,444 | $ 25,256 | $ 394 |
Guggenheim Strategy Fund II | 1,049,547 | 4,184,378 | (3,700,000) | 1,975 | 2,200 | 1,538,100 | 61,499 | 34,031 | 551 |
$ 2,089,828 | $ 8,529,889 | $ (7,850,000) | $ 10,958 | $ (3,502) | $ 2,777,173 | $ 59,287 | $ 945 |
168 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2017 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $1,299,746) | $ | 1,299,745 | ||
Investments in affiliated issuers, at value (cost $2,766,270) | 2,777,173 | |||
Repurchase agreements, at value (cost $4,630,440) | 4,630,440 | |||
Segregated cash with broker | 18,500 | |||
Receivables: | ||||
Dividends | 3,732 | |||
Interest | 1,723 | |||
Fund shares sold | 531 | |||
Total assets | 8,731,844 | |||
Liabilities: | ||||
Securities sold short, at value (proceeds $3,796,425) | 3,806,531 | |||
Payable for: | ||||
Securities purchased | 203,973 | |||
Fund shares redeemed | 16,336 | |||
Management fees | 2,985 | |||
Variation margin | 2,345 | |||
Transfer agent and administrative fees | 829 | |||
Investor service fees | 829 | |||
Portfolio accounting fees | 332 | |||
Miscellaneous | 21,543 | |||
Total liabilities | 4,055,703 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 4,676,141 | ||
Net assets consist of: | ||||
Paid in capital | $ | 11,950,780 | ||
Undistributed net investment income | — | |||
Accumulated net realized loss on investments | (7,268,550 | ) | ||
Net unrealized depreciation on investments | (6,089 | ) | ||
Net assets | $ | 4,676,141 | ||
Capital shares outstanding | 49,355 | |||
Net asset value per share | $ | 94.75 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 59,287 | ||
Interest | 52,233 | |||
Total investment income | 111,520 | |||
Expenses: | ||||
Management fees | 47,614 | |||
Investor service fees | 13,226 | |||
Transfer agent and administrative fees | 13,226 | |||
Short interest expense | 118,973 | |||
Portfolio accounting fees | 5,290 | |||
Custodian fees | 896 | |||
Trustees’ fees* | 695 | |||
Line of credit fees | 10 | |||
Miscellaneous | 11,838 | |||
Total expenses | 211,768 | |||
Net investment loss | (100,248 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 809 | |||
Investments in affiliated issuers | 10,958 | |||
Futures contracts | (79,037 | ) | ||
Securities sold short | (313,663 | ) | ||
Distributions received from affiliated investments company shares | 945 | |||
Net realized loss | (379,988 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (912 | ) | ||
Investments in affiliated issuers | (3,502 | ) | ||
Securities sold short | (73,684 | ) | ||
Futures contracts | (11,288 | ) | ||
Net change in unrealized appreciation (depreciation) | (89,386 | ) | ||
Net realized and unrealized loss | (469,374 | ) | ||
Net decrease in net assets resulting from operations | $ | (569,622 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 169 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (100,248 | ) | $ | (144,984 | ) | ||
Net realized gain (loss) on investments | (379,988 | ) | 40,817 | |||||
Net change in unrealized appreciation (depreciation) on investments | (89,386 | ) | 62,623 | |||||
Net decrease in net assets resulting from operations | (569,622 | ) | (41,544 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 188,057,984 | 88,784,708 | ||||||
Cost of shares redeemed | (186,633,374 | ) | (89,661,807 | ) | ||||
Net increase (decrease) from capital share transactions | 1,424,610 | (877,099 | ) | |||||
Net increase (decrease) in net assets | 854,988 | (918,643 | ) | |||||
Net assets: | ||||||||
Beginning of year | 3,821,153 | 4,739,796 | ||||||
End of year | $ | 4,676,141 | $ | 3,821,153 | ||||
Undistributed net investment income at end of year | $ | — | $ | — | ||||
Capital share activity: | ||||||||
Shares sold | 1,913,948 | 936,504 | * | |||||
Shares redeemed | (1,901,334 | ) | (943,992 | )* | ||||
Net increase (decrease) in shares | 12,614 | (7,488 | )* |
* | Capital share activity for the period presented through December 31, 2016, has been restated to reflect a 1:3 reverse share split effective December 1, 2016 — See Note 11. |
170 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016e | Year Ended December 31, 2015e | Year Ended December 31, 2014d,e | Year Ended December 31, 2013d,e | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 104.00 | $ | 107.17 | $ | 108.46 | $ | 159.80 | $ | 138.61 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (1.88 | ) | (.87 | ) | (3.63 | ) | (5.40 | ) | (5.40 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | (7.37 | ) | (2.30 | ) | 2.34 | (33.58 | ) | 26.59 | ||||||||||||
Total from investment operations | (9.25 | ) | (3.17 | ) | (1.29 | ) | (38.98 | ) | 21.19 | |||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | — | — | — | (12.36 | ) | — | ||||||||||||||
Total distributions | — | — | — | (12.36 | ) | — | ||||||||||||||
Net asset value, end of period | $ | 94.75 | $ | 104.00 | $ | 107.17 | $ | 108.46 | $ | 159.80 | ||||||||||
Total Returnb | (8.89 | %) | (2.94 | %) | (1.22 | %) | (24.91 | %) | 15.26 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 4,676 | $ | 3,821 | $ | 4,740 | $ | 6,595 | $ | 19,598 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (1.89 | %) | (2.59 | %) | (3.39 | %) | (3.90 | %) | (3.56 | %) | ||||||||||
Total expensesc,f | 4.00 | % | 3.65 | % | 3.66 | % | 4.10 | % | 3.59 | % | ||||||||||
Portfolio turnover rate | 2,300 | % | 1,384 | % | 1,305 | % | 2,537 | % | 5,999 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Reverse share split — Per share amounts for the periods presented through December 31, 2014, have been restated to reflect a 1:5 reverse share split effective January 24, 2014. |
e | Reverse share split — Per share amounts for the periods presented through December 31, 2016, have been restated to reflect a 1:3 reverse share split effective December 1, 2016 — See Note 11. |
f | Total expenses may include interest expense related to short sales. Excluding interest expense, the net expense ratios for the periods presented would be: |
2017 | 2016 | 2015 | 2014 | 2013 | |
1.75% | 1.72% | 1.65% | 1.71% | 1.69% |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 171 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
HIGH YIELD STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that correlate, before fees and expenses, to the performance of the high yield bond market.
For the one-year period ended December 31, 2017, the High Yield Strategy returned 6.87%. For comparison, the Bloomberg Barclays U.S. Corporate High Yield Index returned 7.50% for the same period.
The Fund primarily invests in credit default swaps to gain exposure similar to the high yield bond market. Credit default swaps are instruments which allow for the full or partial transfer of third party credit risk, with respect to a particular entity or entities, from one counterparty to the other. A buyer of credit default swaps is buying credit protection or mitigating credit risk. A seller of credit default swaps is selling credit protection or assuming credit risk. The Fund will normally be a seller of credit protection (assuming credit risk) as it seeks to gain exposure to the high yield bond market. In addition, the Fund may invest in bond futures for the purpose of managing duration risk. For cash management purposes, the Fund may invest in other fixed income securities and money market instruments.
High-yield bonds delivered a year of positive returns amid tighter spreads and improving credit conditions. The market was on an upward trajectory throughout the period, similar to equity markets. However, there were a few pauses along the way due to the possibility of interest rate hikes and geopolitical concerns. The strengthening economy and the unabated investor need for income continued to underpin positive performance in high yield.
Derivatives in the Fund are used to help provide exposure to the composition of the benchmark in the highest efficient manner and not for hedging purposes. The results of derivatives use during the period were within our expectations and contributed to the Fund’s performance.
Performance displayed represents past performance, which is no guarantee of future results.
172 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments or investments in Guggenheim Strategy Funds Trust mutual funds. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: October 15, 2014
Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 32.6% |
Guggenheim Strategy Fund I | 26.4% |
iShares iBoxx $ High Yield Corporate Bond ETF | 2.9% |
SPDR Bloomberg Barclays High Yield Bond ETF | 2.8% |
Top Ten Total | 64.7% |
“Largest Holdings” excludes any temporary cash or derivative investments.
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | Since Inception (10/15/14) | |
High Yield Strategy Fund | 6.87% | 5.89% |
S&P 500 Index | 21.83% | 14.29% |
Bloomberg Barclays U.S. Corporate High Yield Index | 7.50% | 5.94% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Bloomberg Barclays U.S. Corporate High Yield Index and the S&P 500 Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 173 |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
HIGH YIELD STRATEGY FUND |
Shares | Value | |||||||
EXCHANGE-TRADED FUNDS† - 5.8% | ||||||||
iShares iBoxx $ High Yield Corporate Bond ETF1 | 2,174 | $ | 189,681 | |||||
SPDR Bloomberg Barclays High Yield Bond ETF | 5,061 | 185,840 | ||||||
Total Exchange-Traded Funds | ||||||||
(Cost $367,980) | 375,521 | |||||||
MUTUAL FUNDS† - 58.9% | ||||||||
Guggenheim Strategy Fund II2 | 84,984 | 2,125,460 | ||||||
Guggenheim Strategy Fund I2 | 68,654 | 1,720,466 | ||||||
Total Mutual Funds | ||||||||
(Cost $3,812,454) | 3,845,926 | |||||||
Face Amount | ||||||||
FEDERAL AGENCY NOTES†† - 22.0% | ||||||||
Federal Home Loan Bank3 | ||||||||
1.25% due 10/26/224 | $ | 935,000 | 934,481 | |||||
Federal Farm Credit Bank3 | ||||||||
1.70% (1 Month USD LIBOR + 0.15%) due 01/23/185 | 500,000 | 500,067 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $1,434,599) | 1,434,548 | |||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 7.6% | ||||||||
Fannie Mae6 | ||||||||
1.25% due 01/03/187,8 | 413,000 | 412,972 |
1.26% due 01/12/187,8 | 80,000 | 79,969 | ||||||
Total Fannie Mae | 492,941 | |||||||
Total Federal Agency Discount Notes | ||||||||
(Cost $492,941) | 492,941 | |||||||
REPURCHASE AGREEMENTS††,9 - 1.9% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | 82,792 | 82,792 | ||||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 44,187 | 44,187 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $126,979) | 126,979 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,10 - 2.2% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%11 | 146,469 | 146,469 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $146,469) | 146,469 | |||||||
Total Investments - 98.4% | ||||||||
(Cost $6,381,422) | $ | 6,422,384 | ||||||
Other Assets & Liabilities, net - 1.6% | 101,396 | |||||||
Total Net Assets - 100.0% | $ | 6,523,780 |
Futures Contracts | ||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Value and Unrealized Loss | ||||||||||
Interest Rate Futures Contracts Purchased† | ||||||||||||||
U.S. Treasury 5 Year Note Futures Contracts | 50 | Mar 2018 | $ | 5,808,594 | $ | (25,084 | ) |
Total Return Swap Agreements | ||||||||||||||||||||||
Counterparty | Index | Financing Rate Pay (Receive) | Payment Frequency | Maturity Date | Units | Notional Amount | Value and Unrealized Loss | |||||||||||||||
OTC Equity Index Swap Agreements††, 12 | ||||||||||||||||||||||
Goldman Sachs International | iShares iBoxx High Yield Corporate Bond | 0.71 | % | At Maturity | 01/08/18 | 102 | $ | 8,901 | $ | (10 | ) |
Centrally Cleared Credit Default Swap Agreements Protection Sold†† | ||||||||||||||||||||||||||||||||
Counterparty | Exchange | Index | Protection Premium Rate | Payment Frequency | Maturity Date | Notional Amount | Value | Upfront Premiums Paid | Unrealized Gain | |||||||||||||||||||||||
Barclays Bank plc | ICE | CDX.NA.HY.29 Index | 5.00 | % | At Maturity | 12/20/22 | $ | 5,800,000 | $ | 481,951 | $ | 414,708 | $ | 67,243 |
174 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
HIGH YIELD STRATEGY FUND |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 7. |
2 | Affiliated issuer. |
3 | The issuer operates under a Congressional charter; its securities are neither issued nor guaranteed by the U.S. Government. |
4 | Security is a step up/step down bond. The coupon increases or decreases at regular intervals until the bond reaches full maturity. |
5 | Variable rate security. The rate indicated is the rate effective at December 31, 2017. In some instances, the underlying reference rate shown was below the minimum rate earned by the security or has been adjusted by a predetermined factor. The settlement status of a position may also impact the effective rate indicated. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
6 | On September 7, 2008, the issuer was placed in conservatorship by the Federal Housing Finance Agency (FHFA). As conservator, the FHFA has full powers to control the assets and operations of the firm. |
7 | Rate indicated is the effective yield at the time of purchase. |
8 | Zero coupon rate security. |
9 | Repurchase Agreements — See Note 6. |
10 | Securities lending collateral — See Note 7. |
11 | Rate indicated is the 7 day yield as of December 31, 2017. |
12 | Total Return based on iShares iBoxx $ High Yield Corporate Bond ETF +/- financing at variable rate. Rate indicated is the rate effective at December 31, 2017. |
CDX.NA.HY.29 Index — Credit Default Swap North American High Yield Series 29 Index. | |
ICE - Intercontinental Exchange | |
LIBOR — London Interbank Offered Rate | |
USD — United States Dollar | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Credit Default Swap Agreements | $ | — | $ | — | $ | — | $ | 67,243 | $ | — | $ | 67,243 | ||||||||||||
Exchange-Traded Funds | 375,521 | — | — | — | — | 375,521 | ||||||||||||||||||
Federal Agency Discount Notes | — | — | 492,941 | — | — | 492,941 | ||||||||||||||||||
Federal Agency Notes | — | — | 1,434,548 | — | — | 1,434,548 | ||||||||||||||||||
Mutual Funds | 3,845,926 | — | — | — | — | 3,845,926 | ||||||||||||||||||
Repurchase Agreements | — | — | 126,979 | — | — | 126,979 | ||||||||||||||||||
Securities Lending Collateral | 146,469 | — | — | — | — | 146,469 | ||||||||||||||||||
Total Assets | $ | 4,367,916 | $ | — | $ | 2,054,468 | $ | 67,243 | $ | — | $ | 6,489,627 | ||||||||||||
Investments in Securities (Liabilities) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Equity Index Swap Agreements | $ | — | $ | — | $ | — | $ | 10 | $ | — | $ | 10 | ||||||||||||
Interest Rate Futures Contracts | — | 25,084 | — | — | — | 25,084 | ||||||||||||||||||
Total Liabilities | $ | — | $ | 25,084 | $ | — | $ | 10 | $ | — | $ | 25,094 |
* | Other financial instruments include futures contracts and swaps, which are reported as unrealized gain/loss at period end. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 175 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
HIGH YIELD STRATEGY FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a portfolio company of a fund, or control of or by, or common control under GI, result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act.
The Fund may invest in the underlying series of the Guggenheim Strategy Funds Trust consisting of Guggenheim Strategy Fund I, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III (collectively, the “Cash Management Funds”), open-end management investment companies managed by GI. The Cash Management Funds, which launched on March 11, 2014, are offered as cash management options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Cash Management Funds pay no investment management fees. The Cash Management Funds’ annual report on Form N-CSR dated September 30, 2017, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180417000715/gug72218.htm.
Transactions during the year ended December 31, 2017, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value 12/31/16 | Additions | Reductions | Realized Gain | Change in Unrealized | Value 12/31/17 | Shares 12/31/17 | Investment Income | Capital Gain Distributions |
Mutual Funds | |||||||||
Guggenheim Strategy Fund I | $ 1,918,340 | $ 3,546,800 | $ (3,750,000) | $ 3,603 | $ 1,723 | $ 1,720,466 | 68,654 | $ 46,151 | $ 840 |
Guggenheim Strategy Fund II | 2,516,026 | 2,062,438 | (2,460,000) | 8,113 | (1,117) | 2,125,460 | 84,984 | 61,715 | 1,131 |
$ 4,434,366 | $ 5,609,238 | $ (6,210,000) | $ 11,716 | $ 606 | $ 3,845,926 | $ 107,866 | $ 1,971 |
176 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
HIGH YIELD STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2017 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $142,234 of securities loaned (cost $2,441,989) | $ | 2,449,479 | ||
Investments in affiliated issuers, at value (cost $3,812,454) | 3,845,926 | |||
Repurchase agreements, at value (cost $126,979) | 126,979 | |||
Segregated cash with broker | 31,250 | |||
Unamortized upfront premiums paid on credit default swaps | 414,708 | |||
Unrealized appreciation on swap agreements | 67,243 | |||
Receivables: | ||||
Interest | 12,004 | |||
Dividends | 7,045 | |||
Variation margin | 5,078 | |||
Swap settlement | 33 | |||
Securities lending income | 7 | |||
Total assets | 6,959,752 | |||
Liabilities: | ||||
Segregated cash due to broker | 194,070 | |||
Overdraft due to custodian bank | 14 | |||
Unrealized depreciation on swap agreements | 10 | |||
Payable for: | ||||
Return of securities loaned | 146,469 | |||
Fund shares redeemed | 69,087 | |||
Securities purchased | 6,956 | |||
Management fees | 4,253 | |||
Transfer agent and administrative fees | 1,418 | |||
Investor service fees | 1,418 | |||
Portfolio accounting fees | 567 | |||
Miscellaneous | 11,710 | |||
Total liabilities | 435,972 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 6,523,780 | ||
Net assets consist of: | ||||
Paid in capital | $ | 6,193,533 | ||
Undistributed net investment income | 294,767 | |||
Accumulated net realized gain on investments | (47,631 | ) | ||
Net unrealized appreciation on investments | 83,111 | |||
Net assets | $ | 6,523,780 | ||
Capital shares outstanding | 78,088 | |||
Net asset value per share | $ | 83.54 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 26,248 | ||
Dividends from securities of affiliated issuers | 107,866 | |||
Interest | 19,628 | |||
Income from securities lending, net | 127 | |||
Total investment income | 153,869 | |||
Expenses: | ||||
Management fees | 59,149 | |||
Investor service fees | 19,716 | |||
Transfer agent and administrative fees | 19,716 | |||
Professional fees | 10,175 | |||
Portfolio accounting fees | 7,886 | |||
Custodian fees | 1,337 | |||
Trustees’ fees* | 986 | |||
Miscellaneous | 7,482 | |||
Total expenses | 126,447 | |||
Net investment income | 27,422 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 63,903 | |||
Investments in affiliated issuers | 11,716 | |||
Swap agreements | 551,498 | |||
Futures contracts | 34,697 | |||
Distributions received from affiliated investment company shares | 1,971 | |||
Net realized gain | 663,785 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (49,430 | ) | ||
Investments in affiliated issuers | 606 | |||
Swap agreements | (120,189 | ) | ||
Futures contracts | (11,490 | ) | ||
Net change in unrealized appreciation (depreciation) | (180,503 | ) | ||
Net realized and unrealized gain | 483,282 | |||
Net increase in net assets resulting from operations | $ | 510,704 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 177 |
HIGH YIELD STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 27,422 | $ | 44,359 | ||||
Net realized gain on investments | 663,785 | 354,168 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (180,503 | ) | 210,172 | |||||
Net increase in net assets resulting from operations | 510,704 | 608,699 | ||||||
Distributions to shareholders from: | ||||||||
Net investment income | (320,362 | ) | (384,650 | ) | ||||
Total distributions to shareholders | (320,362 | ) | (384,650 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 26,835,037 | 57,855,138 | ||||||
Distributions reinvested | 320,362 | 384,650 | ||||||
Cost of shares redeemed | (28,212,332 | ) | (57,824,669 | ) | ||||
Net increase (decrease) from capital share transactions | (1,056,933 | ) | 415,119 | |||||
Net increase (decrease) in net assets | (866,591 | ) | 639,168 | |||||
Net assets: | ||||||||
Beginning of year | 7,390,371 | 6,751,203 | ||||||
End of year | $ | 6,523,780 | $ | 7,390,371 | ||||
Undistributed net investment income at end of year | $ | 294,767 | $ | 320,362 | ||||
Capital share activity:* | ||||||||
Shares sold | 322,071 | 733,204 | * | |||||
Shares issued from reinvestment of distributions | 3,919 | 4,817 | * | |||||
Shares redeemed | (338,582 | ) | (737,152 | )* | ||||
Net increase (decrease) in shares | (12,592 | ) | 869 | * |
* | Capital share activity for the period presented through December 31, 2016, has been restated to reflect a 1:3 reverse share split effective December 1, 2016 — See Note 11. |
178 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
HIGH YIELD STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016e | Year Ended December 31, 2015e | Period Ended December 31, 2014a,e | |||||||||||||
Per Share Data | ||||||||||||||||
Net asset value, beginning of period | $ | 81.50 | $ | 75.17 | $ | 76.12 | $ | 75.00 | ||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income (loss)b | .29 | .14 | (.30 | ) | (.09 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 5.23 | 6.99 | (.29 | ) | 1.21 | |||||||||||
Total from investment operations | 5.52 | 7.13 | (.59 | ) | 1.12 | |||||||||||
Less distributions from: | ||||||||||||||||
Net investment income | (3.48 | ) | (.80 | ) | — | — | ||||||||||
Net realized gains | — | — | (.36 | ) | — | |||||||||||
Total distributions | (3.48 | ) | (.80 | ) | (.36 | ) | — | |||||||||
Net asset value, end of period | $ | 83.54 | $ | 81.50 | $ | 75.17 | $ | 76.12 | ||||||||
Total Returnc | 6.87 | % | 11.62 | % | (0.71 | %) | 1.48 | % | ||||||||
Ratios/Supplemental Data | ||||||||||||||||
Net assets, end of period (in thousands) | $ | 6,524 | $ | 7,390 | $ | 6,751 | $ | 4,060 | ||||||||
Ratios to average net assets: | ||||||||||||||||
Net investment income (loss) | 0.35 | % | 0.51 | % | (0.39 | %) | (0.51 | %) | ||||||||
Total expensesd | 1.60 | % | 1.56 | % | 1.49 | % | 1.57 | % | ||||||||
Portfolio turnover rate | 124 | % | 255 | % | 258 | % | — |
a | Since commencement of operations: October 15, 2014. Percentage amounts for the period, except total return and portfolio turnover rate, have been annualized. |
b | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
c | Total return does not reflect the impact of any additional fees charged by insurance companies. |
d | Does not include expenses of the underlying funds in which the Fund invests. |
e | Reverse share split — Per share amounts for the periods presented through December 31, 2016, have been restated to reflect a 1:3 reverse share split effective December 1, 2016 — See Note 11. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 179 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
U.S. GOVERNMENT MONEY MARKET FUND
OBJECTIVE: Seeks to provide security of principal, high current income, and liquidity.
For the one-year period ended December 31, 2017, U.S. Government Money Market Fund returned 0.01%.
The initial “lift-off” in December 2015 failed to take hold, as the U.S. Federal Reserve (the “Fed”) only raised rates once in following 12 months. “Lift-off 2.0,” which began with the December 2016 rate hike, appears to have taken hold, as the U.S. economy continues to expand at a healthy clip and fears of higher interest rates stemming growth subside. At the start of 2017, the Fed anticipated three rate hikes in the year, based on committee members’ 2016 December “dot plot,” which materialized at the March, June, and December meetings.
Chair Janet Yellen will be replaced by Jerome Powell in early 2018. As of the most recent dot plot in December 2017, the Fed expects three rate hikes in 2018. The “dot plot” is issued by the Federal Open Market Committee to show where meeting participants think the fed funds rate should be at the end of upcoming years and for the longer run. The market is anticipating between three and four rate hikes in 2018.
Performance displayed represents past performance, which is no guarantee of future results.
You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
FADN — Federal Agency Discount Note
FAN — Federal Agency Note
Inception Date: May 7, 1997
The Fund invests principally in money market instruments issued or guaranteed as to principal and interest by the U.S. Government, its agencies or instrumentalities and enters into repurchase agreements fully collateralized by U.S. government securities.
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
U.S. Government Money Market Fund | 0.01% | 0.00% | 0.12% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
180 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
U.S. GOVERNMENT MONEY MARKET FUND |
Face Amount | Value | |||||||
FEDERAL AGENCY NOTES†† - 56.6% | ||||||||
Federal Home Loan Bank1 | ||||||||
1.40% (1 Month USD LIBOR -0.14%) due 08/22/182 | $ | 5,000,000 | $ | 5,000,000 | ||||
1.41% (1 Month USD LIBOR -0.15%) due 03/23/182 | 4,000,000 | 4,000,000 | ||||||
1.42% (1 Month USD LIBOR -0.13%) due 06/25/182 | 3,000,000 | 3,000,000 | ||||||
1.50% (3 Month USD LIBOR -0.18%) due 03/26/182 | 2,000,000 | 2,000,142 | ||||||
1.41% (1 Month USD LIBOR -0.15%) due 04/26/182 | 2,000,000 | 1,999,974 | ||||||
1.43% (1 Month USD LIBOR -0.13%) due 11/23/182 | 1,000,000 | 1,000,000 | ||||||
1.46% (3 Month USD LIBOR -0.22%) due 03/26/182 | 800,000 | 799,906 | ||||||
1.42% (3 Month USD LIBOR -0.17%) due 03/15/182 | 500,000 | 499,928 | ||||||
1.52% (3 Month USD LIBOR) due 03/08/182 | 400,000 | 400,059 | ||||||
0.88% due 03/19/18 | 370,000 | 369,688 | ||||||
1.51% (3 Month USD LIBOR -0.12%) due 09/20/182 | 300,000 | 300,093 | ||||||
3.25% due 03/09/18 | 160,000 | 160,557 | ||||||
2.38% due 03/09/18 | 150,000 | 150,278 | ||||||
1.14% due 02/27/18 | 80,000 | 79,981 | ||||||
Total Federal Home Loan Bank | 19,760,606 | |||||||
Federal Farm Credit Bank1 | ||||||||
1.60% (U.S. Prime Rate -2.90%) due 05/14/182 | 7,000,000 | 7,006,531 | ||||||
1.43% (1 Month USD LIBOR + 0.02%) due 01/08/182 | 3,160,000 | 3,160,096 | ||||||
1.62% (3 Month USD LIBOR -0.05%) due 03/26/182 | 1,250,000 | 1,250,473 | ||||||
1.65% (U.S. Prime Rate -2.85%) due 08/10/182 | 1,000,000 | 1,001,723 | ||||||
1.54% (U.S. Prime Rate -2.96%) due 05/11/182 | 1,000,000 | 1,000,694 | ||||||
1.49% (1 Month USD LIBOR + 0.12%) due 05/04/182 | 560,000 | 560,445 | ||||||
1.57% (3 Month USD LIBOR -0.03%) due 09/18/182 | 500,000 | 500,513 | ||||||
1.52% (1 Month USD LIBOR + 0.03%) due 01/17/182 | 500,000 | 500,041 | ||||||
1.71% (3 Month USD LIBOR + 0.05%) due 06/22/182 | 300,000 | 300,337 | ||||||
1.46% (3 Month USD LIBOR -0.03%) due 03/02/182 | 155,000 | 155,073 | ||||||
1.00% due 01/22/18 | 140,000 | 139,980 | ||||||
1.11% due 02/20/18 | 118,000 | 117,971 | ||||||
Total Federal Farm Credit Bank | 15,693,877 | |||||||
Fannie Mae3 | ||||||||
1.10% due 03/12/18 | 3,100,000 | 3,099,205 | ||||||
1.59% (3 Month USD LIBOR -0.05%) due 03/21/182 | 1,755,000 | 1,755,633 | ||||||
Total Fannie Mae | 4,854,838 | |||||||
Freddie Mac3 | ||||||||
0.88% due 03/07/18 | 3,960,000 | 3,957,373 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $44,266,694) | 44,266,694 | |||||||
U.S. TREASURY BILLS†† - 19.1% | ||||||||
U.S. Treasury Bills | ||||||||
1.30% due 03/22/184,5 | 5,000,000 | 4,985,518 | ||||||
1.22% due 03/22/184,5 | 3,000,000 | 2,991,311 | ||||||
1.44% due 06/14/184,5 | 2,500,000 | 2,483,315 | ||||||
1.42% due 06/14/184,5 | 2,500,000 | 2,483,315 | ||||||
1.22% due 04/26/184,5 | 2,000,000 | 1,992,068 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $14,935,527) | 14,935,527 | |||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 13.9% | ||||||||
Federal Home Loan Bank1 | ||||||||
1.25% due 01/03/184,5 | 3,800,000 | 3,799,737 | ||||||
1.67% due 12/04/184,5 | 1,100,000 | 1,082,804 | ||||||
1.30% due 01/23/184,5 | 485,000 | 484,615 | ||||||
1.55% due 06/13/184,5 | 100,000 | 99,298 | ||||||
Total Federal Home Loan Bank | 5,466,454 | |||||||
Fannie Mae3 | ||||||||
1.25% due 01/03/184,5 | 2,800,000 | 2,799,805 | ||||||
1.26% due 01/12/184,5 | 1,750,000 | 1,749,326 | ||||||
Total Fannie Mae | 4,549,131 | |||||||
Federal Farm Credit Bank1 | ||||||||
1.16% due 01/18/184,5 | 800,000 | 799,562 | ||||||
1.70% due 09/12/184,5 | 100,000 | 98,801 | ||||||
Total Federal Farm Credit Bank | 898,363 | |||||||
Total Federal Agency Discount Notes | ||||||||
(Cost $10,913,948) | 10,913,948 | |||||||
REPURCHASE AGREEMENTS††,6 - 12.1% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | 6,198,947 | 6,198,947 | ||||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 3,308,396 | 3,308,396 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $9,507,343) | 9,507,343 | |||||||
Total Investments - 101.7% | ||||||||
(Cost $79,623,512) | $ | 79,623,512 | ||||||
Other Assets & Liabilities, net - (1.7)% | (1,354,297 | ) | ||||||
Total Net Assets - 100.0% | $ | 78,269,215 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 181 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
U.S. GOVERNMENT MONEY MARKET FUND |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | The issuer operates under a Congressional charter; its securities are neither issued nor guaranteed by the U.S. Government. |
2 | Variable rate security. The rate indicated is the rate effective at December 31, 2017. In some instances, the underlying reference rate shown was below the minimum rate earned by the security or has been adjusted by a predetermined factor. The settlement status of a position may also impact the effective rate indicated. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
3 | On September 7, 2008, the issuer was placed in conservatorship by the Federal Housing Finance Agency (FHFA). As conservator, the FHFA has full powers to control the assets and operations of the firm. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | Zero coupon rate security. |
6 | Repurchase Agreements — See Note 6. |
LIBOR — London Interbank Offered Rate | |
USD — United States Dollar | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | ||||||||||||
Federal Agency Discount Notes | $ | — | $ | 10,913,948 | $ | — | $ | 10,913,948 | ||||||||
Federal Agency Notes | — | 44,266,694 | — | 44,266,694 | ||||||||||||
Repurchase Agreements | — | 9,507,343 | — | 9,507,343 | ||||||||||||
U.S. Treasury Bills | — | 14,935,527 | — | 14,935,527 | ||||||||||||
Total Assets | $ | — | $ | 79,623,512 | $ | — | �� | $ | 79,623,512 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
182 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
U.S. GOVERNMENT MONEY MARKET FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2017 |
Assets: | ||||
Investments, at value (cost $70,116,169) | $ | 70,116,169 | ||
Repurchase agreements, at value (cost $9,507,343) | 9,507,343 | |||
Receivables: | ||||
Interest | 57,359 | |||
Investment adviser | 1,312 | |||
Total assets | 79,682,183 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 1,237,299 | |||
Management fees | 34,398 | |||
Transfer agent and administrative fees | 13,759 | |||
Investor service fees | 12,229 | |||
Portfolio accounting fees | 6,880 | |||
Miscellaneous | 108,403 | |||
Total liabilities | 1,412,968 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 78,269,215 | ||
Net assets consist of: | ||||
Paid in capital | $ | 78,267,787 | ||
Undistributed net ivnestment income | — | |||
Accumulated net realized gain on investments | 1,428 | |||
Net unrealized appreciation on investments | — | |||
Net assets | $ | 78,269,215 | ||
Capital shares outstanding | 78,254,180 | |||
Net asset value per share | $ | 1.00 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Interest | $ | 681,641 | ||
Total investment income | 681,641 | |||
Expenses: | ||||
Management fees | 355,472 | |||
Investor service fees | 177,736 | |||
Transfer agent and administrative fees | 142,190 | |||
Professional fees | 93,530 | |||
Portfolio accounting fees | 71,094 | |||
Custodian fees | 12,574 | |||
Trustees’ fees* | 9,469 | |||
Line of credit fees | 2,440 | |||
Miscellaneous | 64,890 | |||
Total expenses | 929,395 | |||
Less: | ||||
Expenses waived by service company | (151,791 | ) | ||
Expenses waived by distributor | (36 | ) | ||
Expenses waived by Adviser | (97,062 | ) | ||
Total waived expenses | (248,889 | ) | ||
Net expenses | 680,506 | |||
Net investment income | 1,135 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 1,605 | |||
Net realized gain | 1,605 | |||
Net increase in net assets resulting from operations | $ | 2,740 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 183 |
U.S. GOVERNMENT MONEY MARKET FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 1,135 | $ | 31 | ||||
Net realized gain on investments | 1,605 | 27,009 | ||||||
Net change in unrealized appreciation (depreciation) on investments | — | — | ||||||
Net increase in net assets resulting from operations | 2,740 | 27,040 | ||||||
Distributions to shareholders from: | ||||||||
Net investment income | (1,312 | ) | (31 | ) | ||||
Net realized gains | (6,371 | ) | (3,808 | ) | ||||
Total distributions to shareholders | (7,683 | ) | (3,839 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 137,795,910 | 329,868,259 | ||||||
Distributions reinvested | 7,683 | 3,839 | ||||||
Cost of shares redeemed | (121,233,340 | ) | (367,369,762 | ) | ||||
Net increase (decrease) from capital share transactions | 16,570,253 | (37,497,664 | ) | |||||
Net increase (decrease) in net assets | 16,565,310 | (37,474,463 | ) | |||||
Net assets: | ||||||||
Beginning of year | 61,703,905 | 99,178,368 | ||||||
End of year | $ | 78,269,215 | $ | 61,703,905 | ||||
Undistributed net investment income at end of year | $ | — | $ | — | ||||
Capital share activity: | ||||||||
Shares sold | 137,794,598 | 329,868,261 | ||||||
Shares issued from reinvestment of distributions | 7,681 | 3,837 | ||||||
Shares redeemed | (121,233,339 | ) | (367,369,762 | ) | ||||
Net increase (decrease) in shares | 16,568,940 | (37,497,664 | ) |
184 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
U.S. GOVERNMENT MONEY MARKET FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | — | b | — | b | — | b | — | b | — | b | ||||||||||
Net gain (loss) on investments (realized and unrealized) | — | b | — | b | — | b | — | b | — | b | ||||||||||
Total from investment operations | — | — | — | — | — | |||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net Investment Income | (— | )b | (— | )b | (— | )b | (— | )b | (— | )b | ||||||||||
Net realized gains | (— | )b | (— | )b | (— | )b | (— | )b | (— | )b | ||||||||||
Total distributions | (— | )b | (— | )b | (— | )b | (— | )b | (— | )b | ||||||||||
Net asset value, end of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||
Total Returnc | 0.01 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 78,269 | $ | 61,704 | $ | 99,178 | $ | 98,358 | $ | 98,655 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | — | e | — | e | — | e | — | e | — | e | ||||||||||
Total expenses | 1.31 | % | 1.25 | % | 1.20 | % | 1.26 | % | 1.23 | % | ||||||||||
Net expensesd | 0.96 | % | 0.40 | % | 0.13 | % | 0.05 | % | 0.07 | % | ||||||||||
Portfolio turnover rate | — | — | — | — | — |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Less than $0.01 per share. |
c | Total return does not reflect the impact of any additional fees charged by insurance companies. |
d | Net expense information reflects the expense ratios after expense waivers. |
e | Less than 0.01%. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 185 |
NOTES TO FINANCIAL STATEMENTS |
Note 1 – Organization and Significant Accounting Policies
Organization
The Rydex Variable Trust (the “Trust”), a Delaware statutory trust, is registered with the SEC under the Investment Company Act of 1940 (“1940 Act”), as an open-ended investment company of the series type. Each series, in effect, is representing a separate Fund. The Trust is authorized to issue an unlimited number of no par value shares. At December 31, 2017, the Trust consisted of forty-nine funds. The Trust offers shares of the Funds to insurance companies for their variable annuity and variable life insurance contracts.
This report covers the Nova Fund, Inverse S&P 500® Strategy Fund, NASDAQ-100® Fund, Inverse NASDAQ-100® Strategy Fund, S&P 500® 2x Strategy Fund, NASDAQ-100® 2x Strategy Fund, Mid-Cap 1.5x Strategy Fund, Inverse Mid-Cap Strategy Fund, Russell 2000® 2x Strategy Fund, Russell 2000® 1.5x Strategy Fund, Inverse Russell 2000® Strategy Fund, Dow 2x Strategy Fund, Inverse Dow 2x Strategy Fund, Government Long Bond 1.2x Strategy Fund, Inverse Government Long Bond Strategy Fund, High Yield Strategy Fund and U.S. Government Money Market Fund (the “Funds”), each a non-diversified investment company, with the exception of U.S. Government Money Market Fund which is a diversified investment company.
The Funds are designed and operated to accommodate frequent trading by shareholders and, unlike most mutual funds, offer unlimited exchange privileges with no minimum holding periods or transactions fees, which may cause the Funds to experience high portfolio turnover.
Security Investors, LLC, which operates under the name Guggenheim Investments (“GI”), provides advisory services. Guggenheim Funds Distributors, LLC (“GFD”) acts as principal underwriter for the Trust. GI and GFD are affiliated entities.
Significant Accounting Policies
The Funds operate as investment companies and, accordingly, follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
The following significant accounting policies are in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and are consistently followed by the Trust. This requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. All time references are based on Eastern Time.
The net asset value per share (“NAV”) of a fund is calculated by dividing the market value of the fund’s securities and other assets, less all liabilities, by the number of outstanding shares of the fund.
(a) Valuation of Investments
The Board of Trustees of the Funds (the “Board”) has adopted policies and procedures for the valuation of the Funds’ investments (the “Valuation Procedures”). Pursuant to the Valuation Procedures, the Board has delegated to a valuation committee, consisting of representatives from Guggenheim’s investment management, fund administration, legal and compliance departments (the “Valuation Committee”), the day-to-day responsibility for implementing the Valuation Procedures, including, under most circumstances, the responsibility for determining the fair value of the Funds’ securities and/or other assets.
Valuations of the Funds’ securities are supplied primarily by pricing services appointed pursuant to the processes set forth in the Valuation Procedures. The Valuation Committee convenes monthly, or more frequently as needed, to review the valuation of all assets which have been fair valued for reasonableness. The Funds’ officers, through the Valuation Committee and consistent with the monitoring and review responsibilities set forth in the Valuation Procedures, regularly review procedures used and valuations provided by the pricing services.
If the pricing service cannot or does not provide a valuation for a particular investment or such valuation is deemed unreliable, such investment is fair valued by the Valuation Committee.
Equity securities listed on an exchange (New York Stock Exchange (“NYSE”) or American Stock Exchange) are valued at the last quoted sales price as of the close of business on the NYSE, usually 4:00 p.m. on the valuation date. Equity securities listed on the NASDAQ market system are valued at the NASDAQ Official Closing Price on the valuation date, which may not necessarily represent the last sale price. If there has been no sale on such exchange or NASDAQ on a given day, the security is valued at the closing bid price on that day.
Open-end investment companies (“mutual funds”) are valued at their NAV as of the close of business, on the valuation date. Exchange-traded funds (“ETFs”) are valued at the last quoted sale price.
The U.S. Government Money Market Fund values debt securities at amortized cost pursuant to Rule 2a-7 of the 1940 Act, which approximates market value.
186 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
With the exception of the U.S. Government Money Market Fund, U.S. government securities are valued by either independent pricing services, the last traded fill price, or at the reported bid price at the close of business.
Debt securities with a maturity of greater than 60 days at acquisition are valued at prices that reflect broker-dealer supplied valuations or are obtained from independent pricing services, which may consider the trade activity, treasury spreads, yields or price of bonds of comparable quality, coupon, maturity, and type, as well as prices quoted by dealers who make markets in such securities. Short-term debt securities with a maturity of 60 days or less at acquisition are valued at amortized cost, provided such amount approximates market value. Money market funds are valued at net asset value.
Repurchase agreements are valued at amortized cost, provided such amounts approximate market value.
The value of futures contracts is accounted for using the unrealized gain or loss on the contracts that is determined by marking the contracts to their current realized settlement prices. Financial futures contracts are valued at the 4:00 p.m. price on the valuation date. In the event that the exchange for a specific futures contract closes earlier than 4:00 p.m., the futures contract is valued at the Official Settlement Price of the exchange. However, the underlying securities from which the futures contract value is derived are monitored until 4:00 p.m. to determine if fair valuation would provide a more accurate valuation.
The values of over-the-counter (“OTC”) swap agreements and credit default swap agreements entered into by a Fund are accounted for using the unrealized gains or losses on the agreements that are determined by marking the agreements to the last quoted value of the index that the swaps pertain to at the close of the NYSE.
Investments for which market quotations are not readily available are fair-valued as determined in good faith by GI, under the direction of the Board using methods established or ratified by the Board. Valuations in accordance with these methods are intended to reflect each security’s (or asset’s) “fair value”. Each such determination is based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples of such factors may include, but are not limited to market prices; sale prices; broker quotes; and models which derive prices based on inputs such as prices of securities with comparable maturities and characteristics, or based on inputs such as anticipated cash flows or collateral, spread over Treasuries, and other information analysis.
In connection with futures contracts and other derivative investments, such factors may include obtaining information as to how (a) these contracts and other derivative investments trade in the futures or other derivative markets, respectively, and (b) the securities underlying these contracts and other derivative investments trade in the cash market.
(b) U.S. Government and Agency Obligations
Certain U.S. Government and Agency Obligations are traded on a discount basis; the interest rates shown on the Schedules of Investments reflect the effective rates paid at the time of purchase by the Funds. Other securities bear interest at the rates shown, payable at fixed dates through maturity.
(c) Short Sales
When a Fund engages in a short sale of a security, an amount equal to the proceeds is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the market value of the short sale. The Fund maintains a segregated account of cash and/or securities as collateral for short sales.
Fees, if any, paid to brokers to borrow securities in connection with short sales are recorded as interest expense. In addition, the Fund must pay out the dividend rate of the equity or coupon rate of the obligation to the lender and record this as an expense. Short dividend or interest expense is a cost associated with the investment objective of short sales transactions, rather than an operational cost associated with the day-to-day management of any mutual fund. The Fund may also receive rebate income from the broker resulting from the investment of the proceeds from securities sold short.
(d) Futures Contracts
Upon entering into a futures contract, a Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is affected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
(e) Swap Agreements
Swap agreements are marked-to-market daily and the change, if any, is recorded as unrealized gain or loss. Payments received or made as a result of an agreement or termination of an agreement are recognized as realized gains or losses.
THE RYDEX FUNDS ANNUAL REPORT | 187 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Credit default swap agreements are marked-to-market daily and the change, if any, is recorded as unrealized gain or loss. Upfront payments received or made by a Fund on credit default swap agreements are amortized over the expected life of the agreement. Periodic payments received or paid by a Fund are recorded as realized gains or losses. Payments received or made as a result of a credit event or termination of the contract are recognized, net of a proportional amount of the upfront payment, as realized gains or losses.
(f) Foreign Taxes
The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are paid by the Funds and reflected in their Statement of Operations as follows: foreign taxes withheld at source are presented as a reduction of income and foreign taxes on capital gains from sales of investments are included with the net realized gain (loss) on investments. Foreign taxes payable or deferred as of December 31, 2017, if any, are disclosed in the Funds’ Statements of Assets and Liabilities.
(g) Security Transactions
Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from securities transactions are recorded using the identified cost basis. Proceeds from lawsuits related to investment holdings are recorded as realized gains in the respective Fund. Dividend income is recorded on the ex-dividend date, net of applicable taxes withheld by foreign countries. Taxable non-cash dividends are recorded as dividend income. Interest income, including amortization of premiums and accretion of discounts, is accrued on a daily basis. Dividend income from Real Estate Investment Trusts (“REITs”) is recorded based on the income included in the distributions received from the REIT investments using published REIT classifications, including some management estimates when actual amounts are not available. Distributions received in excess of this estimated amount are recorded as a reduction of the cost of investments or reclassified to capital gains. The actual amounts of income, return of capital, and capital gains are only determined by each REIT after its fiscal year-end, and may differ from the estimated amounts.
(h) Distributions
Dividends from net investment income are declared daily in the Government Long Bond 1.2x Strategy Fund and the U.S. Government Money Market Fund. Dividends are reinvested in additional shares unless shareholders request payment in cash. Distributions of net investment income in the remaining Funds and distributions of net realized gains, if any, in all Funds are declared at least annually and recorded on the ex-dividend date and are determined in accordance with income tax regulations which may differ from U.S. GAAP.
(i) Cash
The Funds may leave cash overnight in their cash account with the custodian. Periodically, a Fund may have cash due to the custodian bank as an overdraft balance. A fee is incurred on this overdraft, calculated by multiplying the overdraft by a rate based on the federal funds rate, which was 1.33% at December 31, 2017.
(j) Indemnifications
Under the Funds’ organizational documents, the Trustees and Officers are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, 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.
Note 2 – Financial Instruments and Derivatives
As part of their investment strategy, the Funds utilize short sales and a variety of derivative instruments. These investments involve, to varying degrees, elements of market risk and risks in excess of the amounts recognized in the Statements of Assets and Liabilities. Valuation and accounting treatment of these instruments can be found under Significant Accounting Policies in Note 1 of these Notes to Financial Statements.
Short Sales
A short sale is a transaction in which a Fund sells a security it does not own. If the security sold short decreases in price between the time the Fund sells the security and closes its short position, the Fund will realize a gain on the transaction. Conversely, if the security increases in price during the period, the Fund will realize a loss on the transaction. The risk of such price increases is the principal risk of engaging in short sales.
Derivatives
Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more other assets, such as securities, currencies, commodities or indices. Derivative instruments may be used to increase investment flexibility (including to maintain cash reserves while maintaining exposure to certain other assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. Derivative instruments may also
188 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
be used to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. U.S. GAAP requires disclosures to enable investors to better understand how and why a Fund uses derivative instruments, how these derivative instruments are accounted for and their effects on the Fund’s financial position and results of operations.
The Funds may utilize derivatives for the following purposes:
Duration: the use of an instrument to manage the interest rate risk of a portfolio.
Index Exposure: the use of an instrument to obtain exposure to a listed or other type of index.
Leverage: gaining total exposure to equities or other assets on the long and short sides at greater than 100% of invested capital.
Liquidity: the ability to buy or sell exposure with little price/market impact.
For any Fund whose investment strategy consistently involves applying leverage, the value of the Fund’s shares will tend to increase or decrease more than the value of any increase or decrease in the underlying index or other asset. In addition, because an investment in derivative instruments generally requires a small investment relative to the amount of investment exposure assumed, an opportunity for increased net income is created; but, at the same time, leverage risk will increase. The Fund’s use of leverage, through borrowings or instruments such as derivatives, may cause the Fund to be more volatile and riskier than if they had not been leveraged.
Futures
A futures contract is an agreement to purchase (long) or sell (short) an agreed amount of securities or other instruments at a set price for delivery at a future date. There are significant risks associated with a Fund’s use of futures contracts, including (i) there may be an imperfect or no correlation between the changes in market value of the underlying asset and the prices of futures contracts; (ii) there may not be a liquid secondary market for a futures contract; (iii) trading restrictions or limitations may be imposed by an exchange; and (iv) government regulations may restrict trading in futures contracts. When investing in futures, there is minimal counterparty credit risk to a Fund because futures are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees against default. Cash deposits are shown as segregated cash with broker on the Statements of Assets and Liabilities; securities held as collateral are noted on the Schedules of Investments.
The following table represents the Funds’ use and volume of futures on a quarterly basis:
Average Notional Amount | ||||||||||
Fund | Use | Long | Short | |||||||
Nova Fund | Index exposure, Leverage, Liquidity | $ | 3,552,509 | $ | — | |||||
Inverse S&P 500® Strategy Fund | Index exposure, Liquidity | — | 735,809 | |||||||
NASDAQ-100® Fund | Index exposure, Liquidity | 4,057,008 | — | |||||||
Inverse NASDAQ-100® Strategy Fund | Index exposure, Liquidity | — | 280,505 | |||||||
S&P 500® 2x Strategy Fund | Index exposure, Leverage, Liquidity | 7,411,322 | — | |||||||
NASDAQ-100® 2x Strategy Fund | Index exposure, Leverage, Liquidity | 1,902,194 | — | |||||||
Mid-Cap 1.5x Strategy Fund | Index exposure, Leverage, Liquidity | 1,437,540 | — | |||||||
Russell 2000® 2x Strategy Fund | Index exposure, Leverage, Liquidity | 559,166 | — | |||||||
Russell 2000® 1.5x Strategy Fund | Index exposure, Leverage, Liquidity | 1,049,194 | — | |||||||
Inverse Russell 2000® Strategy Fund | Index exposure, Liquidity | — | 204,395 | |||||||
Dow 2x Strategy Fund | Index exposure, Leverage, Liquidity | 2,126,814 | — | |||||||
Inverse Dow 2x Strategy Fund | Index exposure, Leverage, Liquidity | — | 494,873 | |||||||
Government Long Bond 1.2x Strategy Fund | Duration, Index exposure, Leverage, Liquidity | 11,957,750 | — | |||||||
Inverse Government Long Bond Strategy Fund | Duration, Index exposure, Leverage, Liquidity | — | 1,817,133 | |||||||
High Yield Strategy Fund | Duration, Index exposure, Liquidity | 6,717,863 | — |
THE RYDEX FUNDS ANNUAL REPORT | 189 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Swaps
A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. A Fund utilizing OTC swaps bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty or if the underlying asset declines in value. Certain standardized swaps are subject to mandatory central clearing and are executed on a multi-lateral or other trade facility platform, such as a registered exchange. There is limited counterparty credit risk with respect to centrally-cleared swaps as the transaction is facilitated through a central clearinghouse, much like an exchange-traded futures contract. Upon entering into certain centrally-cleared swap transactions, a Fund is required to deposit with its clearing broker an amount of cash or securities as an initial margin. Subsequent variation margin payments or receipts are made or received by the Fund, depending on fluctuations in the fair value of the reference entity. The exchange bears the risk of loss for interest rate swaps.
Total return swaps involve commitments where single or multiple cash flows are exchanged based on the price of an underlying reference asset (such as index or basket) or a fixed or variable interest rate. Index swaps will usually be computed based on the current index value as of the close of regular trading on the NYSE or other exchange. A fund utilizing a total return index swap bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty or if the underlying index declines in value.
The following table represents the Funds’ use and volume of total return swaps on a quarterly basis:
Average Notional Amount | ||||||||||
Fund | Use | Long | Short | |||||||
Nova Fund | Index exposure, Leverage, Liquidity | $ | 42,336,015 | $ | — | |||||
Inverse S&P 500® Strategy Fund | Index exposure, Liquidity | — | 2,775,379 | |||||||
NASDAQ-100® Fund | Index exposure, Liquidity | 22,730,531 | — | |||||||
Inverse NASDAQ-100® Strategy Fund | Index exposure, Liquidity | — | 1,373,411 | |||||||
S&P 500® 2x Strategy Fund | Index exposure, Leverage, Liquidity | 61,004,748 | — | |||||||
NASDAQ-100® 2x Strategy Fund | Index exposure, Leverage, Liquidity | 92,043,587 | — | |||||||
Mid-Cap 1.5x Strategy Fund | Index exposure, Leverage, Liquidity | 7,143,374 | — | |||||||
Inverse Mid-Cap Strategy Fund | Index exposure, Liquidity | — | 249,249 | |||||||
Russell 2000® 2x Strategy Fund | Index exposure, Leverage, Liquidity | 9,213,187 | — | |||||||
Russell 2000® 1.5x Strategy Fund | Index exposure, Leverage, Liquidity | 9,532,149 | — | |||||||
Inverse Russell 2000® Strategy Fund | Index exposure, Liquidity | — | 1,160,002 | |||||||
Dow 2x Strategy Fund | Index exposure, Leverage, Liquidity | 32,289,651 | — | |||||||
Inverse Dow 2x Strategy Fund | Index exposure, Leverage, Liquidity | — | 4,557,276 | |||||||
High Yield Strategy Fund | Duration, Index exposure, Liquidity | 59,169 | — |
Credit default swaps are instruments which allow for the full or partial transfer of third party credit risk, with respect to a particular entity or entities, from one counterparty to the other. In accordance with its principal investment strategy, the Funds enter into credit default swaps as a seller of protection primarily to gain exposure similar to the high yield bond market. A seller of credit default swaps is selling credit protection or assuming credit risk with respect to the underlying entity or entities. If a credit event occurs, as defined under the terms of the swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. The Notional Principal reflects the maximum potential amount the Fund could be required to pay as a seller of credit protection if a credit event occurs. As the seller of protection, the Fund receives periodic premium payments from the counterparty and may also receive or pay an upfront premium adjustment to the stated periodic premium. In the event a credit event occurs, an adjustment will be made to any upfront premiums that were received by a reduction of 1.00% per credit event.
The quoted market prices and resulting market values for credit default swap agreements on securities and credit indices serve as an indicator of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative had the notional amount of the swap agreement been closed/sold as of the period end. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.
190 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
The following table represents the Funds’ use and volume of credit default swaps on a quarterly basis:
Average Notional Amount | ||||||||||
Fund | Use | Long | Short | |||||||
High Yield Strategy Fund | Duration, Index exposure, Liquidity | $ | 6,737,500 | $ | — |
A credit default swap enables a Fund to buy or sell protection against a defined credit event of an issuer or a basket of securities. Generally, the seller of credit protection against an issuer or basket of securities receives a periodic payment from the buyer to compensate against potential default events. If a default event occurs, the seller must pay the buyer the full notional value of the reference obligation in exchange for the reference obligation. If no default occurs, the counterparty will pay the stream of payments and have no further obligations to the Fund selling the credit protection. A Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty, or in the case of a credit default swap in which the Fund is selling credit protection, the default of a third party issuer.
The table on page 174 included on the Schedule of Investments summarizes the information with regard to sold protection on credit default swap contracts as of December 31, 2017.
Derivative Investment Holdings Categorized by Risk Exposure
The following is a summary of the location of derivative investments on the Funds’ Statements of Assets and Liabilities as of December 31, 2017:
Derivative Investment Type | Asset Derivatives | Liability Derivatives |
Equity/Interest Rate contracts | Variation margin | Variation margin |
Equity/Credit contracts | Unrealized appreciation on swap agreements | Unrealized depreciation on swap agreements |
The following table sets forth the fair value of the Funds’ derivative investments categorized by primary risk exposure at December 31, 2017:
Asset Derivative Investments Value | ||||||||||||||||||||
Fund | Futures Equity Risk* | Swaps Equity Risk | Futures Interest Rate Risk* | Swaps Credit Default Risk | Total Value at December 31, 2017 | |||||||||||||||
Nova Fund | $ | 134,035 | $ | — | $ | — | $ | — | $ | 134,035 | ||||||||||
Inverse S&P 500® Strategy Fund | — | 9,581 | — | — | 9,581 | |||||||||||||||
NASDAQ-100® Fund | 82,181 | — | — | — | 82,181 | |||||||||||||||
Inverse NASDAQ-100® Strategy Fund | — | 4,888 | — | — | 4,888 | |||||||||||||||
S&P 500® 2x Strategy Fund | 157,220 | — | — | — | 157,220 | |||||||||||||||
NASDAQ-100® 2x Strategy Fund | 6,198 | — | — | — | 6,198 | |||||||||||||||
Mid-Cap 1.5x Strategy Fund | 30,943 | — | — | — | 30,943 | |||||||||||||||
Inverse Mid-Cap Strategy Fund | — | 601 | — | — | 601 | |||||||||||||||
Inverse Russell 2000® Strategy Fund | — | 6,685 | — | — | 6,685 | |||||||||||||||
Dow 2x Strategy Fund | 50,721 | — | — | — | 50,721 | |||||||||||||||
Inverse Dow 2x Strategy Fund | — | 17,745 | — | — | 17,745 | |||||||||||||||
Government Long Bond 1.2x Strategy Fund | — | — | 105,492 | — | 105,492 | |||||||||||||||
High Yield Strategy Fund | — | — | — | 67,243 | 67,243 |
THE RYDEX FUNDS ANNUAL REPORT | 191 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Liability Derivative Investments Value | ||||||||||||||||||||
Fund | Futures Equity Risk* | Swaps Equity Risk | Futures Interest Rate Risk* | Swaps Credit Default Risk | Total Value at December 31, 2017 | |||||||||||||||
Nova Fund | $ | — | $ | 113,785 | $ | — | $ | — | $ | 113,785 | ||||||||||
Inverse S&P 500® Strategy Fund | 1,779 | — | — | — | 1,779 | |||||||||||||||
NASDAQ-100® Fund | — | 65,619 | — | — | 65,619 | |||||||||||||||
S&P 500® 2x Strategy Fund | — | 224,689 | — | — | 224,689 | |||||||||||||||
NASDAQ-100® 2x Strategy Fund | — | 655,536 | — | — | 655,536 | |||||||||||||||
Mid-Cap 1.5x Strategy Fund | — | 20,119 | — | — | 20,119 | |||||||||||||||
Russell 2000® 2x Strategy Fund | 2,205 | 61,092 | — | — | 63,297 | |||||||||||||||
Russell 2000® 1.5x Strategy Fund | 1,912 | 51,115 | — | — | 53,027 | |||||||||||||||
Inverse Russell 2000® Strategy Fund | 666 | — | — | — | 666 | |||||||||||||||
Dow 2x Strategy Fund | — | 169,898 | — | — | 169,898 | |||||||||||||||
Inverse Government Long Bond Strategy Fund | — | — | 6,885 | — | 6,885 | |||||||||||||||
High Yield Strategy Fund | — | 10 | 25,084 | — | 25,094 |
* | Includes cumulative appreciation (depreciation) of futures contracts as reported on the Schedules of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities. |
The following is a summary of the location of derivative investments on the Funds’ Statements of Operations for the year ended December 31, 2017:
Derivative Investment Type | Location of Gain (Loss) on Derivatives |
Equity/Interest Rate contracts | Net realized gain (loss) on futures contracts |
Net change in unrealized appreciation (depreciation) on futures contracts | |
Equity/Credit contracts | Net realized gain (loss) on swap agreements |
Net change in unrealized appreciation (depreciation) on swap agreements |
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 December 31, 2017:
Realized Gain (Loss) on Derivative Investments Recognized on the Statements of Operations | ||||||||||||||||||||
Fund | Futures Equity Risk | Swaps Equity Risk | Futures Interest Rate Risk | Swaps Credit Default Risk | Total | |||||||||||||||
Nova Fund | $ | 1,074,458 | $ | 7,991,316 | $ | — | $ | — | $ | 9,065,774 | ||||||||||
Inverse S&P 500® Strategy Fund | (48,680 | ) | (768,305 | ) | — | — | (816,985 | ) | ||||||||||||
NASDAQ-100® Fund | 1,884,930 | 4,870,100 | — | — | 6,755,030 | |||||||||||||||
Inverse NASDAQ-100® Strategy Fund | (2,262 | ) | (463,051 | ) | — | — | (465,313 | ) | ||||||||||||
S&P 500® 2x Strategy Fund | 778,787 | 9,537,829 | — | — | 10,316,616 | |||||||||||||||
NASDAQ-100® 2x Strategy Fund | 1,142,843 | 19,924,944 | — | — | 21,067,787 | |||||||||||||||
Mid-Cap 1.5x Strategy Fund | 400,698 | 1,825,179 | — | — | 2,225,877 | |||||||||||||||
Inverse Mid-Cap Strategy Fund | — | (49,078 | ) | — | — | (49,078 | ) | |||||||||||||
Russell 2000® 2x Strategy Fund | 84,825 | 805,123 | — | — | 889,948 | |||||||||||||||
Russell 2000® 1.5x Strategy Fund | 23,035 | 864,508 | — | — | 887,543 | |||||||||||||||
Inverse Russell 2000® Strategy Fund | 9,846 | (731,955 | ) | — | — | (722,109 | ) | |||||||||||||
Dow 2x Strategy Fund | 382,392 | 6,636,973 | — | — | 7,019,365 | |||||||||||||||
Inverse Dow 2x Strategy Fund | (175,809 | ) | (1,803,424 | ) | — | — | (1,979,233 | ) | ||||||||||||
Government Long Bond 1.2x Strategy Fund | — | — | 315,884 | — | 315,884 | |||||||||||||||
Inverse Government Long Bond Strategy Fund | — | — | (79,037 | ) | — | (79,037 | ) | |||||||||||||
High Yield Strategy Fund | — | 10,828 | 34,697 | 540,670 | 586,195 |
192 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized on the Statements of Operations | ||||||||||||||||||||
Fund | Futures Equity Risk | Swaps Equity Risk | Futures Interest Rate Risk | Swaps Credit Default Risk | Total | |||||||||||||||
Nova Fund | $ | 142,208 | $ | (247,488 | ) | $ | — | $ | — | $ | (105,280 | ) | ||||||||
Inverse S&P 500® Strategy Fund | (2,700 | ) | (23,015 | ) | — | — | (25,715 | ) | ||||||||||||
NASDAQ-100® Fund | 135,613 | 29,234 | — | — | 164,847 | |||||||||||||||
Inverse NASDAQ-100® Strategy Fund | (568 | ) | (24,144 | ) | — | — | (24,712 | ) | ||||||||||||
S&P 500® 2x Strategy Fund | 158,908 | 103,124 | — | — | 262,032 | |||||||||||||||
NASDAQ-100® 2x Strategy Fund | 42,441 | (156,338 | ) | — | — | (113,897 | ) | |||||||||||||
Mid-Cap 1.5x Strategy Fund | 164,768 | (27,516 | ) | — | — | 137,252 | ||||||||||||||
Inverse Mid-Cap Strategy Fund | — | (554 | ) | — | — | (554 | ) | |||||||||||||
Russell 2000® 2x Strategy Fund | (1,989 | ) | (119,122 | ) | — | — | (121,111 | ) | ||||||||||||
Russell 2000® 1.5x Strategy Fund | (1,479 | ) | (115,203 | ) | — | — | (116,682 | ) | ||||||||||||
Inverse Russell 2000® Strategy Fund | (3,015 | ) | (103,410 | ) | — | — | (106,425 | ) | ||||||||||||
Dow 2x Strategy Fund | 57,566 | (296,226 | ) | — | — | (238,660 | ) | |||||||||||||
Inverse Dow 2x Strategy Fund | (1,706 | ) | (23,459 | ) | — | — | (25,165 | ) | ||||||||||||
Government Long Bond 1.2x Strategy Fund | — | — | (119,999 | ) | — | (119,999 | ) | |||||||||||||
Inverse Government Long Bond Strategy Fund | — | — | (11,288 | ) | — | (11,288 | ) | |||||||||||||
High Yield Strategy Fund | — | (3,746 | ) | (11,490 | ) | (116,443 | ) | (131,679 | ) |
In conjunction with the use of short sales and derivative instruments, the Funds are required to maintain collateral in various forms. The Funds use, where appropriate, depending on the financial instrument utilized and the broker involved, margin deposits at the broker, cash and/or securities segregated at the custodian bank, discount notes or the repurchase agreements allocated to the Funds.
The Trust has established counterparty credit guidelines and enters into transactions only with financial institutions of investment grade or better. The Trust monitors the counterparty credit risk.
Note 3 – Offsetting
In the normal course of business, the Funds enter into transactions subject to enforceable master netting arrangements or other similar arrangements. Generally, the right to offset in those agreements allows the Funds to counteract the exposure to a specific counterparty with collateral received from or delivered to that counterparty based on the terms of the arrangements. These arrangements provide for the right to liquidate upon the occurrence of an event of default, credit event upon merger or additional termination event.
In order to better define their contractual rights and to secure rights that will help the Funds mitigate their counterparty risk, the Funds may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with their derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between a Fund and a counterparty that governs OTC derivatives, including foreign exchange contracts, and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of a default (close-out netting) or similar event, including the bankruptcy or insolvency of the counterparty.
For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Funds and the counterparty. For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Funds and cash collateral received from the counterparty, if any, are reported separately on the Statements of Assets and Liabilities as segregated cash with broker/receivable for variation margin, or payable for swap settlement/variation margin. Generally, the amount of collateral due from or to a counterparty must exceed a minimum transfer amount threshold (e.g., $300,000) before a transfer is required to be made. To the extent amounts due to the Funds from their counterparties are not fully collateralized, contractually or otherwise, the Funds bear the risk of loss from counterparty nonperformance. The Funds attempt to mitigate counterparty risk by only entering into agreements with counterparties that they believe to be of good standing and by monitoring the financial stability of those counterparties.
For financial reporting purposes, the Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statements of Assets and Liabilities.
THE RYDEX FUNDS ANNUAL REPORT | 193 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The following tables present derivative financial instruments and secured financing transactions that are subject to enforceable netting arrangements and offset in the Statements of Assets and Liabilities in conformity with U.S. GAAP:
Gross Amounts of Recognized Assets1 | Gross Amounts Offset In the Statements of Assets and Liabilities | Net Amount of Assets Presented on the Statements of Assets and Liabilities | Gross Amounts Not Offset in the Statements of Assets and Liabilities | |||||||||||||||||||||||
Fund | Instrument | Financial Instruments | Cash Collateral Received | Net Amount | ||||||||||||||||||||||
Inverse S&P 500® Strategy Fund | Swap equity contracts | $ | 9,581 | $ | — | $ | 9,581 | $ | — | $ | — | $ | 9,581 | |||||||||||||
Inverse NASDAQ-100® Strategy Fund | Swap equity contracts | 4,888 | — | 4,888 | — | — | 4,888 | |||||||||||||||||||
Inverse Mid-Cap Strategy Fund | Swap equity contracts | 601 | — | 601 | — | — | 601 | |||||||||||||||||||
Inverse Russell 2000® Strategy Fund | Swap equity contracts | 6,685 | — | 6,685 | — | — | 6,685 | |||||||||||||||||||
Inverse Dow 2x Strategy Fund | Swap equity contracts | 17,745 | — | 17,745 | — | — | 17,745 |
Gross Amounts of Recognized Liabilities1 | Gross Amounts Offset In the Statements of Assets and Liabilities | Net Amount of Liabilities Presented on the Statements of Assets and Liabilities | Gross Amounts Not Offset in the Statements of Assets and Liabilities | |||||||||||||||||||||||
Fund | Instrument | Financial Instruments | Cash Collateral Pledged | Net Amount | ||||||||||||||||||||||
Nova Fund | Swap equity contracts | $ | 113,785 | $ | — | $ | 113,785 | $ | 102,975 | $ | — | $ | 10,810 | |||||||||||||
NASDAQ-100® Fund | Swap equity contracts | 65,619 | — | 65,619 | 65,619 | — | — | |||||||||||||||||||
S&P 500® 2x Strategy Fund | Swap equity contracts | 224,689 | — | 224,689 | 224,689 | — | — | |||||||||||||||||||
NASDAQ-100® 2x Strategy Fund | Swap equity contracts | 655,536 | — | 655,536 | 655,536 | — | — | |||||||||||||||||||
Mid-Cap 1.5x Strategy Fund | Swap equity contracts | 20,119 | — | 20,119 | 15,412 | 3,178 | 1,529 | |||||||||||||||||||
Russell 2000® 2x Strategy Fund | Swap equity contracts | 61,092 | — | 61,092 | 50,906 | 10,186 | — | |||||||||||||||||||
Russell 2000® 1.5x Strategy Fund | Swap equity contracts | 51,115 | — | 51,115 | 41,584 | 9,531 | — | |||||||||||||||||||
Dow 2x Strategy Fund | Swap equity contracts | 169,898 | — | 169,898 | 169,898 | — | — | |||||||||||||||||||
High Yield Strategy Fund | Swap equity contracts | 10 | — | 10 | — | — | 10 |
1 | Centrally cleared swaps are excluded from these reported amounts. |
194 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
The following table presents deposits held by others in connection with derivative investments as of December 31, 2017. The derivatives tables following the Schedules of Investments list each counterparty for which cash collateral may have been pledged or received at period end. The Funds have the right to offset these deposits against any related liabilities outstanding with each counterparty.
Fund | Counterparty/Clearing Agent | Asset Type | Cash Pledged | Cash Received | ||||||||
Nova Fund | Barclays Bank plc | Total Return Swap agreements | $ | 214,303 | $ | — | ||||||
Goldman Sachs Group | Futures contracts | 89,800 | — | |||||||||
Nova Fund Total | 304,103 | — | ||||||||||
Inverse S&P 500® Strategy Fund | Barclays Bank plc | Total Return Swap agreements | 210,000 | — | ||||||||
Goldman Sachs Group | Futures contracts | 4,500 | — | |||||||||
Inverse S&P 500® Strategy Fund Total | 214,500 | — | ||||||||||
NASDAQ-100® Fund | Barclays Bank plc | Total Return Swap agreements | 60,224 | — | ||||||||
Goldman Sachs Group | Futures contracts | 71,840 | — | |||||||||
NASDAQ-100® Fund Total | 132,064 | — | ||||||||||
Inverse NASDAQ-100® Strategy Fund | Barclays Bank plc | Total Return Swap agreements | 40,000 | — | ||||||||
Inverse NASDAQ-100® Strategy Fund Total | 40,000 | — | ||||||||||
S&P 500® 2x Strategy Fund | Barclays Bank plc | Total Return Swap agreements | 2,697 | — | ||||||||
Goldman Sachs Group | Futures contracts | 274,340 | — | |||||||||
S&P 500® 2x Strategy Fund Total | 277,037 | — | ||||||||||
NASDAQ-100® 2x Strategy Fund | Barclays Bank plc | Total Return Swap agreements | 15,438 | — | ||||||||
Goldman Sachs Group | Futures contracts | 112,500 | — | |||||||||
NASDAQ-100® 2x Strategy Fund Total | 127,938 | — | ||||||||||
Mid-Cap 1.5x Strategy Fund | Barclays Bank plc | Total Return Swap agreements | 240,000 | — | ||||||||
Goldman Sachs Group | Futures contracts | 312,000 | — | |||||||||
Mid-Cap 1.5x Strategy Fund Total | 552,000 | — | ||||||||||
Russell 2000® 2x Strategy Fund | Barclays Bank plc | Total Return Swap agreements | 280,000 | — | ||||||||
Goldman Sachs Group | Futures contracts | 59,000 | — | |||||||||
Russell 2000® 2x Strategy Fund Total | 339,000 | — | ||||||||||
Russell 2000® 1.5x Strategy Fund | Barclays Bank plc | Total Return Swap agreements | 280,000 | — | ||||||||
Goldman Sachs Group | Futures contracts | 94,400 | — | |||||||||
Russell 2000® 1.5x Strategy Fund Total | 374,400 | — | ||||||||||
Inverse Russell 2000® Strategy Fund | Barclays Bank plc | Total Return Swap agreements | 110,000 | — | ||||||||
Goldman Sachs Group | Futures contracts | 2,950 | — | |||||||||
Inverse Russell 2000® Strategy Fund Total | 112,950 | — | ||||||||||
Dow 2x Strategy Fund | Barclays Bank plc | Total Return Swap agreements | 399,103 | — | ||||||||
Goldman Sachs Group | Futures contracts | 83,750 | — | |||||||||
Dow 2x Strategy Fund Total | 482,853 | — | ||||||||||
Inverse Dow 2x Strategy Fund | Barclays Bank plc | Total Return Swap agreements | 180,000 | — | ||||||||
Inverse Dow 2x Strategy Fund Total | 180,000 | — | ||||||||||
Government Long Bond 1.2x Strategy Fund | Goldman Sachs Group | Futures contracts | 236,800 | — | ||||||||
Government Long Bond 1.2x Strategy Fund Total | 236,800 | — | ||||||||||
Inverse Government Long Bond Strategy Fund | Goldman Sachs Group | Futures contracts | 18,500 | — | ||||||||
Inverse Government Long Bond Strategy Fund Total | 18,500 | — | ||||||||||
High Yield Strategy Fund | Barclays Bank plc | Credit Default Swaps agreements | — | 194,070 | ||||||||
Goldman Sachs Group | Futures contracts | 31,250 | — | |||||||||
High Yield Strategy Fund Total | 31,250 | 194,070 |
THE RYDEX FUNDS ANNUAL REPORT | 195 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 4 – Fair Value Measurement
In accordance with U.S. GAAP, fair value is defined as the price that the Funds 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. U.S. GAAP establishes a three-tier fair value hierarchy based on the types of inputs used to value assets and liabilities and requires corresponding disclosure. The hierarchy and the corresponding inputs are summarized below:
Level 1 — | quoted prices in active markets for identical assets or liabilities. |
Level 2 — | significant other observable inputs (for example quoted prices for securities that are similar based on characteristics such as interest rates, prepayment speeds, credit risk, etc.). |
Level 3 — | significant unobservable inputs based on the best information available under the circumstances, to the extent observable inputs are not available, which may include assumptions. |
The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly, fair value determinations for Level 3 securities require the greatest amount of judgment.
The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The suitability of the techniques and sources employed to determine fair valuation are regularly monitored and subject to change.
Note 5 – Investment Advisory Agreement and other Agreements
Under the terms of an investment advisory contract, the Funds pay GI investment advisory fees calculated at the annualized rates below, based on the average daily net assets of the Funds:
Fund | Management Fees (as a % of Net Assets) |
Nova Fund | 0.75% |
Inverse S&P 500® Strategy Fund | 0.90% |
NASDAQ-100® Fund | 0.75% |
Inverse NASDAQ-100® Strategy Fund | 0.90% |
S&P 500® 2x Strategy Fund | 0.90% |
NASDAQ-100® 2x Strategy Fund | 0.90% |
Mid-Cap 1.5x Strategy Fund | 0.90% |
Inverse Mid-Cap Strategy Fund | 0.90% |
Russell 2000® 2x Strategy Fund | 0.90% |
Russell 2000® 1.5x Strategy Fund | 0.90% |
Inverse Russell 2000® Strategy Fund | 0.90% |
Dow 2x Strategy Fund | 0.90% |
Inverse Dow 2x Strategy Fund | 0.90% |
Government Long Bond 1.2x Strategy Fund | 0.50% |
Inverse Government Long Bond Strategy Fund | 0.90% |
High Yield Strategy Fund | 0.75% |
U.S. Government Money Market Fund | 0.50% |
GI engages external service providers to perform other necessary services for the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, etc., on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.
The Trust has adopted an Investor Services Plan for which GFD and other firms that provide investor services (“Service Providers”) may receive compensation. The Funds will pay investor service fees to GFD at an annual rate not to exceed 0.25% of average daily net assets. GFD, in turn, will compensate Service Providers for providing such services, while retaining a portion of such payments to compensate itself for investor services it performs.
196 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
GI and its affiliates have voluntarily agreed to waive their fees, including but not limited to accounting, shareholder investor services and investment advisory fees, in an attempt to maintain a positive net yield for the U.S. Government Money Market Fund. GI or its affiliates may terminate this voluntary waiver at any time upon notice to the Fund. When shareholder investor services fees are waived, dealer compensation will be reduced to the extent of such waiver.
Certain officers of the Trust are also officers of GI and GFD.
MUFG Investor Services (US), LLC (“MUIS”) acts as the Funds’ administrator, transfer agent and accounting agent. As administrator, transfer agent and accounting agent, MUIS is responsible for maintaining the books and records of the Funds’ securities and cash. The U.S Bank, N.A. (“U.S. Bank”) acts as the Funds’ custodian. As custodian, U.S. Bank is responsible for the custody of the Funds’ assets. For providing the aforementioned services, MUIS and U.S. Bank are entitled to receive a monthly fee equal to an annual percentage of the Fund’s average daily managed assets subject to certain minimum monthly fees and out of pocket expenses.
Note 6 – Repurchase Agreements
The Funds transfer uninvested cash balances into a single joint account, the daily aggregate balance of which is invested in one or more repurchase agreements collateralized by obligations of the U.S. Treasury and U.S. government agencies. The joint account includes other Funds in the Guggenheim complex not covered in this report. The collateral is in the possession of the Funds’ custodian and is evaluated to ensure that its market value exceeds, at a minimum, 102% of the original face amount of the repurchase agreements. Each Fund holds a pro rata share of the collateral based on the dollar amount of the repurchase agreement entered into by each Fund.
At December 31, 2017, the repurchase agreements in the joint account were as follows:
Counterparty and Terms of Agreement | Face Value | Repurchase Price | Collateral | Par Value | Fair Value | |||||||||||||
JP Morgan Chase & Co. | U.S. Treasury Notes | |||||||||||||||||
1.41% | 1.50% - 2.50% | |||||||||||||||||
Due 01/02/18 | $ | 28,652,652 | $ | 28,656,019 | 05/15/24 - 08/15/26 | $ | 31,210,500 | $ | 29,225,798 | |||||||||
Bank of America Merrill Lynch | U.S. Treasury Bond | |||||||||||||||||
1.40% | 3.88% | |||||||||||||||||
Due 01/02/18 | 15,292,005 | 15,293,789 | 04/15/29 | 7,605,000 | 15,597,858 |
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. The Funds’ investment adviser, acting under the supervision of the Board, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the Funds enter into repurchase agreements to evaluate potential risks.
Note 7– Portfolio Securities Loaned
The Funds may lend their securities to approved brokers to earn additional income. Security lending income shown on the Statements 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, U.S. Bank 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 U.S. Bank, cash collateral and proceeds are invested in the First American Government Obligations Fund - Class Z. 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 their 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. Securities lending transactions are accounted for as secured borrowings. The remaining contractual maturity of the securities lending agreement is overnight and continuous.
THE RYDEX FUNDS ANNUAL REPORT | 197 |
NOTES TO FINANCIAL STATEMENTS (continued) |
At December 31, 2017, the Funds participated in securities lending transactions, which are subject to enforceable netting arrangements, as follows:
Gross Amounts Not Offset in the Statements of Assets and Liabilities | Securities Lending Collateral | |||||||||||||||||||||||
Fund | Value of Securities Loaned | Collateral Received(a) | Net Amount | Cash Collateral Invested | Cash Collateral Uninvested | Total Collateral | ||||||||||||||||||
Nova Fund | $ | 1,731 | $ | (1,731 | ) | $ | — | $ | 1,803 | $ | — | $ | 1,803 | |||||||||||
NASDAQ-100® Fund | 457,023 | (457,023 | ) | — | 475,766 | — | 475,766 | |||||||||||||||||
S&P 500® 2x Strategy Fund | 38,077 | (38,077 | ) | — | 40,188 | — | 40,188 | |||||||||||||||||
NASDAQ-100® 2x Strategy Fund | 231,371 | (231,371 | ) | — | 240,860 | — | 240,860 | |||||||||||||||||
Mid-Cap 1.5x Strategy Fund | 99,088 | (99,088 | ) | — | 103,196 | — | 103,196 | |||||||||||||||||
Russell 2000® 2x Strategy Fund | 60,144 | (60,144 | ) | — | 63,092 | — | 63,092 | |||||||||||||||||
Russell 2000® 1.5x Strategy Fund | 56,433 | (56,433 | ) | — | 59,190 | — | 59,190 | |||||||||||||||||
High Yield Strategy Fund | 142,234 | (142,234 | ) | — | 146,469 | — | 146,469 |
(a) | Actual collateral received by the Fund is greater than the amount shown due to overcollateralization. |
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. GI, acting under the supervision of the Board, reviews the value of the collateral and the creditworthiness of those banks and dealers to evaluate potential risks.
Note 8 – Federal Income Tax Information
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 or federal excise 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, and has concluded that no provision for income tax is required in the Funds' financial statements. The Funds' federal tax returns are subject to examination by the Internal Revenue Service for a period of three years after they are filed.
The tax character of distributions paid during the year ended December 31, 2017 was as follows:
Fund | Ordinary Income | Long-Term Capital Gain | Total Distributions | |||||||||
Nova Fund | $ | 13,432 | $ | 1,183,600 | $ | 1,197,032 | ||||||
NASDAQ-100® Fund | — | 5,453,414 | 5,453,414 | |||||||||
S&P 500® 2x Strategy Fund | 1,231,746 | — | 1,231,746 | |||||||||
NASDAQ-100® 2x Strategy Fund | — | 681,689 | 681,689 | |||||||||
Mid-Cap 1.5x Strategy Fund | 2,573,815 | 479,613 | 3,053,428 | |||||||||
Russell 2000® 2x Strategy Fund | 219,611 | — | 219,611 | |||||||||
Russell 2000® 1.5x Strategy Fund | 283,182 | — | 283,182 | |||||||||
Dow 2x Strategy Fund | 8,701 | 303,555 | 312,256 | |||||||||
Government Long Bond 1.2x Strategy Fund | 190,445 | — | 190,445 | |||||||||
High Yield Strategy Fund | 320,362 | — | 320,362 | |||||||||
U.S. Government Money Market Fund | 7,683 | — | 7,683 |
198 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
The tax character of distributions paid during the year ended December 31, 2016 was as follows:
Fund | Ordinary Income | Long-Term Capital Gain | Total Distributions | |||||||||
NASDAQ-100® Fund | $ | 2,524,801 | $ | 4,817,270 | $ | 7,342,071 | ||||||
S&P 500® 2x Strategy Fund | 55,023 | 2,375,553 | 2,430,576 | |||||||||
NASDAQ-100® 2x Strategy Fund | — | 2,940,879 | 2,940,879 | |||||||||
Mid-Cap 1.5x Strategy Fund | — | 750,000 | 750,000 | |||||||||
Government Long Bond 1.2x Strategy Fund | 274,658 | — | 274,658 | |||||||||
High Yield Strategy Fund | 384,650 | — | 384,650 | |||||||||
U.S. Government Money Market Fund | 3,839 | — | 3,839 |
Note: For federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
The tax components of accumulated earnings/(deficit) as of December 31, 2017 were as follows:
Fund | Undistributed Ordinary Income | Undistributed Long-Term Capital Gain | Net Unrealized Appreciation (Depreciation) | Accumulated Capital and Other Losses | Other Temporary Differences | Total | ||||||||||||||||||
Nova Fund | $ | 2,953,404 | $ | — | $ | 1,523,980 | $ | — | $ | — | $ | 4,477,384 | ||||||||||||
Inverse S&P 500® Strategy Fund | — | — | 21,023 | (14,007,668 | ) | — | (13,986,645 | ) | ||||||||||||||||
NASDAQ-100® Fund | 3,444,938 | — | 21,205,129 | — | — | 24,650,067 | ||||||||||||||||||
Inverse NASDAQ-100® Strategy Fund | — | — | 7,861 | (6,195,569 | ) | — | (6,187,708 | ) | ||||||||||||||||
S&P 500® 2x Strategy Fund | 3,408,929 | — | 710,453 | — | 500 | 4,119,882 | ||||||||||||||||||
NASDAQ-100® 2x Strategy Fund | 11,849,568 | — | 5,889,718 | — | — | 17,739,286 | ||||||||||||||||||
Mid-Cap 1.5x Strategy Fund | 1,545,603 | — | 28,595 | — | 623 | 1,574,821 | ||||||||||||||||||
Inverse Mid-Cap Strategy Fund | — | — | 1,190 | (1,655,648 | ) | — | (1,654,458 | ) | ||||||||||||||||
Russell 2000® 2x Strategy Fund | 568,395 | — | 80,389 | (112,835 | ) | — | 535,949 | |||||||||||||||||
Russell 2000® 1.5x Strategy Fund | 457,824 | — | 240,505 | — | — | 698,329 | ||||||||||||||||||
Inverse Russell 2000® Strategy Fund | — | — | 10,163 | (6,607,415 | ) | — | (6,597,252 | ) | ||||||||||||||||
Dow 2x Strategy Fund | 3,676,566 | — | 356,839 | — | — | 4,033,405 | ||||||||||||||||||
Inverse Dow 2x Strategy Fund | — | — | 17,200 | (18,026,043 | ) | — | (18,008,843 | ) | ||||||||||||||||
Government Long Bond 1.2x Strategy Fund | 12,740 | 7,282 | (29,106 | ) | (11,038,202 | ) | — | (11,047,286 | ) | |||||||||||||||
Inverse Government Long Bond Strategy Fund | — | — | (83,934 | ) | (7,190,705 | ) | — | (7,274,639 | ) | |||||||||||||||
High Yield Strategy Fund | 294,767 | — | 98,899 | (63,419 | ) | — | 330,247 | |||||||||||||||||
U.S. Government Money Market Fund | 1,428 | — | — | — | — | 1,428 |
For Federal income tax purposes, capital loss carryforwards represent realized losses of the Fund(s) that may be carried forward and applied against future capital gains. Under the RIC Modernization Act of 2010, the Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period and such capital loss carryforwards will retain their character as either short-term or long-term capital losses. As of December 31,2017 capital loss carryforwards for the Fund(s) were as follows:
Fund | Unlimited | Total Capital Loss Carryforward | ||||||||||
Short-Term | Long-Term | |||||||||||
Inverse S&P 500® Strategy Fund | $ | (12,325,717 | ) | $ | (1,681,951 | ) | $ | (14,007,668 | ) | |||
Inverse NASDAQ-100® Strategy Fund | (5,338,543 | ) | (857,026 | ) | (6,195,569 | ) | ||||||
Inverse Mid-Cap Strategy Fund | (1,548,237 | ) | (107,411 | ) | (1,655,648 | )* | ||||||
Russell 2000® 2x Strategy Fund | (112,835 | ) | — | (112,835 | )* | |||||||
Inverse Russell 2000® Strategy Fund | (5,778,308 | ) | (829,107 | ) | (6,607,415 | )* | ||||||
Inverse Dow 2x Strategy Fund | (15,847,144 | ) | (2,178,899 | ) | (18,026,043 | )* | ||||||
Government Long Bond 1.2x Strategy Fund | (8,152,138 | ) | (2,886,064 | ) | (11,038,202 | )* | ||||||
Inverse Government Long Bond Strategy Fund | (5,405,387 | ) | (1,785,318 | ) | (7,190,705 | )* | ||||||
High Yield Strategy Fund | — | (63,419 | ) | (63,419 | ) |
* | In accordance with Section 382 of the Internal Revenue Code, a portion of certain Fund losses are subject to an annual limitation. This annual limitation is generally applicable to all of the capital loss carryforwards shown with respect to each Fund. |
THE RYDEX FUNDS ANNUAL REPORT | 199 |
NOTES TO FINANCIAL STATEMENTS (continued) |
For the year ended December 31, 2017, the following capital loss carryforward amounts expired or were utilized:
Fund | Expired | Utilized | Total | |||||||||
S&P 500® 2x Strategy Fund | $ | — | $ | 90,449 | $ | 90,449 | ||||||
Mid-Cap 1.5x Strategy Fund | — | 251,705 | 251,705 | |||||||||
Russell 2000® 2x Strategy Fund | — | 71,140 | 71,140 | |||||||||
Dow 2x Strategy Fund | — | 868,837 | 868,837 | |||||||||
Government Long Bond 1.2x Strategy Fund | — | 393,023 | 393,023 | |||||||||
High Yield Strategy Fund | — | 344,478 | 344,478 |
Net investment income and net realized gains (losses) may differ for financial statement and tax purposes because of temporary or permanent book/tax differences. These differences are primarily due to investments in real estate investment trusts and swaps, dividend reclasses, losses deferred due to wash sales, distributions in connection with redemption of fund shares, return of capital distributions received, and the "mark-to-market" or disposition of certain Passive Foreign Investment Companies (PFICs). Additional differences may result from the tax treatment of net investment losses, distribution reclasses, and the "mark-to-market" of certain derivatives. To the extent these differences are permanent, reclassifications are made to the appropriate capital accounts in the period that the differences arise. These reclassifications have no effect on net assets or NAV per share.
The following adjustments were made on the Statements of Assets and Liabilities as of December 31, 2017 for permanent book/tax differences:
Fund | Paid In Capital | Undistributed Net Investment Income/(Loss) | Accumulated Net Realized Gain/(Loss) | |||||||||
Nova Fund | $ | 7,126,273 | $ | 2,028 | $ | (7,128,301 | ) | |||||
Inverse S&P 500® Strategy Fund | (6,460 | ) | 6,460 | — | ||||||||
NASDAQ-100® Fund | 6,334,106 | 223,450 | (6,557,556 | ) | ||||||||
Inverse NASDAQ-100® Strategy Fund | (2,643 | ) | 2,643 | — | ||||||||
S&P 500® 2x Strategy Fund | 7,093,697 | 4,536 | (7,098,233 | ) | ||||||||
NASDAQ-100® 2x Strategy Fund | 9,715,034 | 182,978 | (9,898,012 | ) | ||||||||
Mid-Cap 1.5x Strategy Fund | 1,049,488 | 8,755 | (1,058,243 | ) | ||||||||
Inverse Mid-Cap Strategy Fund | (653 | ) | 653 | — | ||||||||
Russell 2000® 2x Strategy Fund | 548,828 | 23,242 | (572,070 | ) | ||||||||
Russell 2000® 1.5x Strategy Fund | 564,292 | 19,251 | (583,543 | ) | ||||||||
Inverse Russell 2000® Strategy Fund | (26,976 | ) | 26,976 | — | ||||||||
Dow 2x Strategy Fund | 3,345,325 | — | (3,345,325 | ) | ||||||||
Inverse Dow 2x Strategy Fund | (22,925 | ) | 22,925 | — | ||||||||
Inverse Government Long Bond Strategy Fund | (100,248 | ) | 100,248 | — | ||||||||
High Yield Strategy Fund | — | 267,345 | (267,345 | ) | ||||||||
U.S. Government Money Market Fund | 1,921 | 177 | (2,098 | ) |
200 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
At December 31, 2017, the cost of securities for Federal income tax purposes, the aggregate gross unrealized gain for all securities for which there was an excess of value over tax cost and the aggregate gross unrealized loss for all securities for which there was an excess of tax cost over value, were as follows:
Fund | Tax Cost | Tax Unrealized Gain | Tax Unrealized (Loss) | Net Unrealized Gain/(Loss) | ||||||||||||
Nova Fund | $ | 47,315,838 | $ | 1,702,131 | $ | (178,151 | ) | $ | 1,523,980 | |||||||
Inverse S&P 500® Strategy Fund | 2,621,533 | 22,526 | (1,502 | ) | 21,024 | |||||||||||
NASDAQ-100® Fund | 55,830,185 | 21,371,228 | (166,100 | ) | 21,205,128 | |||||||||||
Inverse NASDAQ-100® Strategy Fund | 740,910 | 7,861 | — | 7,861 | ||||||||||||
S&P 500® 2x Strategy Fund | 36,754,520 | 1,031,213 | (320,760 | ) | 710,453 | |||||||||||
NASDAQ-100® 2x Strategy Fund | 65,234,997 | 6,603,109 | (713,391 | ) | 5,889,718 | |||||||||||
Mid-Cap 1.5x Strategy Fund | 10,071,230 | 61,179 | (32,584 | ) | 28,595 | |||||||||||
Inverse Mid-Cap Strategy Fund | 174,809 | 1,190 | — | 1,190 | ||||||||||||
Russell 2000® 2x Strategy Fund | 7,162,538 | 177,511 | (97,122 | ) | 80,389 | |||||||||||
Russell 2000® 1.5x Strategy Fund | 9,250,267 | 305,811 | (65,306 | ) | 240,505 | |||||||||||
Inverse Russell 2000® Strategy Fund | 911,827 | 10,770 | (608 | ) | 10,162 | |||||||||||
Dow 2x Strategy Fund | 22,656,795 | 569,917 | (213,077 | ) | 356,840 | |||||||||||
Inverse Dow 2x Strategy Fund | 3,041,434 | 17,745 | (545 | ) | 17,200 | |||||||||||
Government Long Bond 1.2x Strategy Fund | 10,430,415 | — | (29,106 | ) | (29,106 | ) | ||||||||||
Inverse Government Long Bond Strategy Fund | 4,984,761 | — | (83,934 | ) | (83,934 | ) | ||||||||||
High Yield Strategy Fund | 6,390,719 | 117,252 | (18,354 | ) | 98,898 | |||||||||||
U.S. Government Money Market Fund | 79,623,512 | — | — | — |
Note 9 – Securities Transactions
For the year ended December 31, 2017, the cost of purchases and proceeds from sales of investment securities, excluding government securities, short-term investments and derivatives, were as follows:
Fund | Purchases | Sales | ||||||
Nova Fund | $ | 133,068,505 | $ | 109,784,876 | ||||
Inverse S&P 500® Strategy Fund | 2,633,839 | 3,745,000 | ||||||
NASDAQ-100® Fund | 81,653,026 | 69,341,848 | ||||||
Inverse NASDAQ-100® Strategy Fund | 939,287 | 1,705,000 | ||||||
S&P 500® 2x Strategy Fund | 87,282,531 | 75,745,915 | ||||||
NASDAQ-100® 2x Strategy Fund | 70,775,261 | 46,756,490 | ||||||
Mid-Cap 1.5x Strategy Fund | 40,076,323 | 47,995,818 | ||||||
Inverse Mid-Cap Strategy Fund | 172,470 | 305,000 | ||||||
Russell 2000® 2x Strategy Fund | 22,174,409 | 21,585,033 | ||||||
Russell 2000® 1.5x Strategy Fund | 15,689,338 | 15,264,403 | ||||||
Inverse Russell 2000® Strategy Fund | 6,344,579 | 7,905,000 | ||||||
Dow 2x Strategy Fund | 37,824,784 | 33,574,763 | ||||||
Inverse Dow 2x Strategy Fund | 13,570,741 | 12,700,000 | ||||||
Government Long Bond 1.2x Strategy Fund | 13,173,900 | 14,250,000 | ||||||
Inverse Government Long Bond Strategy Fund | 8,529,889 | 7,850,000 | ||||||
High Yield Strategy Fund | 6,409,068 | 7,260,263 | ||||||
U.S. Government Money Market Fund | — | — |
For the year ended December 31, 2017, the cost of purchases and proceeds from sales of government securities were as follows:
Fund | Purchases | Sales | ||||||
Government Long Bond 1.2x Strategy Fund | $ | 257,684,110 | $ | 262,180,313 | ||||
Inverse Government Long Bond Strategy Fund | 153,634,250 | 153,480,063 |
THE RYDEX FUNDS ANNUAL REPORT | 201 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The Funds are permitted to purchase or sell securities from or to certain affiliated funds under specified conditions outlined in procedures adopted by the Board of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by a Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under these procedures, each transaction is effected at the current market price to save costs, where permissible. For the year ended December 31, 2017, the Funds engaged in purchases and sales of securities, pursuant to Rule 17a-7 of the 1940 Act, as follows:
Fund | Purchases | Sales | Realized Gain (Loss) | |||||||||
Nova Fund | $ | 39,835,969 | $ | 32,250,849 | $ | 367,769 | ||||||
NASDAQ-100® Fund | 32,787,235 | 36,902,558 | 1,779,422 | |||||||||
S&P 500® 2x Strategy Fund | 36,031,983 | 62,666,518 | 500,016 | |||||||||
NASDAQ-100® 2x Strategy Fund | 6,256,483 | 18,666,296 | (187,939 | ) | ||||||||
Mid-Cap 1.5x Strategy Fund | 9,499,547 | 4,657,508 | 95,828 | |||||||||
Russell 2000® 2x Strategy Fund | 4,886,736 | 4,161,962 | 84,761 | |||||||||
Russell 2000® 1.5x Strategy Fund | 3,984,735 | 3,541,095 | 95,990 | |||||||||
Dow 2x Strategy Fund | 16,403,575 | 16,140,721 | 929,741 | |||||||||
U.S. Government Money Market Fund | 1,002,733 | — | — |
Note 10 – Line of Credit
The Trust, along with other affiliated trusts, secured an uncommitted $75,000,000 line of credit from U.S. Bank, N.A., which expires June 11, 2018. This line of credit is reserved for emergency or temporary purposes. Borrowings, if any, under this arrangement bear interest equal to the Prime Rate, minus 2%, which shall be paid monthly, averaging 2.09% for the year ended December 31, 2017. The Funds did not have any borrowings outstanding under this agreement at December 31, 2017.
The average daily balances borrowed for the year ended December 31, 2017, were as follows:
Fund | Average Daily Balance | |||
Nova Fund | $ | 4,395 | ||
NASDAQ-100® Fund | 20,480 | |||
S&P 500® 2x Strategy Fund | 23,640 | |||
NASDAQ-100® 2x Strategy Fund | 20,227 | |||
Mid-Cap 1.5x Strategy Fund | 5,565 | |||
Inverse Mid-Cap Strategy Fund | 6 | |||
Russell 2000® 2x Strategy Fund | 2,985 | |||
Russell 2000® 1.5x Strategy Fund | 2,646 | |||
Inverse Russell 2000® Strategy Fund | 77 | |||
Dow 2x Strategy Fund | 38,149 | |||
Inverse Dow 2x Strategy Fund | 1,236 | |||
Government Long Bond 1.2x Strategy Fund | 21,722 | |||
Inverse Government Long Bond Strategy Fund | 457 | |||
U.S. Government Money Market Fund | 106,948 |
202 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 11 – Share Splits
Effective December 1, 2016, a share split occurred for the following funds:
Fund | Split Type |
Nova Fund | Two-for-One Share Split |
Inverse S&P 500® Strategy Fund | One-for-Six Reverse Share Split |
Inverse NASDAQ-100® Strategy Fund | One-for-Four Reverse Share Split |
Inverse Mid-Cap Strategy Fund | One-for-Three Reverse Share Split |
Inverse Russell 2000® Strategy Fund | One-for-Three Reverse Share Split |
Inverse Dow 2x Strategy Fund | One-for-Three Reverse Share Split |
Inverse Government Long Bond Strategy Fund | One-for-Three Reverse Share Split |
High Yield Strategy Fund | One-for-Three Reverse Share Split |
The effect of the share split was to multiply the number of outstanding shares of the Nova Fund by its split ratio, resulting in a corresponding decrease in the NAV. The effect of reverse share split was to divide the number of outstanding shares of the Funds by the respective split ratio, resulting in a corresponding increase in the net asset value per share. The share transactions presented in the Statements of Changes in Net Assets and the Per Share Data in the Financial Highlights for each of the periods presented prior to the effective date have been restated to reflect these reverse share splits. There were no changes in net assets, results of operations or total return as a result of these transactions.
Note 12 – Legal Proceedings
Tribune Company
Rydex Variable Trust has been named as a defendant and a putative member of the proposed defendant class of shareholders in the case entitled Kirschner v. FitzSimons, No. 12-2652 (S.D.N.Y.) (formerly Official Committee of Unsecured Creditors of Tribune Co. v. FitzSimons, Adv. Pro. No. 10-54010 (Bankr. D. Del.)) (the “FitzSimons action”), as a result of ownership by certain series of the Rydex Variable Trust of shares in the Tribune Company (“Tribune”) in 2007, when Tribune effected a leveraged buyout transaction (“LBO”) by which Tribune converted to a privately-held company. In his complaint, the plaintiff has alleged that, in connection with the LBO, Tribune insiders and shareholders were overpaid for their Tribune stock using financing that the insiders knew would, and ultimately did, leave Tribune insolvent. The plaintiff has asserted claims against certain insiders, major shareholders, professional advisers, and others involved in the LBO. The plaintiff is also attempting to obtain from former Tribune shareholders, including the Rydex Variable Trust, the proceeds they received in connection with the LBO.
In June 2011, a group of Tribune creditors filed multiple actions against former Tribune shareholders involving state law constructive fraudulent conveyance claims arising out of the 2007 LBO (the “SLCFC actions”). Rydex Variable Trust has been named as a defendant in one or more of these suits. In those actions, the creditors seek to recover from Tribune’s former shareholders the proceeds received in connection with the 2007 LBO.
The FitzSimons action and the SLCFC actions have been consolidated with the majority of the other Tribune LBO-related lawsuits in a multidistrict litigation proceeding captioned In re Tribune Company Fraudulent Conveyance Litig., No. 11-md-2696 (S.D.N.Y.) (the “MDL Proceeding”).
On September 23, 2013, the District Court granted the defendants’ omnibus motion to dismiss the SLCFC actions, on the basis that the creditors lacked standing. On September 30, 2013, the creditors filed a notice of appeal of the September 23 order. On October 28, 2013, the defendants filed a joint notice of cross-appeal of that same order. On March 29, 2016, the U.S. Court of Appeals for the Second Circuit issued its opinion on the appeal of the SLCFC actions. The appeals court affirmed the district court’s dismissal of those lawsuits, but on different grounds than the district court. The appeals court held that while the plaintiffs have standing under the U.S. Bankruptcy Code, their claims were preempted by Section 546(e) of the Bankruptcy Code—the statutory safe harbor for settlement payments. On April 12, 2016, the Plaintiffs in the SLCFC actions filed a petition seeking rehearing en banc before the appeals court. On July 22, 2016, the appeals court denied the petition. On September 9, 2016, the plaintiffs filed a petition for writ of certiorari in the U.S. Supreme Court challenging the Second Circuit’s decision that the safe harbor of Section 546(e) applied to their claims. The shareholder defendants, including the Funds, filed a joint brief in opposition to the petition for certiorari on October 24, 2016. The Supreme Court has not yet granted or denied the petition for certiorari.
THE RYDEX FUNDS ANNUAL REPORT | 203 |
NOTES TO FINANCIAL STATEMENTS (continued) |
On May 23, 2014, the defendants filed motions to dismiss the FitzSimons action, including a global motion to dismiss Count I, which is the claim brought against former Tribune shareholders for intentional fraudulent conveyance under U.S. federal law. On January 6, 2017, the United States District Court for the Southern District of New York granted the shareholder defendants’ motion to dismiss the intentional fraudulent conveyance claim in the FitzSimons action. The Court concluded that the plaintiff had failed to allege that Tribune entered the LBO with actual intent to hinder, delay, or defraud its creditors, and therefore the complaint failed to state a claim. In dismissing the intentional fraudulent conveyance claim, the Court denied the plaintiff’s request to amend the complaint. On February 23, 2017, the Court issued an order stating that it intends to permit an interlocutory appeal of the dismissal order, but will wait to do so until it has resolved outstanding motions to dismiss filed by other defendants. Accordingly, the timing of the appeal is uncertain.
On July 18, 2017, the plaintiff submitted a letter to the District Court seeking leave to amend its complaint to add a constructive fraudulent transfer claim. The shareholder defendants opposed that request. On August 24, 2017, the Court denied the plaintiff’s request without prejudice to renewal of the request in the event of an intervening change in the law.
None of these lawsuits alleges any wrongdoing on the part of Rydex Variable Trust. The following series of Rydex Variable Trust held shares of Tribune and tendered these shares as part of Tribune’s LBO: Nova Fund, S&P 500 2x Strategy Fund, Multi-Cap Core Equity Fund, S&P 500 Pure Value Fund, Hedged Equity Fund and Multi-Hedge Strategies Fund (the “Funds”). The value of the proceeds received by the foregoing Funds was $12,580, $2,380, $1,360, $148,376, $2,720, and $119,034, respectively. At this stage of the proceedings, Rydex Variable Trust is not able to make a reliable predication as to the outcome of these lawsuits or the effect, if any, on a Fund’s net asset value.
Lyondell Chemical Company
In December 2011, Rydex Variable Trust was named as a defendant in Weisfelner, as Trustee of the LB Creditor Trust, v. Fund 1 (In re Lyondell Chemical Co.), Adv. Pro. No. 10-4609 (Bankr. S.D.N.Y.) (the “Creditor Trust Action”). Its funds may also be putative members of the proposed defendant classes in Weisfelner, as Trustee of the LB Litigation Trust v. A. Holmes & H. Holmes TTEE (In re Lyondell Co.), Adv. Pro. No. 10-5525 (Bankr. S.D.N.Y.) (the “Litigation Trust Action”) and Weisfelner, as Trustee of the LB Creditor Trust, v. Reichman (In re Lyondell Chemical Co.), Adv. Pro. No. 12-1570 (Bankr. S.D.N.Y.).
Similar to the claims made in the Tribune matter, the Weisfelner complaints seek to have set aside and recovered as fraudulent transfers from former Lyondell Chemical Company (“Lyondell”) shareholders the consideration paid to them pursuant to the cash out merger of Lyondell shareholders in connection with the combination of Lyondell and Basell AF in 2007. Lyondell filed for bankruptcy in 2008. The Creditor Trust Action and Reichman allege claims against the former Lyondell shareholders under state law for both constructive fraudulent transfer and intentional fraudulent transfer. The Litigation Trust Action alleges a claim against the former Lyondell shareholders under federal law for intentional fraudulent transfer.
On April 7, 2014, the plaintiff filed a Third Amended Complaint in the Creditor Trust Action, a Second Amended Complaint in the Litigation Trust Action, and an Amended Complaint in Reichman.
On May 8, 2014, the plaintiff in the Litigation Trust Action filed a motion to certify a defendant class generally comprised of all former Lyondell shareholders that received proceeds in exchange for their shares in the 2007 merger transaction.
On July 30, 2014, the defendants filed a motion to dismiss these lawsuits. The Bankruptcy Court held oral argument on the motion to dismiss and on the motion for class certification on January 14 and January 15, 2015. On September 15, 2015, the Bankruptcy Court denied the motion for class certification without prejudice to the plaintiff’s right to file a renewed motion. On November 18, 2015, the Bankruptcy Court granted the defendants’ motion to dismiss the intentional fraudulent transfer claims in the Creditor Trust Action, the Litigation Trust Action, and in Reichman, but denied the motion to dismiss the constructive fraudulent transfer claims in the Creditor Trust Action and in Reichman. The Bankruptcy Court entered final judgment dismissing the Litigation Trust Action, but the plaintiff appealed the dismissal to the U.S. District Court for the Southern District of New York.
On July 27, 2016, the District Court reversed the Bankruptcy Court and reinstated the federal law intentional fraudulent transfer claim in the Litigation Trust Action and remanded to the Bankruptcy Court for further proceedings. The District Court found that the fraudulent intent that mattered was that of Lyondell’s CEO, not its board, because the CEO’s intent could be imputed to Lyondell under Delaware law agency principles. The District Court did note, however, that plaintiff faces a high standard for proving “actual intent” to harm creditors, and that it remains to be seen whether plaintiff will be able to make this showing. On August 11, 2016, the shareholder defendants filed a motion for reconsideration and/
204 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (concluded) |
or to certify an interlocutory appeal of the District Court’s opinion. On October 5, 2016, the District Court denied the motion for reconsideration and/or to certify an interlocutory appeal. On April 21, 2017, the Bankruptcy Court issued an Opinion and Order After Trial in a related Lyondell litigation (the “Blavatnik Action”) rejecting claims for intentional fraudulent transfer and constructive fraudulent transfer in connection with the 2007 LBO. Based on this related ruling in the Blavatnik Action, the shareholder defendants filed a motion to dismiss the Litigation Trust Action on the grounds of collateral estoppel on May 30, 2017. Although the Bankruptcy Court had not yet ruled on the motion to dismiss, on August 15, 2017, the plaintiff in the Litigation Trust action filed a notice of dismissal of all claims against the defendants who joined the motion to dismiss. On August 18, 2017, the Litigation Trust plaintiff also withdrew his request for class certification of a defendant class in the Litigation Trust action. On September 5, 2017, the Court entered an order dismissing the Litigation Trust action with prejudice. The Court’s order dismissed the action as to all defendants as well as to unnamed members of the putative defendant class.
On May 4, 2016, the defendants filed a motion to dismiss, or in the alternative, for a stay of, the Creditor Trust Action and Reichman in light of the U.S. Court of Appeals for the Second Circuit’s opinion in the appeal of the Tribune SLCFC actions. On July 20, 2016, the Bankruptcy Court issued a report and recommendation granting the defendants’ motion to dismiss. On May 30, 2017, the shareholder defendants filed a motion to remand the proceedings in the Creditor Trust and Reichman Actions to the Bankruptcy Court, for consideration of the collateral estoppel ground for dismissal raised by the Bankruptcy Court’s ruling in the Blavatnik Action. On August 18, 2017, the plaintiff in the Creditor Trust action filed a notice of dismissal of claims brought against defendants who had not answered the Third Amended Complaint. The same day, the plaintiff in the Reichman action filed a notice of dismissal of all claims against named defendants who had not filed an answer and withdrew his request for class certification of a defendant class. On September 5, 2017, the Court entered an order dismissing the Creditor Trust and Reichman actions with prejudice. The Court’s order dismissed the actions as to all defendants as well as to unnamed members of the putative defendant class in the Reichman action.
As a result of the dismissals above, there are no longer claims pending against the Rydex Variable Trust related to the Lyondell merger.
These lawsuits do not allege any wrongdoing on the part of Rydex Variable Trust. The following series of Rydex Variable Trust received cash proceeds from the cash out merger in the following amounts: Basic Materials Fund - $1,235,952; Long Short Equity Fund f/k/a U.S. Long Short Momentum Fund - $523,200; Multi-Cap Core Equity Fund - $5,760; Hedged Equity Fund - $480; and Multi-Hedge Strategies Fund - $112,848.
THE RYDEX FUNDS ANNUAL REPORT | 205 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Shareholders of Nova Fund, Inverse S&P 500® Strategy Fund, NASDAQ-100® Fund, Inverse NASDAQ-100® Strategy Fund, S&P 500® 2x Strategy Fund, NASDAQ-100® 2x Strategy Fund, Mid-Cap 1.5x Strategy Fund, Inverse Mid-Cap Strategy Fund, Russell 2000® 2x Strategy Fund, Russell 2000® 1.5x Strategy Fund, Inverse Russell 2000® Strategy Fund, Dow 2x Strategy Fund, Inverse Dow 2x Strategy Fund, Government Long Bond 1.2x Strategy Fund, Inverse Government Long Bond Strategy Fund, High Yield Strategy Fund, and U.S. Government Money Market Fund and the Board of Trustees of Rydex Variable Trust
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Nova Fund, Inverse S&P 500® Strategy Fund, NASDAQ-100® Fund, Inverse NASDAQ-100® Strategy Fund, S&P 500® 2x Strategy Fund, NASDAQ-100® 2x Strategy Fund, Mid-Cap 1.5x Strategy Fund, Inverse Mid-Cap Strategy Fund, Russell 2000® 2x Strategy Fund, Russell 2000® 1.5x Strategy Fund, Inverse Russell 2000® Strategy Fund, Dow 2x Strategy Fund, Inverse Dow 2x Strategy Fund, Government Long Bond 1.2x Strategy Fund, Inverse Government Long Bond Strategy Fund, High Yield Strategy Fund, and U.S. Government Money Market Fund (collectively referred to as the “Funds”), (seventeen of the funds constituting Rydex Variable Trust (the “Trust”)), including the schedules of investments, as of December 31, 2017, and the related statements of operations and changes in net assets, and the financial highlights for each of the periods indicated in the table below and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds (seventeen of the funds constituting Rydex Variable Trust) at December 31, 2017, and the results of their operations, changes in net assets and financial highlights for each of the periods indicated in the table below, in conformity with U.S. generally accepted accounting principles.
Individual fund constituting the Rydex Variable Trust | Statement of operations | Statement of changes in net assets | Financial highlights |
Nova Fund Inverse S&P 500® Strategy Fund NASDAQ-100® Fund Inverse NASDAQ-100® Strategy Fund S&P 500® 2x Strategy Fund NASDAQ-100® 2x Strategy Fund Mid-Cap 1.5x Strategy Fund Inverse Mid-Cap Strategy Fund Russell 2000® 2x Strategy Fund Russell 2000® 1.5x Strategy Fund Inverse Russell 2000® Strategy Fund Dow 2x Strategy Fund Inverse Dow 2x Strategy Fund Government Long Bond 1.2x Strategy Fund Inverse Government Long Bond Strategy Fund U.S. Government Money Market Fund | For the year ended December 31, 2017 | For each of the two years in the period ended December 31, 2017 | For each of the five years in the period ended December 31, 2017 |
High Yield Strategy Fund | For the year ended December 31, 2017 | For each of the two years in the period ended December 31, 2017 | For each of the three years in the period ended December 31, 2017 and the period from October 15, 2014 (commencement of operations) through December 31, 2014 |
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
206 | THE RYDEX FUNDS ANNUAL REPORT |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (concluded) |
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian, transfer agent, and brokers or by other appropriate auditing procedures where replies from the transfer agent and brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Guggenheim investment companies since 1979.
Tysons, Virginia
February 27, 2018
THE RYDEX FUNDS ANNUAL REPORT | 207 |
OTHER INFORMATION (Unaudited) |
Federal Income Tax Information
This information is being provided as required by the Internal Revenue Code. Amounts shown may differ from those elsewhere in the report because of differences in tax and financial reporting practice.
In January 2018, shareholders will be advised on IRS Form 1099 DIV or substitute 1099 DIV as to the federal tax status of the distributions received by shareholders in the calendar year 2017.
Of the taxable ordinary income distributions paid during the fiscal year ending December 31, 2017, the following funds had the corresponding percentages qualify for the dividends received deduction for corporations:
Fund | Dividend Received Deduction |
Nova Fund | 100.00% |
S&P 500® 2x Strategy Fund | 11.06% |
Mid-Cap 1.5x Strategy Fund | 7.18% |
Russell 2000® 2x Strategy Fund | 4.97% |
Russell 2000® 1.5x Strategy Fund | 7.18% |
Dow 2x Strategy Fund | 100.00% |
With respect to the taxable year ended December 31, 2017, the Funds hereby designate as capital gain dividends the amounts listed below, or, if subsequently determined to be different, the net capital gain of such year:
Fund | From long-term capital gain: | From long-term capital gain, using proceeds from shareholder redemptions: | ||||||
Nova Fund | $ | 1,183,600 | $ | 989,117 | ||||
NASDAQ-100® Fund | 5,453,414 | 1,428,584 | ||||||
S&P 500® 2x Strategy Fund | — | 179,984 | ||||||
NASDAQ-100® 2x Strategy Fund | 681,689 | 649,425 | ||||||
Mid-Cap 1.5x Strategy Fund | 479,613 | 475,079 | ||||||
Russell 2000® 2x Strategy Fund | — | 72,048 | ||||||
Russell 2000® 1.5x Strategy Fund | — | 26,041 | ||||||
Dow 2x Strategy Fund | 303,555 | 569,376 |
208 | THE RYDEX FUNDS ANNUAL REPORT |
OTHER INFORMATION (Unaudited)(concluded) |
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 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
Sector Classification
Information in the Schedule of Investments is categorized by sectors using sector-level Classifications defined by the Bloomberg Industry Classification System, a widely recognized industry classification system provider. Each Fund’s registration statement has investment policies relating to concentration in specific sectors/industries. For purposes of these investment policies, the Funds usually classify sectors/industries based on industry-level Classifications used by widely recognized industry classification system providers such as Bloomberg Industry Classification System, Global Industry Classification Standards and Barclays Global Classification Scheme.
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 https://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 800-SEC-0330. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 800.820.0888.
THE RYDEX FUNDS ANNUAL REPORT | 209 |
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 visiting guggenheiminvestments.com or by calling 800.820.0888.
Name, Address* and Year of Birth of Trustees | Position(s) Held with the Trust | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee |
INDEPENDENT TRUSTEES | ||||
Angela Brock-Kyle (1959) | Trustee, Member of the Audit Committee, Chairwoman and Member of the Compliance and Risk Oversight Committee, and Member of the Nominating and Governance Committee. | Current: Founder and Chief Executive Officer, B.O.A.R.D.S (consulting firm).
Former: Senior Leader, TIAA (financial services firm) (1987-2012). | 133 | Current: Infinity Property & Casualty Corporation (2014-present). |
Corey A. Colehour (1945) | Trustee, Member of the Audit Committee, Member of the Nominating and Governance Committee, and Member of the Investment and Performance Committee. | Current: Retired. | 133 | None. |
J. Kenneth Dalton (1941) | Trustee, Member and Chairman of the Audit Committee, and Member of the Compliance and Risk Oversight Committee. | Current: Retired. | 133 | Epiphany Funds (3) (2009-present). |
John O. Demaret (1940) | Trustee, Member of the Audit Committee, and Member of the Compliance and Risk Oversight Committee. | Current: Retired. | 133 | None. |
Werner E. Keller (1940) | Chairman and Trustee of the Board, and Member of the Audit Committee. | Current: Founder and President, Keller Partners, LLC (investment research firm) (2005-present). | 133 | None. |
Thomas F. Lydon, Jr. (1960) | Trustee, Member of the Audit Committee, Chairman and Member of the Nominating and Governance Committee, and Member of the Investment and Performance Committee. | Current: President, Global Trends Investments (registered investment adviser) (1996-present). | 133 | US Global Investors (GROW) (1995-present). |
Patrick T. McCarville (1942) | Trustee, Member of the Audit Committee, and Member of the Nominating and Governance Committee. | Current: Retired.
Former: Chief Executive Officer, Par Industries, Inc., d/b/a Par Leasing (1977-2010). | 133 | None. |
Sandra G. Sponem (1958)
| Trustee, Member of the Audit Committee, Member of the Nominating and Governance Committee, and Chairwoman and Member of the Investment and Performance Committee, | Current: Retired
Former: Senior Vice President and Chief Financial Officer, M.A. Mortenson Companies, Inc. (general contracting firm) (2007-2017). | 133 | None. |
210 | THE RYDEX FUNDS ANNUAL REPORT |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* and Year of Birth of Trustees | Position(s) Held with the Trust | Principal Occupation(s) During Past 5 Years |
OFFICERS | ||
Michael P. Byrum (1970) | Vice President | Current: Senior Vice President, Security Investors, LLC (2010-present); President and Chief Investment Officer, Rydex Holdings, LLC (2008-present); Director and Chairman, Advisory Research Center, Inc. (2006-present); Manager, Guggenheim Specialized Products, LLC (2005-present).
Former: Vice President, Guggenheim Distributors, LLC (2009); Director (2009-2010) and Secretary (2002-2010), Rydex Fund Services, LLC; Director (2008-2010), Chief Investment Officer (2006-2010), President (2004-2010) and Secretary (2002-2010), Rydex Advisors, LLC; Director (2008-2010), Chief Investment Officer (2006-2010), President (2004-2010) and Secretary (2002-2010), Rydex Advisors II, LLC. |
James M. Howley (1972) | Assistant Treasurer | Current: Managing Director, Guggenheim Investments (2004-present); Assistant Treasurer, certain other funds in the Fund Complex (2006-present).
Former: Manager, Mutual Fund Administration of Van Kampen Investments, Inc. (1996-2004). |
Keith D. Kemp (1960) | Assistant Treasurer | Current: Treasurer and Assistant Treasurer, certain other funds in the Fund Complex (2010-present); Managing Director, Guggenheim Investments (2015-present); Chief Financial Officer, Guggenheim Specialized Products, LLC (2016-present).
Former: Managing Director and Director, Transparent Value, LLC (2010-2016); Director, Guggenheim Partners Investment Management, LLC (2010-2015); Chief Operating Officer, Macquarie Capital Investment Management (2007-2009). |
Amy J. Lee (1961)
| President | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2017-present); Chief Legal Officer, certain other funds in the Fund Complex (2014- present); Senior Managing Director, Guggenheim Investments (2012-present).
Former: Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004-2012). |
Mark E. Mathiasen (1978) | Secretary | Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present). |
Glenn McWhinnie (1969) | Assistant Treasurer | Current: Vice President, Guggenheim Investments (2009-present). |
Elisabeth Miller (1968) | Chief Compliance Officer | Current: CCO, certain other funds in the Fund Complex (2012-present); CCO, Security Investors, LLC (2012- present); CCO, Guggenheim Funds Investment Advisors, LLC (2012-present); Managing Director, Guggenheim Investments (2012-present). Vice President, Guggenheim Funds Distributors, LLC (2014-present).
Former: CCO, Guggenheim Distributors, LLC (2009-2014); Senior Manager, Security Investors, LLC (2004-2009); Senior Manager, Guggenheim Distributors, LLC (2004-2009). |
THE RYDEX FUNDS ANNUAL REPORT | 211 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(concluded) |
Name, Address* and Year of Birth of Trustees | Position(s) Held with the Trust | Principal Occupation(s) During Past 5 Years |
OFFICERS - concluded | ||
Adam J. Nelson (1979) | Assistant Treasurer | Current: Vice President, Guggenheim Investments (2015-present); Assistant Treasurer, certain other funds in the Fund Complex (2015-present).
Former: Assistant Vice President and Fund Administration Director, State Street Corporation (2013-2015); Fund Administration Assistant Director, State Street (2011-2013); Fund Administration Manager, State Street (2009-2011). |
Kimberly J. Scott (1974) | Assistant Treasurer | Current: Director, Guggenheim Investments (2012-present); Assistant Treasurer, certain other funds in the Fund Complex (2012-present).
Former: Financial Reporting Manager, Invesco, Ltd. (2010-2011); Vice President/Assistant Treasurer, Mutual Fund Administration for Van Kampen Investments, Inc./Morgan Stanley Investment Management (2009-2010); Manager of Mutual Fund Administration, Van Kampen Investments, Inc./Morgan Stanley Investment Management (2005-2009). |
John L. Sullivan (1955)
| Chief Financial Officer and Treasurer | Current: CFO, Chief Accounting Officer and Treasurer, certain other funds in the Fund Complex (2010-present); Senior Managing Director, Guggenheim Investments (2010-present).
Former: Managing Director and CCO, each of the funds in the Van Kampen Investments fund complex (2004-2010); Managing Director and Head of Fund Accounting and Administration, Morgan Stanley Investment Management (2002-2004); CFO and Treasurer, Van Kampen Funds (1996-2004). |
Jon Szafran (1989) | Assistant Treasurer | Current: Vice President, Guggenheim Investments (2017-present); Assistant Treasurer, certain other funds in the Fund Complex (2017-present).
Former: Assistant Treasurer of Henderson Global Funds and Manager of US Fund Administration, Henderson Global Investors (North America) Inc. (“HGINA”), (2017); Senior Analyst of US Fund Administration, HGINA (2014-2017); Senior Associate of Fund Administration, Cortland Capital Market Services, LLC (2013-2014); Experienced Associate, PricewaterhouseCoopers LLP (2012-2013). |
* | All Trustees and Officers may be reached c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
212 | THE RYDEX FUNDS ANNUAL REPORT |
GUGGENHEIM INVESTMENTS PRIVACY POLICIES (Unaudited) |
Guggenheim Investments as used herein refers to Guggenheim Partners, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC and Security Investors, LLC as well as the funds in the Guggenheim Funds complex (the “funds”).
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 personal information about you, we hold ourselves to high standards in its safekeeping and use. This means, most importantly, that we do not sell client or account information to anyone—whether you are a current or former Guggenheim Investments client.
The Information We Collect About You and How We Collect It
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 Funds or one of the Guggenheim affiliated companies. “Nonpublic personal information” is personally identifiable information about you. For example it includes 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 Share Your Personal Information
As a matter of policy, we do not disclose your nonpublic personal information to nonaffiliated third parties except as required or permitted by law. 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 your personal 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. In connection with servicing your accounts or 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 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 personal 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 share personal information about you if we are compelled by law to do so, if you direct us to do so with your consent, or in other circumstances as permitted by law.
How We Safeguard Your Personal Information
We maintain physical, electronic and procedural safeguards to protect your personal information. Within Guggenheim Investments, access to such information is limited to those who need it to perform their jobs such as servicing your account, resolving problems or informing you of new products and services.
THE RYDEX FUNDS ANNUAL REPORT | 213 |
12.31.2017
Rydex Variable Funds Annual Report
Domestic Equity Funds |
S&P 500® Pure Growth Fund |
S&P 500® Pure Value Fund |
S&P MidCap 400® Pure Growth Fund |
S&P MidCap 400® Pure Value Fund |
S&P SmallCap 600® Pure Growth Fund |
S&P SmallCap 600® Pure Value Fund |
International Equity Funds |
Europe 1.25x Strategy |
Japan 2x Strategy |
Specialty Funds |
Strengthening Dollar 2x Strategy |
Weakening Dollar 2x Strategy |
GuggenheimInvestments.com | RVATB2-ANN-2-1217x1218 |
TABLE OF CONTENTS |
DEAR SHAREHOLDER | 2 |
ECONOMIC AND MARKET OVERVIEW | 4 |
A BRIEF NOTE ON THE COMPOUNDING OF RETURNS | 6 |
ABOUT SHAREHOLDERS’ FUND EXPENSES | 7 |
S&P 500® PURE GROWTH FUND | 9 |
S&P 500® PURE VALUE FUND | 16 |
S&P MIDCAP 400® PURE GROWTH FUND | 24 |
S&P MIDCAP 400® PURE VALUE FUND | 31 |
S&P SMALLCAP 600® PURE GROWTH FUND | 38 |
S&P SMALLCAP 600® PURE VALUE FUND | 46 |
EUROPE 1.25x STRATEGY FUND | 54 |
JAPAN 2x STRATEGY FUND | 62 |
STRENGTHENING DOLLAR 2x STRATEGY FUND | 69 |
WEAKENING DOLLAR 2x STRATEGY FUND | 76 |
NOTES TO FINANCIAL STATEMENTS | 83 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 99 |
OTHER INFORMATION | 100 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS | 102 |
GUGGENHEIM INVESTMENTS PRIVACY POLICIES | 105 |
THE RYDEX FUNDS ANNUAL REPORT | 1 |
December 31, 2017 |
Dear Shareholder:
Security Investors, LLC (the “Investment Adviser”) is pleased to present the annual shareholder report for ten funds that are part of the Rydex Variable Trust (the “Funds”). This report covers performance of the Funds for the annual period ended December 31, 2017.
The Investment Adviser is a part of Guggenheim Investments, which represents the investment management businesses of Guggenheim Partners, LLC (“Guggenheim”), a global, diversified financial services firm.
Guggenheim Funds Distributors, LLC is the distributor of the Funds. Guggenheim Funds Distributors, LLC is affiliated with Guggenheim and the Investment Adviser.
We encourage you to read the Economic and Market Overview section of the report, which follows this letter, and then the Performance Report and Fund Profile for each Fund.
We are committed to providing innovative investment solutions and appreciate the trust you place in us.
Sincerely,
Security Investors, LLC
January 31, 2018
Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objectives, risks, charges, expenses and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at guggenheiminvestments.com or call 800.820.0888.
This material is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation.
Inverse and leveraged Funds are not suitable for all investors. ● These Funds 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 a Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. ● Inverse Funds involve certain risks, which include increased volatility due to the Funds’ possible use of short sales of securities and derivatives, such as options and futures. ● The Funds’ use of derivatives, such as futures, options, and swap agreements, may expose the Funds’ 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 Funds seek to provide investment results that match the performance of a specific benchmark, before fees and expenses, on a daily basis. Because the 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. 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. The Funds 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 a Fund’s performance if the benchmark experiences volatility. Investors should monitor their leveraged and inverse Funds’ holdings consistent with their strategies, as frequently as daily. ● For more on these and other risks, please read the prospectus.
2 | THE RYDEX FUNDS ANNUAL REPORT |
December 31, 2017 |
Pure Style Funds may not be suitable for all investors. ● The Funds 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 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. ● 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 ● The Funds are subject to active trading and tracking error risks, which may increase volatility, impact the funds’ ability to achieve its investment objective and may decrease the Fund’s performance. ● These Funds are considered non-diversified and can invest a greater portion of its assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of fund shares than would occur in a more diversified fund. ● Securities are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested. ● Please read the prospectus for more detailed information regarding these and other risks.
Strengthening Dollar 2x Strategy Fund is subject to a number of risks and may not be suitable for all investors. ● The Fund’s use of derivatives such as futures, options and swap agreements may expose the fund to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. ● The Fund’s indirect and direct exposure to foreign currencies subjects the fund to the risk that those currencies will appreciate in value relative to the U.S. dollar. ● The more the Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. These risks may cause the Fund to experience higher losses and/or volatility than a Fund that does not invest in derivatives, use leverage or have exposure to foreign currencies. ● Also, the Fund is subject to active trading and tracking error risks that may increase volatility, decrease performance and impact the Fund’s ability to achieve its investment objective. ●Please read the prospectus for more detailed information regarding these and other risks.
Weakening Dollar 2x Strategy Fund is subject to a number of risks and may not be suitable for all investors. ● The Fund’s use of derivatives such as futures, options and swap agreements may expose the fund to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. ● The Fund’s indirect and direct exposure to foreign currencies subjects the Fund to the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of short positions, that the US dollar will decline in value relative to the currency being hedged. ● The more the Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. These risks may cause the Fund to experience higher losses and/or volatility than a fund that does not invest in derivatives, use leverage or have exposure to foreign currencies. ● Also, the Fund is subject to active trading and tracking error risks that may increase volatility, decrease performance and impact the Fund’s ability to achieve its investment objective ● Please read the prospectus for more detailed information regarding these and other risks.
THE RYDEX FUNDS ANNUAL REPORT | 3 |
ECONOMIC AND MARKET OVERVIEW (Unaudited) | December 31, 2017 |
The market story at the end of 2017 was one of positive economic momentum. Economic activity finished 2017 strongly, led by an acceleration in household spending, which was bolstered by consumer confidence near cyclical highs and healthier household balance sheets. Job growth and rebuilding activity resumed following the several hurricanes that hit the U.S., and elevated business optimism and tax changes could boost business capital expenditures plans in the coming quarters. The economy could also benefit from favorable financial conditions both in the U.S. and abroad, which could keep economic growth well above 2% in 2018.
While job growth continues at an unsustainable pace, wage growth has still been relatively unresponsive to declines in the unemployment rate. This could mean that the natural rate of unemployment is lower than the U.S. Federal Reserve’s (the “Fed”) current estimate of 4.6%, and it could also mean that there is still labor market slack left in the form of people not currently participating in the labor force. Even so, the tighter labor market and increasing worker shortages will put upward pressure on wage growth, which has been held back by meager productivity gains.
Core inflation has been below the Fed’s 2% target for some time now, which should continue for the next few months. However, by the middle of 2018 core inflation should approach the Fed’s target due to an accelerating economy, reduced labor market slack, and favorable base effects. Inflation closer to target and continued declines in the unemployment rate will give the Fed confidence to press on with tightening. Moreover, financial conditions remain highly accommodative, and fiscal stimulus will give the economy an additional boost, giving the Fed further room to raise rates. Thus, even as the fourth quarter of 2017 saw the commencement of the Fed’s balance sheet roll-off in October and another rate hike in December, we expect the Fed to move to increasingly tighter policy.
For the 12 months ended December 31, 2017, the Standard & Poor’s 500® (“S&P 500”) Index* returned 21.83%. The MSCI Europe-Australasia-Far East (“EAFE”) Index* returned 25.03%. The return of the MSCI Emerging Markets Index* was 37.28%.
In the bond market, the Bloomberg Barclays U.S. Aggregate Bond Index* posted a 3.54% return for the period, while the Bloomberg Barclays U.S. Corporate High Yield Index* returned 7.50%. The return of the ICE Bank of America (“BofA”) Merrill Lynch 3-Month U.S. Treasury Bill Index* was 0.86% for the 12-month period.
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.
Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, mortgage-backed securities or “MBS” (agency fixed-rate and hybrid adjustable-rate mortgage, or “ARM”, pass-throughs), asset-backed securities (“ABS”), and commercial mortgage-backed securities (“CMBS”) (agency and non-agency).
Bloomberg Barclays U.S. Corporate High Yield Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB +/BB + or below.
ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged market Index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income.
MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada.
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.
Nikkei-225 Stock Average Index is a price-weighted index comprised of Japan’s top 225 blue-chip companies on the Tokyo Stock Exchange.
S&P 500 is a broad-based index, the performance of which is based on the performance of 500 widely held common stocks chosen for market size, liquidity, and industry group representation.
S&P 500® Pure Growth Index is narrow in focus, containing only those S&P 500 Index companies with strong growth characteristics as selected by S&P. The S&P 500 Index is a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues).
S&P 500® Pure Value Index is narrow in focus, containing only those S&P 500 Index companies with strong value characteristics as selected by S&P. The S&P 500 Index is a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues).
4 | THE RYDEX FUNDS ANNUAL REPORT |
ECONOMIC AND MARKET OVERVIEW (Unaudited)(concluded) | December 31, 2017 |
S&P MidCap 400® Pure Growth Index is narrow in focus, containing only those S&P MidCap 400 Index companies with strong growth characteristics as selected by S&P. The S&P MidCap 400 Index measures the performance of the mid-capitalization sector of the U.S. equity market.
S&P MidCap 400® Pure Value Index is narrow in focus, containing only those S&P MidCap 400 Index companies with strong value characteristics as selected by S&P. The S&P MidCap 400 Index measures the performance of the mid-capitalization sector of the U.S. equity market.
S&P SmallCap 600® Pure Growth Index is narrow in focus, containing only those S&P SmallCap 600 Index companies with strong growth characteristics as selected by S&P. The S&P SmallCap 600 Index measures the performance of the small-capitalization sector of the U.S. equity market.
S&P SmallCap 600® Pure Value Index is narrow in focus, containing only those S&P SmallCap 600 Index companies with strong value characteristics as selected by S&P. The S&P SmallCap 600 Index measures the performance of the small-capitalization sector of the U.S. equity market.
STOXX 50® Index provides a blue-chip representation of supersector leaders in the eurozone. The index covers 50 stocks from 12 eurozone countries: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.
USD or U.S. Dollar Index® (USDX) is an index that determines the relative value of the United States dollar to a basket of foreign currencies. This formulated “basket” of currencies comprises the weighting of six other currencies as follows: Euro (EUR), 57.6% + Japanese Yen (JPY), 13.6% + Pound Sterling (GBP), 11.9% + Canadian Dollar (CAD), 9.1% + Swedish Krona (SEK), 4.2% + Swiss Franc (CHF) 3.6%.
THE RYDEX FUNDS ANNUAL REPORT | 5 |
A BRIEF NOTE ON THE COMPOUNDING OF RETURNS (Unaudited) |
Many of the Funds described in this report are benchmarked daily to leveraged and/or inverse leveraged 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 on a cumulative basis. 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 6.0% gain and an expectation that the fund will rise by 9.0%. 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 | 6.0% | 9.0% | $ 10.90 | 9.0% | In line |
Day 2 | 99 | -6.6% | -9.9% | $ 9.82 | -9.9% | In line |
Cumulative | -1.0% | -1.5% | -1.8% | -0.3% |
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.
6 | THE RYDEX FUNDS ANNUAL REPORT |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited) |
All mutual funds have operating expenses, and it is important for our shareholders to understand the impact of costs on their investments. Shareholders of a fund incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, other distributions, and exchange fees, and (ii) ongoing costs, including management fees, administrative services, and shareholder reports, among others. These ongoing costs, or operating expenses, are deducted from a fund’s gross income and reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets, which is known as the expense ratio. The following examples are intended to help investors understand the 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 examples are based on an investment of $1,000 made at the beginning of the period and held for the entire six-month period beginning June 30, 2017 and ending December 31, 2017.
The following tables illustrate the Funds’ costs in two ways:
Table 1. Based on actual Fund return: This section helps investors estimate the actual expenses paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, and the fifth column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. Investors may use the information here, together with the amount invested, to estimate the expenses paid over the period. Simply divide the Fund’s 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 provided under the heading “Expenses Paid During Period.”
Table 2. Based on hypothetical 5% return: This section is intended to help investors compare a Fund’s cost with those of other mutual funds. The table 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. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses paid during the period. The example is useful in making comparisons because the U.S. Securities and Exchange Commission (the “SEC”) requires all mutual funds to calculate expenses based on the 5% return. Investors can assess a Fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
The calculations illustrated above assume no shares were bought or sold during the period. Actual costs may have been higher or lower, depending on the amount of investment and the timing of any purchases or redemptions.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, and contingent deferred sales charges (“CDSC”) on redemptions, if any. 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 transactional costs were included, your costs would have been higher.
More information about the Funds’ expenses, including annual expense ratios for periods up to five years (subject to the Fund’s inception date), can be found in the Financial Highlights section of this report. For additional information on operating expenses and other shareholder costs, please refer to the appropriate Fund prospectus.
THE RYDEX FUNDS ANNUAL REPORT | 7 |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(concluded) |
Expense Ratio1 | Fund Return | Beginning Account Value June 30, 2017 | Ending Account Value December 31, 2017 | Expenses Paid During Period2 | |
Table 1. Based on actual Fund return3 | |||||
S&P 500® Pure Growth Fund | 1.73% | 10.73% | $ 1,000.00 | $ 1,107.30 | $ 9.19 |
S&P 500® Pure Value Fund | 1.63% | 11.53% | 1,000.00 | 1,115.30 | 8.69 |
S&P MidCap 400® Pure Growth Fund | 1.61% | 9.50% | 1,000.00 | 1,095.00 | 8.50 |
S&P MidCap 400® Pure Value Fund | 1.61% | 10.52% | 1,000.00 | 1,105.20 | 8.54 |
S&P SmallCap 600® Pure Growth Fund | 1.62% | 9.76% | 1,000.00 | 1,097.60 | 8.57 |
S&P SmallCap 600® Pure Value Fund | 1.62% | 9.91% | 1,000.00 | 1,099.10 | 8.57 |
Europe 1.25x Strategy Fund | 1.78% | 7.66% | 1,000.00 | 1,076.60 | 9.32 |
Japan 2x Strategy Fund | 1.97% | 26.37% | 1,000.00 | 1,263.70 | 11.24 |
Strengthening Dollar 2x Strategy Fund | 1.80% | (5.88)% | 1,000.00 | 941.20 | 8.81 |
Weakening Dollar 2x Strategy Fund | 1.81% | 5.49% | 1,000.00 | 1,054.90 | 9.37 |
Table 2. Based on hypothetical 5% return (before expenses) | |||||
S&P 500® Pure Growth Fund | 1.73% | 5.00% | $ 1,000.00 | $ 1,016.48 | $ 8.79 |
S&P 500® Pure Value Fund | 1.63% | 5.00% | 1,000.00 | 1,016.99 | 8.29 |
S&P MidCap 400® Pure Growth Fund | 1.61% | 5.00% | 1,000.00 | 1,017.09 | 8.19 |
S&P MidCap 400® Pure Value Fund | 1.61% | 5.00% | 1,000.00 | 1,017.09 | 8.19 |
S&P SmallCap 600® Pure Growth Fund | 1.62% | 5.00% | 1,000.00 | 1,017.04 | 8.24 |
S&P SmallCap 600® Pure Value Fund | 1.62% | 5.00% | 1,000.00 | 1,017.04 | 8.24 |
Europe 1.25x Strategy Fund | 1.78% | 5.00% | 1,000.00 | 1,016.23 | 9.05 |
Japan 2x Strategy Fund | 1.97% | 5.00% | 1,000.00 | 1,015.27 | 10.01 |
Strengthening Dollar 2x Strategy Fund | 1.80% | 5.00% | 1,000.00 | 1,016.13 | 9.15 |
Weakening Dollar 2x Strategy Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
1 | Annualized and excludes expenses of the underlying funds in which the Funds invest. |
2 | Expenses are equal to the Fund's annualized expense ratio, net of any applicable fee waivers, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses shown do not include fees charged by insurance companies. |
3 | Actual cumulative return at net asset value for the period June 30, 2017 to December 31, 2017. |
8 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
S&P 500® PURE GROWTH FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a benchmark for large-cap growth securities on a daily basis. The Fund’s current benchmark is the S&P 500® Pure Growth Index (the “underlying index”).
For the year ended December 31, 2017, S&P 500® Pure Growth Fund returned 24.39%, compared with a return of 26.70% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
Information Technology was the sector contributing the most to the return of the underlying index, followed by Health Care. Energy was the only sector that detracted from performance. The Utilities sector contributed least.
Stocks contributing the most to return of the underlying index were NVIDIA Corp., Applied Materials, Inc., and Lam Research Corp. Incyte Corp., Advance Auto Parts, Inc., and Ulta Beauty, Inc. were the largest detractors from performance of the underlying index.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 3, 2004
Ten Largest Holdings (% of Total Net Assets) | |
Applied Materials, Inc. | 1.8% |
Vertex Pharmaceuticals, Inc. | 1.7% |
Centene Corp. | 1.7% |
PulteGroup, Inc. | 1.7% |
PayPal Holdings, Inc. | 1.6% |
NVIDIA Corp. | 1.6% |
Adobe Systems, Inc. | 1.6% |
Netflix, Inc. | 1.6% |
Lam Research Corp. | 1.6% |
Cboe Global Markets, Inc. | 1.5% |
Top Ten Total | 16.4% |
“Ten Largest Holdings” excludes any temporary cash investments.
THE RYDEX FUNDS ANNUAL REPORT | 9 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
S&P 500® Pure Growth Fund | 24.39% | 15.43% | 9.79% |
S&P 500 Pure Growth Index | 26.70% | 17.41% | 11.79% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Pure Growth Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
10 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
S&P 500® PURE GROWTH FUND |
Shares | Value | |||||||
COMMON STOCKS† - 99.6% | ||||||||
Consumer, Non-cyclical - 29.1% | ||||||||
Vertex Pharmaceuticals, Inc.* | 6,300 | $ | 944,118 | |||||
Centene Corp.* | 9,200 | 928,096 | ||||||
PayPal Holdings, Inc.* | 12,190 | 897,428 | ||||||
Total System Services, Inc. | 10,592 | 837,721 | ||||||
Align Technology, Inc.* | 3,570 | 793,218 | ||||||
Illumina, Inc.* | 2,800 | 611,772 | ||||||
Intuitive Surgical, Inc.* | 1,650 | 602,151 | ||||||
AbbVie, Inc. | 6,200 | 599,602 | ||||||
Hologic, Inc.* | 14,000 | 598,500 | ||||||
UnitedHealth Group, Inc. | 2,660 | 586,424 | ||||||
United Rentals, Inc.* | 3,150 | 541,516 | ||||||
Global Payments, Inc. | 5,200 | 521,248 | ||||||
Edwards Lifesciences Corp.* | 4,490 | 506,068 | ||||||
Cigna Corp. | 2,300 | 467,107 | ||||||
Moody’s Corp. | 3,100 | 457,591 | ||||||
Estee Lauder Companies, Inc. — Class A | 3,500 | 445,340 | ||||||
IDEXX Laboratories, Inc.* | 2,680 | 419,099 | ||||||
Cintas Corp. | 2,652 | 413,261 | ||||||
Becton Dickinson and Co. | 1,920 | 411,063 | ||||||
Avery Dennison Corp. | 3,300 | 379,038 | ||||||
Gartner, Inc.* | 3,012 | 370,928 | ||||||
ResMed, Inc. | 4,200 | 355,698 | ||||||
Constellation Brands, Inc. — Class A | 1,510 | 345,141 | ||||||
Stryker Corp. | 2,210 | 342,196 | ||||||
Boston Scientific Corp.* | 13,110 | 324,997 | ||||||
Abbott Laboratories | 5,600 | 319,592 | ||||||
S&P Global, Inc. | 1,880 | 318,472 | ||||||
Monster Beverage Corp.* | 4,900 | 310,121 | ||||||
Cooper Companies, Inc. | 1,400 | 305,032 | ||||||
Regeneron Pharmaceuticals, Inc.* | 800 | 300,768 | ||||||
Incyte Corp.* | 2,687 | 254,486 | ||||||
Zoetis, Inc. | 3,500 | 252,140 | ||||||
Celgene Corp.* | 2,138 | 223,121 | ||||||
Total Consumer, Non-cyclical | 15,983,053 | |||||||
Technology - 26.1% | ||||||||
Applied Materials, Inc. | 19,374 | 990,399 | ||||||
NVIDIA Corp. | 4,609 | 891,842 | ||||||
Adobe Systems, Inc.* | 5,070 | 888,467 | ||||||
Lam Research Corp. | 4,661 | 857,950 | ||||||
Red Hat, Inc.* | 6,947 | 834,335 | ||||||
Broadcom Ltd. | 3,202 | 822,594 | ||||||
Activision Blizzard, Inc. | 12,780 | 809,230 | ||||||
salesforce.com, Inc.* | 6,847 | 699,969 | ||||||
Qorvo, Inc.* | 9,000 | 599,400 | ||||||
Cerner Corp.* | 8,869 | 597,682 | ||||||
Cadence Design Systems, Inc.* | 14,200 | 593,844 | ||||||
Apple, Inc. | 3,500 | 592,305 | ||||||
Skyworks Solutions, Inc. | 6,073 | 576,631 | ||||||
Microchip Technology, Inc. | 5,992 | 526,577 | ||||||
Micron Technology, Inc.* | 12,400 | 509,888 | ||||||
Synopsys, Inc.* | 5,400 | 460,296 | ||||||
ANSYS, Inc.* | 3,100 | 457,529 | ||||||
Cognizant Technology Solutions Corp. — Class A | 5,900 | 419,018 | ||||||
Intuit, Inc. | 2,600 | 410,228 | ||||||
Analog Devices, Inc. | 4,465 | 397,519 | ||||||
Electronic Arts, Inc.* | 2,942 | 309,086 | ||||||
KLA-Tencor Corp. | 2,900 | 304,703 | ||||||
NetApp, Inc. | 5,400 | 298,728 | ||||||
Texas Instruments, Inc. | 2,523 | 263,502 | ||||||
Fiserv, Inc.* | 1,850 | 242,590 | ||||||
Total Technology | 14,354,312 | |||||||
Financial - 13.3% | ||||||||
Cboe Global Markets, Inc. | 6,800 | 847,212 | ||||||
CBRE Group, Inc. — Class A* | 16,300 | 705,953 | ||||||
Prologis, Inc. REIT | 9,955 | 642,197 | ||||||
Progressive Corp. | 11,200 | 630,784 | ||||||
Visa, Inc. — Class A | 5,400 | 615,708 | ||||||
SBA Communications Corp. REIT* | 3,300 | 539,088 | ||||||
American Tower Corp. — Class A REIT | 3,670 | 523,599 | ||||||
Mastercard, Inc. — Class A | 3,370 | 510,083 | ||||||
E*TRADE Financial Corp.* | 10,098 | 500,558 | ||||||
Intercontinental Exchange, Inc. | 6,570 | 463,579 | ||||||
Extra Space Storage, Inc. REIT | 4,912 | 429,554 | ||||||
Charles Schwab Corp. | 6,350 | 326,200 | ||||||
T. Rowe Price Group, Inc. | 3,100 | 325,283 | ||||||
Equinix, Inc. REIT | 500 | 226,610 | ||||||
Total Financial | 7,286,408 | |||||||
Consumer, Cyclical - 10.2% | ||||||||
PulteGroup, Inc. | 27,500 | 914,375 | ||||||
DR Horton, Inc. | 16,400 | 837,548 | ||||||
Marriott International, Inc. — Class A | 5,320 | 722,083 | ||||||
Norwegian Cruise Line Holdings Ltd.* | 10,900 | 580,425 | ||||||
Wyndham Worldwide Corp. | 4,600 | 533,002 | ||||||
Aptiv plc | 5,700 | 483,531 | ||||||
Dollar Tree, Inc.* | 4,425 | 474,847 | ||||||
Home Depot, Inc. | 2,300 | 435,919 | ||||||
Michael Kors Holdings Ltd.* | 6,100 | 383,995 | ||||||
Wynn Resorts Ltd. | 1,500 | 252,885 | ||||||
Total Consumer, Cyclical | 5,618,610 | |||||||
Industrial - 9.9% | ||||||||
Corning, Inc. | 18,690 | 597,893 | ||||||
Boeing Co. | 1,700 | 501,347 | ||||||
Agilent Technologies, Inc. | 6,700 | 448,699 | ||||||
Waste Management, Inc. | 4,600 | 396,980 | ||||||
Mettler-Toledo International, Inc.* | 600 | 371,712 | ||||||
Fortune Brands Home & Security, Inc. | 5,400 | 369,576 | ||||||
Roper Technologies, Inc. | 1,400 | 362,600 | ||||||
Rockwell Collins, Inc. | 2,600 | 352,612 | ||||||
Waters Corp.* | 1,700 | 328,423 | ||||||
Amphenol Corp. — Class A | 3,730 | 327,494 | ||||||
AMETEK, Inc. | 4,500 | 326,115 | ||||||
AO Smith Corp. | 5,295 | 324,478 | ||||||
TransDigm Group, Inc. | 1,000 | 274,620 | ||||||
CSX Corp. | 4,900 | 269,549 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 11 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
S&P 500® PURE GROWTH FUND |
Shares | Value | |||||||
Illinois Tool Works, Inc. | 1,260 | $ | 210,231 | |||||
Total Industrial | 5,462,329 | |||||||
Communications - 9.7% | ||||||||
Netflix, Inc.* | 4,470 | 858,061 | ||||||
Facebook, Inc. — Class A* | 4,451 | 785,423 | ||||||
Amazon.com, Inc.* | 650 | 760,156 | ||||||
eBay, Inc.* | 15,300 | 577,422 | ||||||
VeriSign, Inc.* | 4,717 | 539,814 | ||||||
Charter Communications, Inc. — Class A* | 1,520 | 510,659 | ||||||
Motorola Solutions, Inc. | 4,828 | 436,162 | ||||||
Priceline Group, Inc.* | 204 | 354,499 | ||||||
Alphabet, Inc. — Class A* | 248 | 261,243 | ||||||
Alphabet, Inc. — Class C* | 240 | 251,136 | ||||||
LogMeIn, Inc. | 1 | 114 | ||||||
Total Communications | 5,334,689 | |||||||
Basic Materials - 1.3% | ||||||||
Sherwin-Williams Co. | 1,100 | 451,044 | ||||||
FMC Corp. | 3,000 | 283,980 | ||||||
Total Basic Materials | 735,024 | |||||||
Total Common Stocks | ||||||||
(Cost $44,778,125) | 54,774,425 |
Face Amount | ||||||||
REPURCHASE AGREEMENTS††,1 - 0.6% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | $ | 222,518 | 222,518 | |||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 118,759 | 118,759 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $341,277) | 341,277 | |||||||
Total Investments - 100.2% | ||||||||
(Cost $45,119,402) | $ | 55,115,702 | ||||||
Other Assets & Liabilities, net - (0.2)% | (93,197 | ) | ||||||
Total Net Assets - 100.0% | $ | 55,022,505 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Repurchase Agreements — See Note 6. |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 54,774,425 | $ | — | $ | — | $ | 54,774,425 | ||||||||
Repurchase Agreements | — | 341,277 | — | 341,277 | ||||||||||||
Total Assets | $ | 54,774,425 | $ | 341,277 | $ | — | $ | 55,115,702 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
12 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P 500® PURE GROWTH FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2017 |
Assets: | ||||
Investments, at value (cost $44,778,125) | $ | 54,774,425 | ||
Repurchase agreements, at value (cost $341,277) | 341,277 | |||
Cash | 11,592 | |||
Receivables: | ||||
Fund shares sold | 324,806 | |||
Securities sold | 298,726 | |||
Dividends | 25,044 | |||
Interest | 40 | |||
Securities lending income | 21 | |||
Total assets | 55,775,931 | |||
Liabilities: | ||||
Payable for: | ||||
Securities purchased | 601,901 | |||
Management fees | 35,197 | |||
Fund shares redeemed | 16,751 | |||
Transfer agent and administrative fees | 11,732 | |||
Investor service fees | 11,732 | |||
Portfolio accounting fees | 4,693 | |||
Miscellaneous | 71,420 | |||
Total liabilities | 753,426 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 55,022,505 | ||
Net assets consist of: | ||||
Paid in capital | $ | 41,694,293 | ||
Undistributed net investment income | — | |||
Accumulated net realized gain on investments | 3,331,912 | |||
Net unrealized appreciation on investments | 9,996,300 | |||
Net assets | $ | 55,022,505 | ||
Capital shares outstanding | 1,094,438 | |||
Net asset value per share | $ | 50.27 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends | $ | 409,715 | ||
Interest | 2,599 | |||
Income from securities lending, net | 2,088 | |||
Total investment income | 414,402 | |||
Expenses: | ||||
Management fees | 357,187 | |||
Investor service fees | 119,062 | |||
Transfer agent and administrative fees | 119,062 | |||
Professional fees | 70,063 | |||
Portfolio accounting fees | 47,625 | |||
Tax expense | 29,225 | |||
Custodian fees | 8,129 | |||
Trustees’ fees* | 5,821 | |||
Line of credit fees | 29 | |||
Miscellaneous | 38,806 | |||
Total expenses | 795,009 | |||
Net investment loss | (380,607 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 6,058,588 | |||
Net realized gain | 6,058,588 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 4,261,174 | |||
Net change in unrealized appreciation (depreciation) | 4,261,174 | |||
Net realized and unrealized gain | 10,319,762 | |||
Net increase in net assets resulting from operations | $ | 9,939,155 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a) (19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 13 |
S&P 500® PURE GROWTH FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (380,607 | ) | $ | (229,575 | ) | ||
Net realized gain on investments | 6,058,588 | 3,957,390 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 4,261,174 | (5,310,795 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 9,939,155 | (1,582,980 | ) | |||||
Distributions to shareholders from: | ||||||||
Net realized gains | (2,087,780 | ) | (2,097,841 | ) | ||||
Total distributions to shareholders | (2,087,780 | ) | (2,097,841 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 135,382,187 | 106,079,539 | ||||||
Distributions reinvested | 2,087,780 | 2,097,841 | ||||||
Cost of shares redeemed | (134,206,512 | ) | (138,232,653 | ) | ||||
Net increase (decrease) from capital share transactions | 3,263,455 | (30,055,273 | ) | |||||
Net increase (decrease) in net assets | 11,114,830 | (33,736,094 | ) | |||||
Net assets: | ||||||||
Beginning of year | 43,907,675 | 77,643,769 | ||||||
End of year | $ | 55,022,505 | $ | 43,907,675 | ||||
Undistributed net investment income at end of year | $ | — | $ | — | ||||
Capital share activity: | ||||||||
Shares sold | 2,880,090 | 2,509,196 | ||||||
Shares issued from reinvestment of distributions | 45,200 | 49,118 | ||||||
Shares redeemed | (2,868,566 | ) | (3,296,405 | ) | ||||
Net increase (decrease) in shares | 56,724 | (738,091 | ) |
14 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P 500® PURE GROWTH FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 42.31 | $ | 43.72 | $ | 47.51 | $ | 47.61 | $ | 33.69 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.38 | ) | (.23 | ) | (.25 | ) | (.33 | ) | (.18 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 10.51 | 1.38 | .91 | 6.19 | 14.10 | |||||||||||||||
Total from investment operations | 10.13 | 1.15 | .66 | 5.86 | 13.92 | |||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (2.17 | ) | (2.56 | ) | (4.45 | ) | (5.96 | ) | — | |||||||||||
Total distributions | (2.17 | ) | (2.56 | ) | (4.45 | ) | (5.96 | ) | — | |||||||||||
Net asset value, end of period | $ | 50.27 | $ | 42.31 | $ | 43.72 | $ | 47.51 | $ | 47.61 | ||||||||||
Total Returnb | 24.39 | % | 2.58 | % | 1.08 | % | 12.42 | % | 41.32 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 55,023 | $ | 43,908 | $ | 77,644 | $ | 87,942 | $ | 61,887 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.80 | %) | (0.54 | %) | (0.54 | %) | (0.67 | %) | (0.44 | %) | ||||||||||
Total expenses | 1.67 | % | 1.56 | % | 1.51 | % | 1.57 | % | 1.54 | % | ||||||||||
Portfolio turnover rate | 303 | % | 265 | % | 174 | % | 251 | % | 324 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 15 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
S&P 500® PURE VALUE FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a benchmark for large-cap value securities on a daily basis. The Fund’s current benchmark is the S&P 500® Pure Value Index (the “underlying index”).
For the year ended December 31, 2017, S&P 500® Pure Value Fund returned 15.86%, compared with a return of 17.71% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
The Financials sector was the leading contributor to performance of the underlying index for the period, followed by the Consumer Discretionary sector. Telecommunications Services was the only sector that detracted from performance. The Information Technology sector contributed the least.
The strongest contributors to performance of the underlying index for the year included Centene Corp., Anthem, Inc., and PulteGroup, Inc. The stocks detracting most from performance of the underlying index were Transocean Ltd., Endo International Plc, and CenturyLink, Inc.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 3, 2004
Ten Largest Holdings (% of Total Net Assets) | |
CenturyLink, Inc. | 2.4% |
Berkshire Hathaway, Inc. — Class B | 2.2% |
Envision Healthcare Corp. | 2.1% |
Kohl’s Corp. | 1.8% |
Archer-Daniels-Midland Co. | 1.7% |
Ford Motor Co. | 1.7% |
General Motors Co. | 1.7% |
Signet Jewelers Ltd. | 1.6% |
Macy’s, Inc. | 1.6% |
Leucadia National Corp. | 1.6% |
Top Ten Total | 18.4% |
“Ten Largest Holdings” excludes any temporary cash investments.
16 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
S&P 500® Pure Value Fund | 15.86% | 14.71% | 8.19% |
S&P 500 Pure Value Index | 17.71% | 16.64% | 10.35% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Pure Value Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 17 |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
S&P 500® PURE VALUE FUND |
Shares | Value | |||||||
COMMON STOCKS† - 99.7% | ||||||||
Financial - 26.8% | ||||||||
Berkshire Hathaway, Inc. — Class B* | 4,991 | $ | 989,316 | |||||
Prudential Financial, Inc. | 5,717 | 657,341 | ||||||
Loews Corp. | 11,158 | 558,235 | ||||||
Lincoln National Corp. | 6,930 | 532,709 | ||||||
Navient Corp. | 38,442 | 512,047 | ||||||
Capital One Financial Corp. | 4,967 | 494,614 | ||||||
MetLife, Inc. | 9,298 | 470,107 | ||||||
Assurant, Inc. | 4,660 | 469,914 | ||||||
XL Group Ltd. | 12,999 | 457,045 | ||||||
Citigroup, Inc. | 5,880 | 437,531 | ||||||
American International Group, Inc. | 7,045 | 419,741 | ||||||
Everest Re Group Ltd. | 1,880 | 415,969 | ||||||
Hartford Financial Services Group, Inc. | 7,292 | 410,394 | ||||||
Unum Group | 7,225 | 396,580 | ||||||
Citizens Financial Group, Inc. | 9,260 | 388,735 | ||||||
Travelers Companies, Inc. | 2,270 | 307,903 | ||||||
Goldman Sachs Group, Inc. | 1,198 | 305,202 | ||||||
Morgan Stanley | 5,590 | 293,307 | ||||||
Regions Financial Corp. | 16,590 | 286,675 | ||||||
Aflac, Inc. | 3,196 | 280,545 | ||||||
People’s United Financial, Inc. | 14,600 | 273,020 | ||||||
SunTrust Banks, Inc. | 4,002 | 258,489 | ||||||
Chubb Ltd. | 1,728 | 252,513 | ||||||
Fifth Third Bancorp | 7,434 | 225,548 | ||||||
KeyCorp | 10,940 | 220,660 | ||||||
Zions Bancorporation | 4,280 | 217,552 | ||||||
Wells Fargo & Co. | 3,430 | 208,098 | ||||||
BB&T Corp. | 3,881 | 192,963 | ||||||
Bank of New York Mellon Corp. | 3,480 | 187,433 | ||||||
JPMorgan Chase & Co. | 1,690 | 180,729 | ||||||
Cincinnati Financial Corp. | 2,380 | 178,428 | ||||||
PNC Financial Services Group, Inc. | 1,076 | 155,256 | ||||||
Huntington Bancshares, Inc. | 10,505 | 152,953 | ||||||
Invesco Ltd. | 4,070 | 148,718 | ||||||
Total Financial | 11,936,270 | |||||||
Consumer, Cyclical - 23.0% | ||||||||
Kohl’s Corp.1 | 14,750 | 799,893 | ||||||
Ford Motor Co. | 60,257 | 752,610 | ||||||
General Motors Co. | 18,164 | 744,542 | ||||||
Signet Jewelers Ltd. | 12,630 | 714,227 | ||||||
Macy’s, Inc. | 27,646 | 696,403 | ||||||
CVS Health Corp. | 8,419 | 610,377 | ||||||
Goodyear Tire & Rubber Co. | 18,590 | 600,643 | ||||||
United Continental Holdings, Inc.* | 8,360 | 563,464 | ||||||
Target Corp. | 8,070 | 526,568 | ||||||
Best Buy Company, Inc. | 7,350 | 503,254 | ||||||
Newell Brands, Inc. | 15,770 | 487,293 | ||||||
Foot Locker, Inc.1 | 9,030 | 423,326 | ||||||
Whirlpool Corp. | 2,380 | 401,363 | ||||||
Walgreens Boots Alliance, Inc. | 4,549 | 330,348 | ||||||
Nordstrom, Inc. | 6,713 | 318,062 | ||||||
Advance Auto Parts, Inc. | 2,960 | 295,082 | ||||||
Wal-Mart Stores, Inc. | 2,918 | 288,153 | ||||||
Delta Air Lines, Inc. | 4,300 | 240,800 | ||||||
PVH Corp. | 1,640 | 225,024 | ||||||
Alaska Air Group, Inc. | 2,980 | 219,060 | ||||||
Gap, Inc. | 5,550 | 189,033 | ||||||
Costco Wholesale Corp. | 910 | 169,369 | ||||||
Genuine Parts Co. | 1,570 | 149,166 | ||||||
Total Consumer, Cyclical | 10,248,060 | |||||||
Consumer, Non-cyclical - 16.9% | ||||||||
Envision Healthcare Corp.* | 26,670 | 921,715 | ||||||
Archer-Daniels-Midland Co. | 19,380 | 776,750 | ||||||
Express Scripts Holding Co.* | 8,745 | 652,727 | ||||||
McKesson Corp. | 3,700 | 577,015 | ||||||
Cardinal Health, Inc. | 9,039 | 553,819 | ||||||
Kroger Co. | 18,850 | 517,432 | ||||||
Quanta Services, Inc.* | 12,790 | 500,217 | ||||||
Patterson Companies, Inc. | 10,450 | 377,559 | ||||||
AmerisourceBergen Corp. — Class A | 3,840 | 352,589 | ||||||
Molson Coors Brewing Co. — Class B | 4,250 | 348,798 | ||||||
Mylan N.V.* | 7,100 | 300,401 | ||||||
DaVita, Inc.* | 4,084 | 295,069 | ||||||
Universal Health Services, Inc. — Class B | 2,500 | 283,375 | ||||||
Tyson Foods, Inc. — Class A | 3,085 | 250,101 | ||||||
Humana, Inc. | 980 | 243,109 | ||||||
Coty, Inc. — Class A | 11,260 | 223,961 | ||||||
Sysco Corp. | 3,350 | 203,446 | ||||||
JM Smucker Co. | 1,280 | 159,027 | ||||||
Total Consumer, Non-cyclical | 7,537,110 | |||||||
Energy - 11.6% | ||||||||
TechnipFMC plc | 21,880 | 685,063 | ||||||
Valero Energy Corp. | 7,185 | 660,373 | ||||||
Andeavor | 5,760 | 658,598 | ||||||
Baker Hughes a GE Co. | 19,960 | 631,534 | ||||||
Marathon Petroleum Corp. | 7,373 | 486,470 | ||||||
Phillips 66 | 4,037 | 408,343 | ||||||
Range Resources Corp. | 22,930 | 391,186 | ||||||
Kinder Morgan, Inc. | 18,810 | 339,897 | ||||||
National Oilwell Varco, Inc. | 9,100 | 327,782 | ||||||
Chevron Corp. | 1,700 | 212,823 | ||||||
Chesapeake Energy Corp.*,1 | 46,960 | 185,962 | ||||||
Exxon Mobil Corp. | 1,900 | 158,916 | ||||||
Total Energy | 5,146,947 | |||||||
Communications - 5.8% | ||||||||
CenturyLink, Inc. | 63,577 | 1,060,464 | ||||||
Viacom, Inc. — Class B | 12,270 | 378,039 | ||||||
News Corp. — Class A | 17,948 | 290,937 | ||||||
AT&T, Inc. | 6,540 | 254,275 | ||||||
Discovery Communications, Inc. — Class C* | 8,780 | 185,873 | ||||||
Discovery Communications, Inc. — Class A*,1 | 6,570 | 147,036 | ||||||
Interpublic Group of Companies, Inc. | 7,180 | 144,749 | ||||||
News Corp. — Class B | 5,737 | 95,234 | ||||||
Total Communications | 2,556,607 |
18 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
S&P 500® PURE VALUE FUND |
Shares | Value | |||||||
Industrial - 4.7% | ||||||||
Fluor Corp. | 11,708 | $ | 604,718 | |||||
Jacobs Engineering Group, Inc. | 5,273 | 347,807 | ||||||
WestRock Co. | 5,360 | 338,806 | ||||||
Johnson Controls International plc | 7,370 | 280,871 | ||||||
General Electric Co. | 10,410 | 181,654 | ||||||
Textron, Inc. | 3,176 | 179,730 | ||||||
Eaton Corporation plc | 2,224 | 175,718 | ||||||
Total Industrial | 2,109,304 | |||||||
Utilities - 3.7% | ||||||||
SCANA Corp. | 10,990 | 437,182 | ||||||
AES Corp. | 39,857 | 431,651 | ||||||
Exelon Corp. | 8,581 | 338,177 | ||||||
PG&E Corp. | 5,820 | 260,911 | ||||||
Duke Energy Corp. | 2,149 | 180,753 | ||||||
Total Utilities | 1,648,674 | |||||||
Technology - 3.2% | ||||||||
Hewlett Packard Enterprise Co. | 43,980 | 631,553 | ||||||
Xerox Corp. | 17,424 | 507,909 | ||||||
Western Digital Corp. | 3,287 | 261,415 | ||||||
Total Technology | 1,400,877 | |||||||
Basic Materials - 2.4% | ||||||||
Mosaic Co. | 23,176 | 594,696 | ||||||
Nucor Corp. | 4,600 | 292,468 | ||||||
DowDuPont, Inc. | 2,770 | 197,280 | ||||||
Total Basic Materials | 1,084,444 | |||||||
Diversified - 1.6% | ||||||||
Leucadia National Corp. | 26,070 | 690,594 | ||||||
Total Common Stocks | ||||||||
(Cost $36,940,479) | 44,358,887 |
Face Amount | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.7% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | $ | 191,696 | 191,696 | |||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 102,309 | 102,309 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $294,005) | 294,005 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 2.7% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%4 | 1,218,249 | 1,218,249 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $1,218,249) | 1,218,249 | |||||||
Total Investments - 103.1% | ||||||||
(Cost $38,452,733) | $ | 45,871,141 | ||||||
Other Assets & Liabilities, net - (3.1)% | (1,375,597 | ) | ||||||
Total Net Assets - 100.0% | $ | 44,495,544 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7 day yield as of December 31, 2017. |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 19 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
S&P 500® PURE VALUE FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 44,358,887 | $ | — | $ | — | $ | 44,358,887 | ||||||||
Repurchase Agreements | — | 294,005 | — | 294,005 | ||||||||||||
Securities Lending Collateral | 1,218,249 | — | — | 1,218,249 | ||||||||||||
Total Assets | $ | 45,577,136 | $ | 294,005 | $ | — | $ | 45,871,141 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
20 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P 500® PURE VALUE FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2017 |
Assets: | ||||
Investments, at value - including $1,162,899 of securities loaned (cost $38,158,728) | $ | 45,577,136 | ||
Repurchase agreements, at value (cost $294,005) | 294,005 | |||
Receivables: | ||||
Fund shares sold | 383,401 | |||
Dividends | 46,649 | |||
Securities lending income | 59 | |||
Interest | 35 | |||
Total assets | 46,301,285 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities loaned | 1,218,249 | |||
Securities purchased | 379,280 | |||
Fund shares redeemed | 83,853 | |||
Management fees | 27,323 | |||
Transfer agent and administrative fees | 9,108 | |||
Investor service fees | 9,108 | |||
Portfolio accounting fees | 3,643 | |||
Miscellaneous | 75,177 | |||
Total liabilities | 1,805,741 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 44,495,544 | ||
Net assets consist of: | ||||
Paid in capital | $ | 36,403,115 | ||
Undistributed net investment income | 252,334 | |||
Accumulated net realized gain on investments | 421,687 | |||
Net unrealized appreciation on investments | 7,418,408 | |||
Net assets | $ | 44,495,544 | ||
Capital shares outstanding | 719,692 | |||
Net asset value per share | $ | 61.83 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends | $ | 921,912 | ||
Interest | 1,995 | |||
Income from securities lending, net | 1,190 | |||
Total investment income | 925,097 | |||
Expenses: | ||||
Management fees | 311,416 | |||
Investor service fees | 103,805 | |||
Transfer agent and administrative fees | 103,805 | |||
Professional fees | 59,942 | |||
Portfolio accounting fees | 41,522 | |||
Custodian fees | 7,040 | |||
Trustees’ fees* | 4,830 | |||
Tax expense | 3,062 | |||
Line of credit fees | 65 | |||
Miscellaneous | 34,964 | |||
Total expenses | 670,451 | |||
Net investment income | 254,646 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 4,034,225 | |||
Net realized gain | 4,034,225 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 1,242,426 | |||
Net change in unrealized appreciation (depreciation) | 1,242,426 | |||
Net realized and unrealized gain | 5,276,651 | |||
Net increase in net assets resulting from operations | $ | 5,531,297 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a) (19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 21 |
S&P 500® PURE VALUE FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 254,646 | $ | 311,589 | ||||
Net realized gain on investments | 4,034,225 | 2,579,759 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 1,242,426 | 2,366,999 | ||||||
Net increase in net assets resulting from operations | 5,531,297 | 5,258,347 | ||||||
Distributions to shareholders from: | ||||||||
Net investment income | (313,901 | ) | (401,556 | ) | ||||
Net realized gains | (1,917,632 | ) | (1,016,397 | ) | ||||
Total distributions to shareholders | (2,231,533 | ) | (1,417,953 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 45,594,001 | 74,464,953 | ||||||
Distributions reinvested | 2,231,533 | 1,417,953 | ||||||
Cost of shares redeemed | (51,478,447 | ) | (67,200,697 | ) | ||||
Net increase (decrease) from capital share transactions | (3,652,913 | ) | 8,682,209 | |||||
Net increase (decrease) in net assets | (353,149 | ) | 12,522,603 | |||||
Net assets: | ||||||||
Beginning of year | 44,848,693 | 32,326,090 | ||||||
End of year | $ | 44,495,544 | $ | 44,848,693 | ||||
Undistributed net investment income at end of year | $ | 252,334 | $ | 311,589 | ||||
Capital share activity: | ||||||||
Shares sold | 778,343 | 1,449,037 | * | |||||
Shares issued from reinvestment of distributions | 39,764 | 27,250 | * | |||||
Shares redeemed | (892,928 | ) | (1,327,228 | )* | ||||
Net increase (decrease) in shares | (74,821 | ) | 149,059 | * |
* | Capital share activity for the periods presented through December 31, 2016, has been restated to reflect a 2:1 share split effective December 1, 2016 — See Note 11. |
22 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P 500® PURE VALUE FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016c | Year Ended December 31, 2015c | Year Ended December 31, 2014c | Year Ended December 31, 2013c | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 56.45 | $ | 50.08 | $ | 71.22 | $ | 69.60 | $ | 47.91 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .35 | .83 | .63 | .42 | .21 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 8.28 | 9.87 | (5.87 | ) | 7.10 | 21.48 | ||||||||||||||
Total from investment operations | 8.63 | 10.70 | (5.24 | ) | 7.52 | 21.69 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.46 | ) | (1.23 | ) | (.82 | ) | (.34 | ) | — | |||||||||||
Net realized gains | (2.79 | ) | (3.10 | ) | (15.08 | ) | (5.56 | ) | — | |||||||||||
Total distributions | (3.25 | ) | (4.33 | ) | (15.90 | ) | (5.90 | ) | — | |||||||||||
Net asset value, end of period | $ | 61.83 | $ | 56.45 | $ | 50.08 | $ | 71.22 | $ | 69.60 | ||||||||||
Total Returnb | 15.86 | % | 17.40 | % | (9.38 | %) | 10.94 | % | 45.26 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 44,496 | $ | 44,849 | $ | 32,326 | $ | 63,165 | $ | 74,001 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.61 | % | 0.88 | % | 1.02 | % | 0.58 | % | 0.35 | % | ||||||||||
Total expenses | 1.61 | % | 1.56 | % | 1.51 | % | 1.57 | % | 1.54 | % | ||||||||||
Portfolio turnover rate | 127 | % | 207 | % | 162 | % | 209 | % | 371 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Share split — Per share amounts for the periods presented through December 31, 2016 have been restated to reflect a 2:1 share split effective December 1, 2016 — See Note 11. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 23 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
S&P MIDCAP 400® PURE GROWTH FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a benchmark for mid-cap growth securities on a daily basis. The Fund’s current benchmark is the S&P MidCap 400® Pure Growth Index (the “underlying index”).
For the year ended December 31, 2017, S&P MidCap 400® Pure Growth Fund returned 18.73%, compared with a return of 20.79% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
The Information Technology sector contributed the most to the return of the underlying index for the period, followed by the Health Care sector. No sector detracted from performance. The Utilities sector and the Consumer Staples sector contributed the least.
Cognex Corp., Take-Two Interactive Software, Inc., and ABIOMED, Inc. added the most to return of the underlying index for the year. Dick’s Sporting Goods, Inc., Papa John’s International, Inc., and InterDigital, Inc. detracted the most from performance of the underlying index for the year.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 3, 2004
Ten Largest Holdings (% of Total Net Assets) | |
Akorn, Inc. | 2.0% |
ABIOMED, Inc. | 1.9% |
KB Home | 1.8% |
Louisiana-Pacific Corp. | 1.8% |
MKS Instruments, Inc. | 1.8% |
IPG Photonics Corp. | 1.8% |
Medidata Solutions, Inc. | 1.8% |
Skechers U.S.A., Inc. — Class A | 1.8% |
TRI Pointe Group, Inc. | 1.7% |
Jabil, Inc. | 1.7% |
Top Ten Total | 18.1% |
“Ten Largest Holdings” excludes any temporary cash investments.
24 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
S&P MidCap 400® Pure Growth Fund | 18.73% | 10.28% | 9.58% |
S&P MidCap 400 Pure Growth Index | 20.79% | 12.05% | 11.34% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P MidCap 400 Pure Growth Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 25 |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
S&P MIDCAP 400® PURE GROWTH FUND |
Shares | Value | |||||||
COMMON STOCKS† - 99.6% | ||||||||
Consumer, Non-cyclical - 23.9% | ||||||||
Akorn, Inc.* | 12,593 | $ | 405,873 | |||||
ABIOMED, Inc.* | 2,020 | 378,568 | ||||||
LivaNova plc* | 4,010 | 320,479 | ||||||
Catalent, Inc.* | 7,390 | 303,581 | ||||||
Masimo Corp.* | 3,080 | 261,184 | ||||||
Hill-Rom Holdings, Inc. | 3,060 | 257,928 | ||||||
Globus Medical, Inc. — Class A* | 5,950 | 244,545 | ||||||
Live Nation Entertainment, Inc.* | 5,710 | 243,075 | ||||||
Charles River Laboratories International, Inc.* | 2,120 | 232,034 | ||||||
Sprouts Farmers Market, Inc.* | 8,750 | 213,062 | ||||||
Brink’s Co. | 2,660 | 209,342 | ||||||
Bioverativ, Inc.* | 3,800 | 204,896 | ||||||
Service Corporation International | 4,710 | 175,777 | ||||||
HealthSouth Corp. | 3,460 | 170,959 | ||||||
Lamb Weston Holdings, Inc. | 3,000 | 169,350 | ||||||
Bio-Techne Corp. | 1,260 | 163,233 | ||||||
MarketAxess Holdings, Inc. | 793 | 159,988 | ||||||
Teleflex, Inc. | 610 | 151,780 | ||||||
Sotheby’s* | 2,880 | 148,608 | ||||||
Rollins, Inc. | 2,890 | 134,472 | ||||||
CoreLogic, Inc.* | 2,801 | 129,434 | ||||||
WEX, Inc.* | 710 | 100,273 | ||||||
Bio-Rad Laboratories, Inc. — Class A* | 360 | 85,921 | ||||||
Total Consumer, Non-cyclical | 4,864,362 | |||||||
Technology - 20.8% | ||||||||
MKS Instruments, Inc. | 3,890 | 367,605 | ||||||
IPG Photonics Corp.* | 1,708 | 365,734 | ||||||
Medidata Solutions, Inc.* | 5,740 | 363,744 | ||||||
MSCI, Inc. — Class A | 2,518 | 318,628 | ||||||
Fortinet, Inc.* | 7,280 | 318,063 | ||||||
Broadridge Financial Solutions, Inc. | 2,856 | 258,696 | ||||||
Teradyne, Inc. | 5,790 | 242,427 | ||||||
Monolithic Power Systems, Inc. | 2,155 | 242,136 | ||||||
Integrated Device Technology, Inc.* | 8,139 | 241,972 | ||||||
Blackbaud, Inc. | 2,340 | 221,107 | ||||||
Cirrus Logic, Inc.* | 3,773 | 195,668 | ||||||
MAXIMUS, Inc. | 2,270 | 162,487 | ||||||
Tyler Technologies, Inc.* | 870 | 154,033 | ||||||
Ultimate Software Group, Inc.* | 681 | 148,615 | ||||||
j2 Global, Inc. | 1,920 | 144,058 | ||||||
Silicon Laboratories, Inc.* | 1,580 | 139,514 | ||||||
Fair Isaac Corp. | 905 | 138,646 | ||||||
Jack Henry & Associates, Inc. | 1,120 | 130,995 | ||||||
Microsemi Corp.* | 1,792 | 92,557 | ||||||
Total Technology | 4,246,685 | |||||||
Industrial - 18.8% | ||||||||
Louisiana-Pacific Corp.* | 14,010 | 367,903 | ||||||
Jabil, Inc. | 13,340 | 350,175 | ||||||
Coherent, Inc.* | 1,230 | 347,130 | ||||||
Cognex Corp. | 5,498 | 336,258 | ||||||
KLX, Inc.* | 4,710 | 321,457 | ||||||
Dycom Industries, Inc.* | 2,830 | 315,347 | ||||||
Zebra Technologies Corp. — Class A* | 2,436 | 252,857 | ||||||
Graco, Inc. | 5,180 | 234,239 | ||||||
Littelfuse, Inc. | 933 | 184,566 | ||||||
Orbital ATK, Inc. | 1,310 | 172,265 | ||||||
Old Dominion Freight Line, Inc. | 1,282 | 168,647 | ||||||
Lennox International, Inc. | 800 | 166,608 | ||||||
Teledyne Technologies, Inc.* | 650 | 117,748 | ||||||
Trimble, Inc.* | 2,620 | 106,477 | ||||||
IDEX Corp. | 780 | 102,937 | ||||||
Eagle Materials, Inc. | 878 | 99,477 | ||||||
Nordson Corp. | 660 | 96,624 | ||||||
National Instruments Corp. | 2,130 | 88,672 | ||||||
Total Industrial | 3,829,387 | |||||||
Consumer, Cyclical - 17.2% | ||||||||
KB Home | 11,790 | 376,690 | ||||||
Skechers U.S.A., Inc. — Class A* | 9,604 | 363,415 | ||||||
TRI Pointe Group, Inc.* | 19,790 | 354,637 | ||||||
NVR, Inc.* | 99 | 347,314 | ||||||
Thor Industries, Inc. | 2,130 | 321,033 | ||||||
Toll Brothers, Inc. | 6,630 | 318,373 | ||||||
Churchill Downs, Inc. | 1,367 | 318,101 | ||||||
Copart, Inc.* | 5,898 | 254,735 | ||||||
Herman Miller, Inc. | 5,760 | 230,688 | ||||||
Delphi Technologies plc* | 3,740 | 196,238 | ||||||
Domino’s Pizza, Inc. | 860 | 162,505 | ||||||
Polaris Industries, Inc. | 1,250 | 154,988 | ||||||
Pool Corp. | 902 | 116,944 | ||||||
Total Consumer, Cyclical | 3,515,661 | |||||||
Financial - 13.6% | ||||||||
CNO Financial Group, Inc. | 13,780 | 340,228 | ||||||
First Industrial Realty Trust, Inc. REIT | 7,736 | 243,452 | ||||||
Primerica, Inc. | 2,340 | 237,627 | ||||||
Janus Henderson Group plc | 5,830 | 223,056 | ||||||
Kemper Corp. | 3,170 | 218,413 | ||||||
DCT Industrial Trust, Inc. REIT | 3,235 | 190,153 | ||||||
CoreSite Realty Corp. REIT | 1,580 | 179,962 | ||||||
SEI Investments Co. | 2,440 | 175,338 | ||||||
Bank of the Ozarks | 3,278 | 158,819 | ||||||
Synovus Financial Corp. | 3,240 | 155,325 | ||||||
East West Bancorp, Inc. | 2,290 | 139,301 | ||||||
Federated Investors, Inc. — Class B | 3,270 | 117,982 | ||||||
SVB Financial Group* | 500 | 116,885 | ||||||
Texas Capital Bancshares, Inc.* | 1,220 | 108,458 | ||||||
Interactive Brokers Group, Inc. — Class A | 1,360 | 80,526 | ||||||
Eaton Vance Corp. | 1,390 | 78,382 | ||||||
Total Financial | 2,763,907 | |||||||
Communications - 2.8% | ||||||||
LogMeIn, Inc. | 1,694 | 193,963 | ||||||
New York Times Co. — Class A | 7,180 | 132,830 | ||||||
FactSet Research Systems, Inc. | 660 | 127,222 | ||||||
InterDigital, Inc. | 1,634 | 124,429 | ||||||
Total Communications | 578,444 |
26 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
S&P MIDCAP 400® PURE GROWTH FUND |
Shares | Value | |||||||
Basic Materials - 2.5% | ||||||||
Royal Gold, Inc. | 2,462 | $ | 202,179 | |||||
Versum Materials, Inc. | 5,133 | 194,284 | ||||||
Chemours Co. | 2,050 | 102,623 | ||||||
Total Basic Materials | 499,086 | |||||||
Total Common Stocks | ||||||||
(Cost $17,740,940) | 20,297,532 |
Face Amount | ||||||||
REPURCHASE AGREEMENTS††,1 - 0.2% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | $ | 31,240 | 31,240 | |||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 16,673 | 16,673 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $47,913) | $ | 47,913 | ||||||
Total Investments - 99.8% | ||||||||
(Cost $17,788,853) | $ | 20,345,445 | ||||||
Other Assets & Liabilities, net - 0.2% | 48,876 | |||||||
Total Net Assets - 100.0% | $ | 20,394,321 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Repurchase Agreements — See Note 6. |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 20,297,532 | $ | — | $ | — | $ | 20,297,532 | ||||||||
Repurchase Agreements | — | 47,913 | — | 47,913 | ||||||||||||
Total Assets | $ | 20,297,532 | $ | 47,913 | $ | — | $ | 20,345,445 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 27 |
S&P MIDCAP 400® PURE GROWTH FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2017 |
Assets: | ||||
Investments, at value (cost $17,740,940) | $ | 20,297,532 | ||
Repurchase agreements, at value (cost $47,913) | 47,913 | |||
Receivables: | ||||
Securities sold | 121,616 | |||
Fund shares sold | 57,278 | |||
Dividends | 14,485 | |||
Securities lending income | 15 | |||
Interest | 6 | |||
Total assets | 20,538,845 | |||
Liabilities: | ||||
Overdraft due to custodian bank | 1,471 | |||
Payable for: | ||||
Securities purchased | 80,525 | |||
Management fees | 13,520 | |||
Fund shares redeemed | 7,540 | |||
Transfer agent and administrative fees | 4,507 | |||
Investor service fees | 4,507 | |||
Portfolio accounting fees | 1,802 | |||
Miscellaneous | 30,652 | |||
Total liabilities | 144,524 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 20,394,321 | ||
Net assets consist of: | ||||
Paid in capital | $ | 16,916,881 | ||
Undistributed net investment income | — | |||
Accumulated net realized gain on investments | 920,848 | |||
Net unrealized appreciation on investments | 2,556,592 | |||
Net assets | $ | 20,394,321 | ||
Capital shares outstanding | 518,833 | |||
Net asset value per share | $ | 39.31 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends | $ | 185,328 | ||
Interest | 1,128 | |||
Income from securities lending, net | 368 | |||
Total investment income | 186,824 | |||
Expenses: | ||||
Management fees | 154,609 | |||
Investor service fees | 51,536 | |||
Transfer agent and administrative fees | 51,536 | |||
Professional fees | 31,165 | |||
Portfolio accounting fees | 20,615 | |||
Custodian fees | 3,640 | |||
Trustees’ fees* | 2,731 | |||
Line of credit fees | 39 | |||
Miscellaneous | 15,551 | |||
Total expenses | 331,422 | |||
Net investment loss | (144,598 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 2,534,052 | |||
Net realized gain | 2,534,052 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 1,073,528 | |||
Net change in unrealized appreciation (depreciation) | 1,073,528 | |||
Net realized and unrealized gain | 3,607,580 | |||
Net increase in net assets resulting from operations | $ | 3,462,982 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a) (19) of the 1940 Act. |
28 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P MIDCAP 400® PURE GROWTH FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (144,598 | ) | $ | (148,149 | ) | ||
Net realized gain on investments | 2,534,052 | 1,320,585 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 1,073,528 | (2,117,736 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 3,462,982 | (945,300 | ) | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 37,220,117 | 53,165,131 | ||||||
Cost of shares redeemed | (39,349,617 | ) | (67,302,715 | ) | ||||
Net decrease from capital share transactions | (2,129,500 | ) | (14,137,584 | ) | ||||
Net increase (decrease) in net assets | 1,333,482 | (15,082,884 | ) | |||||
Net assets: | ||||||||
Beginning of year | 19,060,839 | 34,143,723 | ||||||
End of year | $ | 20,394,321 | $ | 19,060,839 | ||||
Undistributed net investment income at end of year | $ | — | $ | — | ||||
Capital share activity: | ||||||||
Shares sold | 1,043,953 | 1,665,435 | ||||||
Shares redeemed | (1,100,852 | ) | (2,148,974 | ) | ||||
Net decrease in shares | (56,899 | ) | (483,539 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 29 |
S&P MIDCAP 400® PURE GROWTH FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 33.11 | $ | 32.23 | $ | 34.05 | $ | 43.02 | $ | 34.66 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.25 | ) | (.22 | ) | (.22 | ) | (.28 | ) | (.17 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 6.45 | 1.10 | .88 | (.31 | ) | 11.79 | ||||||||||||||
Total from investment operations | 6.20 | .88 | .66 | (.59 | ) | 11.62 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | — | — | (2.48 | ) | (8.38 | ) | (3.26 | ) | ||||||||||||
Total distributions | — | — | (2.48 | ) | (8.38 | ) | (3.26 | ) | ||||||||||||
Net asset value, end of period | $ | 39.31 | $ | 33.11 | $ | 32.23 | $ | 34.05 | $ | 43.02 | ||||||||||
Total Returnb | 18.73 | % | 2.70 | % | 1.32 | % | (1.55 | %) | 34.05 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 20,394 | $ | 19,061 | $ | 34,144 | $ | 29,927 | $ | 49,701 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.70 | %) | (0.71 | %) | (0.64 | %) | (0.67 | %) | (0.43 | %) | ||||||||||
Total expenses | 1.61 | % | 1.56 | % | 1.50 | % | 1.57 | % | 1.54 | % | ||||||||||
Portfolio turnover rate | 233 | % | 296 | % | 269 | % | 380 | % | 335 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
30 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
S&P MIDCAP 400® PURE VALUE FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a benchmark for mid-cap value securities on a daily basis. The Fund’s current benchmark is the S&P MidCap 400® Pure Value Index (the “underlying index”).
For the year ended December 31, 2017, S&P MidCap 400® Pure Value Fund returned 13.15%, compared with a return of 15.17% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
The Consumer Discretionary and Information Technology sectors contributed the most to the return of the underlying index for the period. The Consumer Staples and Health Care sectors detracted the most from return.
KB Home, First Solar, Inc., and CalAtlantic Group, Inc. added the most to return of the underlying index for the year. Frontier Communications Corp. — Class B, Endo International Plc, and World Fuel Services Corp. detracted the most from performance of the underlying index for the year.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 3, 2004
Ten Largest Holdings (% of Total Net Assets) | |
LifePoint Health, Inc. | 2.7% |
Office Depot, Inc. | 2.7% |
Avnet, Inc. | 2.4% |
GameStop Corp. — Class A | 2.4% |
Dillard’s, Inc. — Class A | 2.3% |
Genworth Financial, Inc. — Class A | 2.3% |
World Fuel Services Corp. | 2.3% |
Owens & Minor, Inc. | 2.2% |
Bed Bath & Beyond, Inc. | 2.1% |
Arrow Electronics, Inc. | 2.0% |
Top Ten Total | 23.4% |
“Ten Largest Holdings” excludes any temporary cash investments.
THE RYDEX FUNDS ANNUAL REPORT | 31 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
S&P MidCap 400® Pure Value Fund | 13.15% | 13.25% | 7.84% |
S&P MidCap 400 Pure Value Index | 15.17% | 15.36% | 10.07% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P MidCap 400 Pure Value Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
32 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
S&P MIDCAP 400® PURE VALUE FUND |
Shares | Value | |||||||
COMMON STOCKS† - 99.5% | ||||||||
Industrial - 18.7% | ||||||||
Avnet, Inc. | 10,590 | $ | 419,576 | |||||
Arrow Electronics, Inc.* | 4,274 | 343,672 | ||||||
Tech Data Corp.* | 3,504 | 343,287 | ||||||
AECOM* | 8,407 | 312,320 | ||||||
SYNNEX Corp. | 1,810 | 246,069 | ||||||
Esterline Technologies Corp.* | 2,880 | 215,136 | ||||||
Ryder System, Inc. | 2,100 | 176,757 | ||||||
Regal Beloit Corp. | 1,887 | 144,544 | ||||||
AGCO Corp. | 2,022 | 144,431 | ||||||
Trinity Industries, Inc. | 3,430 | 128,488 | ||||||
EMCOR Group, Inc. | 1,430 | 116,903 | ||||||
Greif, Inc. — Class A | 1,908 | 115,587 | ||||||
KBR, Inc. | 5,800 | 115,014 | ||||||
Owens-Illinois, Inc.* | 4,420 | 97,991 | ||||||
Worthington Industries, Inc. | 2,200 | 96,932 | ||||||
Kirby Corp.* | 1,300 | 86,840 | ||||||
GATX Corp. | 1,300 | 80,808 | ||||||
Knowles Corp.* | 5,030 | 73,740 | ||||||
Total Industrial | 3,258,095 | |||||||
Consumer, Cyclical - 18.7% | ||||||||
Office Depot, Inc. | 133,562 | 472,810 | ||||||
GameStop Corp. — Class A | 22,900 | 411,055 | ||||||
Dillard’s, Inc. — Class A1 | 6,800 | 408,340 | ||||||
World Fuel Services Corp. | 14,179 | 398,997 | ||||||
Bed Bath & Beyond, Inc. | 16,660 | 366,353 | ||||||
Dick’s Sporting Goods, Inc. | 10,150 | 291,711 | ||||||
AutoNation, Inc.* | 4,590 | 235,605 | ||||||
Cooper Tire & Rubber Co. | 5,650 | 199,727 | ||||||
Big Lots, Inc. | 2,668 | 149,808 | ||||||
JetBlue Airways Corp.* | 6,000 | 134,040 | ||||||
HNI Corp. | 2,570 | 99,125 | ||||||
International Speedway Corp. — Class A | 1,922 | 76,592 | ||||||
Total Consumer, Cyclical | 3,244,163 | |||||||
Financial - 17.4% | ||||||||
Genworth Financial, Inc. — Class A* | 130,747 | 406,623 | ||||||
Legg Mason, Inc. | 5,899 | 247,640 | ||||||
Old Republic International Corp. | 10,937 | 233,833 | ||||||
Reinsurance Group of America, Inc. — Class A | 1,316 | 205,204 | ||||||
Aspen Insurance Holdings Ltd. | 4,010 | 162,806 | ||||||
Alleghany Corp.* | 230 | 137,101 | ||||||
Hanover Insurance Group, Inc. | 1,259 | 136,073 | ||||||
WR Berkley Corp. | 1,886 | 135,132 | ||||||
New York Community Bancorp, Inc. | 10,280 | 133,845 | ||||||
Sabra Health Care REIT, Inc. REIT | 7,060 | 132,516 | ||||||
FNB Corp. | 9,420 | 130,184 | ||||||
Stifel Financial Corp. | 2,135 | 127,161 | ||||||
Mercury General Corp. | 2,115 | 113,026 | ||||||
Washington Prime Group, Inc. REIT | 15,260 | 108,651 | ||||||
American Financial Group, Inc. | 877 | 95,189 | ||||||
LaSalle Hotel Properties REIT | 3,389 | 95,130 | ||||||
Associated Banc-Corp. | 3,627 | 92,126 | ||||||
PacWest Bancorp | 1,800 | 90,720 | ||||||
Umpqua Holdings Corp. | 3,980 | 82,784 | ||||||
Alexander & Baldwin, Inc. REIT | 2,900 | 80,446 | ||||||
United Bankshares, Inc. | 2,300 | 79,925 | ||||||
Total Financial | 3,026,115 | |||||||
Consumer, Non-cyclical - 16.3% | ||||||||
LifePoint Health, Inc.* | 9,506 | 473,399 | ||||||
Owens & Minor, Inc. | 20,054 | 378,620 | ||||||
United Natural Foods, Inc.* | 6,531 | 321,782 | ||||||
TreeHouse Foods, Inc.* | 6,430 | 318,028 | ||||||
Dean Foods Co. | 24,024 | 277,718 | ||||||
Acadia Healthcare Company, Inc.* | 7,090 | 231,346 | ||||||
ManpowerGroup, Inc. | 1,637 | 206,442 | ||||||
Aaron’s, Inc. | 3,917 | 156,092 | ||||||
Avis Budget Group, Inc.* | 3,490 | 153,141 | ||||||
Graham Holdings Co. — Class B | 240 | 134,004 | ||||||
MEDNAX, Inc.* | 2,000 | 106,880 | ||||||
Adtalem Global Education, Inc.* | 2,035 | 85,572 | ||||||
Total Consumer, Non-cyclical | 2,843,024 | |||||||
Energy - 14.9% | ||||||||
NOW, Inc.* | 29,950 | 330,348 | ||||||
PBF Energy, Inc. — Class A | 9,300 | 329,685 | ||||||
Diamond Offshore Drilling, Inc.*,1 | 13,970 | 259,702 | ||||||
HollyFrontier Corp. | 4,659 | 238,634 | ||||||
Ensco plc — Class A | 37,210 | 219,911 | ||||||
Murphy USA, Inc.* | 2,362 | 189,810 | ||||||
QEP Resources, Inc.* | 18,910 | 180,969 | ||||||
Rowan Companies plc — Class A* | 11,130 | 174,296 | ||||||
Gulfport Energy Corp.* | 12,900 | 164,604 | ||||||
Oceaneering International, Inc. | 7,207 | 152,356 | ||||||
Murphy Oil Corp. | 4,480 | 139,104 | ||||||
CNX Resources Corp.* | 9,360 | 136,937 | ||||||
Callon Petroleum Co.* | 6,540 | 79,461 | ||||||
Total Energy | 2,595,817 | |||||||
Basic Materials - 7.2% | ||||||||
Domtar Corp. | 6,657 | 329,655 | ||||||
United States Steel Corp. | 8,300 | 292,077 | ||||||
Reliance Steel & Aluminum Co. | 3,262 | 279,847 | ||||||
Commercial Metals Co. | 11,256 | 239,978 | ||||||
Allegheny Technologies, Inc.* | 4,310 | 104,043 | ||||||
Total Basic Materials | 1,245,600 | |||||||
Technology - 3.3% | ||||||||
Convergys Corp. | 6,590 | 154,865 | ||||||
Synaptics, Inc.* | 3,820 | 152,571 | ||||||
NCR Corp.* | 3,160 | 107,408 | ||||||
NetScout Systems, Inc.* | 2,660 | 80,997 | ||||||
Diebold Nixdorf, Inc.1 | 4,933 | 80,655 | ||||||
Total Technology | 576,496 | |||||||
Communications - 3.0% | ||||||||
Telephone & Data Systems, Inc. | 9,905 | 275,359 | ||||||
Ciena Corp.* | 6,970 | 145,882 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 33 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
S&P MIDCAP 400® PURE VALUE FUND |
Shares | Value | |||||||
ARRIS International plc* | 4,130 | $ | 106,100 | |||||
Total Communications | 527,341 | |||||||
Total Common Stocks | ||||||||
(Cost $15,055,646) | 17,316,651 | |||||||
Face Amount | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.7% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | $ | 80,912 | 80,912 | |||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 43,183 | 43,183 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $124,095) | 124,095 |
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 3.1% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%4 | 543,771 | 543,771 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $543,771) | 543,771 | |||||||
Total Investments - 103.3% | ||||||||
(Cost $15,723,512) | $ | 17,984,517 | ||||||
Other Assets & Liabilities, net - (3.3)% | (569,080 | ) | ||||||
Total Net Assets - 100.0% | $ | 17,415,437 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7 day yield as of December 31, 2017. |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 17,316,651 | $ | — | $ | — | $ | 17,316,651 | ||||||||
Repurchase Agreements | — | 124,095 | — | 124,095 | ||||||||||||
Securities Lending Collateral | 543,771 | — | — | 543,771 | ||||||||||||
Total Assets | $ | 17,860,422 | $ | 124,095 | $ | — | $ | 17,984,517 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
34 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P MIDCAP 400® PURE VALUE FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2017 |
Assets: | ||||
Investments, at value - including $520,772 of securities loaned (cost $15,599,417) | $ | 17,860,422 | ||
Repurchase agreements, at value (cost $124,095) | 124,095 | |||
Cash | 268 | |||
Receivables: | ||||
Fund shares sold | 70,775 | |||
Dividends | 12,991 | |||
Securities lending income | 1,085 | |||
Interest | 14 | |||
Total assets | 18,069,650 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities loaned | 543,771 | |||
Fund shares redeemed | 64,220 | |||
Management fees | 10,135 | |||
Transfer agent and administrative fees | 3,379 | |||
Investor service fees | 3,379 | |||
Portfolio accounting fees | 1,351 | |||
Miscellaneous | 27,978 | |||
Total liabilities | 654,213 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 17,415,437 | ||
Net assets consist of: | ||||
Paid in capital | $ | 14,098,300 | ||
Undistributed net investment income | — | |||
Accumulated net realized gain on investments | 1,056,132 | |||
Net unrealized appreciation on investments | 2,261,005 | |||
Net assets | $ | 17,415,437 | ||
Capital shares outstanding | 349,807 | |||
Net asset value per share | $ | 49.79 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends | $ | 252,256 | ||
Interest | 853 | |||
Income from securities lending, net | 8,690 | |||
Total investment income | 261,799 | |||
Expenses: | ||||
Management fees | 130,527 | |||
Investor service fees | 43,509 | |||
Transfer agent and administrative fees | 43,509 | |||
Professional fees | 24,700 | |||
Portfolio accounting fees | 17,404 | |||
Custodian fees | 3,054 | |||
Trustees’ fees* | 2,282 | |||
Line of credit fees | 23 | |||
Miscellaneous | 14,451 | |||
Total expenses | 279,459 | |||
Net investment loss | (17,660 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 3,203,311 | |||
Net realized gain | 3,203,311 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (1,434,502 | ) | ||
Net change in unrealized appreciation (depreciation) | (1,434,502 | ) | ||
Net realized and unrealized gain | 1,768,809 | |||
Net increase in net assets resulting from operations | $ | 1,751,149 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a) (19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 35 |
S&P MIDCAP 400® PURE VALUE FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (17,660 | ) | $ | (15,790 | ) | ||
Net realized gain on investments | 3,203,311 | 2,647,427 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (1,434,502 | ) | 2,343,449 | |||||
Net increase in net assets resulting from operations | 1,751,149 | 4,975,086 | ||||||
Distributions to shareholders from: | ||||||||
Net investment income | — | (78,852 | ) | |||||
Net realized gains | (2,937,929 | ) | — | |||||
Total distributions to shareholders | (2,937,929 | ) | (78,852 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 20,987,144 | 64,197,074 | ||||||
Distributions reinvested | 2,937,929 | 78,852 | ||||||
Cost of shares redeemed | (35,529,984 | ) | (50,972,378 | ) | ||||
Net increase (decrease) from capital share transactions | (11,604,911 | ) | 13,303,548 | |||||
Net increase (decrease) in net assets | (12,791,691 | ) | 18,199,782 | |||||
Net assets: | ||||||||
Beginning of year | 30,207,128 | 12,007,346 | ||||||
End of year | $ | 17,415,437 | $ | 30,207,128 | ||||
Undistributed net investment income at end of year | $ | — | $ | — | ||||
Capital share activity: | ||||||||
Shares sold | 407,681 | 1,357,429 | * | |||||
Shares issued from reinvestment of distributions | 64,912 | 1,647 | * | |||||
Shares redeemed | (678,573 | ) | (1,087,157 | )* | ||||
Net increase (decrease) in shares | (205,980 | ) | 271,919 | * |
* | Capital Share activity for the periods presented through December 31, 2016 has been restated to reflect a 2:1 share split effective December 1, 2016 — See Note 11. |
36 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P MIDCAP 400® PURE VALUE FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016c | Year Ended December 31, 2015c | Year Ended December 31, 2014c | Year Ended December 31, 2013c | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 54.35 | $ | 42.30 | $ | 53.78 | $ | 58.55 | $ | 43.15 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.05 | ) | (.06 | ) | .26 | .05 | .03 | |||||||||||||
Net gain (loss) on investments (realized and unrealized) | 6.13 | 12.41 | (5.93 | ) | 3.68 | 15.42 | ||||||||||||||
Total from investment operations | 6.08 | 12.35 | (5.67 | ) | 3.73 | 15.45 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | — | (.30 | ) | (.08 | ) | (.05 | ) | (.05 | ) | |||||||||||
Net realized gains | (10.64 | ) | — | (5.73 | ) | (8.45 | ) | — | ||||||||||||
Total distributions | (10.64 | ) | (.30 | ) | (5.81 | ) | (8.50 | ) | (.05 | ) | ||||||||||
Net asset value, end of period | $ | 49.79 | $ | 54.35 | $ | 42.30 | $ | 53.78 | $ | 58.55 | ||||||||||
Total Returnb | 13.15 | % | 28.89 | % | (11.86 | %) | 6.72 | % | 35.80 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 17,415 | $ | 30,207 | $ | 12,007 | $ | 17,460 | $ | 28,156 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.10 | %) | (0.07 | %) | 0.52 | % | 0.08 | % | 0.04 | % | ||||||||||
Total expenses | 1.61 | % | 1.56 | % | 1.50 | % | 1.57 | % | 1.54 | % | ||||||||||
Portfolio turnover rate | 144 | % | 282 | % | 280 | % | 353 | % | 499 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Share split — Per share amounts for the periods presented through December 31, 2016 have been restated to reflect a 2:1 share split effective December 1, 2016 — See Note 11. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 37 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
S&P SMALLCAP 600® PURE GROWTH FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a benchmark for small-cap growth securities on a daily basis. The Fund’s current benchmark is the S&P SmallCap 600® Pure Growth Index (the “underlying index”).
For the year ended December 31, 2017, S&P SmallCap 600® Pure Growth Fund return was 16.08%, compared with a gain of 18.21% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
The Consumer Discretionary sector and the Health Care sector contributed the most to the return of the underlying index for the period. The Consumer Staples sector was the only one to detract from return. The Telecommunications Services sector contributed the least.
The best-performing stocks of the underlying index were LendingTree, Inc., Installed Building Products, Inc., and MKS Instruments, Inc. The weakest performers of the underlying index were Progenics Pharmaceuticals, Inc., AMAG Pharmaceuticals, Inc., and Synchronoss Technologies, Inc.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 3, 2004
Ten Largest Holdings (% of Total Net Assets) | |
Applied Optoelectronics, Inc. | 1.4% |
OraSure Technologies, Inc. | 1.3% |
Four Corners Property Trust, Inc. | 1.3% |
Mercury Systems, Inc. | 1.3% |
NMI Holdings, Inc. — Class A | 1.3% |
LendingTree, Inc. | 1.3% |
MiMedx Group, Inc. | 1.3% |
LGI Homes, Inc. | 1.3% |
Innoviva, Inc. | 1.2% |
Cutera, Inc. | 1.2% |
Top Ten Total | 12.9% |
“Ten Largest Holdings” excludes any temporary cash investments.
38 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
S&P SmallCap 600® Pure Growth Fund | 16.08% | 14.17% | 9.38% |
S&P SmallCap 600 Pure Growth Index | 18.21% | 16.15% | 11.55% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P SmallCap 600 Pure Growth Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 39 |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
S&P SMALLCAP 600® PURE GROWTH FUND |
Shares | Value | |||||||
COMMON STOCKS† - 99.9% | ||||||||
Consumer, Non-cyclical - 33.2% | ||||||||
OraSure Technologies, Inc.* | 14,609 | $ | 275,526 | |||||
LendingTree, Inc.*,1 | 762 | 259,423 | ||||||
MiMedx Group, Inc.*,1 | 20,540 | 259,009 | ||||||
Innoviva, Inc.* | 17,732 | 251,617 | ||||||
Cutera, Inc.* | 5,500 | 249,425 | ||||||
BioTelemetry, Inc.* | 8,184 | 244,702 | ||||||
Supernus Pharmaceuticals, Inc.* | 6,031 | 240,335 | ||||||
Corcept Therapeutics, Inc.*,1 | 12,970 | 234,238 | ||||||
Calavo Growers, Inc.1 | 2,576 | 217,414 | ||||||
Enanta Pharmaceuticals, Inc.* | 3,628 | 212,891 | ||||||
AMN Healthcare Services, Inc.* | 3,940 | 194,045 | ||||||
Insperity, Inc. | 3,380 | 193,843 | ||||||
Integer Holdings Corp.* | 3,800 | 172,140 | ||||||
NutriSystem, Inc. | 3,024 | 159,062 | ||||||
Amedisys, Inc.* | 2,990 | 157,603 | ||||||
On Assignment, Inc.* | 2,440 | 156,819 | ||||||
ICU Medical, Inc.* | 720 | 155,520 | ||||||
Providence Service Corp.* | 2,540 | 150,724 | ||||||
Healthcare Services Group, Inc. | 2,770 | 146,034 | ||||||
Emergent BioSolutions, Inc.* | 3,100 | 144,057 | ||||||
LeMaitre Vascular, Inc. | 4,348 | 138,440 | ||||||
Korn/Ferry International | 3,260 | 134,899 | ||||||
Ligand Pharmaceuticals, Inc. — Class B* | 984 | 134,739 | ||||||
Coca-Cola Bottling Company Consolidated | 620 | 133,461 | ||||||
LHC Group, Inc.* | 2,140 | 131,075 | ||||||
Inogen, Inc.* | 1,090 | 129,797 | ||||||
Central Garden & Pet Co. — Class A* | 3,440 | 129,722 | ||||||
Merit Medical Systems, Inc.* | 2,787 | 120,398 | ||||||
Chemed Corp. | 470 | 114,219 | ||||||
Medifast, Inc. | 1,560 | 108,904 | ||||||
Momenta Pharmaceuticals, Inc.* | 7,600 | 106,020 | ||||||
Repligen Corp.* | 2,910 | 105,575 | ||||||
ANI Pharmaceuticals, Inc.* | 1,612 | 103,894 | ||||||
Cantel Medical Corp. | 1,001 | 102,973 | ||||||
CorVel Corp.* | 1,930 | 102,097 | ||||||
Myriad Genetics, Inc.* | 2,850 | 97,883 | ||||||
Tivity Health, Inc.* | 2,560 | 93,568 | ||||||
Green Dot Corp. — Class A* | 1,470 | 88,582 | ||||||
Neogen Corp.* | 1,065 | 87,554 | ||||||
Heska Corp.* | 969 | 77,724 | ||||||
Nektar Therapeutics* | 1,210 | 72,261 | ||||||
Phibro Animal Health Corp. — Class A | 2,150 | 72,025 | ||||||
Orthofix International N.V.* | 1,150 | 62,905 | ||||||
Surmodics, Inc.* | 2,220 | 62,160 | ||||||
Eagle Pharmaceuticals, Inc.* | 1,149 | 61,380 | ||||||
Inter Parfums, Inc. | 1,200 | 52,140 | ||||||
Lantheus Holdings, Inc.* | 2,130 | 43,559 | ||||||
Central Garden & Pet Co.* | 1,019 | 39,660 | ||||||
Total Consumer, Non-cyclical | 6,782,041 | |||||||
Industrial - 18.0% | ||||||||
Applied Optoelectronics, Inc.*,1 | 7,600 | 287,432 | ||||||
TTM Technologies, Inc.* | 14,321 | 224,410 | ||||||
KEMET Corp.* | 14,590 | 219,726 | ||||||
TopBuild Corp.* | 2,900 | 219,646 | ||||||
EnPro Industries, Inc. | 1,980 | 185,150 | ||||||
Control4 Corp.* | 5,980 | 177,965 | ||||||
Proto Labs, Inc.*,1 | 1,720 | 177,160 | ||||||
Patrick Industries, Inc.* | 2,435 | 169,076 | ||||||
Trex Company, Inc.* | 1,540 | 166,920 | ||||||
PGT Innovations, Inc.* | 9,666 | 162,872 | ||||||
II-VI, Inc.* | 3,272 | 153,620 | ||||||
Electro Scientific Industries, Inc.* | 7,030 | 150,653 | ||||||
US Concrete, Inc.* | 1,800 | 150,570 | ||||||
Rogers Corp.* | 820 | 132,774 | ||||||
John Bean Technologies Corp. | 972 | 107,698 | ||||||
Alamo Group, Inc. | 880 | 99,326 | ||||||
Comfort Systems USA, Inc. | 2,170 | 94,721 | ||||||
Aerovironment, Inc.* | 1,640 | 92,102 | ||||||
Harsco Corp.* | 4,560 | 85,044 | ||||||
Aerojet Rocketdyne Holdings, Inc.* | 2,540 | 79,248 | ||||||
American Woodmark Corp.* | 600 | 78,150 | ||||||
Vicor Corp.* | 3,259 | 68,113 | ||||||
Forward Air Corp. | 1,130 | 64,907 | ||||||
Simpson Manufacturing Company, Inc. | 1,070 | 61,429 | ||||||
Barnes Group, Inc. | 960 | 60,739 | ||||||
Axon Enterprise, Inc.* | 2,138 | 56,657 | ||||||
Advanced Energy Industries, Inc.* | 745 | 50,273 | ||||||
Albany International Corp. — Class A | 810 | 49,774 | ||||||
Raven Industries, Inc. | 1,330 | 45,685 | ||||||
Total Industrial | 3,671,840 | |||||||
Consumer, Cyclical - 15.9% | ||||||||
LGI Homes, Inc.* | 3,440 | 258,103 | ||||||
Installed Building Products, Inc.* | 2,961 | 224,888 | ||||||
Five Below, Inc.* | 2,856 | 189,410 | ||||||
Scientific Games Corp. — Class A* | 3,457 | 177,344 | ||||||
Sleep Number Corp.* | 4,610 | 173,290 | ||||||
Marriott Vacations Worldwide Corp. | 1,210 | 163,604 | ||||||
Ollie’s Bargain Outlet Holdings, Inc.* | 3,069 | 163,424 | ||||||
Winnebago Industries, Inc. | 2,896 | 161,018 | ||||||
Fox Factory Holding Corp.* | 4,007 | 155,672 | ||||||
Cavco Industries, Inc.* | 1,010 | 154,126 | ||||||
Dave & Buster’s Entertainment, Inc.* | 2,669 | 147,249 | ||||||
Penn National Gaming, Inc.* | 4,510 | 141,299 | ||||||
FirstCash, Inc. | 1,880 | 126,806 | ||||||
LCI Industries | 972 | 126,360 | ||||||
Ruth’s Hospitality Group, Inc. | 5,820 | 126,003 | ||||||
iRobot Corp.*,1 | 1,500 | 115,050 | ||||||
PetMed Express, Inc. | 2,500 | 113,750 | ||||||
Monarch Casino & Resort, Inc.* | 2,480 | 111,154 | ||||||
Wingstop, Inc. | 2,843 | 110,820 | ||||||
RH* | 1,210 | 104,314 | ||||||
Boyd Gaming Corp. | 2,470 | 86,573 | ||||||
Interface, Inc. — Class A | 2,450 | 61,617 | ||||||
Shake Shack, Inc. — Class A* | 1,240 | 53,568 | ||||||
Total Consumer, Cyclical | 3,245,442 | |||||||
Technology - 14.8% | ||||||||
Mercury Systems, Inc.* | 5,141 | 263,990 | ||||||
Axcelis Technologies, Inc.* | 8,560 | 245,672 |
40 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
S&P SMALLCAP 600® PURE GROWTH FUND |
Shares | Value | |||||||
Qualys, Inc.* | 4,120 | $ | 244,522 | |||||
Brooks Automation, Inc. | 10,250 | 244,463 | ||||||
Cohu, Inc. | 9,560 | 209,842 | ||||||
Rudolph Technologies, Inc.* | 8,620 | 206,018 | ||||||
CEVA, Inc.* | 4,341 | 200,337 | ||||||
Virtusa Corp.* | 4,070 | 179,406 | ||||||
Kulicke & Soffa Industries, Inc.* | 7,350 | 178,862 | ||||||
MaxLinear, Inc. — Class A* | 6,430 | 169,881 | ||||||
Ebix, Inc.1 | 1,744 | 138,212 | ||||||
Barracuda Networks, Inc.* | 4,270 | 117,425 | ||||||
Omnicell, Inc.* | 2,410 | 116,885 | ||||||
Quality Systems, Inc.* | 8,210 | 111,492 | ||||||
Cabot Microelectronics Corp. | 1,040 | 97,843 | ||||||
ExlService Holdings, Inc.* | 1,590 | 95,956 | ||||||
TeleTech Holdings, Inc. | 1,710 | 68,828 | ||||||
Progress Software Corp. | 1,290 | 54,915 | ||||||
SPS Commerce, Inc.* | 940 | 45,675 | ||||||
Rambus, Inc.* | 3,078 | 43,769 | ||||||
Total Technology | 3,033,993 | |||||||
Financial - 11.8% | ||||||||
Four Corners Property Trust, Inc. REIT | 10,292 | 264,504 | ||||||
NMI Holdings, Inc. — Class A* | 15,490 | 263,330 | ||||||
National Storage Affiliates Trust REIT | 9,020 | 245,885 | ||||||
National Bank Holdings Corp. — Class A | 6,640 | 215,335 | ||||||
Walker & Dunlop, Inc.* | 4,501 | 213,798 | ||||||
Third Point Reinsurance Ltd.* | 10,370 | 151,921 | ||||||
Evercore, Inc. — Class A | 1,535 | 138,150 | ||||||
BofI Holding, Inc.*,1 | 4,474 | 133,773 | ||||||
HFF, Inc. — Class A | 2,710 | 131,814 | ||||||
Easterly Government Properties, Inc. REIT | 5,990 | 127,827 | ||||||
LegacyTexas Financial Group, Inc. | 2,545 | 107,424 | ||||||
Pacific Premier Bancorp, Inc.* | 2,330 | 93,200 | ||||||
Meta Financial Group, Inc. | 910 | 84,311 | ||||||
ServisFirst Bancshares, Inc. | 1,746 | 72,459 | ||||||
Lexington Realty Trust REIT | 6,858 | 66,180 | ||||||
WageWorks, Inc.* | 940 | 58,280 | ||||||
EastGroup Properties, Inc. REIT1 | 620 | 54,796 | ||||||
Total Financial | 2,422,987 | |||||||
Communications - 4.5% | ||||||||
Stamps.com, Inc.* | 1,106 | 207,928 | ||||||
World Wrestling Entertainment, Inc. — Class A | 5,688 | 173,939 | ||||||
QuinStreet, Inc.* | 14,980 | 125,532 | ||||||
CalAmp Corp.* | 5,390 | 115,507 | ||||||
XO Group, Inc.* | 6,100 | 112,606 | ||||||
Vonage Holdings Corp.* | 7,210 | 73,326 | ||||||
Shutterstock, Inc.* | 1,390 | 59,812 | ||||||
Cogent Communications Holdings, Inc. | 995 | 45,074 | ||||||
Total Communications | 913,724 | |||||||
Basic Materials - 1.7% | ||||||||
Kraton Corp.* | 3,435 | 165,464 | ||||||
Koppers Holdings, Inc.* | 2,610 | 132,849 | ||||||
Ingevity Corp.* | 600 | 42,282 | ||||||
Total Basic Materials | 340,595 | |||||||
Total Common Stocks | ||||||||
(Cost $16,903,790) | 20,410,622 | |||||||
Face Amount | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.7% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | $ | 90,629 | 90,629 | |||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 48,369 | 48,369 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $138,998) | 138,998 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 6.3% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%4 | 1,291,503 | 1,291,503 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $1,291,503) | 1,291,503 | |||||||
Total Investments - 106.9% | ||||||||
(Cost $18,334,291) | $ | 21,841,123 | ||||||
Other Assets & Liabilities, net - (6.9)% | (1,402,935 | ) | ||||||
Total Net Assets - 100.0% | $ | 20,438,188 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7 day yield as of December 31, 2017. |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 41 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
S&P SMALLCAP 600® PURE GROWTH FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 20,410,622 | $ | — | $ | — | $ | 20,410,622 | ||||||||
Repurchase Agreements | — | 138,998 | — | 138,998 | ||||||||||||
Securities Lending Collateral | 1,291,503 | — | — | 1,291,503 | ||||||||||||
Total Assets | $ | 21,702,125 | $ | 138,998 | $ | — | $ | 21,841,123 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
42 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P SMALLCAP 600® PURE GROWTH FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2017 |
Assets: | ||||
Investments, at value - including $1,237,803 of securities loaned (cost $18,195,293) | $ | 21,702,125 | ||
Repurchase agreements, at value (cost $138,998) | 138,998 | |||
Receivables: | ||||
Securities sold | 220,780 | |||
Fund shares sold | 23,221 | |||
Dividends | 7,978 | |||
Securities lending income | 2,786 | |||
Interest | 16 | |||
Total assets | 22,095,904 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities loaned | 1,291,503 | |||
Fund shares redeemed | 311,106 | |||
Management fees | 12,826 | |||
Transfer agent and administrative fees | 4,275 | |||
Investor service fees | 4,275 | |||
Portfolio accounting fees | 1,710 | |||
Miscellaneous | 32,021 | |||
Total liabilities | 1,657,716 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 20,438,188 | ||
Net assets consist of: | ||||
Paid in capital | $ | 16,945,275 | ||
Undistributed net investment income | 1,221 | |||
Accumulated net realized loss on investments | (15,140 | ) | ||
Net unrealized appreciation on investments | 3,506,832 | |||
Net assets | $ | 20,438,188 | ||
Capital shares outstanding | 371,969 | |||
Net asset value per share | $ | 54.95 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends | $ | 126,028 | ||
Interest | 988 | |||
Income from securities lending, net | 8,681 | |||
Total investment income | 135,697 | |||
Expenses: | ||||
Management fees | 144,314 | |||
Investor service fees | 48,105 | |||
Transfer agent and administrative fees | 48,104 | |||
Professional fees | 29,655 | |||
Portfolio accounting fees | 19,242 | |||
Custodian fees | 3,287 | |||
Trustees’ fees* | 2,247 | |||
Line of credit fees | 8 | |||
Miscellaneous | 14,391 | |||
Total expenses | 309,353 | |||
Net investment loss | (173,656 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 1,913,809 | |||
Net realized gain | 1,913,809 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 383,097 | |||
Net change in unrealized appreciation (depreciation) | 383,097 | |||
Net realized and unrealized gain | 2,296,906 | |||
Net increase in net assets resulting from operations | $ | 2,123,250 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a) (19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 43 |
S&P SMALLCAP 600® PURE GROWTH FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (173,656 | ) | $ | (53,294 | ) | ||
Net realized gain on investments | 1,913,809 | 1,486,851 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 383,097 | 275,329 | ||||||
Net increase in net assets resulting from operations | 2,123,250 | 1,708,886 | ||||||
Distributions to shareholders from: | ||||||||
Net realized gains | (799,644 | ) | — | |||||
Total distributions to shareholders | (799,644 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 48,903,502 | 76,277,555 | ||||||
Distributions reinvested | 799,644 | — | ||||||
Cost of shares redeemed | (51,432,819 | ) | (79,298,060 | ) | ||||
Net decrease from capital share transactions | (1,729,673 | ) | (3,020,505 | ) | ||||
Net decrease in net assets | (406,067 | ) | (1,311,619 | ) | ||||
Net assets: | ||||||||
Beginning of year | 20,844,255 | 22,155,874 | ||||||
End of year | $ | 20,438,188 | $ | 20,844,255 | ||||
Undistributed net investment income at end of year | $ | 1,221 | $ | — | ||||
Capital share activity: | ||||||||
Shares sold | 940,267 | 1,749,429 | ||||||
Shares issued from reinvestment of distributions | 15,863 | — | ||||||
Shares redeemed | (1,002,241 | ) | (1,858,795 | ) | ||||
Net decrease in shares | (46,111 | ) | (109,366 | ) |
44 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P SMALLCAP 600® PURE GROWTH FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 49.86 | $ | 42.01 | $ | 45.67 | $ | 45.67 | $ | 34.20 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.47 | ) | (.14 | ) | (.30 | ) | (.38 | ) | (.32 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 8.25 | 7.99 | .62 | .38 | 14.34 | |||||||||||||||
Total from investment operations | 7.78 | 7.85 | .32 | — | 14.02 | |||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (2.69 | ) | — | (3.98 | ) | — | (2.55 | ) | ||||||||||||
Total distributions | (2.69 | ) | — | (3.98 | ) | — | (2.55 | ) | ||||||||||||
Net asset value, end of period | $ | 54.95 | $ | 49.86 | $ | 42.01 | $ | 45.67 | $ | 45.67 | ||||||||||
Total Returnb | 16.08 | % | 18.69 | % | (0.37 | %) | 0.00 | % | 41.30 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 20,438 | $ | 20,844 | $ | 22,156 | $ | 25,379 | $ | 48,492 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.90 | %) | (0.32 | %) | (0.64 | %) | (0.85 | %) | (0.78 | %) | ||||||||||
Total expenses | 1.61 | % | 1.56 | % | 1.50 | % | 1.57 | % | 1.54 | % | ||||||||||
Portfolio turnover rate | 280 | % | 475 | % | 282 | % | 268 | % | 350 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 45 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
S&P SMALLCAP 600® PURE VALUE FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a benchmark for small-cap value securities on a daily basis. The Fund’s current benchmark is the S&P SmallCap 600® Pure Value Index (the “underlying index”).
For the year ended December 31, 2017, S&P SmallCap 600® Pure Value Fund returned -0.28%, compared with a return of 1.24% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
The sectors contributing the most to the return of the underlying index for the year were the Information Technology sector and Health Care sector. The Consumer Discretionary sector and the Energy sector detracted the most from return.
The stocks contributing the most to return of the underlying index were RH, Inc., Electro Scientific Industries, Inc. and Comtech Telecommunications Corp. Those detracting the most from return of the underlying index were Adeptus Health, Inc. — Class A, Fred’s, Inc. — Class A, and Tuesday Morning Corp.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 3, 2004
Ten Largest Holdings (% of Total Net Assets) | |
Finish Line, Inc. — Class A | 1.6% |
DHI Group, Inc. | 1.4% |
Barnes & Noble Education, Inc. | 1.4% |
Olympic Steel, Inc. | 1.4% |
Big 5 Sporting Goods Corp. | 1.3% |
Green Plains, Inc. | 1.3% |
Barnes & Noble, Inc. | 1.2% |
Cloud Peak Energy, Inc. | 1.2% |
Perry Ellis International, Inc. | 1.2% |
ScanSource, Inc. | 1.2% |
Top Ten Total | 13.2% |
“Ten Largest Holdings” excludes any temporary cash investments.
46 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
S&P SmallCap 600® Pure Value Fund | (0.28%) | 10.45% | 7.47% |
S&P SmallCap 600 Pure Value Index | 1.24% | 12.32% | 9.50% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P SmallCap 600 Pure Value Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 47 |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
S&P SMALLCAP 600® PURE VALUE FUND |
Shares | Value | |||||||
COMMON STOCKS† - 99.9% | ||||||||
Consumer, Cyclical - 36.6% | ||||||||
Finish Line, Inc. — Class A1 | 19,790 | $ | 287,549 | |||||
Barnes & Noble Education, Inc.* | 29,424 | 242,454 | ||||||
Big 5 Sporting Goods Corp.1 | 30,923 | 235,015 | ||||||
Barnes & Noble, Inc. | 32,113 | 215,157 | ||||||
Perry Ellis International, Inc.* | 8,487 | 212,514 | ||||||
ScanSource, Inc.* | 5,922 | 212,008 | ||||||
Veritiv Corp.* | 6,737 | 194,699 | ||||||
Hibbett Sports, Inc.*,1 | 9,370 | 191,148 | ||||||
Abercrombie & Fitch Co. — Class A | 10,495 | 182,928 | ||||||
Superior Industries International, Inc. | 12,308 | 182,774 | ||||||
American Axle & Manufacturing Holdings, Inc.* | 10,550 | 179,666 | ||||||
Shoe Carnival, Inc. | 6,622 | 177,139 | ||||||
Cato Corp. — Class A1 | 11,100 | 176,712 | ||||||
Biglari Holdings, Inc.*,1 | 420 | 174,048 | ||||||
Sonic Automotive, Inc. — Class A | 8,898 | 164,168 | ||||||
Anixter International, Inc.* | 2,160 | 164,160 | ||||||
Express, Inc.* | 15,691 | 159,264 | ||||||
M/I Homes, Inc.* | 4,540 | 156,176 | ||||||
Group 1 Automotive, Inc. | 1,996 | 141,656 | ||||||
Genesco, Inc.* | 4,231 | 137,508 | ||||||
Kirkland’s, Inc.* | 11,347 | 135,767 | ||||||
EZCORP, Inc. — Class A* | 10,807 | 131,845 | ||||||
Chico’s FAS, Inc. | 14,670 | 129,389 | ||||||
J.C. Penney Company, Inc.*,1 | 39,767 | 125,664 | ||||||
Vera Bradley, Inc.* | 10,250 | 124,845 | ||||||
G-III Apparel Group Ltd.* | 3,310 | 122,106 | ||||||
MarineMax, Inc.* | 6,418 | 121,300 | ||||||
Regis Corp.* | 7,813 | 120,008 | ||||||
Red Robin Gourmet Burgers, Inc.* | 2,050 | 115,620 | ||||||
Caleres, Inc. | 3,279 | 109,781 | ||||||
Guess?, Inc.1 | 5,842 | 98,613 | ||||||
Zumiez, Inc.* | 4,655 | 96,940 | ||||||
Francesca’s Holdings Corp.* | 13,140 | 96,053 | ||||||
Asbury Automotive Group, Inc.* | 1,481 | 94,784 | ||||||
Core-Mark Holding Company, Inc. | 3,001 | 94,771 | ||||||
Haverty Furniture Companies, Inc. | 4,022 | 91,098 | ||||||
DSW, Inc. — Class A | 4,220 | 90,350 | ||||||
Vitamin Shoppe, Inc.* | 18,183 | 80,005 | ||||||
Fossil Group, Inc.*,1 | 9,910 | 77,001 | ||||||
Ascena Retail Group, Inc.* | 32,360 | 76,046 | ||||||
Titan International, Inc. | 5,490 | 70,711 | ||||||
Essendant, Inc. | 7,246 | 67,170 | ||||||
Cooper-Standard Holdings, Inc.* | 531 | 65,048 | ||||||
Vista Outdoor, Inc.* | 4,440 | 64,691 | ||||||
Fred’s, Inc. — Class A | 15,814 | 64,047 | ||||||
Movado Group, Inc. | 1,822 | 58,668 | ||||||
Daktronics, Inc. | 6,260 | 57,154 | ||||||
El Pollo Loco Holdings, Inc.* | 5,260 | 52,074 | ||||||
Unifi, Inc.* | 1,256 | 45,053 | ||||||
Standard Motor Products, Inc. | 920 | 41,317 | ||||||
Total Consumer, Cyclical | 6,504,662 | |||||||
Industrial - 17.0% | ||||||||
Olympic Steel, Inc. | 11,182 | 240,301 | ||||||
Roadrunner Transportation Systems, Inc.* | 26,695 | 205,818 | ||||||
Orion Group Holdings, Inc.* | 22,420 | 175,549 | ||||||
Sanmina Corp.* | 5,287 | 174,471 | ||||||
Atlas Air Worldwide Holdings, Inc.* | 2,642 | 154,953 | ||||||
Benchmark Electronics, Inc.* | 5,033 | 146,460 | ||||||
ArcBest Corp. | 3,916 | 139,997 | ||||||
Greenbrier Companies, Inc.1 | 2,299 | 122,537 | ||||||
DXP Enterprises, Inc.* | 4,140 | 122,420 | ||||||
Boise Cascade Co. | 3,058 | 122,014 | ||||||
MYR Group, Inc.* | 3,390 | 121,125 | ||||||
Hub Group, Inc. — Class A* | 2,365 | 113,284 | ||||||
Echo Global Logistics, Inc.* | 3,939 | 110,292 | ||||||
TimkenSteel Corp.* | 7,212 | 109,551 | ||||||
Powell Industries, Inc. | 3,711 | 106,320 | ||||||
Briggs & Stratton Corp. | 3,739 | 94,858 | ||||||
Tredegar Corp. | 4,591 | 88,147 | ||||||
Triumph Group, Inc. | 3,090 | 84,048 | ||||||
Bel Fuse, Inc. — Class B | 3,172 | 79,855 | ||||||
Matson, Inc. | 2,670 | 79,673 | ||||||
AAR Corp. | 1,822 | 71,586 | ||||||
Encore Wire Corp. | 1,450 | 70,543 | ||||||
Fabrinet* | 2,450 | 70,315 | ||||||
Haynes International, Inc. | 2,020 | 64,741 | ||||||
KapStone Paper and Packaging Corp. | 2,612 | 59,266 | ||||||
Plexus Corp.* | 852 | 51,734 | ||||||
Aegion Corp. — Class A* | 1,596 | 40,586 | ||||||
Total Industrial | 3,020,444 | |||||||
Consumer, Non-cyclical - 11.6% | ||||||||
Kelly Services, Inc. — Class A | 7,666 | 209,052 | ||||||
Seneca Foods Corp. — Class A* | 6,422 | 197,477 | ||||||
Andersons, Inc. | 4,934 | 153,694 | ||||||
Magellan Health, Inc.* | 1,510 | 145,790 | ||||||
Universal Corp. | 2,654 | 139,335 | ||||||
Diplomat Pharmacy, Inc.* | 6,488 | 130,214 | ||||||
SpartanNash Co. | 4,730 | 126,196 | ||||||
SUPERVALU, Inc.* | 5,667 | 122,407 | ||||||
TrueBlue, Inc.* | 4,241 | 116,628 | ||||||
LSC Communications, Inc. | 7,615 | 115,367 | ||||||
Team, Inc.*,1 | 7,080 | 105,492 | ||||||
ABM Industries, Inc. | 2,360 | 89,019 | ||||||
Navigant Consulting, Inc.* | 4,280 | 83,075 | ||||||
Community Health Systems, Inc.* | 16,161 | 68,846 | ||||||
FTI Consulting, Inc.* | 1,470 | 63,151 | ||||||
Cross Country Healthcare, Inc.* | 4,860 | 62,014 | ||||||
Invacare Corp. | 3,269 | 55,083 | ||||||
Resources Connection, Inc. | 2,776 | 42,889 | ||||||
AngioDynamics, Inc.* | 2,350 | 39,080 | ||||||
Total Consumer, Non-cyclical | 2,064,809 | |||||||
Financial - 10.9% | ||||||||
Stewart Information Services Corp. | 3,677 | 155,537 | ||||||
INTL FCStone, Inc.* | 3,383 | 143,879 | ||||||
CBL & Associates Properties, Inc. REIT1 | 24,590 | 139,179 |
48 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
S&P SMALLCAP 600® PURE VALUE FUND |
Shares | Value | |||||||
American Equity Investment Life Holding Co. | 4,372 | $ | 134,352 | |||||
Hersha Hospitality Trust REIT | 6,360 | 110,664 | ||||||
OFG Bancorp | 11,729 | 110,253 | ||||||
Maiden Holdings Ltd. | 15,074 | 99,488 | ||||||
First BanCorp*,1 | 18,560 | 94,656 | ||||||
Enova International, Inc.* | 5,600 | 85,120 | ||||||
ARMOUR Residential REIT, Inc. REIT | 3,170 | 81,532 | ||||||
Invesco Mortgage Capital, Inc. REIT | 4,550 | 81,127 | ||||||
Infinity Property & Casualty Corp. | 697 | 73,882 | ||||||
Apollo Commercial Real Estate Finance, Inc. REIT | 3,950 | 72,878 | ||||||
Navigators Group, Inc. | 1,422 | 69,251 | ||||||
Capstead Mortgage Corp. REIT | 7,691 | 66,527 | ||||||
United Fire Group, Inc. | 1,440 | 65,635 | ||||||
HomeStreet, Inc.* | 2,056 | 59,521 | ||||||
World Acceptance Corp.* | 724 | 58,441 | ||||||
Opus Bank* | 2,047 | 55,883 | ||||||
Kite Realty Group Trust REIT | 2,440 | 47,824 | ||||||
United Insurance Holdings Corp. | 2,491 | 42,970 | ||||||
DiamondRock Hospitality Co. REIT | 3,800 | 42,902 | ||||||
Horace Mann Educators Corp. | 895 | 39,470 | ||||||
Total Financial | 1,930,971 | |||||||
Energy - 9.2% | ||||||||
Green Plains, Inc. | 13,628 | 229,632 | ||||||
Cloud Peak Energy, Inc.* | 47,927 | 213,275 | ||||||
Matrix Service Co.* | 8,496 | 151,229 | ||||||
McDermott International, Inc.* | 19,500 | 128,310 | ||||||
Par Pacific Holdings, Inc.* | 6,450 | 124,356 | ||||||
Flotek Industries, Inc.* | 24,641 | 114,827 | ||||||
Unit Corp.* | 4,770 | 104,940 | ||||||
Pioneer Energy Services Corp.* | 32,733 | 99,836 | ||||||
Archrock, Inc. | 8,260 | 86,730 | ||||||
SunCoke Energy, Inc.* | 5,517 | 66,149 | ||||||
Bristow Group, Inc. | 4,668 | 62,878 | ||||||
Gulf Island Fabrication, Inc. | 4,665 | 62,628 | ||||||
Helix Energy Solutions Group, Inc.* | 7,300 | 55,042 | ||||||
Oil States International, Inc.* | 1,880 | 53,204 | ||||||
Newpark Resources, Inc.* | 5,211 | 44,814 | ||||||
REX American Resources Corp.* | 470 | 38,911 | ||||||
Total Energy | 1,636,761 | |||||||
Communications - 5.9% | ||||||||
DHI Group, Inc.* | 134,585 | 255,711 | ||||||
Gannett Company, Inc. | 13,201 | 152,999 | ||||||
Comtech Telecommunications Corp. | 4,960 | 109,715 | ||||||
Time, Inc. | 5,269 | 97,213 | ||||||
Scholastic Corp. | 2,297 | 92,133 | ||||||
Iridium Communications, Inc.* | 7,417 | 87,521 | ||||||
New Media Investment Group, Inc. | 4,675 | 78,447 | ||||||
FTD Companies, Inc.* | 9,050 | 65,070 | ||||||
Spok Holdings, Inc. | 3,530 | 55,244 | ||||||
Frontier Communications Corp.1 | 7,460 | 50,430 | ||||||
Total Communications | 1,044,483 | |||||||
Technology - 5.3% | ||||||||
Super Micro Computer, Inc.* | 8,350 | 174,724 | ||||||
Insight Enterprises, Inc.* | 4,103 | 157,104 | ||||||
Engility Holdings, Inc.* | 4,220 | 119,722 | ||||||
Digi International, Inc.* | 10,108 | 96,531 | ||||||
Photronics, Inc.* | 10,325 | 88,020 | ||||||
CACI International, Inc. — Class A* | 575 | 76,101 | ||||||
Sykes Enterprises, Inc.* | 2,176 | 68,435 | ||||||
Synchronoss Technologies, Inc.* | 6,640 | 59,362 | ||||||
Veeco Instruments, Inc.* | 3,829 | 56,861 | ||||||
ManTech International Corp. — Class A | 817 | 41,005 | ||||||
Total Technology | 937,865 | |||||||
Basic Materials - 3.4% | ||||||||
Aceto Corp. | 17,610 | 181,911 | ||||||
Clearwater Paper Corp.* | 2,959 | 134,339 | ||||||
PH Glatfelter Co. | 5,841 | 125,231 | ||||||
AK Steel Holding Corp.* | 10,820 | 61,241 | ||||||
Hawkins, Inc. | 1,620 | 57,024 | ||||||
A. Schulman, Inc. | 1,130 | 42,093 | ||||||
Total Basic Materials | 601,839 | |||||||
Total Common Stocks | ||||||||
(Cost $15,671,958) | 17,741,834 | |||||||
Face Amount | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.2% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | $ | 23,598 | 23,598 | |||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 12,594 | 12,594 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $36,192) | 36,192 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 5.3% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%4 | 933,900 | 933,900 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $933,900) | 933,900 | |||||||
Total Investments - 105.4% | ||||||||
(Cost $16,642,050) | $ | 18,711,926 | ||||||
Other Assets & Liabilities, net - (5.4)% | (963,898 | ) | ||||||
Total Net Assets - 100.0% | $ | 17,748,028 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 49 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
S&P SMALLCAP 600® PURE VALUE FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7 day yield as of December 31, 2017. |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 17,741,834 | $ | — | $ | — | $ | 17,741,834 | ||||||||
Repurchase Agreements | — | 36,192 | — | 36,192 | ||||||||||||
Securities Lending Collateral | 933,900 | — | — | 933,900 | ||||||||||||
Total Assets | $ | 18,675,734 | $ | 36,192 | $ | — | $ | 18,711,926 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
50 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P SMALLCAP 600® PURE VALUE FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2017 |
Assets: | ||||
Investments, at value - including $893,641 of securities loaned (cost $16,605,858) | $ | 18,675,734 | ||
Repurchase agreements, at value (cost $36,192) | 36,192 | |||
Receivables: | ||||
Securities sold | 537,965 | |||
Fund shares sold | 38,622 | |||
Dividends | 21,455 | |||
Securities lending income | 1,576 | |||
Interest | 4 | |||
Total assets | 19,311,548 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities loaned | 933,900 | |||
Fund shares redeemed | 577,368 | |||
Management fees | 11,823 | |||
Transfer agent and administrative fees | 3,941 | |||
Investor service fees | 3,941 | |||
Portfolio accounting fees | 1,576 | |||
Miscellaneous | 30,971 | |||
Total liabilities | 1,563,520 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 17,748,028 | ||
Net assets consist of: | ||||
Paid in capital | $ | 18,531,769 | ||
Undistributed net investment income | — | |||
Accumulated net realized loss on investments | (2,853,617 | ) | ||
Net unrealized appreciation on investments | 2,069,876 | |||
Net assets | $ | 17,748,028 | ||
Capital shares outstanding | 266,964 | |||
Net asset value per share | $ | 66.48 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $174) | $ | 206,642 | ||
Interest | 815 | |||
Income from securities lending, net | 16,972 | |||
Total investment income | 224,429 | |||
Expenses: | ||||
Management fees | 134,146 | |||
Investor service fees | 44,715 | |||
Transfer agent and administrative fees | 44,715 | |||
Professional fees | 26,170 | |||
Portfolio accounting fees | 17,886 | |||
Custodian fees | 3,009 | |||
Trustees’ fees* | 1,923 | |||
Line of credit fees | 65 | |||
Miscellaneous | 14,831 | |||
Total expenses | 287,460 | |||
Net investment loss | (63,031 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (18,013 | ) | ||
Net realized loss | (18,013 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (1,426,664 | ) | ||
Net change in unrealized appreciation (depreciation) | (1,426,664 | ) | ||
Net realized and unrealized loss | (1,444,677 | ) | ||
Net decrease in net assets resulting from operations | $ | (1,507,708 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a) (19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 51 |
S&P SMALLCAP 600® PURE VALUE FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (63,031 | ) | $ | (73,052 | ) | ||
Net realized gain (loss) on investments | (18,013 | ) | 1,394,592 | |||||
Net change in unrealized appreciation (depreciation) on investments | (1,426,664 | ) | 2,675,338 | |||||
Net increase (decrease) in net assets resulting from operations | (1,507,708 | ) | 3,996,878 | |||||
Distributions to shareholders from: | ||||||||
Net realized gains | (398,643 | ) | — | |||||
Total distributions to shareholders | (398,643 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 32,718,612 | 56,652,261 | ||||||
Distributions reinvested | 398,643 | — | ||||||
Cost of shares redeemed | (41,870,956 | ) | (43,987,710 | ) | ||||
Net increase (decrease) from capital share transactions | (8,753,701 | ) | 12,664,551 | |||||
Net increase (decrease) in net assets | (10,660,052 | ) | 16,661,429 | |||||
Net assets: | ||||||||
Beginning of year | 28,408,080 | 11,746,651 | ||||||
End of year | $ | 17,748,028 | $ | 28,408,080 | ||||
Undistributed net investment income at end of year | $ | — | $ | — | ||||
Capital share activity: | ||||||||
Shares sold | 502,067 | 977,354 | * | |||||
Shares issued from reinvestment of distributions | 6,643 | — | * | |||||
Shares redeemed | (652,665 | ) | (790,268 | )* | ||||
Net increase (decrease) in shares | (143,955 | ) | 187,086 | * |
* | Capital Share activity for the periods presented through December 31, 2016 has been restated to reflect a 2:1 share split effective December 1, 2016 — See Note 11. |
52 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P SMALLCAP 600® PURE VALUE FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016c | Year Ended December 31, 2015c | Year Ended December 31, 2014c | Year Ended December 31, 2013c | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 69.13 | $ | 52.48 | $ | 65.72 | $ | 79.11 | $ | 55.59 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.23 | ) | (.45 | ) | (.06 | ) | (.39 | ) | (.29 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | (.20 | ) | 17.10 | (8.15 | ) | 1.28 | 24.08 | |||||||||||||
Total from investment operations | (.43 | ) | 16.65 | (8.21 | ) | .89 | 23.79 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (2.22 | ) | — | (5.03 | ) | (14.28 | ) | (.27 | ) | |||||||||||
Total distributions | (2.22 | ) | — | (5.03 | ) | (14.28 | ) | (.27 | ) | |||||||||||
Net asset value, end of period | $ | 66.48 | $ | 69.13 | $ | 52.48 | $ | 65.72 | $ | 79.11 | ||||||||||
Total Returnb | (0.28 | %) | 31.74 | % | (13.54 | %) | 1.31 | % | 42.83 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 17,748 | $ | 28,408 | $ | 11,747 | $ | 14,318 | $ | 29,575 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.35 | %) | (0.44 | %) | (0.09 | %) | (0.50 | %) | (0.43 | %) | ||||||||||
Total expenses | 1.61 | % | 1.56 | % | 1.50 | % | 1.57 | % | 1.54 | % | ||||||||||
Portfolio turnover rate | 204 | % | 303 | % | 245 | % | 144 | % | 260 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Share split — Per share amounts for the periods presented through December 31, 2016 have been restated to reflect a 2:1 share split effective December 1, 2016 — See Note 11. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 53 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
EUROPE 1.25x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that correlate, before fees and expenses, to the performance of a specific benchmark. The Fund’s current benchmark is 125% of the fair value of the STOXX 50® Index (the “underlying index”).
For the one-year period ended December 31, 2017, Europe 1.25x Strategy Fund maintained a daily correlation of over 98% to its benchmark of 125% of the daily price movement of the underlying index. Europe 1.25x Strategy Fund returned 28.60% while the underlying index returned 24.12% over the same period.
The sectors contributing the most to the return of the underlying index of the period were Financials and Consumer Staples. No sector detracted from performance. The Utilities and Telecommunications Services sectors contributed the least to the performance of the underlying index for the period.
The stocks contributing the most to performance of the underlying index were HSBC Holdings Plc, Nestle S.A., and Novartis AG. Those detracting the most from return of the underlying index were BT Group Plc, Barclays Plc, and GlaxoSmithKline Plc.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage, not for hedging purposes.
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 6 of this report.
Performance displayed represents past performance, which is no guarantee of future results.
54 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments or investments in Guggenheim Strategy Funds Trust mutual funds. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: October 1, 2001
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 15.8% |
Guggenheim Strategy Fund I | 4.7% |
Nestle S.A. ADR | 4.6% |
Novartis AG ADR | 3.6% |
HSBC Holdings plc ADR | 3.6% |
Roche Holding AG ADR | 3.0% |
British American Tobacco plc ADR | 2.7% |
Royal Dutch Shell plc — Class A ADR | 2.6% |
Total S.A. ADR | 2.4% |
BP plc ADR | 2.4% |
Top Ten Total | 45.4% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments.
COUNTRY DIVERSIFICATION
Country | % of Securities | Value | ||||||
United Kingdom | 33 | % | $ | 1,419,581 | ||||
Switzerland | 17 | % | 739,063 | |||||
France | 16 | % | 718,016 | |||||
Germany | 15 | % | 660,488 | |||||
Netherlands | 5 | % | 220,617 | |||||
Spain | 5 | % | 199,432 | |||||
Swaziland | 3 | % | 130,686 | |||||
Other | 6 | % | 261,981 | |||||
Total Securities | 100 | % | $ | 4,349,864 |
The chart above reflects percentages of the value of long-term securities.
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Europe 1.25x Strategy Fund | 28.60% | 4.09% | (3.65%) |
STOXX 50 Index | 24.12% | 5.76% | (0.02%) |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The STOXX 50 Index (Total Return/Dollars) is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 55 |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
EUROPE 1.25x STRATEGY FUND |
Shares | Value | |||||||
COMMON STOCKS† - 76.0% | ||||||||
Consumer, Non-cyclical - 30.2% | ||||||||
Nestle S.A. ADR | 3,036 | $ | 261,005 | |||||
Novartis AG ADR | 2,450 | 205,702 | ||||||
Roche Holding AG ADR | 5,508 | 173,943 | ||||||
British American Tobacco plc ADR | 2,283 | 152,938 | ||||||
Bayer AG ADR1 | 3,221 | 100,141 | ||||||
Sanofi ADR | 2,249 | 96,707 | ||||||
Novo Nordisk A/S ADR | 1,742 | 93,493 | ||||||
Diageo plc ADR | 613 | 89,516 | ||||||
Unilever N.V. — Class Y | 1,534 | 86,395 | ||||||
AstraZeneca plc ADR | 2,450 | 85,015 | ||||||
GlaxoSmithKline plc ADR | 2,373 | 84,170 | ||||||
Anheuser-Busch InBev S.A. ADR | 728 | 81,216 | ||||||
Unilever plc ADR | 1,278 | 70,724 | ||||||
Reckitt Benckiser Group plc ADR1 | 3,216 | 61,136 | ||||||
L’Oreal S.A. ADR | 1,193 | 52,826 | ||||||
Imperial Brands plc ADR | 835 | 35,630 | ||||||
Total Consumer, Non-cyclical | 1,730,557 | |||||||
Financial - 17.6% | ||||||||
HSBC Holdings plc ADR | 3,953 | 204,133 | ||||||
Banco Santander S.A. ADR | 15,613 | 102,109 | ||||||
Allianz SE ADR | 4,384 | 100,678 | ||||||
BNP Paribas S.A. ADR | 2,241 | 83,701 | ||||||
ING Groep N.V. ADR | 3,787 | 69,908 | ||||||
UBS Group AG* | 3,745 | 68,871 | ||||||
Lloyds Banking Group plc ADR | 17,675 | 66,281 | ||||||
Prudential plc ADR | 1,261 | 64,033 | ||||||
AXA S.A. ADR | 2,028 | 60,161 | ||||||
Banco Bilbao Vizcaya Argentaria S.A. ADR | 6,497 | 55,225 | ||||||
Intesa Sanpaolo SpA ADR | 2,326 | 46,415 | ||||||
Zurich Insurance Group AG ADR1 | 1,482 | 45,068 | ||||||
Barclays plc ADR | 3,919 | 42,717 | ||||||
Total Financial | 1,009,300 | |||||||
Energy - 8.0% | ||||||||
Royal Dutch Shell plc — Class A ADR | 2,202 | 146,895 | ||||||
Total S.A. ADR | 2,441 | 134,939 | ||||||
BP plc ADR | 3,208 | 134,832 | ||||||
Eni SpA ADR | 1,231 | 40,857 | ||||||
Total Energy | 457,523 | |||||||
Industrial - 5.7% | ||||||||
Siemens AG ADR | 1,653 | 114,503 | ||||||
Airbus SE ADR | 2,317 | 57,415 | ||||||
Vinci S.A. ADR | 2,181 | 55,616 | ||||||
ABB Ltd. ADR1 | 1,989 | 53,345 | ||||||
Schneider Electric SE ADR | 2,718 | 46,057 | ||||||
Total Industrial | 326,936 | |||||||
Basic Materials - 4.8% | ||||||||
BASF SE ADR | 3,544 | 97,354 | ||||||
Glencore plc ADR* | 5,938 | 61,815 | ||||||
Rio Tinto plc ADR | 1,142 | 60,446 | ||||||
Air Liquide S.A. ADR | 2,081 | 52,347 | ||||||
Total Basic Materials | 271,962 | |||||||
Communications - 3.1% | ||||||||
Vodafone Group plc ADR | 2,556 | 81,536 | ||||||
Deutsche Telekom AG ADR1 | 3,169 | 55,968 | ||||||
Telefonica S.A. ADR | 4,349 | 42,098 | ||||||
Total Communications | 179,602 | |||||||
Technology - 3.1% | ||||||||
SAP SE ADR1 | 976 | 109,663 | ||||||
ASML Holding N.V. — Class G | 370 | 64,314 | ||||||
Total Technology | 173,977 | |||||||
Consumer, Cyclical - 2.8% | ||||||||
Daimler AG ADR | 971 | 82,181 | ||||||
LVMH Moet Hennessy Louis Vuitton SE ADR | 1,333 | 78,247 | ||||||
Total Consumer, Cyclical | 160,428 | |||||||
Utilities - 0.7% | ||||||||
National Grid plc ADR | 673 | 39,579 | ||||||
Total Common Stocks | ||||||||
(Cost $4,086,791) | 4,349,864 | |||||||
MUTUAL FUNDS† - 20.5% | ||||||||
Guggenheim Strategy Fund II2 | 36,247 | 906,537 | ||||||
Guggenheim Strategy Fund I2 | 10,645 | 266,751 | ||||||
Total Mutual Funds | ||||||||
(Cost $1,170,466) | 1,173,288 | |||||||
Face Amount | ||||||||
REPURCHASE AGREEMENTS††,3 - 0.6% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | $ | 23,104 | 23,104 | |||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 12,330 | 12,330 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $35,434) | 35,434 |
56 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
EUROPE 1.25x STRATEGY FUND |
Shares | Value | |||||||
SECURITIES LENDING COLLATERAL†,4 - 5.6% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%5 | 321,083 | $ | 321,083 | |||||
Total Securities Lending Collateral | ||||||||
(Cost $321,083) | 321,083 | |||||||
Total Investments - 102.7% | ||||||||
(Cost $5,613,774) | $ | 5,879,669 | ||||||
Other Assets & Liabilities, net - (2.7)% | (154,324 | ) | ||||||
Total Net Assets - 100.0% | $ | 5,725,345 |
Futures Contracts | ||||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Value and Unrealized Gain (Loss) | ||||||||||||
Currency Futures Contracts Purchased† | ||||||||||||||||
Euro FX Futures Contracts | 19 | Mar 2018 | $ | 2,862,469 | $ | 49,899 | ||||||||||
Equity Futures Contracts Purchased†† | ||||||||||||||||
STOXX 50 Index Futures Contracts | 75 | Mar 2018 | $ | 2,823,581 | $ | (38,093 | ) |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 7. |
2 | Affiliated issuer. |
3 | Repurchase Agreements — See Note 6. |
4 | Securities lending collateral — See Note 7. |
5 | Rate indicated is the 7 day yield as of December 31, 2017. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 57 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
EUROPE 1.25x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Common Stocks | $ | 4,349,864 | $ | — | $ | — | $ | — | $ | — | $ | 4,349,864 | ||||||||||||
Currency Futures Contracts | — | 49,899 | — | — | — | 49,899 | ||||||||||||||||||
Mutual Funds | 1,173,288 | — | — | — | — | 1,173,288 | ||||||||||||||||||
Repurchase Agreements | — | — | 35,434 | — | — | 35,434 | ||||||||||||||||||
Securities Lending Collateral | 321,083 | — | — | — | — | 321,083 | ||||||||||||||||||
Total Assets | $ | 5,844,235 | $ | 49,899 | $ | 35,434 | $ | — | $ | — | $ | 5,929,568 | ||||||||||||
Investments in Securities (Liabilities) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Equity Futures Contracts | $ | — | $ | — | $ | — | $ | 38,093 | $ | — | $ | 38,093 |
* | Other financial instruments include futures contracts, which are reported as unrealized gain/loss at period end. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a portfolio company of a fund, or control of or by, or common control under Guggenheim Investments (“GI”), result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act.
The Fund may invest in the underlying series of the Guggenheim Strategy Funds Trust consisting of Guggenheim Strategy Fund I, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III (collectively, the “Cash Management Funds”), open-end management investment companies managed by GI. The Cash Management Funds, which launched on March 11, 2014, are offered as cash management options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Cash Management Funds pay no investment management fees. The Cash Management Funds’ annual report on Form N-CSR dated September 30, 2017, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180417000715/gug72218.htm.
Transactions during the year ended December 31, 2017, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value 12/31/16 | Additions | Reductions | Realized Gain | Change in Unrealized | Value 12/31/17 | Shares 12/31/17 | Investment Income | Capital Gain Distributions |
Mutual Funds | |||||||||
Guggenheim Strategy Fund I | $ 546,006 | $ 1,166,126 | $ (1,450,000) | $ 4,083 | $ 536 | $ 266,751 | 10,645 | $ 16,131 | $ 25 |
Guggenheim Strategy Fund II | 626,210 | 977,338 | (700,000) | 1,248 | 1,741 | 906,537 | 36,247 | 26,876 | 482 |
$ 1,172,216 | $ 2,143,464 | $ (2,150,000) | $ 5,331 | $ 2,277 | $ 1,173,288 | $ 43,007 | $ 507 |
58 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
EUROPE 1.25x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2017 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $309,754 of securities loaned (cost $4,407,874) | $ | 4,670,947 | ||
Investments in affiliated issuers, at value (cost $1,170,466) | 1,173,288 | |||
Repurchase agreements, at value (cost $35,434) | 35,434 | |||
Segregated cash with broker | 218,583 | |||
Receivables: | ||||
Foreign tax reclaims | 12,973 | |||
Dividends | 7,514 | |||
Swap settlement | 322 | |||
Securities lending income | 185 | |||
Fund shares sold | 97 | |||
Interest | 4 | |||
Total assets | 6,119,347 | |||
Liabilities: | ||||
Overdraft due to custodian bank | 78 | |||
Payable for: | ||||
Return of securities loaned | 321,083 | |||
Fund shares redeemed | 52,060 | |||
Management fees | 4,341 | |||
Variation margin | 1,964 | |||
Securities purchased | 1,732 | |||
Transfer agent and administrative fees | 1,206 | |||
Investor service fees | 1,206 | |||
Portfolio accounting fees | 482 | |||
Miscellaneous | 9,850 | |||
Total liabilities | 394,002 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 5,725,345 | ||
Net assets consist of: | ||||
Paid in capital | $ | 8,029,090 | ||
Undistributed net investment income | 14,576 | |||
Accumulated net realized loss on investments | (2,595,941 | ) | ||
Net unrealized appreciation on investments | 277,620 | |||
Net assets | $ | 5,725,345 | ||
Capital shares outstanding | 54,702 | |||
Net asset value per share | $ | 104.66 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $3,477) | $ | 46,611 | ||
Dividends from securities of affiliated issuers | 43,007 | |||
Interest | 4,517 | |||
Income from securities lending, net | 1,859 | |||
Total investment income | 95,994 | |||
Expenses: | ||||
Management fees | 42,011 | |||
Investor service fees | 11,670 | |||
Transfer agent and administrative fees | 11,670 | |||
Professional fees | 7,033 | |||
Portfolio accounting fees | 4,668 | |||
Custodian fees | 835 | |||
Trustees’ fees* | 483 | |||
Line of credit fees | 33 | |||
Miscellaneous | 5,663 | |||
Total expenses | 84,066 | |||
Net investment income | 11,928 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | (11,463 | ) | ||
Investments in affiliated issuers | 5,331 | |||
Distributions received from affiliated investment company shares | 507 | |||
Futures contracts | 682,110 | |||
Foreign currency transactions | 2,889 | |||
Net realized gain | 679,374 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 246,869 | |||
Investments in affiliated issuers | 2,277 | |||
Futures contracts | 15,110 | |||
Foreign currency translations | (79 | ) | ||
Net change in unrealized appreciation (depreciation) | 264,177 | |||
Net realized and unrealized gain | 943,551 | |||
Net increase in net assets resulting from operations | $ | 955,479 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a) (19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 59 |
EUROPE 1.25x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 11,928 | $ | 45,454 | ||||
Net realized gain on investments | 679,374 | 77,168 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 264,177 | (310,764 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 955,479 | (188,142 | ) | |||||
Distributions to shareholders from: | ||||||||
Net investment income | (40,552 | ) | (36,982 | ) | ||||
Total distributions to shareholders | (40,552 | ) | (36,982 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 16,896,795 | 14,667,771 | ||||||
Distributions reinvested | 40,552 | 36,982 | ||||||
Cost of shares redeemed | (14,679,728 | ) | (15,009,638 | ) | ||||
Net increase (decrease) from capital share transactions | 2,257,619 | (304,885 | ) | |||||
Net increase (decrease) in net assets | 3,172,546 | (530,009 | ) | |||||
Net assets: | ||||||||
Beginning of year | 2,552,799 | 3,082,808 | ||||||
End of year | $ | 5,725,345 | $ | 2,552,799 | ||||
Undistributed net investment income at end of year | $ | 14,576 | $ | 40,552 | ||||
Capital share activity: | ||||||||
Shares sold | 176,252 | 178,857 | * | |||||
Shares issued from reinvestment of distributions | 412 | 444 | * | |||||
Shares redeemed | (153,070 | ) | (183,112 | )* | ||||
Net increase (decrease) in shares | 23,594 | (3,811 | )* |
* | Capital Share activity for the periods presented through December 31, 2016 has been restated to reflect a 1:6 reverse share split effective December 1, 2016 — See Note 11. |
60 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
EUROPE 1.25x STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016d | Year Ended December 31, 2015d | Year Ended December 31, 2014d | Year Ended December 31, 2013d | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 82.06 | $ | 88.28 | $ | 96.17 | $ | 112.32 | $ | 90.79 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .25 | .25 | .66 | 1.26 | .78 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 23.17 | (6.25 | ) | (7.35 | ) | (15.19 | ) | 20.87 | ||||||||||||
Total from investment operations | 23.42 | (6.00 | ) | (6.69 | ) | (13.93 | ) | 21.65 | ||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.82 | ) | (.22 | ) | (1.20 | ) | (2.22 | ) | (.12 | ) | ||||||||||
Total distributions | (.82 | ) | (.22 | ) | (1.20 | ) | (2.22 | ) | (.12 | ) | ||||||||||
Net asset value, end of period | $ | 104.66 | $ | 82.06 | $ | 88.28 | $ | 96.17 | $ | 112.32 | ||||||||||
Total Returnb | 28.60 | % | (5.58 | %) | (7.19 | %) | (12.49 | %) | 23.89 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 5,725 | $ | 2,553 | $ | 3,083 | $ | 3,304 | $ | 12,116 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.26 | % | 1.70 | % | 0.63 | % | 1.14 | % | 0.79 | % | ||||||||||
Total expensesc | 1.80 | % | 1.73 | % | 1.66 | % | 1.75 | % | 1.71 | % | ||||||||||
Portfolio turnover rate | 121 | % | 441 | % | 620 | % | 401 | % | 455 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Reverse share split — Per share amounts for the periods presented through December 31, 2016 have been restated to reflect a 1:6 reverse share split effective December 1, 2016 — See Note 11. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 61 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
JAPAN 2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that correlate, before fees and expenses, to the performance of a specific benchmark. The Fund’s current benchmark is 200% of the fair value of the Nikkei-225 Stock Average Index (the “underlying index”).
For the one-year period ended December 31, 2017, Japan 2x Strategy Fund maintained a daily correlation of over 99% to its benchmark of 200% of the daily price movement of the fair value of the underlying index. Japan 2x Strategy Fund returned 50.30%, while the underlying index returned 23.40% over the same time period.
The sectors contributing the most to the return of the underlying index of the period were Industrials and Information Technology. No sector detracted from performance. The Utilities and Energy sectors contributed the least to the performance of the underlying index for the period.
Stocks contributing most to return of the underlying index were Tokyo Electron Ltd., Fanuc Corp., and SoftBank Group Corp. Those detracting most from performance of the underlying index were Subaru Corp., Astellas Pharma, Inc., and Dentsu, Inc.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage, not for hedging purposes.
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 6 of this report.
Performance displayed represents past performance, which is no guarantee of future results.
62 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments or investments in Guggenheim Strategy Funds Trust mutual funds. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: October 1, 2001
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 33.0% |
Guggenheim Strategy Fund I | 26.5% |
Total | 59.5% |
“Largest Holdings” excludes any temporary cash or derivative investments.
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Japan 2x Strategy Fund | 50.30% | 19.31% | 7.07% |
Nikkei-225 Stock Average Index | 23.40% | 10.86% | 4.07% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Nikkei-225 Stock Average Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 63 |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
JAPAN 2x STRATEGY FUND |
Shares | Value | |||||||
MUTUAL FUNDS† - 59.5% | ||||||||
Guggenheim Strategy Fund II1 | 74,067 | $ | 1,852,417 | |||||
Guggenheim Strategy Fund I1 | 59,318 | 1,486,508 | ||||||
Total Mutual Funds | ||||||||
(Cost $3,328,891) | 3,338,925 | |||||||
Face Amount | ||||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 21.4% | ||||||||
Federal Home Loan Bank2 | ||||||||
1.06% due 01/02/183,4 | $ | 1,000,000 | 999,966 | |||||
Fannie Mae5 | ||||||||
1.26% due 01/12/183,4 | 200,000 | 199,923 | ||||||
Total Federal Agency Discount Notes | ||||||||
(Cost $1,199,889) | 1,199,889 | |||||||
FEDERAL AGENCY NOTES†† - 6.8% | ||||||||
Federal Farm Credit Bank2 | ||||||||
1.43% (1 Month USD LIBOR + 0.02%) due 01/08/186 | 200,000 | 200,006 | ||||||
1.41% (1 Month USD LIBOR + 0.04%) due 01/02/186 | 180,000 | 180,000 | ||||||
Total Federal Farm Credit Bank | 380,006 | |||||||
Total Federal Agency Notes | ||||||||
(Cost $380,007) | 380,006 | |||||||
REPURCHASE AGREEMENTS††,7 - 9.1% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | 334,924 | 334,924 | ||||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 178,750 | 178,750 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $513,674) | 513,674 | |||||||
Total Investments - 96.8% | ||||||||
(Cost $5,422,461) | $ | 5,432,494 | ||||||
Other Assets & Liabilities, net - 3.2% | 181,601 | |||||||
Total Net Assets - 100.0% | $ | 5,614,095 |
Futures Contracts | ||||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Value and Unrealized Gain | ||||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||||
Nikkei-225 (CME) Index Futures Contracts | 99 | Mar 2018 | $ | 11,273,625 | $ | 136,099 | ||||||||||
Currency Futures Contracts Purchased† | ||||||||||||||||
Japanese Yen Futures Contracts | 101 | Mar 2018 | $ | 11,244,456 | $ | 39,516 |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | The issuer operates under a Congressional charter; its securities are neither issued nor guaranteed by the U.S. Government. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | Zero coupon rate security. |
5 | On September 7, 2008, the issuer was placed in conservatorship by the Federal Housing Finance Agency (FHFA). As conservator, the FHFA has full powers to control the assets and operations of the firm. |
6 | Variable rate security. Rate indicated is rate effective at December 31, 2017. In some instances, the underlying reference rate shown was below the minimum rate earned by the security or has been adjusted by a predetermined factor. The settlement status of a position may also impact the effective rate indicated. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
7 | Repurchase Agreements — See Note 6. |
LIBOR — London Interbank Offered Rate | |
CME — Chicago Mercantile Exchange | |
See Sector Classification in Other Information section. |
64 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
JAPAN 2x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | |||||||||||||||
Currency Futures Contracts | $ | — | $ | 39,516 | $ | — | $ | — | $ | 39,516 | ||||||||||
Equity Futures Contracts | — | 136,099 | — | — | 136,099 | |||||||||||||||
Federal Agency Discount Notes | — | — | 1,199,889 | — | 1,199,889 | |||||||||||||||
Federal Agency Notes | — | — | 380,006 | — | 380,006 | |||||||||||||||
Mutual Funds | 3,338,925 | — | — | — | 3,338,925 | |||||||||||||||
Repurchase Agreements | — | — | 513,674 | — | 513,674 | |||||||||||||||
Total Assets | $ | 3,338,925 | $ | 175,615 | $ | 2,093,569 | $ | — | $ | 5,608,109 |
* | Other financial instruments include futures contracts, which are reported as unrealized gain/loss at period end. |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a portfolio company of a fund, or control of or by, or common control under GI, result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act.
The Fund may invest in the underlying series of the Guggenheim Strategy Funds Trust consisting of Guggenheim Strategy Fund I, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III (collectively, the “Cash Management Funds”), open-end management investment companies managed by GI. The Cash Management Funds, which launched on March 11, 2014, are offered as cash management options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Cash Management Funds pay no investment management fees. The Cash Management Funds’ annual report on Form N-CSR dated September 30, 2017, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180417000715/gug72218.htm.
Transactions during the year ended December 31, 2017, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value 12/31/16 | Additions | Reductions | Realized Gain (Loss) | Change in Unrealized | Value 12/31/17 | Shares 12/31/17 | Investment Income | Capital Gain Distributions |
Mutual Funds | |||||||||
Guggenheim Strategy Fund I | $ 663,226 | $ 1,873,672 | $ (1,050,000) | $ (899) | $ 509 | $ 1,486,508 | 59,318 | $ 22,880 | $ 751 |
Guggenheim Strategy Fund II | 817,417 | 1,434,765 | (400,000) | 45 | 190 | 1,852,417 | 74,067 | 23,956 | 826 |
$ 1,480,643 | $ 3,308,437 | $ (1,450,000) | $ (854) | $ 699 | $ 3,338,925 | $ 46,836 | $ 1,577 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 65 |
JAPAN 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2017 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $1,579,896) | $ | 1,579,895 | ||
Investments in affiliated issuers, at value (cost $3,328,891) | 3,338,925 | |||
Repurchase agreements, at value (cost $513,674) | 513,674 | |||
Cash | 2 | |||
Segregated cash with broker | 252,443 | |||
Receivables: | ||||
Securities sold | 500,000 | |||
Dividends | 5,597 | |||
Swap settlement | 2,295 | |||
Fund shares sold | 566 | |||
Interest | 462 | |||
Total assets | 6,193,859 | |||
Liabilities: | ||||
Payable for: | ||||
Securities purchased | 505,761 | |||
Fund shares redeemed | 52,349 | |||
Variation margin | 8,838 | |||
Management fees | 3,714 | |||
Transfer agent and administrative fees | 1,238 | |||
Investor service fees | 1,238 | |||
Portfolio accounting fees | 495 | |||
Miscellaneous | 6,131 | |||
Total liabilities | 579,764 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 5,614,095 | ||
Net assets consist of: | ||||
Paid in capital | $ | 6,514,886 | ||
Undistributed net investment income | — | |||
Accumulated net realized loss on investments | (1,086,439 | ) | ||
Net unrealized appreciation on investments | 185,648 | |||
Net assets | $ | 5,614,095 | ||
Capital shares outstanding | 55,682 | |||
Net asset value per share | $ | 100.82 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 46,836 | ||
Interest | 14,978 | |||
Total investment income | 61,814 | |||
Expenses: | ||||
Management fees | 27,670 | |||
Investor service fees | 9,223 | |||
Transfer agent and administrative fees | 9,223 | |||
Tax expense | 8,477 | |||
Professional fees | 5,489 | |||
Portfolio accounting fees | 3,689 | |||
Custodian fees | 630 | |||
Trustees’ fees* | 393 | |||
Miscellaneous | 2,664 | |||
Total expenses | 67,458 | |||
Net investment loss | (5,644 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in affiliated issuers | (854 | ) | ||
Futures contracts | 1,507,941 | |||
Distributions received from affiliated investment company shares | 1,577 | |||
Net realized gain | 1,508,664 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (10 | ) | ||
Investments in affiliated issuers | 699 | |||
Futures contracts | 27,929 | |||
Net change in unrealized appreciation (depreciation) | 28,618 | |||
Net realized and unrealized gain | 1,537,282 | |||
Net increase in net assets resulting from operations | $ | 1,531,638 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a) (19) of the 1940 Act. |
66 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
JAPAN 2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (5,644 | ) | $ | (13,342 | ) | ||
Net realized gain (loss) on investments | 1,508,664 | (29,838 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 28,618 | 204,312 | ||||||
Net increase in net assets resulting from operations | 1,531,638 | 161,132 | ||||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 16,175,572 | 14,650,143 | ||||||
Cost of shares redeemed | (14,591,761 | ) | (15,889,563 | ) | ||||
Net increase (decrease) from capital share transactions | 1,583,811 | (1,239,420 | ) | |||||
Net increase (decrease) in net assets | 3,115,449 | (1,078,288 | ) | |||||
Net assets: | ||||||||
Beginning of year | 2,498,646 | 3,576,934 | ||||||
End of year | $ | 5,614,095 | $ | 2,498,646 | ||||
Undistributed net investment income at end of year | $ | — | $ | — | ||||
Capital share activity: | ||||||||
Shares sold | 195,913 | 245,606 | * | |||||
Shares redeemed | (177,480 | ) | (266,377 | )* | ||||
Net increase (decrease) in shares | 18,433 | (20,771 | )* |
* | Capital Share activity for the year ended December 31, 2016 has been restated to reflect a 1:6 reverse share split effective December 1, 2016 — See Note 11. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 67 |
JAPAN 2x STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016d | Year Ended December 31, 2015d | Year Ended December 31, 2014d | Year Ended December 31, 2013d | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 67.08 | $ | 61.65 | $ | 55.02 | $ | 171.68 | $ | 110.06 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.13 | ) | (.06 | ) | (.78 | ) | (1.68 | ) | (2.16 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 33.87 | 5.49 | 7.41 | (16.58 | ) | 63.78 | ||||||||||||||
Total from investment operations | 33.74 | 5.43 | 6.63 | (18.26 | ) | 61.62 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | — | — | — | (98.40 | ) | — | ||||||||||||||
Total distributions | — | — | — | (98.40 | ) | — | ||||||||||||||
Net asset value, end of period | $ | 100.82 | $ | 67.08 | $ | 61.65 | $ | 55.02 | $ | 171.68 | ||||||||||
Total Returnb | 50.30 | % | 8.86 | % | 12.00 | % | (15.41 | %) | 56.00 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 5,614 | $ | 2,499 | $ | 3,577 | $ | 2,608 | $ | 4,909 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.15 | %) | (0.50 | %) | (1.22 | %) | (1.39 | %) | (1.50 | %) | ||||||||||
Total expensesc | 1.83 | % | 1.56 | % | 1.50 | % | 1.59 | % | 1.54 | % | ||||||||||
Portfolio turnover rate | 73 | % | 183 | % | 87 | % | 146 | % | — |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Reverse share split — Per share amounts for the periods presented through December 31, 2016 have been restated to reflect a 1:6 reverse share split effective December 1, 2016 — See Note 11. |
68 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
STRENGTHENING DOLLAR 2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is 200% of the performance of the U.S. Dollar Index® (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2017, Strengthening Dollar 2x Strategy Fund maintained a daily correlation of over 99% to its benchmark of 200% of the daily price movement of the underlying index. Strengthening Dollar 2x Strategy Fund returned -17.65%, compared with a return of -9.87% for its benchmark, the underlying index.
Contributing the most to performance of the underlying index for the year were the Euro, British Pound, and Canadian Dollar. No currencies detracted from performance. The Swiss Franc, Swedish Krona, and Japanese Yen contributed the least to the USDX during the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage, not for hedging purposes.
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 6 of this report.
Performance displayed represents past performance, which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 69 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments or investments in Guggenheim Strategy Funds Trust mutual funds. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: September 30, 2005
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 34.1% |
Guggenheim Strategy Fund I | 28.0% |
Total | 62.1% |
“Largest Holdings” excludes any temporary cash or derivative investments.
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Strengthening Dollar 2x Strategy Fund | (17.65%) | 3.56% | (0.97%) |
U.S. Dollar Index | (9.87%) | 2.92% | 1.85% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The U.S. Dollar Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
70 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
STRENGTHENING DOLLAR 2x STRATEGY FUND |
Shares | Value | |||||||
MUTUAL FUNDS† - 62.1% | ||||||||
Guggenheim Strategy Fund II1 | 23,701 | $ | 592,767 | |||||
Guggenheim Strategy Fund I1 | 19,398 | 486,103 | ||||||
Total Mutual Funds | ||||||||
(Cost $1,067,999) | 1,078,870 | |||||||
Face Amount | ||||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 14.4% | ||||||||
Federal Home Loan Bank2 | ||||||||
1.26% due 01/05/183,4 | $ | 100,000 | 99,986 | |||||
Fannie Mae5 | ||||||||
1.26% due 01/12/183,4 | 100,000 | 99,962 | ||||||
Farmer Mac2 | ||||||||
1.32% due 02/28/183,4 | 51,000 | 50,893 | ||||||
Total Federal Agency Discount Notes | ||||||||
(Cost $250,839) | 250,841 | |||||||
FEDERAL AGENCY NOTES†† - 5.8% | ||||||||
Federal Farm Credit Bank2 | ||||||||
1.43% (1 Month USD LIBOR + 0.02%) due 01/08/186 | 100,000 | 100,003 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $100,003) | 100,003 | |||||||
REPURCHASE AGREEMENTS††,7 - 17.9% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/188 | 202,271 | 202,271 | ||||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/188 | 107,952 | 107,952 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $310,223) | 310,223 | |||||||
Total Investments - 100.2% | ||||||||
(Cost $1,729,064) | $ | 1,739,937 | ||||||
Other Assets & Liabilities, net - (0.2)% | (3,322 | ) | ||||||
Total Net Assets - 100.0% | $ | 1,736,615 |
Futures Contracts | ||||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Value and Unrealized Loss | ||||||||||||
Currency Futures Contracts Purchased† | ||||||||||||||||
U.S. Dollar Index Futures Contracts | 35 | Mar 2018 | $ | 3,219,825 | $ | (35,479 | ) |
Total Return Swap Agreements | ||||||||||||||||||||||||||
Counterparty | Index | Financing Rate Pay (Receive) | Payment Frequency | Maturity Date | Units | Notional Amount | Value and Unrealized Loss | |||||||||||||||||||
OTC Currency Index Swap Agreements†† | ||||||||||||||||||||||||||
Goldman Sachs International | U.S. Dollar Index | 1.69 | % | At Maturity | 03/16/18 | 2,852 | $ | 262,516 | $ | (3,780 | ) |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | The issuer operates under a Congressional charter; its securities are neither issued nor guaranteed by the U.S. Government. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | Zero coupon rate security. |
5 | On September 7, 2008, the issuer was placed in conservatorship by the Federal Housing Finance Agency (FHFA). As conservator, the FHFA has full powers to control the assets and operations of the firm. |
6 | Variable rate security. Rate indicated is rate effective at December 31, 2017. In some instances, the underlying reference rate shown was below the minimum rate earned by the security or has been adjusted by a predetermined factor. The settlement status of a position may also impact the effective rate indicated. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
7 | Repurchase Agreements — See Note 6. |
8 | All or a portion of this security is pledged as currency index swap collateral at December 31, 2017. |
LIBOR — London Interbank Offered Rate | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 71 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
STRENGTHENING DOLLAR 2x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Federal Agency Discount Notes | $ | — | $ | — | $ | 250,841 | $ | — | $ | — | $ | 250,841 | ||||||||||||
Federal Agency Notes | — | — | 100,003 | — | — | 100,003 | ||||||||||||||||||
Mutual Funds | 1,078,870 | — | — | — | — | 1,078,870 | ||||||||||||||||||
Repurchase Agreements | — | — | 310,223 | — | — | 310,223 | ||||||||||||||||||
Total Assets | $ | 1,078,870 | $ | — | $ | 661,067 | $ | — | $ | — | $ | 1,739,937 | ||||||||||||
Investments in Securities (Liabilities) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Currency Futures Contracts | $ | — | $ | 35,479 | $ | — | $ | — | $ | — | $ | 35,479 | ||||||||||||
Currency Index Swap Agreements | — | — | — | 3,780 | — | 3,780 | ||||||||||||||||||
Total Liabilities | $ | — | $ | 35,479 | $ | — | $ | 3,780 | $ | — | $ | 39,259 |
* | Other financial instruments include futures contracts and/or swaps, which are reported as unrealized gain/loss at period end. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a portfolio company of a fund, or control of or by, or common control under GI, result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act.
The Fund may invest in the underlying series of the Guggenheim Strategy Funds Trust consisting of Guggenheim Strategy Fund I, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III (collectively, the “Cash Management Funds”), open-end management investment companies managed by GI. The Cash Management Funds, which launched on March 11, 2014, are offered as cash management options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Cash Management Funds pay no investment management fees. The Cash Management Funds’ annual report on Form N-CSR dated September 30, 2017, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180417000715/gug72218.htm.
Transactions during the year ended December 31, 2017, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value 12/31/16 | Additions | Reductions | Realized Gain (Loss) | Change in Unrealized | Value 12/31/17 | Shares 12/31/17 | Investment Income | Capital Gain Distributions |
Mutual Funds | |||||||||
Guggenheim Strategy Fund I | $ 1,589,640 | $ 778,644 | $ (1,885,000) | $ 3,100 | $ (281) | $ 486,103 | 19,398 | $ 17,488 | $ 259 |
Guggenheim Strategy Fund II | 1,537,878 | 786,603 | (1,735,000) | 3,261 | 25 | 592,767 | 23,701 | 21,366 | 369 |
$ 3,127,518 | $ 1,565,247 | $ (3,620,000) | $ 6,361 | $ (256) | $ 1,078,870 | $ 38,854 | $ 628 |
72 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STRENGTHENING DOLLAR 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2017 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $350,842) | $ | 350,844 | ||
Investments in affiliated issuers, at value (cost $1,067,999) | 1,078,870 | |||
Repurchase agreements, at value (cost $310,223) | 310,223 | |||
Segregated cash with broker | 64,800 | |||
Receivables: | ||||
Dividends | 2,101 | |||
Interest | 132 | |||
Total assets | 1,806,970 | |||
Liabilities: | ||||
Unrealized depreciation on swap agreements | 3,780 | |||
Payable for: | ||||
Fund shares redeemed | 47,950 | |||
Variation margin | 10,983 | |||
Securities purchased | 2,155 | |||
Swap settlement | 1,538 | |||
Management fees | 1,416 | |||
Transfer agent and administrative fees | 393 | |||
Investor service fees | 393 | |||
Portfolio accounting fees | 157 | |||
Miscellaneous | 1,590 | |||
Total liabilities | 70,355 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 1,736,615 | ||
Net assets consist of: | ||||
Paid in capital | $ | 3,027,020 | ||
Undistributed net investment income | — | |||
Accumulated net realized loss on investments | (1,262,019 | ) | ||
Net unrealized depreciation on investments | (28,386 | ) | ||
Net assets | $ | 1,736,615 | ||
Capital shares outstanding | 48,882 | |||
Net asset value per share | $ | 35.53 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 38,854 | ||
Interest | 7,377 | |||
Total investment income | 46,231 | |||
Expenses: | ||||
Management fees | 24,553 | |||
Investor service fees | 6,820 | |||
Transfer agent and administrative fees | 6,820 | |||
Professional fees | 4,116 | |||
Portfolio accounting fees | 2,728 | |||
Custodian fees | 510 | |||
Trustees’ fees* | 410 | |||
Line of credit fees | 7 | |||
Miscellaneous | 3,072 | |||
Total expenses | 49,036 | |||
Net investment loss | (2,805 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in affiliated issuers | 6,361 | |||
Swap agreements | (85,251 | ) | ||
Futures contracts | (423,618 | ) | ||
Distributions received from affiliated investment company shares | 628 | |||
Net realized loss | (501,880 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 2 | |||
Investments in affiliated issuers | (256 | ) | ||
Swap agreements | (10,752 | ) | ||
Futures contracts | (111,227 | ) | ||
Net change in unrealized appreciation (depreciation) | (122,233 | ) | ||
Net realized and unrealized loss | (624,113 | ) | ||
Net decrease in net assets resulting from operations | $ | (626,918 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a) (19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 73 |
STRENGTHENING DOLLAR 2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (2,805 | ) | $ | (21,339 | ) | ||
Net realized gain (loss) on investments | (501,880 | ) | 162,095 | |||||
Net change in unrealized appreciation (depreciation) on investments | (122,233 | ) | 22,548 | |||||
Net increase (decrease) in net assets resulting from operations | (626,918 | ) | 163,304 | |||||
Distributions to shareholders from: | ||||||||
Net realized gains | (54,703 | ) | (166,501 | ) | ||||
Total distributions to shareholders | (54,703 | ) | (166,501 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 12,652,905 | 21,813,084 | ||||||
Distributions reinvested | 54,703 | 166,501 | ||||||
Cost of shares redeemed | (15,933,084 | ) | (19,635,591 | ) | ||||
Net increase (decrease) from capital share transactions | (3,225,476 | ) | 2,343,994 | |||||
Net increase (decrease) in net assets | (3,907,097 | ) | 2,340,797 | |||||
Net assets: | ||||||||
Beginning of year | 5,643,712 | 3,302,915 | ||||||
End of year | $ | 1,736,615 | $ | 5,643,712 | ||||
Undistributed net investment income at end of year | $ | — | $ | — | ||||
Capital share activity: | ||||||||
Shares sold | 327,875 | 529,807 | ||||||
Shares issued from reinvestment of distributions | 1,446 | 4,308 | ||||||
Shares redeemed | (408,989 | ) | (481,576 | ) | ||||
Net increase (decrease) in shares | (79,668 | ) | 52,539 |
74 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STRENGTHENING DOLLAR 2x STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014d | Year Ended December 31, 2013d | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 43.90 | $ | 43.45 | $ | 42.19 | $ | 34.32 | $ | 35.37 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.04 | ) | (.23 | ) | (.55 | ) | (.47 | ) | (.60 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | (7.67 | ) | 2.96 | 6.09 | 8.34 | (.45 | ) | |||||||||||||
Total from investment operations | (7.71 | ) | 2.73 | 5.54 | 7.87 | (1.05 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (.66 | ) | (2.28 | ) | (4.28 | ) | — | — | ||||||||||||
Total distributions | (.66 | ) | (2.28 | ) | (4.28 | ) | — | — | ||||||||||||
Net asset value, end of period | $ | 35.53 | $ | 43.90 | $ | 43.45 | $ | 42.19 | $ | 34.32 | ||||||||||
Total Returnb | (17.65 | %) | 7.00 | % | 13.35 | % | 22.93 | % | (2.97 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 1,737 | $ | 5,644 | $ | 3,303 | $ | 6,980 | $ | 2,803 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.10 | %) | (0.57 | %) | (1.21 | %) | (1.24 | %) | (1.69 | %) | ||||||||||
Total expensesc | 1.80 | % | 1.76 | % | 1.70 | % | 1.76 | % | 1.73 | % | ||||||||||
Portfolio turnover rate | 88 | % | 190 | % | 177 | % | 189 | % | — |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Reverse share split — Per share amounts for the period presented through January 24, 2014 have been restated to reflect a 1:3 reverse share split effective January 24, 2014. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 75 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
WEAKENING DOLLAR 2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is 200% of the inverse (opposite) of the performance of the U.S. Dollar Index® (the “underlying index”).
The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2017, Weakening Dollar 2x Strategy Fund maintained a daily correlation of over 99% to its benchmark of -200% of the daily price movement of the underlying index. Weakening Dollar 2x Strategy Fund returned 19.31%, compared with a return of -9.87% for its benchmark, the underlying index.
Contributing the most to performance of the underlying index for the year were the Euro, British Pound, and Canadian Dollar. No currencies detracted from performance. The Swiss Franc, Swedish Krona, and Japanese Yen contributed the least to the USDX during the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage, not for hedging purposes.
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 6 of this report.
Performance displayed represents past performance, which is no guarantee of future results.
76 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments or investments in Guggenheim Strategy Funds Trust mutual funds. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: September 30, 2005
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 30.4% |
Guggenheim Strategy Fund I | 24.0% |
Total | 54.4% |
“Largest Holdings” excludes any temporary cash or derivative investments.
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Weakening Dollar 2x Strategy Fund | 19.31% | (7.22%) | (5.15%) |
U.S. Dollar Index | (9.87%) | 2.92% | 1.85% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The U.S. Dollar Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 77 |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
WEAKENING DOLLAR 2x STRATEGY FUND |
Shares | Value | |||||||
MUTUAL FUNDS† - 54.4% | ||||||||
Guggenheim Strategy Fund II1 | 9,462 | $ | 236,637 | |||||
Guggenheim Strategy Fund I1 | 7,466 | 187,101 | ||||||
Total Mutual Funds | ||||||||
(Cost $419,186) | 423,738 | |||||||
Face Amount | ||||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 12.8% | ||||||||
Fannie Mae2 | ||||||||
1.26% due 01/12/183,4 | $ | 50,000 | 49,981 | |||||
Farmer Mac5 | ||||||||
1.32% due 02/28/183,4 | 50,000 | 49,895 | ||||||
Total Federal Agency Discount Notes | ||||||||
(Cost $99,874) | 99,876 |
REPURCHASE AGREEMENTS††,6 - 29.4% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/187 | 149,416 | 149,416 | ||||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/187 | 79,744 | 79,744 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $229,160) | 229,160 | |||||||
Total Investments - 96.6% | ||||||||
(Cost $748,220) | $ | 752,774 | ||||||
Other Assets & Liabilities, net - 3.4% | 26,159 | |||||||
Total Net Assets - 100.0% | $ | 778,933 |
Futures Contracts | ||||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Value and Unrealized Gain | ||||||||||||
Currency Futures Contracts Sold Short† | ||||||||||||||||
U.S. Dollar Index Futures Contracts | 11 | Mar 2018 | $ | 1,011,945 | $ | 11,122 |
Total Return Swap Agreements | ||||||||||||||||||||||||||
Counterparty | Index | Financing Rate Pay (Receive) | Payment Frequency | Maturity Date | Units | Notional Amount | Value and Unrealized Gain | |||||||||||||||||||
OTC Currency Index Swap Agreements Sold Short†† | ||||||||||||||||||||||||||
Goldman Sachs International | U.S. Dollar Index | — | At Maturity | 03/16/18 | 5,851 | $ | 538,562 | $ | 6,040 |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | On September 7, 2008, the issuer was placed in conservatorship by the Federal Housing Finance Agency (FHFA). As conservator, the FHFA has full powers to control the assets and operations of the firm. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | Zero coupon rate security. |
5 | The issuer operates under a Congressional charter; its securities are neither issued nor guaranteed by the U.S. Government. |
6 | Repurchase Agreements — See Note 6. |
7 | All or a portion of this security is pledged as currency index swap collateral at December 31, 2017. |
See Sector Classification in Other Information section. |
78 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
WEAKENING DOLLAR 2x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 1 - Other* | Level 2 Significant Observable Inputs | Level 2 - Other* | Level 3 Significant Unobservable Inputs | Total | ||||||||||||||||||
Currency Futures Contracts | $ | — | $ | 11,122 | $ | — | $ | — | $ | — | $ | 11,122 | ||||||||||||
Currency Index Swap Agreements | — | — | — | 6,040 | — | 6,040 | ||||||||||||||||||
Federal Agency Discount Notes | — | — | 99,876 | — | — | 99,876 | ||||||||||||||||||
Mutual Funds | 423,738 | — | — | — | — | 423,738 | ||||||||||||||||||
Repurchase Agreements | — | — | 229,160 | — | — | 229,160 | ||||||||||||||||||
Total Assets | $ | 423,738 | $ | 11,122 | $ | 329,036 | $ | 6,040 | $ | — | $ | 769,936 |
* | Other financial instruments include futures contracts and/or swaps, which are reported as unrealized gain/loss at period end. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a portfolio company of a fund, or control of or by, or common control under GI, result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act.
The Fund may invest in the underlying series of the Guggenheim Strategy Funds Trust consisting of Guggenheim Strategy Fund I, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III (collectively, the “Cash Management Funds”), open-end management investment companies managed by GI. The Cash Management Funds, which launched on March 11, 2014, are offered as cash management options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Cash Management Funds pay no investment management fees. The Cash Management Funds’ annual report on Form N-CSR dated September 30, 2017, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180417000715/gug72218.htm.
Transactions during the year ended December 31, 2017, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value 12/31/16 | Additions | Reductions | Realized Gain (Loss) | Change in Unrealized | Value 12/31/17 | Shares 12/31/17 | Investment Income | Capital Gain Distributions |
Mutual Funds | |||||||||
Guggenheim Strategy Fund I | $ 116,478 | $ 1,246,176 | $ (1,176,000) | $ 28 | $ 419 | $ 187,101 | 7,466 | $ 6,078 | $ 99 |
Guggenheim Strategy Fund II | 218,404 | 1,097,704 | (1,080,000) | (4) | 533 | 236,637 | 9,462 | 7,575 | 139 |
$ 334,882 | $ 2,343,880 | $ (2,256,000) | $ 24 | $ 952 | $ 423,738 | $ 13,653 | $ 238 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 79 |
WEAKENING DOLLAR 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2017 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $99,874) | $ | 99,876 | ||
Investments in affiliated issuers, at value (cost $419,186) | 423,738 | |||
Repurchase agreements, at value (cost $229,160) | 229,160 | |||
Segregated cash with broker | 19,800 | |||
Unrealized appreciation on swap agreements | 6,040 | |||
Receivables: | ||||
Variation margin | 3,355 | |||
Miscellaneous | 2,784 | |||
Dividends | 804 | |||
Fund shares sold | 147 | |||
Swap settlement | 42 | |||
Interest | 27 | |||
Total assets | 785,773 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 3,695 | |||
Securities purchased | 825 | |||
Management fees | 542 | |||
Transfer agent and administrative fees | 150 | |||
Investor service fees | 150 | |||
Portfolio accounting fees | 60 | |||
Miscellaneous | 1,418 | |||
Total liabilities | 6,840 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 778,933 | ||
Net assets consist of: | ||||
Paid in capital | $ | 2,055,340 | ||
Undistributed net investment income | — | |||
Accumulated net realized loss on investments | (1,298,123 | ) | ||
Net unrealized appreciation on investments | 21,716 | |||
Net assets | $ | 778,933 | ||
Capital shares outstanding | 11,557 | |||
Net asset value per share | $ | 67.40 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 13,653 | ||
Interest | 4,086 | |||
Total investment income | 17,739 | |||
Expenses: | ||||
Management fees | 10,105 | |||
Investor service fees | 2,807 | |||
Transfer agent and administrative fees | 2,807 | |||
Professional fees | 1,639 | |||
Portfolio accounting fees | 1,123 | |||
Custodian fees | 186 | |||
Trustees’ fees* | 123 | |||
Miscellaneous | 1,470 | |||
Total expenses | 20,260 | |||
Net investment loss | (2,521 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in affiliated issuers | 24 | |||
Distributions received from affiliated investment company shares | 238 | |||
Swap agreements | (5,290 | ) | ||
Futures contracts | 1,887 | |||
Net realized loss | (3,141 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 2 | |||
Investments in affiliated issuers | 952 | |||
Swap agreements | 4,947 | |||
Futures contracts | 19,409 | |||
Net change in unrealized appreciation (depreciation) | 25,310 | |||
Net realized and unrealized gain | 22,169 | |||
Net increase in net assets resulting from operations | $ | 19,648 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a) (19) of the 1940 Act. |
80 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
WEAKENING DOLLAR 2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (2,521 | ) | $ | (7,046 | ) | ||
Net realized loss on investments | (3,141 | ) | (170,311 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | 25,310 | 367 | ||||||
Net increase (decrease) in net assets resulting from operations | 19,648 | (176,990 | ) | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 13,687,425 | 5,757,266 | ||||||
Cost of shares redeemed | (13,615,500 | ) | (6,189,651 | ) | ||||
Net increase (decrease) from capital share transactions | 71,925 | (432,385 | ) | |||||
Net increase (decrease) in net assets | 91,573 | (609,375 | ) | |||||
Net assets: | ||||||||
Beginning of year | 687,360 | 1,296,735 | ||||||
End of year | $ | 778,933 | $ | 687,360 | ||||
Undistributed net investment income at end of year | $ | — | $ | — | ||||
Capital share activity: | ||||||||
Shares sold | 221,937 | 87,953 | * | |||||
Shares redeemed | (222,548 | ) | (96,735 | )* | ||||
Net decrease in shares | (611 | ) | (8,782 | )* |
* | Capital Share activity for the periods presented through December 31, 2016 has been restated to reflect a 1:4 reverse share split effective December 1, 2016 — See Note 11. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 81 |
WEAKENING DOLLAR 2x STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016d | Year Ended December 31, 2015d | Year Ended December 31, 2014d | Year Ended December 31, 2013d | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 56.49 | $ | 61.90 | $ | 74.41 | $ | 95.30 | $ | 98.04 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.14 | ) | (.11 | ) | (.80 | ) | (1.28 | ) | (1.60 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 11.05 | (5.30 | ) | (11.71 | ) | (19.61 | ) | (1.14 | ) | |||||||||||
Total from investment operations | 10.91 | (5.41 | ) | (12.51 | ) | (20.89 | ) | (2.74 | ) | |||||||||||
Net asset value, end of period | $ | 67.40 | $ | 56.49 | $ | 61.90 | $ | 74.41 | $ | 95.30 | ||||||||||
Total Returnb | 19.31 | % | (8.71 | %) | (16.83 | %) | (21.91 | %) | (2.82 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 779 | $ | 687 | $ | 1,297 | $ | 1,209 | $ | 1,896 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.22 | %) | (0.63 | %) | (1.22 | %) | (1.44 | %) | (1.69 | %) | ||||||||||
Total expensesc | 1.80 | % | 1.76 | % | 1.71 | % | 1.76 | % | 1.74 | % | ||||||||||
Portfolio turnover rate | 367 | % | 250 | % | 232 | % | 108 | % | — |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Reverse share split — Per share amounts for the periods presented through December 31, 2016 have been restated to reflect a 1:4 reverse share split effective December 1, 2016 — See Note 11. |
82 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
NOTES TO FINANCIAL STATEMENTS |
Note 1 – Organization and Significant Accounting Policies
Organization
The Rydex Variable Trust (the “Trust”), a Delaware statutory trust, is registered with the SEC under the Investment Company Act of 1940 (“1940 Act”), as an open-ended investment company of the series type. Each series, in effect, is representing a separate Fund. The Trust is authorized to issue an unlimited number of no par value shares. At December 31, 2017, the Trust consisted of forty-nine funds. The Trust offers shares of the Funds to insurance companies for their variable annuity and variable life insurance contracts.
This report covers the S&P 500® Pure Growth Fund, S&P 500® Pure Value Fund, S&P MidCap 400® Pure Growth Fund, S&P MidCap 400® Pure Value Fund, S&P SmallCap 600® Pure Growth Fund, S&P SmallCap 600® Pure Value Fund, Europe 1.25x Strategy Fund, Japan 2x Strategy Fund, Strengthening Dollar 2x Strategy Fund and Weakening Dollar 2x Strategy Fund (the “Funds”), each a non-diversified investment company.
The Funds are designed and operated to accommodate frequent trading by shareholders and, unlike most mutual funds, offer unlimited exchange privileges with no minimum holding periods or transactions fees, which may cause the Funds to experience high portfolio turnover.
Security Investors, LLC, which operates under the name Guggenheim Investments (“GI”), provides advisory services. Guggenheim Funds Distributors, LLC (“GFD”) acts as principal underwriter for the Trust. GI and GFD are affiliated entities.
Significant Accounting Policies
The Funds operate as investment companies and, accordingly, follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
The following significant accounting policies are in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and are consistently followed by the Trust. This requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. All time references are based on Eastern Time.
The net asset value per share (“NAV”) of a fund is calculated by dividing the market value of the fund’s securities and other assets, less all liabilities, by the number of outstanding shares of the fund.
(a) Valuation of Investments
The Board of Trustees of the Funds (the “Board”) has adopted policies and procedures for the valuation of the Funds’ investments (the “Valuation Procedures”). Pursuant to the Valuation Procedures, the Board has delegated to a valuation committee, consisting of representatives from Guggenheim’s investment management, fund administration, legal and compliance departments (the “Valuation Committee”), the day-to-day responsibility for implementing the Valuation Procedures, including, under most circumstances, the responsibility for determining the fair value of the Funds’ securities and/or other assets.
Valuations of the Funds’ securities are supplied primarily by pricing services appointed pursuant to the processes set forth in the Valuation Procedures. The Valuation Committee convenes monthly, or more frequently as needed, to review the valuation of all assets which have been fair valued for reasonableness. The Funds’ officers, through the Valuation Committee and consistent with the monitoring and review responsibilities set forth in the Valuation Procedures, regularly review procedures used and valuations provided by the pricing services.
If the pricing service cannot or does not provide a valuation for a particular investment or such valuation is deemed unreliable, such investment is fair valued by the Valuation Committee.
Equity securities listed on an exchange (New York Stock Exchange (“NYSE”) or American Stock Exchange) are valued at the last quoted sales price as of the close of business on the NYSE, usually 4:00 p.m. on the valuation date. Equity securities listed on the NASDAQ market system are valued at the NASDAQ Official Closing Price on the valuation date, which may not necessarily represent the last sale price. If there has been no sale on such exchange or NASDAQ on a given day, the security is valued at the closing bid price on that day.
Open-end investment companies (“mutual funds”) are valued at their NAV as of the close of business, on the valuation date.
U.S. Government securities are valued by either independent pricing services, the last traded fill price, or at the reported bid price at the close of business.
Debt securities with a maturity of greater than 60 days at acquisition are valued at prices that reflect broker-dealer supplied valuations or are obtained from independent pricing services, which may consider the trade activity, treasury spreads, yields or price of bonds of comparable quality, coupon, maturity, and type, as well as prices quoted by dealers who make markets in such securities. Short-term debt securities with a maturity of 60 days
THE RYDEX FUNDS ANNUAL REPORT | 83 |
NOTES TO FINANCIAL STATEMENTS (continued) |
or less at acquisition are valued at amortized cost, provided such amount approximates market value. Money market funds are valued at net asset value.
Repurchase agreements are valued at amortized cost, provided such amounts approximate market value.
The value of futures contracts is accounted for using the unrealized gain or loss on the contracts that is determined by marking the contracts to their current realized settlement prices. Financial futures contracts are valued at the 4:00 p.m. price on the valuation date. In the event that the exchange for a specific futures contract closes earlier than 4:00 p.m., the futures contract is valued at the Official Settlement Price of the exchange. However, the underlying securities from which the futures contract value is derived are monitored until 4:00 p.m. to determine if fair valuation would provide a more accurate valuation.
The value of currency index swap agreements entered into by a Fund is accounted for using the unrealized gain or loss on the agreements that is determined by marking the agreements to the broker quote.
Investments for which market quotations are not readily available are fair-valued as determined in good faith by GI under the direction of the Board using methods established or ratified by the Board. Valuations in accordance with these methods are intended to reflect each security’s (or asset’s) “fair value”. Each such determination is based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples of such factors may include, but are not limited to market prices; sale prices; broker quotes; and models which derive prices based on inputs such as prices of securities with comparable maturities and characteristics, or based on inputs such as anticipated cash flows or collateral, spread over Treasuries, and other information analysis.
In connection with futures contracts and other derivative investments, such factors may include obtaining information as to how (a) these contracts and other derivative investments trade in the futures or other derivative markets, respectively, and (b) the securities underlying these contracts and other derivative investments trade in the cash market.
(b) U.S. Government and Agency Obligations
Certain U.S. Government and Agency Obligations are traded on a discount basis; the interest rates shown on the Schedules of Investments reflect the effective rates paid at the time of purchase by the Funds. Other securities bear interest at the rates shown, payable at fixed dates through maturity.
(c) Futures Contracts
Upon entering into a futures contract, a Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is affected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
(d) Swap Agreements
Swap agreements are marked-to-market daily and the change, if any, is recorded as unrealized gain or loss. Payments received or made as a result of an agreement or termination of an agreement are recognized as realized gains or losses.
(e) Foreign Taxes
The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are paid by the Funds and reflected in their Statement of Operations as follows: foreign taxes withheld at source are presented as a reduction of income and foreign taxes on capital gains from sales of investments are included with the net realized gain (loss) on investments. Foreign taxes payable or deferred as of December 31, 2017, if any, are disclosed in the Funds’ Statements of Assets and Liabilities.
(f) Currency Translation
The accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities initially expressed in foreign currencies are converted into U.S. dollars at prevailing exchange rates. Purchases and sales of investment securities, dividend and interest income, and certain expenses are translated at the rates of exchange prevailing on the respective dates of such transactions.
Changes in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Funds. Foreign investments may also subject the Funds to foreign government exchange restrictions, expropriation, taxation or other political, social or economic developments, all of which could affect the market and/or credit risk of the investments.
84 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
The Funds do not isolate that portion of the results of operations resulting from changes in the foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Reported net realized foreign exchange gains and losses arise from sales of foreign currencies and currency gains or losses realized between the trade and settlement dates on investment transactions. Net unrealized exchange gains and losses arise from changes in the fair values of assets and liabilities other than investments in securities at the fiscal period end, resulting from changes in exchange rates.
(g) Security Transactions
Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from securities transactions are recorded using the identified cost basis. Proceeds from lawsuits related to investment holdings are recorded as realized gains in the respective Fund. Dividend income is recorded on the ex-dividend date, net of applicable taxes withheld by foreign countries. Taxable non-cash dividends are recorded as dividend income. Interest income, including amortization of premiums and accretion of discounts, is accrued on a daily basis. Dividend income from Real Estate Investment Trusts (“REITs”) is recorded based on the income included in the distributions received from the REIT investments using published REIT classifications, including some management estimates when actual amounts are not available. Distributions received in excess of this estimated amount are recorded as a reduction of the cost of investments or reclassified to capital gains. The actual amounts of income, return of capital, and capital gains are only determined by each REIT after its fiscal year-end, and may differ from the estimated amounts.
(h) Distributions
Distributions of net investment income and net realized gains, if any, are declared and paid at least annually. Normally, all such distributions of a Fund will automatically be reinvested without charge in additional shares of the same Fund. Distributions are recorded on the ex-dividend date and are determined in accordance with income tax regulations which may differ from U.S. GAAP.
(i) Cash
The Funds may leave cash overnight in their cash account with the custodian. Periodically, a Fund may have cash due to the custodian bank as an overdraft balance. A fee is incurred on this overdraft, calculated by multiplying the overdraft by a rate based on the federal funds rate, which was 1.33% at December 31, 2017.
(j) Indemnifications
Under the Funds’ organizational documents, the Trustees and Officers are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, 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.
Note 2 – Financial Instruments and Derivatives
As part of their investment strategy, the Funds utilize a variety of derivative instruments. These investments involve, to varying degrees, elements of market risk and risks in excess of the amounts recognized in the Statements of Assets and Liabilities. Valuation and accounting treatment of these instruments can be found under Significant Accounting Policies in Note 1 of these Notes to Financial Statements.
Derivatives
Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more other assets, such as securities, currencies, commodities or indices. Derivative instruments may be used to increase investment flexibility (including to maintain cash reserves while maintaining exposure to certain other assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. Derivative instruments may also be used to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. U.S. GAAP requires disclosures to enable investors to better understand how and why a Fund uses derivative instruments, how these derivative instruments are accounted for and their effects on the Fund’s financial position and results of operations.
The Funds utilized derivatives for the following purposes:
Index Exposure: the use of an instrument to obtain exposure to a listed or other type of index.
Leverage: gaining total exposure to equities or other assets on the long and short sides at greater than 100% of invested capital.
Liquidity: the ability to buy or sell exposure with little price/market impact.
For any Fund whose investment strategy consistently involves applying leverage, the value of the Fund’s shares will tend to increase or decrease more than the value of any increase
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NOTES TO FINANCIAL STATEMENTS (continued) |
or decrease in the underlying index or other asset. In addition, because an investment in derivative instruments generally requires a small investment relative to the amount of investment exposure assumed, an opportunity for increased net income is created; but, at the same time, leverage risk will increase. The Fund’s use of leverage, through borrowings or instruments such as derivatives, may cause the Fund to be more volatile and riskier than if they had not been leveraged.
Futures
A futures contract is an agreement to purchase (long) or sell (short) an agreed amount of securities or other instruments at a set price for delivery at a future date. There are significant risks associated with a Fund’s use of futures contracts, including (i) there may be an imperfect or no correlation between the changes in market value of the underlying asset and the prices of futures contracts; (ii) there may not be a liquid secondary market for a futures contract; (iii) trading restrictions or limitations may be imposed by an exchange; and (iv) government regulations may restrict trading in futures contracts. When investing in futures, there is minimal counterparty credit risk to a Fund because futures are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees against default. Cash deposits are shown as segregated cash with broker on the Statements of Assets and Liabilities; securities held as collateral are noted on the Schedules of Investments.
The following table represents the Funds’ use and volume of futures on a quarterly basis:
Average Notional Amount | ||||||||||
Fund | Use | Long | Short | |||||||
Europe 1.25x Strategy Fund | Index exposure, Leverage, Liquidity | $ | 7,778,750 | $ | — | |||||
Japan 2x Strategy Fund | Index exposure, Leverage, Liquidity | 15,086,628 | — | |||||||
Strengthening Dollar 2x Strategy Fund | Index exposure, Leverage, Liquidity | 3,978,354 | — | |||||||
Weakening Dollar 2x Strategy Fund | Index exposure, Leverage, Liquidity | — | 1,474,223 |
Swaps
A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. A Fund utilizing over-the-counter (“OTC”) swaps bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty or if the underlying asset declines in value. Certain standardized swaps are subject to mandatory central clearing and are executed on a multi-lateral or other trade facility platform, such as a registered exchange. There is limited counterparty credit risk with respect to centrally-cleared swaps as the transaction is facilitated through a central clearinghouse, much like an exchange-traded futures contract. Upon entering into certain centrally-cleared swap transactions, a Fund is required to deposit with its clearing broker an amount of cash or securities as an initial margin. Subsequent variation margin payments or receipts are made or received by the Fund, depending on fluctuations in the fair value of the reference entity. The exchange bears the risk of loss for interest rate swaps.
Currency swaps enable the Funds to gain exposure to currencies in a market without actually possessing a given currency, or to hedge a position. Currency swaps involve the exchange of the principal and interest in one currency for the principal and interest in another currency. As in other types of OTC swaps, the Funds may be at risk due to the counterparty’s inability to perform.
The following table represents the Funds’ use and volume of currency swaps on a quarterly basis:
Average Notional Amount | ||||||||||
Fund | Use | Long | Short | |||||||
Strengthening Dollar 2x Strategy Fund | Index exposure, Leverage, Liquidity | $ | 798,020 | $ | — | |||||
Weakening Dollar 2x Strategy Fund | Index exposure, Leverage, Liquidity | — | 441,456 |
86 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Derivative Investment Holdings Categorized by Risk Exposure
The following is a summary of the location of derivative investments on the Funds’ Statements of Assets and Liabilities as of December 31, 2017:
Derivative Investment Type | Asset Derivatives | Liability Derivatives |
Equity/Currency contracts | Variation margin | Variation margin |
Unrealized appreciation on swap agreements | Unrealized depreciation on swap agreements |
The following table sets forth the fair value of the Funds’ derivative investments categorized by primary risk exposure at December 31, 2017:
Asset Derivative Investments Value | ||||||||||||||||
Fund | Futures Equity Risk* | Futures Currency Risk* | Swaps Currency Risk | Total Value at December 31, 2017 | ||||||||||||
Europe 1.25x Strategy Fund | $ | — | $ | 49,899 | $ | — | $ | 49,899 | ||||||||
Japan 2x Strategy Fund | 136,099 | 39,516 | — | 175,615 | ||||||||||||
Weakening Dollar 2x Strategy Fund | — | 11,122 | 6,040 | 17,162 |
Liability Derivative Investments Value | ||||||||||||||||
Fund | Futures Equity Risk* | Futures Currency Risk* | Swaps Currency Risk | Total Value at December 31, 2017 | ||||||||||||
Europe 1.25x Strategy Fund | $ | 38,093 | $ | — | $ | — | $ | 38,093 | ||||||||
Strengthening Dollar 2x Strategy Fund | — | 35,479 | 3,780 | 39,259 |
* | Includes cumulative appreciation (depreciation) of futures contracts as reported on the Schedules of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities. |
The following is a summary of the location of derivative investments on the Funds’ Statements of Operations for the year ended December 31, 2017:
Derivative Investment Type | Location of Gain (Loss) on Derivatives |
Equity/Currency contracts | Net realized gain (loss) on futures contracts |
Net change in unrealized appreciation (depreciation) on futures contracts | |
Net realized gain (loss) on swap agreements | |
Net change in unrealized appreciation (depreciation) on swap agreements |
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 December 31, 2017:
Realized Gain (Loss) on Derivative Investments Recognized on the Statements of Operations | ||||||||||||||||
Fund | Futures Equity Risk | Futures Currency Risk | Swaps Currency Risk | Total | ||||||||||||
Europe 1.25x Strategy Fund | $ | 318,511 | $ | 363,599 | $ | — | $ | 682,110 | ||||||||
Japan 2x Strategy Fund | 1,440,652 | 67,289 | — | 1,507,941 | ||||||||||||
Strengthening Dollar 2x Strategy Fund | — | (423,618 | ) | (85,251 | ) | (508,869 | ) | |||||||||
Weakening Dollar 2x Strategy Fund | — | 1,887 | (5,290 | ) | (3,403 | ) |
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NOTES TO FINANCIAL STATEMENTS (continued) |
Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized on the Statements of Operations | ||||||||||||||||
Fund | Futures Equity Risk | Futures Currency Risk | Swaps Currency Risk | Total | ||||||||||||
Europe 1.25x Strategy Fund | $ | (49,820 | ) | $ | 64,930 | $ | — | $ | 15,110 | |||||||
Japan 2x Strategy Fund | (41,394 | ) | 69,323 | — | 27,929 | |||||||||||
Strengthening Dollar 2x Strategy Fund | — | (111,227 | ) | (10,752 | ) | (121,979 | ) | |||||||||
Weakening Dollar 2x Strategy Fund | — | 19,409 | 4,947 | 24,356 |
In conjunction with the use of derivative instruments, the Funds are required to maintain collateral in various forms. The Funds use, where appropriate, depending on the financial instrument utilized and the broker involved, margin deposits at the broker, cash and/or securities segregated at the custodian bank, discount notes or the repurchase agreements allocated to the Funds.
The Trust has established counterparty credit guidelines and enters into transactions only with financial institutions of investment grade or better. The Trust monitors the counterparty credit risk.
Note 3 – Offsetting
In the normal course of business, the Funds enter into transactions subject to enforceable master netting arrangements or other similar arrangements. Generally, the right to offset in those agreements allows the Funds to counteract the exposure to a specific counterparty with collateral received from or delivered to that counterparty based on the terms of the arrangements. These arrangements provide for the right to liquidate upon the occurrence of an event of default, credit event upon merger or additional termination event.
In order to better define their contractual rights and to secure rights that will help the Funds mitigate their counterparty risk, the Funds may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with their derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between a Fund and a counterparty that governs OTC derivatives, including foreign exchange contracts, and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of a default (close-out netting) or similar event, including the bankruptcy or insolvency of the counterparty.
For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Funds and the counterparty. For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Funds and cash collateral received from the counterparty, if any, are reported separately on the Statements of Assets and Liabilities as segregated cash with broker/receivable for variation margin, or payable for swap settlement/variation margin. Generally, the amount of collateral due from or to a counterparty must exceed a minimum transfer amount threshold (e.g., $300,000) before a transfer is required to be made. To the extent amounts due to the Funds from their counterparties are not fully collateralized, contractually or otherwise, the Funds bear the risk of loss from counterparty nonperformance. The Funds attempt to mitigate counterparty risk by only entering into agreements with counterparties that they believe to be of good standing and by monitoring the financial stability of those counterparties.
For financial reporting purposes, the Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statements of Assets and Liabilities.
88 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
The following tables present derivative financial instruments and secured financing transactions that are subject to enforceable netting arrangements and offset in the Statements of Assets and Liabilities in conformity with U.S. GAAP:
Gross Amounts Not Offset in the Statements of Assets and Liabilities | ||||||||||||||||||||||||||
Fund | Instrument | Gross Amounts of Recognized Assets1 | Gross Amounts Offset In the Statements of Assets and Liabilities | Net Amount of Assets Presented on the Statements of Assets and Liabilities | Financial Instruments | Cash Collateral Received | Net Amount | |||||||||||||||||||
Weakening Dollar 2x Strategy Fund | Swap currency contracts | $ | 6,040 | $ | — | $ | 6,040 | $ | — | $ | — | $ | 6,040 |
Gross Amounts Not Offset in the Statements of Assets and Liabilities | ||||||||||||||||||||||||||
Fund | Instrument | Gross Amounts of Recognized Liabilities1 | Gross Amounts Offset In the Statements of Assets and Liabilities | Net Amount of Liabilities Presented on the Statements of Assets and Liabilities | Financial Instruments | Cash Collateral Pledged | Net Amount | |||||||||||||||||||
Strengthening Dollar 2x Strategy Fund | Swap currency contracts | $ | 3,780 | $ | — | $ | 3,780 | $ | 3,780 | $ | — | $ | — |
1 | Centrally cleared swaps and exchange-traded futures are excluded from these reported amounts. |
The following table presents deposits held by others in connection with derivative investments as of December 31, 2017. The derivatives tables following the Schedule of Investments list each counterparty for which cash collateral may have been pledged or received at period end. The Funds have the right to offset these deposits against any related liabilities outstanding with each counterparty.
Fund | Counterparty/ Clearing Agent | Asset Type | Cash Pledged | Cash Received | ||||||||
Europe 1.25x Strategy Fund | Goldman Sachs Group | Futures contracts | $ | 218,583 | $ | — | ||||||
Europe 1.25x Strategy Fund Total | 218,583 | — | ||||||||||
Japan 2x Strategy Fund | Goldman Sachs Group | Futures contracts | 252,443 | — | ||||||||
Japan 2x Strategy Fund Total | 252,443 | — | ||||||||||
Strengthening Dollar 2x Strategy Fund | Goldman Sachs Group | Futures contracts | 64,800 | — | ||||||||
Strengthening Dollar 2x Strategy Fund Total | 64,800 | — | ||||||||||
Weakening Dollar 2x Strategy Fund | Goldman Sachs Group | Futures contracts | 19,800 | — | ||||||||
Weakening Dollar 2x Strategy Fund Total | 19,800 | — |
Note 4 – Fair Value Measurement
In accordance with U.S. GAAP, fair value is defined as the price that the Funds 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. U.S. GAAP establishes a three-tier fair value hierarchy based on the types of inputs used to value assets and liabilities and requires corresponding disclosure. The hierarchy and the corresponding inputs are summarized below:
Level 1 — | quoted prices in active markets for identical assets or liabilities. |
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NOTES TO FINANCIAL STATEMENTS (continued) |
Level 2 — | significant other observable inputs (for example quoted prices for securities that are similar based on characteristics such as interest rates, prepayment speeds, credit risk, etc.). |
Level 3 — | significant unobservable inputs based on the best information available under the circumstances, to the extent observable inputs are not available, which may include assumptions. |
The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly, fair value determinations for Level 3 securities require the greatest amount of judgment.
The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The suitability of the techniques and sources employed to determine fair valuation are regularly monitored and subject to change.
Note 5 – Investment Advisory Agreement and Other Agreements
Under the terms of an investment advisory contract, the Funds pay GI investment advisory fees calculated at the annualized rates below, based on the average daily net assets of the Funds:
Fund | Management Fees (as a % of Net Assets) |
S&P 500® Pure Growth Fund | 0.75% |
S&P 500® Pure Value Fund | 0.75% |
S&P MidCap 400® Pure Growth Fund | 0.75% |
S&P MidCap 400® Pure Value Fund | 0.75% |
S&P SmallCap 600® Pure Growth Fund | 0.75% |
S&P SmallCap 600® Pure Value Fund | 0.75% |
Europe 1.25x Strategy Fund | 0.90% |
Japan 2x Strategy Fund | 0.75% |
Strengthening Dollar 2x Strategy Fund | 0.90% |
Weakening Dollar 2x Strategy Fund | 0.90% |
GI engages external service providers to perform other necessary services for the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, etc., on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.
The Trust has adopted an Investor Services Plan for which GFD and other firms that provide investor services (“Service Providers”) may receive compensation. The Funds will pay investor service fees to GFD at an annual rate not to exceed 0.25% of average daily net assets. GFD, in turn, will compensate Service Providers for providing such services, while retaining a portion of such payments to compensate itself for investor services it performs.
If a Fund invests in an affiliated fund, the investing Fund’s adviser has agreed to waive fees at the investing fund level. Fee waivers will be calculated at the investing Fund level without regard to any expense cap, if any, in effect for the investing Fund. Fees waived under this arrangement are not subject to reimbursement to GI. For the year ended December 31, 2017, the Funds did not waive any fees related to investments in affiliated funds.
Certain trustees and officers of the Trust are also officers of GI and GFD.
MUFG Investor Services (US), LLC (“MUIS”) acts as the Funds’ administrator and accounting agent. As administrator and accounting agent, MUIS is responsible for maintaining the books and records of the Funds’ securities and cash. The U.S Bank, N.A. (“U.S. Bank”) acts as the Funds’ custodian. As custodian, U.S. Bank is responsible for the custody of the Funds’ assets. For providing the aforementioned services, MUIS and U.S. Bank are entitled to receive a monthly fee equal to an annual percentage of the Fund’s average daily net assets subject to certain minimum monthly fees and out of pocket expenses.
90 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 6 – Repurchase Agreements
The Funds transfer uninvested cash balances into a single joint account, the daily aggregate balance of which is invested in one or more repurchase agreements collateralized by obligations of the U.S. Treasury and U.S. government agencies. The joint account includes other Funds in the Guggenheim complex not covered in this report. The collateral is in the possession of the Funds’ custodian and is evaluated to ensure that its market value exceeds, at a minimum, 102% of the original face amount of the repurchase agreements. Each Fund holds a pro rata share of the collateral based on the dollar amount of the repurchase agreement entered into by each Fund.
At December 31, 2017, the repurchase agreements in the joint account were as follows:
Counterparty and Terms of Agreement | Face Value | Repurchase Price | Collateral | Par Value | Fair Value | |||||||||||||
JPMorgan Chase & Co. | U.S. Treasury Notes | |||||||||||||||||
1.41% | 1.50% - 2.50% | |||||||||||||||||
Due 01/02/18 | $ | 28,652,652 | $ | 28,656,019 | 05/15/24 - 08/15/26 | $ | 31,210,500 | $ | 29,225,798 | |||||||||
Bank of America Merrill Lynch | U.S. Treasury Bond | |||||||||||||||||
1.40% | 3.88% | |||||||||||||||||
Due 01/02/18 | 15,292,005 | 15,293,789 | 04/15/29 | 7,605,000 | 15,597,858 |
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. The Funds’ investment adviser, acting under the supervision of the Board, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the Funds enter into repurchase agreements to evaluate potential risks.
Note 7 – Portfolio Securities Loaned
The Funds may lend their securities to approved brokers to earn additional income. Security lending income shown on the Statements 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, U.S. Bank 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 U.S. Bank, cash collateral and proceeds are invested in the First American Government Obligations Fund - Class Z. 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 it’s 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. Securities lending transactions are accounted for as secured borrowings. The remaining contractual maturity of the securities lending agreement is overnight and continuous.
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NOTES TO FINANCIAL STATEMENTS (continued) |
At December 31, 2017, the Funds participated in securities lending transactions, which are subject to enforceable netting arrangements, as follows:
Gross Amounts Not Offset in the Statements of Assets and Liabilities | Securities Lending Collateral | |||||||||||||||||||||||
Fund | Value of Securities Loaned | Collateral Received(a) | Net Amount | Cash Collateral Invested | Cash Collateral Uninvested | Total Collateral | ||||||||||||||||||
S&P 500® Pure Value Fund | $ | 1,162,899 | $ | (1,162,899 | ) | $ | — | $ | 1,218,249 | $ | — | $ | 1,218,249 | |||||||||||
S&P MidCap 400® Pure Value Fund | 520,772 | (520,772 | ) | — | 543,771 | — | 543,771 | |||||||||||||||||
S&P SmallCap 600® Pure Growth Fund | 1,237,803 | (1,237,803 | ) | — | 1,291,503 | — | 1,291,503 | |||||||||||||||||
S&P SmallCap 600® Pure Value Fund | 893,641 | (893,641 | ) | — | 933,900 | — | 933,900 | |||||||||||||||||
Europe 1.25x Strategy Fund | 309,754 | (309,754 | ) | — | 321,083 | — | 321,083 |
(a) | Actual collateral received by the Fund is greater than the amount shown due to overcollateralization. |
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. GI, acting under the supervision of the Board, reviews the value of the collateral and the creditworthiness of those banks and dealers to evaluate potential risks.
Note 8 – Federal Income Tax Information
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 or federal excise 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, and has concluded that no provision for income tax is required in the Funds’ financial statements. The Funds’ federal tax returns are subject to examination by the Internal Revenue Service for a period of three years after they are filed.
The tax character of distributions paid during the year ended December 31, 2017 was as follows:
Fund | Ordinary Income | Long-Term Capital Gain | Total Distributions | |||||||||
S&P 500® Pure Growth Fund | $ | — | $ | 2,087,780 | $ | 2,087,780 | ||||||
S&P 500® Pure Value Fund | 2,231,533 | — | 2,231,533 | |||||||||
S&P MidCap 400® Pure Value Fund | 2,789,318 | 148,611 | 2,937,929 | |||||||||
S&P SmallCap 600® Pure Growth Fund | — | 799,644 | 799,644 | |||||||||
S&P SmallCap 600® Pure Value Fund | — | 398,643 | 398,643 | |||||||||
Europe 1.25x Strategy Fund | 40,552 | — | 40,552 | |||||||||
Strengthening Dollar 2x Strategy Fund | 9,995 | 44,708 | 54,703 |
92 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
The tax character of distributions paid during the year ended December 31, 2016 was as follows:
Fund | Ordinary Income | Long-Term Capital Gain | Total Distributions | |||||||||
S&P 500® Pure Growth Fund | $ | — | $ | 2,097,841 | $ | 2,097,841 | ||||||
S&P 500® Pure Value Fund | 401,556 | 1,016,397 | 1,417,953 | |||||||||
S&P MidCap 400® Pure Value Fund | 78,852 | — | 78,852 | |||||||||
Europe 1.25x Strategy Fund | 36,982 | — | 36,982 | |||||||||
Strengthening Dollar 2x Strategy Fund | 15,804 | 150,697 | 166,501 |
Note: For federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
The tax components of accumulated earnings/(deficit) as of December 31, 2017 were as follows:
Fund | Undistributed Ordinary Income | Undistributed Long-Term Capital Gain | Net Unrealized Appreciation/ (Depreciation) | Accumulated Capital and Other Losses | Other Temporary Differences | Total | ||||||||||||||||||
S&P 500® Pure Growth Fund | $ | 2,320,668 | $ | 1,892,642 | $ | 9,114,902 | $ | — | $ | — | $ | 13,328,212 | ||||||||||||
S&P 500® Pure Value Fund | 1,352,538 | 1,769,311 | 4,970,580 | — | — | 8,092,429 | ||||||||||||||||||
S&P MidCap 400® Pure Growth Fund | 1,255,727 | 291,651 | 1,930,062 | — | — | 3,477,440 | ||||||||||||||||||
S&P MidCap 400® Pure Value Fund | 389,206 | 1,522,741 | 1,405,190 | — | — | 3,317,137 | ||||||||||||||||||
S&P SmallCap 600® Pure Growth Fund | — | 544,795 | 2,946,897 | — | 1,221 | 3,492,913 | ||||||||||||||||||
S&P SmallCap 600® Pure Value Fund | — | — | (64,175 | ) | (719,566 | ) | — | (783,741 | ) | |||||||||||||||
Europe 1.25x Strategy Fund | 14,576 | — | 96,222 | (2,414,543 | ) | — | (2,303,745 | ) | ||||||||||||||||
Japan 2x Strategy Fund | 248,466 | 308,203 | 6,627 | (1,464,087 | ) | — | (900,791 | ) | ||||||||||||||||
Strengthening Dollar 2x Strategy Fund | — | — | 8,019 | (1,298,424 | ) | — | (1,290,405 | ) | ||||||||||||||||
Weakening Dollar 2x Strategy Fund | — | — | 4,492 | (1,280,899 | ) | — | (1,276,407 | ) |
For Federal income tax purposes, capital loss carryforwards represent realized losses of the Funds that may be carried forward and applied against future capital gains. For taxable years beginning on or before December 22, 2010, such capital losses may be carried forward for a maximum of eight years. Under the RIC Modernization Act of 2010, the 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 taxable years must be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to 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. As of December 31, 2017, capital loss carryforwards for the Funds were as follows:
Fund | Expires in 2018 | Unlimited | Total Capital Loss Carryforward | |||||||||||||
Short-Term | Long-Term | |||||||||||||||
S&P SmallCap 600® Pure Value Fund | $ | — | $ | (693,512 | ) | $ | (26,054 | ) | $ | (719,566 | ) | |||||
Europe 1.25x Strategy Fund | (1,734,902 | ) | (607,105 | ) | (72,536 | ) | (2,414,543 | )* | ||||||||
Japan 2x Strategy Fund | — | (585,635 | ) | (878,452 | ) | (1,464,087 | )* | |||||||||
Strengthening Dollar 2x Strategy Fund | — | (519,794 | ) | (778,630 | ) | (1,298,424 | )* | |||||||||
Weakening Dollar 2x Strategy Fund | — | (511,486 | ) | (769,413 | ) | (1,280,899 | )* |
* | In accordance with Section 382 of the Internal Revenue Code, a portion of certain Fund losses are subject to an annual limitation. This annual limitation is generally applicable to all of the capital loss carryforwards shown with respect to each Fund. |
THE RYDEX FUNDS ANNUAL REPORT | 93 |
NOTES TO FINANCIAL STATEMENTS (continued) |
For the year ended December 31, 2017, the following capital loss carryforward amounts expired or were utilized:
Fund | Expired | Utilized | Total | |||||||||
S&P MidCap 400® Pure Growth Fund | $ | — | $ | 122,577 | $ | 122,577 | ||||||
S&P SmallCap 600® Pure Value Fund | 570,741 | — | 570,741 | |||||||||
Europe 1.25x Strategy Fund | — | 712,869 | 712,869 | |||||||||
Japan 2x Strategy Fund | — | 946,677 | 946,677 | |||||||||
Weakening Dollar 2x Strategy Fund | — | 21,277 | 21,277 |
Net investment income and net realized gains (losses) may differ for financial statement and tax purposes because of temporary or permanent book/tax differences. These differences are primarily due to investments in real estate investment trusts, foreign currency gains and losses, dividend reclasses, losses deferred due to wash sales, distributions in connection with redemption of fund shares, return of capital distributions received, and the “mark-to-market” of forward foreign currency exchange contracts. Additional differences may result from the tax treatment of net investment losses, the expiration of capital loss carryforward amounts, and the “mark-to-market of certain derivatives. To the extent these differences are permanent, reclassifications are made to the appropriate capital accounts in the period that the differences arise. These reclassifications have no effect on net assets or NAV per share.
The following adjustments were made on the Statements of Assets and Liabilities as of December 31, 2017 for permanent book/tax differences:
Fund | Paid In Capital | Undistributed Net Investment Income | Accumulated Net Realized Gain/(Loss) | |||||||||
S&P 500® Pure Growth Fund | $ | 1,332,877 | $ | 380,607 | $ | (1,713,484 | ) | |||||
S&P 500® Pure Value Fund | 145,135 | — | (145,135 | ) | ||||||||
S&P MidCap 400® Pure Growth Fund | 469,735 | 144,598 | (614,333 | ) | ||||||||
S&P MidCap 400® Pure Value Fund | 346,146 | 17,660 | (363,806 | ) | ||||||||
S&P SmallCap 600® Pure Growth Fund | 846,803 | 174,877 | (1,021,680 | ) | ||||||||
S&P SmallCap 600® Pure Value Fund | (615,151 | ) | 63,031 | 552,120 | ||||||||
Europe 1.25x Strategy Fund | (1 | ) | 2,648 | (2,647 | ) | |||||||
Japan 2x Strategy Fund | 29,359 | 5,644 | (35,003 | ) | ||||||||
Strengthening Dollar 2x Strategy Fund | (2,805 | ) | 2,805 | — | ||||||||
Weakening Dollar 2x Strategy Fund | (2,521 | ) | 2,521 | — |
At December 31, 2017, the cost of securities for Federal income tax purposes, the aggregate gross unrealized gain for all securities for which there was an excess of value over tax cost, and the aggregate gross unrealized loss for all securities for which there was an excess of tax cost over value, were as follows:
Fund | Tax Cost | Tax Unrealized Gain | Tax Unrealized (Loss) | Net Unrealized Gain/(Loss) | ||||||||||||
S&P 500® Pure Growth Fund | $ | 46,000,800 | $ | 9,407,533 | $ | (292,631 | ) | $ | 9,114,902 | |||||||
S&P 500® Pure Value Fund | 40,900,561 | 5,481,408 | (510,828 | ) | 4,970,580 | |||||||||||
S&P MidCap 400® Pure Growth Fund | 18,415,383 | 2,164,370 | (234,308 | ) | 1,930,062 | |||||||||||
S&P MidCap 400® Pure Value Fund | 16,579,328 | 1,716,704 | (311,515 | ) | 1,405,189 | |||||||||||
S&P SmallCap 600® Pure Growth Fund | 18,894,226 | 3,192,089 | (245,192 | ) | 2,946,897 | |||||||||||
S&P SmallCap 600® Pure Value Fund | 18,776,101 | 408,794 | (472,969 | ) | (64,175 | ) | ||||||||||
Europe 1.25x Strategy Fund | 5,783,367 | 171,594 | (75,292 | ) | 96,302 | |||||||||||
Japan 2x Strategy Fund | 5,425,867 | 6,628 | (1 | ) | 6,627 | |||||||||||
Strengthening Dollar 2x Strategy Fund | 1,731,917 | 8,020 | — | 8,020 | ||||||||||||
Weakening Dollar 2x Strategy Fund | 748,282 | 4,492 | — | 4,492 |
94 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 9 – Securities Transactions
For the year ended December 31, 2017, the cost of purchases and proceeds from sales of investment securities, excluding government securities, short-term investments and derivatives, were as follows:
Fund | Purchases | Sales | ||||||
S&P 500® Pure Growth Fund | $ | 149,329,287 | $ | 148,868,041 | ||||
S&P 500® Pure Value Fund | 52,684,781 | 58,231,087 | ||||||
S&P MidCap 400® Pure Growth Fund | 48,268,225 | 50,650,155 | ||||||
S&P MidCap 400® Pure Value Fund | 25,842,371 | 40,320,200 | ||||||
S&P SmallCap 600® Pure Growth Fund | 53,380,502 | 56,081,045 | ||||||
S&P SmallCap 600® Pure Value Fund | 37,122,918 | 46,174,941 | ||||||
Europe 1.25x Strategy Fund | 8,057,042 | 4,792,196 | ||||||
Japan 2x Strategy Fund | 3,308,438 | 1,450,000 | ||||||
Strengthening Dollar 2x Strategy Fund | 1,565,248 | 3,620,000 | ||||||
Weakening Dollar 2x Strategy Fund | 2,343,880 | 2,256,000 |
The Funds are permitted to purchase or sell securities from or to certain affiliated funds under specified conditions outlined in procedures adopted by the Board of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by a Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under these procedures, each transaction is effected at the current market price to save costs, where permissible. For the year ended December 31, 2017, the Funds engaged in purchases and sales of securities, pursuant to Rule 17a-7 of the 1940 Act, as follows:
Fund | Purchases | Sales | Realized Gain (Loss) | |||||||||
S&P 500® Pure Growth Fund | $ | 27,139,502 | $ | 29,609,009 | $ | 237,452 | ||||||
S&P 500® Pure Value Fund | 11,365,103 | 16,402,584 | 982,567 | |||||||||
S&P MidCap 400® Pure Growth Fund | 8,023,826 | 8,202,656 | 260,143 | |||||||||
S&P MidCap 400® Pure Value Fund | 5,258,024 | 8,527,610 | 950,425 | |||||||||
S&P SmallCap 600® Pure Growth Fund | 6,870,757 | 5,620,699 | 510,471 | |||||||||
S&P SmallCap 600® Pure Value Fund | 6,235,720 | 5,620,716 | 464,286 | |||||||||
Europe 1.25x Strategy Fund | 5,578,995 | 1,730,790 | (24,696 | ) |
Note 10 – Line of Credit
The Trust, along with other affiliated trusts, secured an uncommitted $75,000,000 line of credit from U.S. Bank, N.A., which expires June 11, 2018. This line of credit is reserved for emergency or temporary purposes. Borrowings, if any, under this arrangement bear interest equal to the Prime Rate, minus 2%, which shall be paid monthly, averaging 2.09% for the year ended December 31, 2017. The Funds did not have any borrowings outstanding under this agreement at December 31, 2017.
The average daily balances borrowed for the year ended December 31, 2017, were as follows:
Fund | Average Daily Balance | |||
S&P 500® Pure Growth Fund | $ | 1,372 | ||
S&P 500® Pure Value Fund | 3,453 | |||
S&P MidCap 400® Pure Growth Fund | 1,745 | |||
S&P MidCap 400® Pure Value Fund | 1,050 | |||
S&P SmallCap 600® Pure Growth Fund | 370 | |||
S&P SmallCap 600® Pure Value Fund | 3,075 | |||
Europe 1.25x Strategy Fund | 1,466 | |||
Strengthening Dollar 2x Strategy Fund | 367 |
THE RYDEX FUNDS ANNUAL REPORT | 95 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 11 – Share Splits
Share splits occurred for the following funds at the close of business:
Fund | Effective Day | Split Type |
S&P 500® Pure Value Fund | December 1, 2016 | Two-for One Share Split |
S&P MidCap 400® Pure Value Fund | December 1, 2016 | Two-for One Share Split |
S&P SmallCap 600® Pure Value Fund | December 1, 2016 | Two-for One Share Split |
Europe 1.25x Strategy Fund | December 1, 2016 | One-for-Six Reverse Share Split |
Japan 2x Strategy Fund | December 1, 2016 | One-for-Six Reverse Share Split |
Weakening Dollar 2x Strategy Fund | December 1, 2016 | One-for-Four Reverse Share Split |
The effect of these transactions was to multiply the number of outstanding shares of the S&P 500® Pure Value Fund, S&P MidCap 400® Pure Value Fund and S&P SmallCap 600® Pure Value Fund by their split ratio, resulting in a corresponding decrease in the NAV and to divide the number of outstanding shares of the Europe 1.25x Strategy Fund, Japan 2x Strategy Fund and the Weakening Dollar 2x Strategy Fund by their respective reverse split ratio, resulting in a corresponding increase in the NAV. The share transactions presented in the Statements of Changes in net assets and the per share data in the Financial Highlights for each of the periods presented prior to the effective date, have been restated to reflect these respective share splits. There were no changes in net assets, results of operations or total return as a result of these transactions.
Note 12 – Legal Proceedings
Tribune Company
Rydex Variable Trust has been named as a defendant and a putative member of the proposed defendant class of shareholders in the case entitled Kirschner v. FitzSimons, No. 12-2652 (S.D.N.Y.) (formerly Official Committee of Unsecured Creditors of Tribune Co. v. FitzSimons, Adv. Pro. No. 10-54010 (Bankr. D. Del.)) (the “FitzSimons action”), as a result of ownership by certain series of the Rydex Variable Trust of shares in the Tribune Company (“Tribune”) in 2007, when Tribune effected a leveraged buyout transaction (“LBO”) by which Tribune converted to a privately-held company. In his complaint, the plaintiff has alleged that, in connection with the LBO, Tribune insiders and shareholders were overpaid for their Tribune stock using financing that the insiders knew would, and ultimately did, leave Tribune insolvent. The plaintiff has asserted claims against certain insiders, major shareholders, professional advisers, and others involved in the LBO. The plaintiff is also attempting to obtain from former Tribune shareholders, including the Rydex Variable Trust, the proceeds they received in connection with the LBO.
In June 2011, a group of Tribune creditors filed multiple actions against former Tribune shareholders involving state law constructive fraudulent conveyance claims arising out of the 2007 LBO (the “SLCFC actions”). Rydex Variable Trust has been named as a defendant in one or more of these suits. In those actions, the creditors seek to recover from Tribune’s former shareholders the proceeds received in connection with the 2007 LBO.
The FitzSimons action and the SLCFC actions have been consolidated with the majority of the other Tribune LBO-related lawsuits in a multidistrict litigation proceeding captioned In re Tribune Company Fraudulent Conveyance Litig., No. 11-md-2696 (S.D.N.Y.) (the “MDL Proceeding”).
On September 23, 2013, the District Court granted the defendants’ omnibus motion to dismiss the SLCFC actions, on the basis that the creditors lacked standing. On September 30, 2013, the creditors filed a notice of appeal of the September 23 order. On October 28, 2013, the defendants filed a joint notice of cross-appeal of that same order. On March 29, 2016, the U.S. Court of Appeals for the Second Circuit issued its opinion on the appeal of the SLCFC actions. The appeals court affirmed the district court’s dismissal of those lawsuits, but on different grounds than the district court. The appeals court held that while the plaintiffs have standing under the U.S. Bankruptcy Code, their claims were preempted by Section 546(e) of the Bankruptcy Code—the statutory safe harbor for settlement payments. On April 12, 2016, the Plaintiffs in the SLCFC actions filed a petition seeking rehearing en banc before the appeals court. On July 22, 2016, the appeals court denied the petition. On September 9, 2016, the plaintiffs filed a petition for writ of certiorari in the U.S. Supreme Court challenging the Second Circuit’s decision that the safe harbor of Section 546(e) applied to their claims. The shareholder defendants, including the Funds, filed a joint brief in opposition to the petition for certiorari on October 24, 2016. The Supreme Court has not yet granted or denied the petition for certiorari.
96 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
On May 23, 2014, the defendants filed motions to dismiss the FitzSimons action, including a global motion to dismiss Count I, which is the claim brought against former Tribune shareholders for intentional fraudulent conveyance under U.S. federal law. On January 6, 2017, the United States District Court for the Southern District of New York granted the shareholder defendants’ motion to dismiss the intentional fraudulent conveyance claim in the FitzSimons action. The Court concluded that the plaintiff had failed to allege that Tribune entered the LBO with actual intent to hinder, delay, or defraud its creditors, and therefore the complaint failed to state a claim. In dismissing the intentional fraudulent conveyance claim, the Court denied the plaintiff’s request to amend the complaint. On February 23, 2017, the Court issued an order stating that it intends to permit an interlocutory appeal of the dismissal order, but will wait to do so until it has resolved outstanding motions to dismiss filed by other defendants. Accordingly, the timing of the appeal is uncertain.
On July 18, 2017, the plaintiff submitted a letter to the District Court seeking leave to amend its complaint to add a constructive fraudulent transfer claim. The shareholder defendants opposed that request. On August 24, 2017, the Court denied the plaintiff’s request without prejudice to renewal of the request in the event of an intervening change in the law.
None of these lawsuits alleges any wrongdoing on the part of Rydex Variable Trust. The following series of Rydex Variable Trust held shares of Tribune and tendered these shares as part of Tribune’s LBO: Nova Fund, S&P 500 2x Strategy Fund, Multi-Cap Core Equity Fund, S&P 500 Pure Value Fund, Hedged Equity Fund and Multi-Hedge Strategies Fund (the “Funds”). The value of the proceeds received by the foregoing Funds was $12,580, $2,380, $1,360, $148,376, $2,720, and $119,034, respectively. At this stage of the proceedings, Rydex Variable Trust is not able to make a reliable predication as to the outcome of these lawsuits or the effect, if any, on a Fund’s net asset value.
Lyondell Chemical Company
In December 2011, Rydex Variable Trust was named as a defendant in Weisfelner, as Trustee of the LB Creditor Trust, v. Fund 1 (In re Lyondell Chemical Co.), Adv. Pro. No. 10-4609 (Bankr. S.D.N.Y.) (the “Creditor Trust Action”). Its funds may also be putative members of the proposed defendant classes in Weisfelner, as Trustee of the LB Litigation Trust v. A. Holmes & H. Holmes TTEE (In re Lyondell Co.), Adv. Pro. No. 10-5525 (Bankr. S.D.N.Y.) (the “Litigation Trust Action”) and Weisfelner, as Trustee of the LB Creditor Trust, v. Reichman (In re Lyondell Chemical Co.), Adv. Pro. No. 12-1570 (Bankr. S.D.N.Y.).
Similar to the claims made in the Tribune matter, the Weisfelner complaints seek to have set aside and recovered as fraudulent transfers from former Lyondell Chemical Company (“Lyondell”) shareholders the consideration paid to them pursuant to the cash out merger of Lyondell shareholders in connection with the combination of Lyondell and Basell AF in 2007. Lyondell filed for bankruptcy in 2008. The Creditor Trust Action and Reichman allege claims against the former Lyondell shareholders under state law for both constructive fraudulent transfer and intentional fraudulent transfer. The Litigation Trust Action alleges a claim against the former Lyondell shareholders under federal law for intentional fraudulent transfer.
On April 7, 2014, the plaintiff filed a Third Amended Complaint in the Creditor Trust Action, a Second Amended Complaint in the Litigation Trust Action, and an Amended Complaint in Reichman.
On May 8, 2014, the plaintiff in the Litigation Trust Action filed a motion to certify a defendant class generally comprised of all former Lyondell shareholders that received proceeds in exchange for their shares in the 2007 merger transaction.
On July 30, 2014, the defendants filed a motion to dismiss these lawsuits. The Bankruptcy Court held oral argument on the motion to dismiss and on the motion for class certification on January 14 and January 15, 2015. On September 15, 2015, the Bankruptcy Court denied the motion for class certification without prejudice to the plaintiff’s right to file a renewed motion. On November 18, 2015, the Bankruptcy Court granted the defendants’ motion to dismiss the intentional fraudulent transfer claims in the Creditor Trust Action, the Litigation Trust Action, and in Reichman, but denied the motion to dismiss the constructive fraudulent transfer claims in the Creditor Trust Action and in Reichman. The Bankruptcy Court entered final judgment dismissing the Litigation Trust Action, but the plaintiff appealed the dismissal to the U.S. District Court for the Southern District of New York.
On July 27, 2016, the District Court reversed the Bankruptcy Court and reinstated the federal law intentional fraudulent transfer claim in the Litigation Trust Action and remanded to the Bankruptcy Court for further proceedings. The District Court found that the fraudulent intent that mattered was that of Lyondell’s CEO, not its board, because the CEO’s intent could be imputed to Lyondell under Delaware law agency principles. The District Court did note, however, that plaintiff faces a high standard for proving “actual intent” to harm creditors, and that it remains to be seen whether plaintiff will be able to make this showing. On August 11, 2016, the shareholder defendants filed a motion for reconsideration and/
THE RYDEX FUNDS ANNUAL REPORT | 97 |
NOTES TO FINANCIAL STATEMENTS (concluded) |
or to certify an interlocutory appeal of the District Court’s opinion. On October 5, 2016, the District Court denied the motion for reconsideration and/or to certify an interlocutory appeal. On April 21, 2017, the Bankruptcy Court issued an Opinion and Order After Trial in a related Lyondell litigation (the “Blavatnik Action”) rejecting claims for intentional fraudulent transfer and constructive fraudulent transfer in connection with the 2007 LBO. Based on this related ruling in the Blavatnik Action, the shareholder defendants filed a motion to dismiss the Litigation Trust Action on the grounds of collateral estoppel on May 30, 2017. Although the Bankruptcy Court had not yet ruled on the motion to dismiss, on August 15, 2017, the plaintiff in the Litigation Trust action filed a notice of dismissal of all claims against the defendants who joined the motion to dismiss. On August 18, 2017, the Litigation Trust plaintiff also withdrew his request for class certification of a defendant class in the Litigation Trust action. On September 5, 2017, the Court entered an order dismissing the Litigation Trust action with prejudice. The Court’s order dismissed the action as to all defendants as well as to unnamed members of the putative defendant class.
On May 4, 2016, the defendants filed a motion to dismiss, or in the alternative, for a stay of, the Creditor Trust Action and Reichman in light of the U.S. Court of Appeals for the Second Circuit’s opinion in the appeal of the Tribune SLCFC actions. On July 20, 2016, the Bankruptcy Court issued a report and recommendation granting the defendants’ motion to dismiss. On May 30, 2017, the shareholder defendants filed a motion to remand the proceedings in the Creditor Trust and Reichman Actions to the Bankruptcy Court, for consideration of the collateral estoppel ground for dismissal raised by the Bankruptcy Court’s ruling in the Blavatnik Action. On August 18, 2017, the plaintiff in the Creditor Trust action filed a notice of dismissal of claims brought against defendants who had not answered the Third Amended Complaint. The same day, the plaintiff in the Reichman action filed a notice of dismissal of all claims against named defendants who had not filed an answer and withdrew his request for class certification of a defendant class. On September 5, 2017, the Court entered an order dismissing the Creditor Trust and Reichman actions with prejudice. The Court’s order dismissed the actions as to all defendants as well as to unnamed members of the putative defendant class in the Reichman action.
As a result of the dismissals above, there are no longer claims pending against the Rydex Variable Trust related to the Lyondell merger.
These lawsuits do not allege any wrongdoing on the part of Rydex Variable Trust. The following series of Rydex Variable Trust received cash proceeds from the cash out merger in the following amounts: Basic Materials Fund - $1,235,952; Long Short Equity Fund f/k/a U.S. Long Short Momentum Fund - $523,200; Multi-Cap Core Equity Fund - $5,760; Hedged Equity Fund - $480; and Multi-Hedge Strategies Fund - $112,848.
98 | THE RYDEX FUNDS ANNUAL REPORT |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Shareholders of S&P 500® Pure Growth Fund, S&P 500® Pure Value Fund, S&P MidCap 400® Pure Growth Fund, S&P MidCap 400® Pure Value Fund, S&P SmallCap 600® Pure Growth Fund, S&P SmallCap 600® Pure Value Fund, Europe 1.25x Strategy Fund, Japan 2x Strategy Fund, Strengthening Dollar 2x Strategy Fund, and Weakening Dollar 2x Strategy Fund and the Board of Trustees of Rydex Variable Trust
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of S&P 500® Pure Growth Fund, S&P 500® Pure Value Fund, S&P MidCap 400® Pure Growth Fund, S&P MidCap 400® Pure Value Fund, S&P SmallCap 600® Pure Growth Fund, S&P SmallCap 600® Pure Value Fund, Europe 1.25x Strategy Fund, Japan 2x Strategy Fund, Strengthening Dollar 2x Strategy Fund, and Weakening Dollar 2x Strategy Fund (collectively referred to as the “Funds”), (ten of the funds constituting Rydex Variable Trust (the “Trust”)), including the schedules of investments, as of December 31, 2017, 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, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds (ten of the funds constituting Rydex Variable Trust) at December 31, 2017, 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.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian, transfer agent, and brokers or by other appropriate auditing procedures where replies from the transfer agent and brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Guggenheim investment companies since 1979.
Tysons, Virginia
February 27, 2018
THE RYDEX FUNDS ANNUAL REPORT | 99 |
OTHER INFORMATION (Unaudited) |
Federal Income Tax Information
This information is being provided as required by the Internal Revenue Code. Amounts shown may differ from those elsewhere in the report because of differences in tax and financial reporting practice.
In January 2018, shareholders will be advised on IRS Form 1099 DIV or substitute 1099 DIV as to the federal tax status of the distributions received by shareholders in the calendar year 2017.
Of the taxable ordinary income distributions paid during the fiscal year ending December 31, 2017, the following funds had the corresponding percentages qualify for the dividends received deduction for corporations:
Fund | Dividend Received Deduction |
S&P 500® Pure Value Fund | 31.17% |
S&P MidCap 400® Pure Value Fund | 9.43% |
Europe 1.25x Strategy Fund | 0.00% |
Strengthening Dollar 2x Strategy Fund | 0.00% |
With respect to the taxable year ended December 31, 2017, the Funds hereby designate as capital gain dividends the amounts listed below, or, if subsequently determined to be different, the net capital gain of such year:
Fund | From long-term capital gain: | From long-term capital gain, using proceeds from shareholder redemptions: | ||||||
S&P 500® Pure Growth Fund | $ | 2,087,780 | $ | 1,353,103 | ||||
S&P 500® Pure Value Fund | — | 149,153 | ||||||
S&P MidCap 400® Pure Growth Fund | — | 487,102 | ||||||
S&P MidCap 400® Pure Value Fund | 148,611 | 331,048 | ||||||
S&P SmallCap 600® Pure Growth Fund | 799,644 | 940,805 | ||||||
S&P SmallCap 600® Pure Value Fund | 398,643 | — | ||||||
Japan 2x Strategy Fund | — | 29,321 | ||||||
Strengthening Dollar 2x Strategy Fund | 44,708 | — |
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 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
Sector Classification
Information in the Schedule of Investments is categorized by sectors using sector-level Classifications defined by the Bloomberg Industry Classification System, a widely recognized industry classification system provider. Each Fund’s registration statement has investment policies relating to concentration in specific sectors/industries. For purposes of these investment policies, the Funds usually classify sectors/industries based on industry-level Classifications used by widely recognized industry classification system providers such as Bloomberg Industry Classification System, Global Industry Classification Standards and Barclays Global Classification Scheme.
100 | THE RYDEX FUNDS ANNUAL REPORT |
OTHER INFORMATION (Unaudited)(concluded) |
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 https://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 800-SEC-0330. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 800.820.0888.
THE RYDEX FUNDS ANNUAL REPORT | 101 |
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 visiting guggenheiminvestments.com or by calling 800.820.0888.
Name, Address* and Year of Birth of Trustees | Position(s) Held with the Trust | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee |
INDEPENDENT TRUSTEES | ||||
Angela Brock-Kyle (1959) | Trustee, Member of the Audit Committee, Chairwoman and Member of the Compliance and Risk Oversight Committee, and Member of the Nominating and Governance Committee. | Current: Founder and Chief Executive Officer, B.O.A.R.D.S (consulting firm).
Former: Senior Leader, TIAA (financial services firm) (1987-2012). | 133 | Current: Infinity Property & Casualty Corporation (2014-present). |
Corey A. Colehour (1945) | Trustee, Member of the Audit Committee, Member of the Nominating and Governance Committee, and Member of the Investment and Performance Committee. | Current: Retired. | 133 | None. |
J. Kenneth Dalton (1941) | Trustee, Member and Chairman of the Audit Committee, and Member of the Compliance and Risk Oversight Committee. | Current: Retired. | 133 | Epiphany Funds (3) (2009-present). |
John O. Demaret (1940) | Trustee, Member of the Audit Committee, and Member of the Compliance and Risk Oversight Committee. | Current: Retired. | 133 | None. |
Werner E. Keller (1940) | Chairman and Trustee of the Board, and Member of the Audit Committee. | Current: Founder and President, Keller Partners, LLC (investment research firm) (2005-present). | 133 | None. |
Thomas F. Lydon, Jr. (1960) | Trustee, Member of the Audit Committee, Chairman and Member of the Nominating and Governance Committee, and Member of the Investment and Performance Committee. | Current: President, Global Trends Investments (registered investment adviser) (1996-present). | 133 | US Global Investors (GROW) (1995-present). |
Patrick T. McCarville (1942) | Trustee, Member of the Audit Committee, and Member of the Nominating and Governance Committee. | Current: Retired.
Former: Chief Executive Officer, Par Industries, Inc., d/b/a Par Leasing (1977-2010). | 133 | None. |
Sandra G. Sponem (1958)
| Trustee, Member of the Audit Committee, Member of the Nominating and Governance Committee, and Chairwoman and Member of the Investment and Performance Committee, | Current: Retired
Former: Senior Vice President and Chief Financial Officer, M.A. Mortenson Companies, Inc. (general contracting firm) (2007-2017). | 133 | None. |
102 | THE RYDEX FUNDS ANNUAL REPORT |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* and Year of Birth of Trustees | Position(s) Held with the Trust | Principal Occupation(s) During Past 5 Years |
OFFICERS | ||
Michael P. Byrum (1970) | Vice President | Current: Senior Vice President, Security Investors, LLC (2010-present); President and Chief Investment Officer, Rydex Holdings, LLC (2008-present); Director and Chairman, Advisory Research Center, Inc. (2006-present); Manager, Guggenheim Specialized Products, LLC (2005-present).
Former: Vice President, Guggenheim Distributors, LLC (2009); Director (2009-2010) and Secretary (2002-2010), Rydex Fund Services, LLC; Director (2008-2010), Chief Investment Officer (2006-2010), President (2004-2010) and Secretary (2002-2010), Rydex Advisors, LLC; Director (2008-2010), Chief Investment Officer (2006-2010), President (2004-2010) and Secretary (2002-2010), Rydex Advisors II, LLC. |
James M. Howley (1972) | Assistant Treasurer | Current: Managing Director, Guggenheim Investments (2004-present); Assistant Treasurer, certain other funds in the Fund Complex (2006-present).
Former: Manager, Mutual Fund Administration of Van Kampen Investments, Inc. (1996-2004). |
Keith D. Kemp (1960) | Assistant Treasurer | Current: Treasurer and Assistant Treasurer, certain other funds in the Fund Complex (2010-present); Managing Director, Guggenheim Investments (2015-present); Chief Financial Officer, Guggenheim Specialized Products, LLC (2016-present).
Former: Managing Director and Director, Transparent Value, LLC (2010-2016); Director, Guggenheim Partners Investment Management, LLC (2010-2015); Chief Operating Officer, Macquarie Capital Investment Management (2007-2009). |
Amy J. Lee (1961)
| President | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2017-present); Chief Legal Officer, certain other funds in the Fund Complex (2014- present); Senior Managing Director, Guggenheim Investments (2012-present).
Former: Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004-2012). |
Mark E. Mathiasen (1978) | Secretary | Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present). |
Glenn McWhinnie (1969) | Assistant Treasurer | Current: Vice President, Guggenheim Investments (2009-present).
Former: Tax Compliance Manager, Ernst & Young LLP (1996-2009). |
Elisabeth Miller (1968) | Chief Compliance Officer | Current: CCO, certain other funds in the Fund Complex (2012-present); CCO, Security Investors, LLC (2012- present); CCO, Guggenheim Funds Investment Advisors, LLC (2012-present); Managing Director, Guggenheim Investments (2012-present). Vice President, Guggenheim Funds Distributors, LLC (2014-present).
Former: CCO, Guggenheim Distributors, LLC (2009-2014); Senior Manager, Security Investors, LLC (2004-2009); Senior Manager, Guggenheim Distributors, LLC (2004-2009). |
THE RYDEX FUNDS ANNUAL REPORT | 103 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(concluded) |
Name, Address* and Year of Birth of Trustees | Position(s) Held with the Trust | Principal Occupation(s) During Past 5 Years |
OFFICERS - concluded | ||
Adam J. Nelson (1979) | Assistant Treasurer | Current: Vice President, Guggenheim Investments (2015-present); Assistant Treasurer, certain other funds in the Fund Complex (2015-present).
Former: Assistant Vice President and Fund Administration Director, State Street Corporation (2013-2015); Fund Administration Assistant Director, State Street (2011-2013); Fund Administration Manager, State Street (2009-2011). |
Kimberly J. Scott (1974) | Assistant Treasurer | Current: Director, Guggenheim Investments (2012-present); Assistant Treasurer, certain other funds in the Fund Complex (2012-present).
Former: Financial Reporting Manager, Invesco, Ltd. (2010-2011); Vice President/Assistant Treasurer, Mutual Fund Administration for Van Kampen Investments, Inc./Morgan Stanley Investment Management (2009-2010); Manager of Mutual Fund Administration, Van Kampen Investments, Inc./Morgan Stanley Investment Management (2005-2009). |
John L. Sullivan (1955)
| Chief Financial Officer and Treasurer | Current: CFO, Chief Accounting Officer and Treasurer, certain other funds in the Fund Complex (2010-present); Senior Managing Director, Guggenheim Investments (2010-present).
Former: Managing Director and CCO, each of the funds in the Van Kampen Investments fund complex (2004-2010); Managing Director and Head of Fund Accounting and Administration, Morgan Stanley Investment Management (2002-2004); CFO and Treasurer, Van Kampen Funds (1996-2004). |
Jon Szafran (1989) | Assistant Treasurer | Current: Vice President, Guggenheim Investments (2017-present); Assistant Treasurer, certain other funds in the Fund Complex (2017-present).
Former: Assistant Treasurer of Henderson Global Funds and Manager of US Fund Administration, Henderson Global Investors (North America) Inc. (“HGINA”), (2017); Senior Analyst of US Fund Administration, HGINA (2014-2017); Senior Associate of Fund Administration, Cortland Capital Market Services, LLC (2013-2014); Experienced Associate, PricewaterhouseCoopers LLP (2012-2013). |
* | All Trustees and Officers may be reached c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
104 | THE RYDEX FUNDS ANNUAL REPORT |
GUGGENHEIM INVESTMENTS PRIVACY POLICIES (Unaudited) |
Guggenheim Investments as used herein refers to Guggenheim Partners, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC and Security Investors, LLC as well as the funds in the Guggenheim Funds complex (the “funds”).
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 personal information about you, we hold ourselves to high standards in its safekeeping and use. This means, most importantly, that we do not sell client or account information to anyone—whether you are a current or former Guggenheim Investments client.
The Information We Collect About You and How We Collect It
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 Funds or one of the Guggenheim affiliated companies. “Nonpublic personal information” is personally identifiable information about you. For example it includes 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 Share Your Personal Information
As a matter of policy, we do not disclose your nonpublic personal information to nonaffiliated third parties except as required or permitted by law. 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 your personal 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. In connection with servicing your accounts or 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 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 personal 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 share personal information about you if we are compelled by law to do so, if you direct us to do so with your consent, or in other circumstances as permitted by law.
How We Safeguard Your Personal Information
We maintain physical, electronic and procedural safeguards to protect your personal information. Within Guggenheim Investments, access to such information is limited to those who need it to perform their jobs such as servicing your account, resolving problems or informing you of new products and services.
THE RYDEX FUNDS ANNUAL REPORT | 105 |
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12.31.2017
Rydex Variable Trust Annual Report
Sector Funds | ||
Banking Fund | ||
Basic Materials Fund | ||
Biotechnology Fund | ||
Consumer Products Fund | ||
Electronics Fund | ||
Energy Fund | ||
Energy Services Fund | ||
Financial Services Fund | ||
Health Care Fund | ||
Internet Fund | ||
Leisure Fund | ||
Precious Metals Fund | ||
Real Estate Fund | ||
Retailing Fund | ||
Technology Fund | ||
Telecommunications Fund | ||
Transportation Fund | ||
Utilities Fund |
GuggenheimInvestments.com | RVASECF-ANN-2-1217x1218 |
TABLE OF CONTENTS |
DEAR SHAREHOLDER | 2 |
ECONOMIC AND MARKET OVERVIEW | 3 |
ABOUT SHAREHOLDERS’ FUND EXPENSES | 5 |
BANKING FUND | 7 |
BASIC MATERIALS FUND | 14 |
BIOTECHNOLOGY FUND | 21 |
CONSUMER PRODUCTS FUND | 28 |
ELECTRONICS FUND | 35 |
ENERGY FUND | 42 |
ENERGY SERVICES FUND | 49 |
FINANCIAL SERVICES FUND | 56 |
HEALTH CARE FUND | 64 |
INTERNET FUND | 72 |
LEISURE FUND | 80 |
PRECIOUS METALS FUND | 88 |
REAL ESTATE FUND | 95 |
RETAILING FUND | 103 |
TECHNOLOGY FUND | 110 |
TELECOMMUNICATIONS FUND | 118 |
TRANSPORTATION FUND | 125 |
UTILITIES FUND | 132 |
NOTES TO FINANCIAL STATEMENTS | 139 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 152 |
OTHER INFORMATION | 153 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS | 155 |
GUGGENHEIM INVESTMENTS PRIVACY POLICIES | 158 |
THE RYDEX FUNDS ANNUAL REPORT | 1 |
December 31, 2017 |
Dear Shareholder:
Security Investors, LLC (the “Investment Adviser”) is pleased to present the annual shareholder report for 18 of our Funds (the “Funds”) that are part of the Rydex Variable Trust. This report covers performance of the Funds for the annual period ended December 31, 2017.
The Investment Adviser is a part of Guggenheim Investments, which represents the investment management businesses of Guggenheim Partners, LLC (“Guggenheim”), a global, diversified financial services firm.
Guggenheim Funds Distributors, LLC is the distributor of the Funds. Guggenheim Funds Distributors, LLC is affiliated with Guggenheim and the Investment Adviser.
We encourage you to read the Economic and Market Overview section of the report, which follows this letter, and then the Performance Report and Fund Profile for each Fund.
We are committed to providing innovative investment solutions and appreciate the trust you place in us.
Sincerely,
Security Investors, LLC
January 31, 2018
Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objectives, risks, charges, expenses and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at guggenheiminvestments.com or call 800.820.0888.
This material is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation.
Sector funds 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 Fund’s holdings in issuers of the same or similar offerings. These Funds are considered non-diversified and can invest a greater portion of their 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.
2 | THE RYDEX FUNDS ANNUAL REPORT |
ECONOMIC AND MARKET OVERVIEW (Unaudited) | December 31, 2017 |
The market story at the end of 2017 was one of positive economic momentum. Economic activity finished 2017 strongly, led by an acceleration in household spending, which was bolstered by consumer confidence near cyclical highs and healthier household balance sheets. Job growth and rebuilding activity resumed following the several hurricanes that hit the U.S., and elevated business optimism and tax changes could boost business capital expenditure plans in the coming quarters. The economy could also benefit from favorable financial conditions both in the U.S. and abroad, which could keep economic growth well above 2% in 2018.
While job growth continues at an unsustainable pace, wage growth has still been relatively unresponsive to declines in the unemployment rate. This could mean that the natural rate of unemployment is lower than the U.S. Federal Reserve’s (the “Fed”) current estimate of 4.6%, and it could also mean that there is still labor market slack left in the form of people not currently participating in the labor force. Even so, the tighter labor market and increasing worker shortages will put upward pressure on wage growth, which has been held back by meager productivity gains.
Core inflation has been below the Fed’s 2% target for some time now, which should continue for the next few months. However, by the middle of 2018 core inflation should approach the Fed’s target due to an accelerating economy, reduced labor market slack, and favorable base effects. Inflation closer to target and continued declines in the unemployment rate will give the Fed confidence to press on with tightening. Moreover, financial conditions remain highly accommodative, and fiscal stimulus will give the economy an additional boost, giving the Fed further room to raise rates. Thus, even as the fourth quarter of 2017 saw the commencement of the Fed’s balance sheet roll-off in October and another rate hike in December, we expect the Fed to move to increasingly tighter policy.
For the 12 months ended December 31, 2017, the Standard & Poor’s 500® (“S&P 500”) Index* returned 21.83%. The MSCI Europe-Australasia-Far East (“EAFE”) Index* returned 25.03%. The return of the MSCI Emerging Markets Index* was 37.28%.
In the bond market, the Bloomberg Barclays U.S. Aggregate Bond Index* posted a 3.54% return for the period, while the Bloomberg Barclays U.S. Corporate High Yield Index* returned 7.50%. The return of the ICE Bank of America (“BofA”) Merrill Lynch 3-Month U.S. Treasury Bill Index* was 0.86% for the 12-month period.
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.
Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, mortgage-backed securities or “MBS” (agency fixed-rate and hybrid adjustable-rate mortgage, or “ARM”, pass-throughs), asset-backed securities (���ABS”), and commercial mortgage-backed securities (“CMBS”) (agency and non-agency).
Bloomberg Barclays U.S. Corporate High Yield Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB +/BB + or below.
THE RYDEX FUNDS ANNUAL REPORT | 3 |
ECONOMIC AND MARKET OVERVIEW (Unaudited)(concluded) | December 31, 2017 |
ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged market Index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income.
MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada.
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.
MSCI U.S. REIT Index is a free float market capitalization weighted index that is comprised of equity real estate investment trust (“REIT”) securities that belong to the MSCI U.S. Investable Market 2500 Index. The MSCI U.S. REIT Index includes only REIT securities that are of reasonable size in terms of full and free float-adjusted market capitalization to ensure that the performance of the equity REIT universe can be captured and replicated in actual institutional and retail portfolios of different sizes.
S&P 500® Index is a broad-based index, the performance of which is based on the performance of 500 widely held common stocks chosen for market size, liquidity, and industry group representation.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
4 | THE RYDEX FUNDS ANNUAL REPORT |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited) |
|
All mutual funds have operating expenses, and it is important for our shareholders to understand the impact of costs on their investments. Shareholders of a fund incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, other distributions, and exchange fees, and (ii) ongoing costs, including management fees, administrative services, and shareholder reports, among others. These ongoing costs, or operating expenses, are deducted from a fund’s gross income and reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets, which is known as the expense ratio. The following examples are intended to help investors understand the 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 examples are based on an investment of $1,000 made at the beginning of the period and held for the entire six-month period beginning June 30, 2017 and ending December 31, 2017.
The following tables illustrate the Funds’ costs in two ways:
Table 1. Based on actual Fund return: This section helps investors estimate the actual expenses paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, and the fifth column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. Investors may use the information here, together with the amount invested, to estimate the expenses paid over the period. Simply divide the Fund’s 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 provided under the heading “Expenses Paid During Period.”
Table 2. Based on hypothetical 5% return: This section is intended to help investors compare a Fund’s cost with those of other mutual funds. The table 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. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses paid during the period. The example is useful in making comparisons because the U.S. Securities and Exchange Commission (the “SEC”) requires all mutual funds to calculate expenses based on the 5% return. Investors can assess a Fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
The calculations illustrated above assume no shares were bought or sold during the period. Actual costs may have been higher or lower, depending on the amount of investment and the timing of any purchases or redemptions.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, and contingent deferred sales charges (“CDSC”) on redemptions, if any. 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 transactional costs were included, your costs would have been higher.
More information about the Funds’ expenses, including annual expense ratios for periods up to five years (subject to the Fund’s inception date), can be found in the Financial Highlights section of this report. For additional information on operating expenses and other shareholder costs, please refer to the appropriate Fund prospectus.
THE RYDEX FUNDS ANNUAL REPORT | 5 |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(concluded) |
|
Expense | Fund | Beginning 2017 | Ending 2017 | Expenses | |
Table 1. Based on actual Fund return3 | |||||
Banking Fund | 1.71% | 9.72% | $ 1,000.00 | $ 1,097.20 | $ 9.04 |
Basic Materials Fund | 1.71% | 12.87% | 1,000.00 | 1,128.70 | 9.17 |
Biotechnology Fund | 1.71% | 7.04% | 1,000.00 | 1,070.40 | 8.92 |
Consumer Products Fund | 1.71% | 5.11% | 1,000.00 | 1,051.10 | 8.84 |
Electronics Fund | 1.71% | 17.89% | 1,000.00 | 1,178.90 | 9.39 |
Energy Fund | 1.71% | 14.61% | 1,000.00 | 1,146.10 | 9.25 |
Energy Services Fund | 1.71% | 10.79% | 1,000.00 | 1,107.90 | 9.09 |
Financial Services Fund | 1.71% | 9.11% | 1,000.00 | 1,091.10 | 9.01 |
Health Care Fund | 1.71% | 3.25% | 1,000.00 | 1,032.50 | 8.76 |
Internet Fund | 1.71% | 12.36% | 1,000.00 | 1,123.60 | 9.15 |
Leisure Fund | 1.71% | 6.04% | 1,000.00 | 1,060.40 | 8.88 |
Precious Metals Fund | 1.61% | 3.60% | 1,000.00 | 1,036.00 | 8.26 |
Real Estate Fund | 1.71% | 2.52% | 1,000.00 | 1,025.20 | 8.73 |
Retailing Fund | 1.71% | 11.72% | 1,000.00 | 1,117.20 | 9.13 |
Technology Fund | 1.71% | 14.11% | 1,000.00 | 1,141.10 | 9.23 |
Telecommunications Fund | 1.71% | 5.61% | 1,000.00 | 1,056.10 | 8.86 |
Transportation Fund | 1.71% | 12.31% | 1,000.00 | 1,123.10 | 9.15 |
Utilities Fund | 1.71% | 3.23% | 1,000.00 | 1,032.30 | 8.76 |
Table 2. Based on hypothetical 5% return (before expenses) | |||||
Banking Fund | 1.71% | 5.00% | $ 1,000.00 | $ 1,016.59 | $ 8.69 |
Basic Materials Fund | 1.71% | 5.00% | 1,000.00 | 1,016.59 | 8.69 |
Biotechnology Fund | 1.71% | 5.00% | 1,000.00 | 1,016.59 | 8.69 |
Consumer Products Fund | 1.71% | 5.00% | 1,000.00 | 1,016.59 | 8.69 |
Electronics Fund | 1.71% | 5.00% | 1,000.00 | 1,016.59 | 8.69 |
Energy Fund | 1.71% | 5.00% | 1,000.00 | 1,016.59 | 8.69 |
Energy Services Fund | 1.71% | 5.00% | 1,000.00 | 1,016.59 | 8.69 |
Financial Services Fund | 1.71% | 5.00% | 1,000.00 | 1,016.59 | 8.69 |
Health Care Fund | 1.71% | 5.00% | 1,000.00 | 1,016.59 | 8.69 |
Internet Fund | 1.71% | 5.00% | 1,000.00 | 1,016.59 | 8.69 |
Leisure Fund | 1.71% | 5.00% | 1,000.00 | 1,016.59 | 8.69 |
Precious Metals Fund | 1.61% | 5.00% | 1,000.00 | 1,017.09 | 8.19 |
Real Estate Fund | 1.71% | 5.00% | 1,000.00 | 1,016.59 | 8.69 |
Retailing Fund | 1.71% | 5.00% | 1,000.00 | 1,016.59 | 8.69 |
Technology Fund | 1.71% | 5.00% | 1,000.00 | 1,016.59 | 8.69 |
Telecommunications Fund | 1.71% | 5.00% | 1,000.00 | 1,016.59 | 8.69 |
Transportation Fund | 1.71% | 5.00% | 1,000.00 | 1,016.59 | 8.69 |
Utilities Fund | 1.71% | 5.00% | 1,000.00 | 1,016.59 | 8.69 |
1 | Annualized and excludes expenses of the underlying funds in which the Funds invest. |
2 | Expenses are equal to the Fund's annualized expense ratio, net of any applicable fee waivers, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses shown do not include fees charged by insurance companies. |
3 | Actual cumulative return at net asset value for the period June 30, 2017 to December 31, 2017. |
6 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
BANKING FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that are involved in the banking sector, including commercial banks (and their holding companies) and savings and loan institutions (“Banking Companies”).
For the year ended December 31, 2017, Banking Fund returned 12.48%, compared with the S&P 500 Index, which returned 21.83%. The S&P 500 Financials Index returned 22.18%.
The banks industry is the largest in the Fund, accounting for most of the Fund by weight, and as a whole it contributed to return. The capital markets industry and the commercial banks industry also contributed to Fund performance. The only industry to detract from return was the thrifts & mortgage finance industry.
Bank of America Corp., Citigroup, Inc., and JPMorgan Chase & Co. were the holdings that contributed the most to the Fund’s return for the period. Popular, Inc., United Bankshares, Inc., and New York Community Bancorp, Inc. detracted the most from return.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 2, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Wells Fargo & Co. | 4.2% |
Bank of America Corp. | 4.1% |
JPMorgan Chase & Co. | 4.1% |
Citigroup, Inc. | 4.0% |
U.S. Bancorp | 3.0% |
PNC Financial Services Group, Inc. | 2.7% |
Bank of New York Mellon Corp. | 2.4% |
Capital One Financial Corp. | 2.3% |
BB&T Corp. | 2.0% |
State Street Corp. | 1.9% |
Top Ten Total | 30.7% |
“Ten Largest Holdings” excludes any temporary cash investments. |
THE RYDEX FUNDS ANNUAL REPORT | 7 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Banking Fund | 12.48% | 12.72% | 1.22% |
S&P 500 Financials Index | 22.18% | 18.21% | 3.78% |
S&P 500 Index | 21.83% | 15.79% | 8.50% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and S&P 500 Financials Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
8 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
BANKING FUND |
Shares | Value | |||||||
COMMON STOCKS† - 99.4% | ||||||||
Banks - 94.6% | ||||||||
Wells Fargo & Co. | 6,662 | $ | 404,184 | |||||
Bank of America Corp. | 13,558 | 400,232 | ||||||
JPMorgan Chase & Co. | 3,716 | 397,389 | ||||||
Citigroup, Inc. | 5,176 | 385,146 | ||||||
U.S. Bancorp | 5,388 | 288,689 | ||||||
PNC Financial Services Group, Inc. | 1,791 | 258,423 | ||||||
Bank of New York Mellon Corp. | 4,257 | 229,282 | ||||||
Capital One Financial Corp. | 2,210 | 220,072 | ||||||
BB&T Corp. | 3,914 | 194,604 | ||||||
State Street Corp. | 1,925 | 187,899 | ||||||
SunTrust Banks, Inc. | 2,676 | 172,843 | ||||||
M&T Bank Corp. | 928 | 158,679 | ||||||
Northern Trust Corp. | 1,499 | 149,735 | ||||||
KeyCorp | 7,287 | 146,979 | ||||||
Fifth Third Bancorp | 4,751 | 144,145 | ||||||
Citizens Financial Group, Inc. | 3,401 | 142,774 | ||||||
Regions Financial Corp. | 8,142 | 140,694 | ||||||
Huntington Bancshares, Inc. | 8,519 | 124,037 | ||||||
Comerica, Inc. | 1,414 | 122,749 | ||||||
First Republic Bank | 1,313 | 113,758 | ||||||
SVB Financial Group* | 475 | 111,041 | ||||||
Banco Bradesco S.A. ADR | 10,757 | 110,152 | ||||||
ICICI Bank Ltd. ADR | 10,696 | 104,072 | ||||||
Toronto-Dominion Bank | 1,761 | 103,159 | ||||||
Royal Bank of Canada | 1,247 | 101,818 | ||||||
HDFC Bank Ltd. ADR | 998 | 101,467 | ||||||
Zions Bancorporation | 1,984 | 100,847 | ||||||
Popular, Inc. | 2,823 | 100,188 | ||||||
HSBC Holdings plc ADR | 1,915 | 98,891 | ||||||
Deutsche Bank AG | 5,077 | 96,615 | ||||||
Canadian Imperial Bank of Commerce | 977 | 95,170 | ||||||
Credit Suisse Group AG ADR* | 5,247 | 93,659 | ||||||
East West Bancorp, Inc. | 1,535 | 93,374 | ||||||
Bank of Nova Scotia | 1,398 | 90,213 | ||||||
Bank of Montreal | 1,123 | 89,862 | ||||||
ING Groep N.V. ADR | 4,860 | 89,716 | ||||||
Signature Bank* | 622 | 85,376 | ||||||
First Horizon National Corp. | 4,025 | 80,459 | ||||||
Bank of the Ozarks | 1,659 | 80,379 | ||||||
PacWest Bancorp | 1,579 | 79,582 | ||||||
BOK Financial Corp. | 847 | 78,195 | ||||||
Commerce Bancshares, Inc. | 1,378 | 76,947 | ||||||
CIT Group, Inc. | 1,563 | 76,946 | ||||||
Cullen/Frost Bankers, Inc. | 803 | 76,004 | ||||||
Western Alliance Bancorporation* | 1,334 | 75,531 | ||||||
Synovus Financial Corp. | 1,555 | 74,547 | ||||||
Pinnacle Financial Partners, Inc. | 1,079 | 71,538 | ||||||
First Citizens BancShares, Inc. — Class A | 177 | 71,331 | ||||||
Webster Financial Corp. | 1,254 | 70,425 | ||||||
Prosperity Bancshares, Inc. | 992 | 69,509 | ||||||
Umpqua Holdings Corp. | 3,230 | 67,184 | ||||||
Wintrust Financial Corp. | 815 | 67,132 | ||||||
BankUnited, Inc. | 1,621 | 66,007 | ||||||
FNB Corp. | 4,767 | 65,880 | ||||||
Texas Capital Bancshares, Inc.* | 740 | 65,786 | ||||||
Hancock Holding Co. | 1,306 | 64,647 | ||||||
Home BancShares, Inc. | 2,762 | 64,216 | ||||||
IBERIABANK Corp. | 827 | 64,092 | ||||||
First Hawaiian, Inc. | 2,138 | 62,387 | ||||||
Associated Banc-Corp. | 2,422 | 61,519 | ||||||
MB Financial, Inc. | 1,362 | 60,636 | ||||||
Chemical Financial Corp. | 1,134 | 60,635 | ||||||
Bank of Hawaii Corp. | 700 | 59,990 | ||||||
United Bankshares, Inc. | 1,716 | 59,631 | ||||||
TCF Financial Corp. | 2,864 | 58,712 | ||||||
UMB Financial Corp. | 815 | 58,615 | ||||||
Cathay General Bancorp | 1,370 | 57,773 | ||||||
South State Corp. | 645 | 56,212 | ||||||
Glacier Bancorp, Inc. | 1,420 | 55,934 | ||||||
Fulton Financial Corp. | 3,101 | 55,508 | ||||||
Columbia Banking System, Inc. | 1,263 | 54,865 | ||||||
First Financial Bankshares, Inc.1 | 1,189 | 53,564 | ||||||
Valley National Bancorp | 4,723 | 52,992 | ||||||
Simmons First National Corp. — Class A | 907 | 51,790 | ||||||
BancorpSouth Bank | 1,646 | 51,767 | ||||||
International Bancshares Corp. | 1,272 | 50,498 | ||||||
CVB Financial Corp. | 2,122 | 49,994 | ||||||
Hope Bancorp, Inc. | 2,704 | 49,348 | ||||||
First Midwest Bancorp, Inc. | 2,020 | 48,500 | ||||||
Old National Bancorp | 2,733 | 47,691 | ||||||
First Interstate BancSystem, Inc. — Class A | 1,185 | 47,459 | ||||||
Trustmark Corp. | 1,434 | 45,687 | ||||||
United Community Banks, Inc. | 1,610 | 45,305 | ||||||
Eagle Bancorp, Inc.* | 780 | 45,162 | ||||||
LegacyTexas Financial Group, Inc. | 1,069 | 45,122 | ||||||
First Merchants Corp. | 1,063 | 44,710 | ||||||
Ameris Bancorp | 886 | 42,705 | ||||||
Banner Corp. | 753 | 41,505 | ||||||
First Financial Bancorp | 1,488 | 39,209 | ||||||
Total Banks | 9,169,695 | |||||||
Savings & Loans - 3.8% | ||||||||
People’s United Financial, Inc. | 4,250 | 79,475 | ||||||
New York Community Bancorp, Inc. | 5,996 | 78,068 | ||||||
Sterling Bancorp | 2,973 | 73,136 | ||||||
Investors Bancorp, Inc. | 4,610 | 63,987 | ||||||
Pacific Premier Bancorp, Inc.* | 1,103 | 44,120 | ||||||
Banc of California, Inc.1 | 1,539 | 31,780 | ||||||
Total Savings & Loans | 370,566 | |||||||
Insurance - 1.0% | ||||||||
Voya Financial, Inc. | 1,939 | 95,923 | ||||||
Total Common Stocks | ||||||||
(Cost $6,699,581) | 9,636,184 | |||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 9 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
BANKING FUND |
Shares | Value | |||||||
PREFERRED STOCKS† - 1.3% | ||||||||
Banks - 1.3% | ||||||||
Itau Unibanco Holding S.A. ADR | 9,231 | $ | 120,003 | |||||
Total Preferred Stocks | ||||||||
(Cost $84,160) | 120,003 | |||||||
Face Amount | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.9% | ||||||||
JPMorgan Chase & Co. | $ | 57,392 | 57,392 | |||||
Bank of America Merrill Lynch | 30,631 | 30,631 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $88,023) | 88,023 | |||||||
SECURITIES LENDING COLLATERAL†,3 - 0.7% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%4 | 70,052 | 70,052 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $70,052) | 70,052 | |||||||
Total Investments - 102.3% | ||||||||
(Cost $6,941,816) | $ | 9,914,262 | ||||||
Other Assets & Liabilities, net - (2.3)% | (222,039 | ) | ||||||
Total Net Assets - 100.0% | $ | 9,692,223 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 3. |
†† | Value determined based on Level 2 inputs — See Note 3. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 5. |
2 | Repurchase Agreements — See Note 4. |
3 | Securities lending collateral — See Note 5. |
4 | Rate indicated is the 7 day yield as of December 31, 2017. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 9,636,184 | $ | — | $ | — | $ | 9,636,184 | ||||||||
Preferred Stocks | 120,003 | — | — | 120,003 | ||||||||||||
Repurchase Agreements | — | 88,023 | — | 88,023 | ||||||||||||
Securities Lending Collateral | 70,052 | — | — | 70,052 | ||||||||||||
Total Assets | $ | 9,826,239 | $ | 88,023 | $ | — | $ | 9,914,262 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
10 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
BANKING FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2017 |
Assets: | ||||
Investments, at value - including $66,115 of securities loaned (cost $6,853,793) | $ | 9,826,239 | ||
Repurchase agreements, at value (cost $88,023) | 88,023 | |||
Receivables: | ||||
Securities sold | 901,119 | |||
Dividends | 16,121 | |||
Foreign tax reclaims | 937 | |||
Securities lending income | 35 | |||
Interest | 10 | |||
Total assets | 10,832,484 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 1,034,841 | |||
Return of securities loaned | 70,052 | |||
Management fees | 7,416 | |||
Transfer agent and administrative fees | 2,182 | |||
Investor service fees | 2,182 | |||
Portfolio accounting fees | 873 | |||
Miscellaneous | 22,715 | |||
Total liabilities | 1,140,261 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 9,692,223 | ||
Net assets consist of: | ||||
Paid in capital | $ | 8,946,297 | ||
Undistributed net investment income | 34,621 | |||
Accumulated net realized loss on investments | (2,261,141 | ) | ||
Net unrealized appreciation on investments | 2,972,446 | |||
Net assets | $ | 9,692,223 | ||
Capital shares outstanding | 101,818 | |||
Net asset value per share | $ | 95.19 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $3,380) | $ | 213,187 | ||
Interest | 583 | |||
Income from securities lending, net | 866 | |||
Total investment income | 214,636 | |||
Expenses: | ||||
Management fees | 89,904 | |||
Investor service fees | 26,442 | |||
Transfer agent and administrative fees | 26,442 | |||
Professional fees | 15,701 | |||
Portfolio accounting fees | 10,577 | |||
Custodian fees | 1,728 | |||
Trustees’ fees* | 959 | |||
Line of credit fees | 21 | |||
Miscellaneous | 8,443 | |||
Total expenses | 180,217 | |||
Net investment income | 34,419 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 300,585 | |||
Net realized gain | 300,585 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 492,571 | |||
Net change in unrealized appreciation (depreciation) | 492,571 | |||
Net realized and unrealized gain | 793,156 | |||
Net increase in net assets resulting from operations | $ | 827,575 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 11 |
BANKING FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 34,419 | $ | 33,966 | ||||
Net realized gain on investments | 300,585 | 376,626 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 492,571 | 1,144,359 | ||||||
Net increase in net assets resulting from operations | 827,575 | 1,554,951 | ||||||
Distributions to shareholders from: | ||||||||
Net investment income | (33,765 | ) | (45,284 | ) | ||||
Total distributions to shareholders | (33,765 | ) | (45,284 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 30,366,745 | 32,177,327 | ||||||
Distributions reinvested | 33,765 | 45,284 | ||||||
Cost of shares redeemed | (37,578,472 | ) | (23,267,078 | ) | ||||
Net increase (decrease) from capital share transactions | (7,177,962 | ) | 8,955,533 | |||||
Net increase (decrease) in net assets | (6,384,152 | ) | 10,465,200 | |||||
Net assets: | ||||||||
Beginning of year | 16,076,375 | 5,611,175 | ||||||
End of year | $ | 9,692,223 | $ | 16,076,375 | ||||
Undistributed net investment income at end of year | $ | 34,621 | $ | 33,966 | ||||
Capital share activity: | ||||||||
Shares sold | 347,123 | 454,966 | * | |||||
Shares issued from reinvestment of distributions | 386 | 706 | * | |||||
Shares redeemed | (435,048 | ) | (348,993 | )* | ||||
Net increase (decrease) in shares | (87,539 | ) | 106,679 | * |
* | Capital share activity for the periods presented through December 31, 2016, has been restated to reflect a 1:6 reverse share split effective December 1, 2016 — See Note 9. |
12 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
BANKING FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 84.90 | $ | 67.87 | $ | 71.43 | $ | 86.82 | $ | 80.41 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .28 | .10 | .42 | .48 | .48 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 10.28 | 17.11 | (3.86 | ) | 2.55 | 22.37 | ||||||||||||||
Total from investment operations | 10.56 | 17.21 | (3.44 | ) | 3.03 | 22.85 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.27 | ) | (.18 | ) | (.12 | ) | (1.44 | ) | (1.20 | ) | ||||||||||
Net realized gains | — | — | — | (16.98 | ) | (15.24 | ) | |||||||||||||
Total distributions | (.27 | ) | (.18 | ) | (.12 | ) | (18.42 | ) | (16.44 | ) | ||||||||||
Net asset value, end of period | $ | 95.19 | $ | 84.90 | $ | 67.87 | $ | 71.43 | $ | 86.82 | ||||||||||
�� | ||||||||||||||||||||
Total Returnb | 12.48 | % | 27.25 | % | (4.86 | %) | 3.42 | % | 29.18 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 9,692 | $ | 16,076 | $ | 5,611 | $ | 3,938 | $ | 5,966 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.33 | % | 0.69 | % | 0.62 | % | 0.56 | % | 0.52 | % | ||||||||||
Total expenses | 1.70 | % | 1.67 | % | 1.59 | % | 1.66 | % | 1.64 | % | ||||||||||
Portfolio turnover rate | 273 | % | 417 | % | 388 | % | 285 | % | 438 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Reverse share split — Per share amounts for the periods presented through December 31, 2016 have been restated to reflect a 1:6 reverse share split effective December 1, 2016 — See Note 9. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 13 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
BASIC MATERIALS FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies engaged in the mining, manufacture, or sale of basic materials, such as lumber, steel, iron, aluminum, concrete, chemicals, and other basic building and manufacturing materials (“Basic Materials Companies”).
For the year ended December 31, 2017, Basic Materials Fund returned 21.43%, compared with a return of 21.83% for the S&P 500 Index. The S&P 500 Materials Index returned 23.84%.
The chemicals industry was the largest contributor to the Fund’s return for the period, followed by the metals & mining industry. No industry detracted from return. The paper & forest products industry contributed the least to the Fund’s return for the period, followed by the construction materials industry.
The top-performing holdings were Vale S.A. ADR, Sherwin-Williams Co., and DowDuPont, Inc. The worst-performing holdings included Tahoe Resources, Inc., AK Steel Holding Corp., and Hecla Mining Co.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 2, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
DowDuPont, Inc. | 4.5% |
Monsanto Co. | 2.5% |
Praxair, Inc. | 2.3% |
LyondellBasell Industries N.V. — Class A | 2.3% |
Vale S.A. ADR | 2.2% |
Ecolab, Inc. | 2.1% |
Sherwin-Williams Co. | 2.1% |
Air Products & Chemicals, Inc. | 2.1% |
Freeport-McMoRan, Inc. | 2.0% |
PPG Industries, Inc. | 1.9% |
Top Ten Total | 24.0% |
“Ten Largest Holdings” excludes any temporary cash investments. |
14 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Basic Materials Fund | 21.43% | 5.49% | 2.65% |
S&P 500 Materials Index | 23.84% | 12.20% | 6.17% |
S&P 500 Index | 21.83% | 15.79% | 8.50% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and S&P 500 Materials Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 15 |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
BASIC MATERIALS FUND |
Shares | Value | |||||||
COMMON STOCKS† - 100.5% | ||||||||
Chemicals - 45.3% | ||||||||
DowDuPont, Inc. | 10,689 | $ | 761,271 | |||||
Monsanto Co. | 3,593 | 419,591 | ||||||
Praxair, Inc. | 2,544 | 393,506 | ||||||
LyondellBasell Industries N.V. — Class A | 3,556 | 392,298 | ||||||
Sherwin-Williams Co. | 893 | 366,166 | ||||||
Air Products & Chemicals, Inc. | 2,141 | 351,295 | ||||||
PPG Industries, Inc. | 2,760 | 322,423 | ||||||
Celanese Corp. — Class A | 2,115 | 226,474 | ||||||
Westlake Chemical Corp. | 2,096 | 223,287 | ||||||
Albemarle Corp. | 1,703 | 217,797 | ||||||
FMC Corp. | 2,267 | 214,594 | ||||||
Eastman Chemical Co. | 2,308 | 213,813 | ||||||
International Flavors & Fragrances, Inc. | 1,344 | 205,108 | ||||||
CF Industries Holdings, Inc. | 4,515 | 192,068 | ||||||
Mosaic Co. | 7,108 | 182,391 | ||||||
Chemours Co. | 3,635 | 181,968 | ||||||
Huntsman Corp. | 5,115 | 170,278 | ||||||
Axalta Coating Systems Ltd.* | 5,073 | 164,162 | ||||||
Potash Corporation of Saskatchewan, Inc. | 7,885 | 162,825 | ||||||
RPM International, Inc. | 2,979 | 156,159 | ||||||
Sociedad Quimica y Minera de Chile S.A. ADR | 2,480 | 147,238 | ||||||
Olin Corp. | 4,066 | 144,668 | ||||||
Methanex Corp. | 2,323 | 140,658 | ||||||
Valvoline, Inc. | 5,356 | 134,221 | ||||||
WR Grace & Co. | 1,821 | 127,707 | ||||||
Ashland Global Holdings, Inc. | 1,741 | 123,959 | ||||||
Cabot Corp. | 1,907 | 117,452 | ||||||
PolyOne Corp. | 2,514 | 109,359 | ||||||
Agrium, Inc. | 950 | 109,250 | ||||||
Sensient Technologies Corp. | 1,421 | 103,946 | ||||||
Platform Specialty Products Corp.* | 10,240 | 101,581 | ||||||
Ingevity Corp.* | 1,420 | 100,068 | ||||||
HB Fuller Co. | 1,809 | 97,451 | ||||||
Balchem Corp. | 1,170 | 94,302 | ||||||
Tronox Ltd. — Class A | 4,540 | 93,115 | ||||||
Minerals Technologies, Inc. | 1,345 | 92,603 | ||||||
GCP Applied Technologies, Inc.* | 2,800 | 89,320 | ||||||
Ferro Corp.* | 3,540 | 83,509 | ||||||
Innospec, Inc. | 1,100 | 77,660 | ||||||
A. Schulman, Inc. | 1,672 | 62,282 | ||||||
Calgon Carbon Corp. | 2,870 | 61,131 | ||||||
Total Chemicals | 7,728,954 | |||||||
Mining - 18.6% | ||||||||
Freeport-McMoRan, Inc.* | 18,164 | 344,389 | ||||||
Newmont Mining Corp. | 7,360 | 276,147 | ||||||
Barrick Gold Corp. | 17,284 | 250,100 | ||||||
Teck Resources Ltd. — Class B | 8,114 | 212,343 | ||||||
Rio Tinto plc ADR | 3,942 | 208,650 | ||||||
Alcoa Corp.* | 3,860 | 207,938 | ||||||
Goldcorp, Inc. | 15,492 | 197,833 | ||||||
BHP Billiton Ltd. ADR1 | 4,206 | 193,434 | ||||||
Agnico Eagle Mines Ltd. | 3,323 | 153,456 | ||||||
Wheaton Precious Metals Corp. | 6,808 | 150,661 | ||||||
Randgold Resources Ltd. ADR | 1,444 | 142,797 | ||||||
Franco-Nevada Corp. | 1,728 | 138,154 | ||||||
Royal Gold, Inc. | 1,649 | 135,416 | ||||||
Pan American Silver Corp. | 7,771 | 120,917 | ||||||
AngloGold Ashanti Ltd. ADR | 11,621 | 118,418 | ||||||
Compass Minerals International, Inc. | 1,305 | 94,286 | ||||||
Century Aluminum Co.* | 4,139 | 81,290 | ||||||
Kaiser Aluminum Corp. | 760 | 81,206 | ||||||
Coeur Mining, Inc.* | 9,429 | 70,718 | ||||||
Total Mining | 3,178,153 | |||||||
Packaging & Containers - 11.3% | ||||||||
WestRock Co. | 3,700 | 233,877 | ||||||
Ball Corp. | 5,532 | 209,386 | ||||||
Packaging Corporation of America | 1,666 | 200,836 | ||||||
Sealed Air Corp. | 3,612 | 178,072 | ||||||
Berry Global Group, Inc.* | 2,744 | 160,991 | ||||||
Crown Holdings, Inc.* | 2,823 | 158,794 | ||||||
Sonoco Products Co. | 2,542 | 135,082 | ||||||
Graphic Packaging Holding Co. | 8,320 | 128,544 | ||||||
Bemis Company, Inc. | 2,596 | 124,063 | ||||||
Owens-Illinois, Inc.* | 4,896 | 108,544 | ||||||
Silgan Holdings, Inc. | 3,630 | 106,686 | ||||||
Greif, Inc. — Class A | 1,666 | 100,926 | ||||||
KapStone Paper and Packaging Corp. | 3,905 | 88,604 | ||||||
Total Packaging & Containers | 1,934,405 | |||||||
Iron & Steel - 10.6% | ||||||||
Vale S.A. ADR | 30,526 | 373,333 | ||||||
Nucor Corp. | 4,201 | 267,100 | ||||||
Steel Dynamics, Inc. | 4,485 | 193,438 | ||||||
ArcelorMittal*,1 | 4,982 | 160,968 | ||||||
United States Steel Corp. | 4,251 | 149,593 | ||||||
Reliance Steel & Aluminum Co. | 1,733 | 148,674 | ||||||
Allegheny Technologies, Inc.* | 4,238 | 102,305 | ||||||
Commercial Metals Co. | 4,450 | 94,874 | ||||||
Carpenter Technology Corp. | 1,805 | 92,037 | ||||||
Cleveland-Cliffs, Inc.* | 12,575 | 90,666 | ||||||
AK Steel Holding Corp.* | 14,120 | 79,919 | ||||||
Schnitzer Steel Industries, Inc. — Class A | 1,795 | 60,132 | ||||||
Total Iron & Steel | 1,813,039 | |||||||
Building Materials - 5.8% | ||||||||
Vulcan Materials Co. | 1,956 | 251,092 | ||||||
Martin Marietta Materials, Inc. | 1,035 | 228,777 | ||||||
Eagle Materials, Inc. | 1,211 | 137,206 | ||||||
Louisiana-Pacific Corp.* | 4,343 | 114,047 | ||||||
Summit Materials, Inc. — Class A* | 3,586 | 112,744 | ||||||
Boise Cascade Co. | 1,840 | 73,416 | ||||||
US Concrete, Inc.* | 860 | 71,939 | ||||||
Total Building Materials | 989,221 |
16 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
BASIC MATERIALS FUND |
Shares | Value | |||||||
Forest Products & Paper - 2.3% | ||||||||
International Paper Co. | 4,981 | $ | 288,599 | |||||
Domtar Corp. | 2,119 | 104,933 | ||||||
Total Forest Products & Paper | 393,532 | |||||||
Commercial Services - 2.2% | ||||||||
Ecolab, Inc. | 2,734 | 366,848 | ||||||
Miscellaneous Manufacturing - 1.4% | ||||||||
AptarGroup, Inc. | 1,580 | 136,323 | ||||||
Trinseo S.A. | 1,444 | 104,834 | ||||||
Total Miscellaneous Manufacturing | 241,157 | |||||||
Household Products & Housewares - 1.1% | ||||||||
Avery Dennison Corp. | 1,623 | 186,418 | ||||||
Housewares - 0.9% | ||||||||
Scotts Miracle-Gro Co. — Class A | 1,380 | 147,646 | ||||||
Metal Fabricate & Hardware - 0.6% | ||||||||
Worthington Industries, Inc. | 2,256 | 99,399 | ||||||
Coal - 0.4% | ||||||||
Warrior Met Coal, Inc. | 2,760 | 69,414 | ||||||
Total Common Stocks | ||||||||
(Cost $11,820,706) | 17,148,186 |
Face Amount~ | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.4% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | $ | 44,152 | 44,152 | |||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 23,564 | 23,564 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $67,716) | 67,716 |
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 1.4% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%4 | 239,835 | 239,835 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $239,835) | 239,835 | |||||||
Total Investments - 102.3% | ||||||||
(Cost $12,128,257) | $ | 17,455,737 | ||||||
Other Assets & Liabilities, net - (2.3)% | (388,310 | ) | ||||||
Total Net Assets - 100.0% | $ | 17,067,427 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 3. |
†† | Value determined based on Level 2 inputs — See Note 3. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 5. |
2 | Repurchase Agreements — See Note 4. |
3 | Securities lending collateral — See Note 5. |
4 | Rate indicated is the 7 day yield as of December 31, 2017. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 17,148,186 | $ | — | $ | — | $ | 17,148,186 | ||||||||
Repurchase Agreements | — | 67,716 | — | 67,716 | ||||||||||||
Securities Lending Collateral | 239,835 | — | — | 239,835 | ||||||||||||
Total Assets | $ | 17,388,021 | $ | 67,716 | $ | — | $ | 17,455,737 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 17 |
BASIC MATERIALS FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2017 |
Assets: | ||||
Investments, at value - including $229,530 of securities loaned (cost $12,060,541) | $ | 17,388,021 | ||
Repurchase agreements, at value (cost $67,716) | 67,716 | |||
Cash | 2,615 | |||
Receivables: | ||||
Fund shares sold | 1,281,427 | |||
Dividends | 15,634 | |||
Securities lending income | 69 | |||
Foreign tax reclaims | 51 | |||
Interest | 8 | |||
Total assets | 18,755,541 | |||
Liabilities: | ||||
Payable for: | ||||
Securities purchased | 1,219,403 | |||
Return of securities loaned | 239,835 | |||
Fund shares redeemed | 161,800 | |||
Deferred foreign capital gain taxes | 25,971 | |||
Management fees | 10,775 | |||
Transfer agent and administrative fees | 3,169 | |||
Investor service fees | 3,169 | |||
Portfolio accounting fees | 1,268 | |||
Miscellaneous | 22,724 | |||
Total liabilities | 1,688,114 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 17,067,427 | ||
Net assets consist of: | ||||
Paid in capital | $ | 13,078,917 | ||
Accumulated net investment loss | (30,465 | ) | ||
Accumulated net realized loss on investments | (1,308,505 | ) | ||
Net unrealized appreciation on investments | 5,327,480 | |||
Net assets | $ | 17,067,427 | ||
Capital shares outstanding | 210,008 | |||
Net asset value per share | $ | 81.27 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $3,213) | $ | 223,609 | ||
Interest | 891 | |||
Income from securities lending, net | 1,430 | |||
Total investment income | 225,930 | |||
Expenses: | ||||
Management fees | 119,610 | |||
Investor service fees | 35,179 | |||
Transfer agent and administrative fees | 35,179 | |||
Professional fees | 20,208 | |||
Portfolio accounting fees | 14,071 | |||
Custodian fees | 2,341 | |||
Trustees’ fees* | 1,545 | |||
Line of credit fees | 10 | |||
Miscellaneous | 11,726 | |||
Total expenses | 239,869 | |||
Net investment loss | (13,939 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 732,957 | a | ||
Net realized gain | 732,957 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 1,828,447 | |||
Net change in unrealized appreciation (depreciation) | 1,828,447 | |||
Net realized and unrealized gain | 2,561,404 | |||
Net increase in net assets resulting from operations | $ | 2,547,465 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
a | Net of foreign capital gain taxes of $25,971. |
18 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
BASIC MATERIALS FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (13,939 | ) | $ | 9,979 | |||
Net realized gain on investments | 732,957 | 999,289 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 1,828,447 | 1,564,607 | ||||||
Net increase in net assets resulting from operations | 2,547,465 | 2,573,875 | ||||||
Distributions to shareholders from: | ||||||||
Net investment income | (71,217 | ) | — | |||||
Net realized gains | (34,563 | ) | (252,952 | ) | ||||
Total distributions to shareholders | (105,780 | ) | (252,952 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 29,274,757 | 43,319,102 | ||||||
Distributions reinvested | 105,780 | 252,952 | ||||||
Cost of shares redeemed | (29,983,875 | ) | (35,747,641 | ) | ||||
Net increase (decrease) from capital share transactions | (603,338 | ) | 7,824,413 | |||||
Net increase in net assets | 1,838,347 | 10,145,336 | ||||||
Net assets: | ||||||||
Beginning of year | 15,229,080 | 5,083,744 | ||||||
End of year | $ | 17,067,427 | $ | 15,229,080 | ||||
(Accumulated net investment loss)/Undistributed net investment income at end of year | $ | (30,465 | ) | $ | 31,212 | |||
Capital share activity: | ||||||||
Shares sold | 391,107 | 688,344 | * | |||||
Shares issued from reinvestment of distributions | 1,441 | 3,831 | * | |||||
Shares redeemed | (407,804 | ) | (563,714 | )* | ||||
Net increase (decrease) in shares | (15,256 | ) | 128,461 | * |
* | Capital share activity for the periods presented through December 31, 2016, has been restated to reflect a 1:3 reverse share split effective December 1, 2016 — See Note 9. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 19 |
BASIC MATERIALS FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 67.61 | $ | 52.52 | $ | 63.47 | $ | 74.45 | $ | 78.25 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.07 | ) | .02 | .18 | .15 | .27 | ||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 14.47 | 15.43 | (11.13 | ) | (1.32 | ) | .58 | |||||||||||||
Total from investment operations | 14.40 | 15.45 | (10.95 | ) | (1.17 | ) | .85 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.50 | ) | — | — | (3.39 | ) | (.57 | ) | ||||||||||||
Net realized gains | (.24 | ) | (.36 | ) | — | (6.42 | ) | (4.08 | ) | |||||||||||
Total distributions | (.74 | ) | (.36 | ) | — | (9.81 | ) | (4.65 | ) | |||||||||||
Net asset value, end of period | $ | 81.27 | $ | 67.61 | $ | 52.52 | $ | 63.47 | $ | 74.45 | ||||||||||
Total Returnb | 21.43 | % | 30.86 | % | (17.30 | %) | (1.81 | %) | 1.25 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 17,067 | $ | 15,229 | $ | 5,084 | $ | 9,062 | $ | 11,587 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.10 | %) | 0.08 | % | 0.27 | % | 0.18 | % | 0.37 | % | ||||||||||
Total expenses | 1.70 | % | 1.66 | % | 1.59 | % | 1.66 | % | 1.64 | % | ||||||||||
Portfolio turnover rate | 181 | % | 266 | % | 228 | % | 218 | % | 350 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Reverse share split — Per share amounts for the periods presented through December 31, 2016 have been restated to reflect a 1:3 reverse share split effective December 1, 2016 — See Note 9. |
20 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
BIOTECHNOLOGY FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that are involved in the biotechnology industry, including companies involved in research and development, genetic, or other biological engineering, and in the design, manufacture, or sale of related biotechnology products or services (“Biotechnology Companies”).
For the year ended December 31, 2017, Biotechnology Fund returned 29.44%, compared with the S&P 500 Index, which returned 21.83%. The S&P 500 Health Care Index returned 22.08%.
Companies in the biotechnology industry compose most of the weight of the Fund. For the year, that group contributed the most to return, followed by the life sciences tools & services segment. No industry detracted from return.
The best-performing holdings in the Fund were AbbVie, Inc., Vertex Pharmaceuticals, Inc., and Nektar Therapeutics. The worst-performing holdings in the Fund included OPKO Health, Inc., Tesaro, Inc., and Depomed, Inc.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 2, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
AbbVie, Inc. | 5.9% |
Amgen, Inc. | 5.3% |
Gilead Sciences, Inc. | 4.4% |
Celgene Corp. | 4.2% |
Biogen, Inc. | 3.8% |
Shire plc ADR | 3.3% |
Vertex Pharmaceuticals, Inc. | 3.0% |
Regeneron Pharmaceuticals, Inc. | 3.0% |
Illumina, Inc. | 2.7% |
Alexion Pharmaceuticals, Inc. | 2.6% |
Top Ten Total | 38.2% |
“Ten Largest Holdings” excludes any temporary cash investments. |
THE RYDEX FUNDS ANNUAL REPORT | 21 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Biotechnology Fund | 29.44% | 18.21% | 14.90% |
S&P 500 Health Care Index | 22.08% | 17.62% | 11.02% |
S&P 500 Index | 21.83% | 15.79% | 8.50% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and S&P 500 Health Care Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
22 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
BIOTECHNOLOGY FUND |
Shares | Value | |||||||
COMMON STOCKS† - 99.3% | ||||||||
Biotechnology - 67.2% | ||||||||
Amgen, Inc. | 8,850 | $ | 1,539,015 | |||||
Gilead Sciences, Inc. | 17,993 | 1,289,019 | ||||||
Celgene Corp.* | 11,736 | 1,224,769 | ||||||
Biogen, Inc.* | 3,511 | 1,118,499 | ||||||
Vertex Pharmaceuticals, Inc.* | 5,897 | 883,724 | ||||||
Regeneron Pharmaceuticals, Inc.* | 2,325 | 874,107 | ||||||
Illumina, Inc.* | 3,618 | 790,497 | ||||||
Alexion Pharmaceuticals, Inc.* | 6,265 | 749,231 | ||||||
Incyte Corp.* | 6,433 | 609,269 | ||||||
BioMarin Pharmaceutical, Inc.* | 5,975 | 532,791 | ||||||
Alnylam Pharmaceuticals, Inc.* | 3,900 | 495,495 | ||||||
Exelixis, Inc.* | 14,869 | 452,018 | ||||||
Seattle Genetics, Inc.* | 7,329 | 392,102 | ||||||
Sage Therapeutics, Inc.* | 2,240 | 368,950 | ||||||
United Therapeutics Corp.* | 2,483 | 367,360 | ||||||
Bio-Rad Laboratories, Inc. — Class A* | 1,498 | 357,528 | ||||||
Exact Sciences Corp.* | 6,772 | 355,801 | ||||||
Bluebird Bio, Inc.* | 1,930 | 343,733 | ||||||
Ionis Pharmaceuticals, Inc.* | 6,810 | 342,543 | ||||||
Bioverativ, Inc.* | 6,190 | 333,765 | ||||||
Juno Therapeutics, Inc.* | 7,141 | 326,415 | ||||||
Charles River Laboratories International, Inc.* | 2,969 | 324,957 | ||||||
FibroGen, Inc.* | 6,010 | 284,874 | ||||||
Avexis, Inc.* | 2,530 | 279,995 | ||||||
ACADIA Pharmaceuticals, Inc.* | 8,999 | 270,960 | ||||||
Puma Biotechnology, Inc.* | 2,670 | 263,929 | ||||||
Immunomedics, Inc.*,1 | 15,440 | 249,510 | ||||||
Spark Therapeutics, Inc.*,1 | 4,790 | 246,302 | ||||||
Halozyme Therapeutics, Inc.* | 11,889 | 240,871 | ||||||
Ligand Pharmaceuticals, Inc. — Class B* | 1,731 | 237,026 | ||||||
Amicus Therapeutics, Inc.* | 15,648 | 225,175 | ||||||
Myriad Genetics, Inc.* | 6,526 | 224,135 | ||||||
Insmed, Inc.* | 7,140 | 222,625 | ||||||
Prothena Corporation plc*,1 | 5,844 | 219,092 | ||||||
Loxo Oncology, Inc.* | 2,600 | 218,868 | ||||||
Medicines Co.* | 7,370 | 201,496 | ||||||
Spectrum Pharmaceuticals, Inc.* | 10,510 | 199,165 | ||||||
Blueprint Medicines Corp.* | 2,640 | 199,082 | ||||||
Ultragenyx Pharmaceutical, Inc.* | 4,270 | 198,043 | ||||||
Esperion Therapeutics, Inc.* | 2,970 | 195,545 | ||||||
Editas Medicine, Inc.*,1 | 6,160 | 189,297 | ||||||
Sangamo Therapeutics, Inc.* | 10,460 | 171,544 | ||||||
Radius Health, Inc.*,1 | 5,277 | 167,650 | ||||||
Intercept Pharmaceuticals, Inc.*,1 | 2,819 | 164,686 | ||||||
Dynavax Technologies Corp.* | 7,850 | 146,795 | ||||||
Acorda Therapeutics, Inc.* | 6,741 | 144,594 | ||||||
ImmunoGen, Inc.* | 20,320 | 130,251 | ||||||
PTC Therapeutics, Inc.* | 7,100 | 118,428 | ||||||
Five Prime Therapeutics, Inc.* | 4,781 | 104,800 | ||||||
AMAG Pharmaceuticals, Inc.* | 6,866 | 90,974 | ||||||
Total Biotechnology | 19,677,300 | |||||||
Pharmaceuticals - 25.6% | ||||||||
AbbVie, Inc. | 17,786 | 1,720,084 | ||||||
Shire plc ADR | 6,258 | 970,741 | ||||||
Nektar Therapeutics* | 7,422 | 443,242 | ||||||
Neurocrine Biosciences, Inc.* | 5,024 | 389,812 | ||||||
PRA Health Sciences, Inc.* | 3,820 | 347,887 | ||||||
Alkermes plc* | 5,773 | 315,956 | ||||||
Jazz Pharmaceuticals plc* | 2,340 | 315,081 | ||||||
TESARO, Inc.* | 3,620 | 299,989 | ||||||
Akorn, Inc.* | 8,611 | 277,533 | ||||||
Sarepta Therapeutics, Inc.* | 4,788 | 266,404 | ||||||
Clovis Oncology, Inc.* | 3,850 | 261,800 | ||||||
Portola Pharmaceuticals, Inc.* | 4,978 | 242,329 | ||||||
Array BioPharma, Inc.* | 18,650 | 238,720 | ||||||
Agios Pharmaceuticals, Inc.* | 3,890 | 222,391 | ||||||
Horizon Pharma plc* | 14,721 | 214,927 | ||||||
Ironwood Pharmaceuticals, Inc. — Class A* | 13,798 | 206,832 | ||||||
Pacira Pharmaceuticals, Inc.* | 4,224 | 192,826 | ||||||
Global Blood Therapeutics, Inc.* | 4,380 | 172,353 | ||||||
Impax Laboratories, Inc.* | 9,169 | 152,664 | ||||||
Flexion Therapeutics, Inc.*,1 | 5,440 | 136,218 | ||||||
Eagle Pharmaceuticals, Inc.*,1 | 2,170 | 115,921 | ||||||
Total Pharmaceuticals | 7,503,710 | |||||||
Healthcare-Products - 3.4% | ||||||||
Bio-Techne Corp. | 2,384 | 308,847 | ||||||
QIAGEN N.V.* | 8,828 | 273,050 | ||||||
OPKO Health, Inc.*,1 | 46,140 | 226,086 | ||||||
MiMedx Group, Inc.*,1 | 13,600 | 171,496 | ||||||
Total Healthcare-Products | 979,479 | |||||||
Healthcare-Services - 2.1% | ||||||||
IQVIA Holdings, Inc.* | 6,281 | 614,910 | ||||||
Commercial Services - 1.0% | ||||||||
Incorporated Research Holdings, Inc. — Class A* | 6,946 | 302,846 | ||||||
Total Common Stocks | ||||||||
(Cost $14,309,819) | 29,078,245 | |||||||
RIGHTS††† - 0.0% | ||||||||
Chelsea Therapeutics International | ||||||||
Expires 03/01/18*,5 | 18,097 | — | ||||||
Dyax Corp. | ||||||||
Expires 03/06/18*,5 | 12,367 | — | ||||||
Clinical Data, Inc. | ||||||||
Expires 12/31/20*,5 | 4,730 | — | ||||||
Total Rights | ||||||||
(Cost $1,341) | — |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 23 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
BIOTECHNOLOGY FUND |
Face Amount | ||||||||
REPURCHASE AGREEMENTS††,2 - 1.2% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | $ | 224,088 | 224,088 | |||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 119,596 | 119,596 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $343,684) | 343,684 |
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 3.9% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%4 | 1,125,384 | 1,125,384 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $1,125,384) | 1,125,384 | |||||||
Total Investments - 104.4% | ||||||||
(Cost $15,780,228) | $ | 30,547,313 | ||||||
Other Assets & Liabilities, net - (4.4)% | (1,275,233 | ) | ||||||
Total Net Assets - 100.0% | $ | 29,272,080 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 3. |
†† | Value determined based on Level 2 inputs — See Note 3. |
††† | Value determined based on Level 3 inputs — See Note 3. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 5. |
2 | Repurchase Agreements — See Note 4. |
3 | Securities lending collateral — See Note 5. |
4 | Rate indicated is the 7 day yield as of December 31, 2017. |
5 | Security was fair valued by the Valuation Committee at December 31, 2017. The total market value of fair valued securities amounts to $0, (cost $ 1,341) or 0.0% of total net assets. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 29,078,245 | $ | — | $ | — | $ | 29,078,245 | ||||||||
Repurchase Agreements | — | 343,684 | — | 343,684 | ||||||||||||
Rights | — | — | — | * | — | |||||||||||
Securities Lending Collateral | 1,125,384 | — | — | 1,125,384 | ||||||||||||
Total Assets | $ | 30,203,629 | $ | 343,684 | $ | — | $ | 30,547,313 |
* | Securities have a market value of $0. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
24 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
BIOTECHNOLOGY FUND |
STATEMENT OF ASSETS AND LIABILITIES | |
December 31, 2017 |
Assets: | ||||
Investments, at value - including $1,066,545 of securities loaned (cost $15,436,544) | $ | 30,203,629 | ||
Repurchase agreements, at value (cost $343,684) | 343,684 | |||
Receivables: | ||||
Fund shares sold | 71,589 | |||
Securities lending income | 1,519 | |||
Interest | 40 | |||
Total assets | 30,620,461 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities loaned | 1,125,384 | |||
Fund shares redeemed | 148,179 | |||
Management fees | 20,997 | |||
Transfer agent and administrative fees | 6,176 | |||
Investor service fees | 6,176 | |||
Portfolio accounting fees | 2,470 | |||
Miscellaneous | 38,999 | |||
Total liabilities | 1,348,381 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 29,272,080 | ||
Net assets consist of: | ||||
Paid in capital | $ | 16,790,843 | ||
Undistributed net investment income | — | |||
Accumulated net realized loss on investments | (2,285,848 | ) | ||
Net unrealized appreciation on investments | 14,767,085 | |||
Net assets | $ | 29,272,080 | ||
Capital shares outstanding | 338,291 | |||
Net asset value per share | $ | 86.53 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $1,220) | $ | 174,652 | ||
Interest | 1,532 | |||
Income from securities lending, net | 12,946 | |||
Total investment income | 189,130 | |||
Expenses: | ||||
Management fees | 224,166 | |||
Investor service fees | 65,931 | |||
Transfer agent and administrative fees | 65,931 | |||
Professional fees | 39,239 | |||
Portfolio accounting fees | 26,372 | |||
Custodian fees | 4,554 | |||
Trustees’ fees* | 3,436 | |||
Line of credit fees | 123 | |||
Miscellaneous | 19,875 | |||
Total expenses | 449,627 | |||
Net investment loss | (260,497 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 1,484,880 | |||
Net realized gain | 1,484,880 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 4,982,566 | |||
Net change in unrealized appreciation (depreciation) | 4,982,566 | |||
Net realized and unrealized gain | 6,467,446 | |||
Net increase in net assets resulting from operations | $ | 6,206,949 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 25 |
BIOTECHNOLOGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (260,497 | ) | $ | (305,744 | ) | ||
Net realized gain on investments | 1,484,880 | 14,032 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 4,982,566 | (7,892,957 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 6,206,949 | (8,184,669 | ) | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 41,892,541 | 35,395,561 | ||||||
Cost of shares redeemed | (41,058,300 | ) | (46,984,722 | ) | ||||
Net increase (decrease) from capital share transactions | 834,241 | (11,589,161 | ) | |||||
Net increase (decrease) in net assets | 7,041,190 | (19,773,830 | ) | |||||
Net assets: | ||||||||
Beginning of year | 22,230,890 | 42,004,720 | ||||||
End of year | $ | 29,272,080 | $ | 22,230,890 | ||||
Undistributed net investment income at end of year | $ | — | $ | — | ||||
Capital share activity: | ||||||||
Shares sold | 533,295 | 510,265 | ||||||
Shares redeemed | (527,513 | ) | (682,479 | ) | ||||
Net increase (decrease) in shares | 5,782 | (172,214 | ) |
26 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
BIOTECHNOLOGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 66.86 | $ | 83.22 | $ | 76.71 | $ | 57.81 | $ | 37.49 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.79 | ) | (.80 | ) | (1.02 | ) | (.62 | ) | (.56 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 20.46 | (15.56 | ) | 7.53 | 19.52 | 20.88 | ||||||||||||||
Total from investment operations | 19.67 | (16.36 | ) | 6.51 | 18.90 | 20.32 | ||||||||||||||
Net asset value, end of period | $ | 86.53 | $ | 66.86 | $ | 83.22 | �� | $ | 76.71 | $ | 57.81 | |||||||||
Total Returnb | 29.44 | % | (19.66 | %) | 8.47 | % | 32.69 | % | 54.20 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 29,272 | $ | 22,231 | $ | 42,005 | $ | 38,094 | $ | 26,499 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.99 | %) | (1.16 | %) | (1.17 | %) | (0.92 | %) | (1.15 | %) | ||||||||||
Total expenses | 1.70 | % | 1.66 | % | 1.60 | % | 1.66 | % | 1.63 | % | ||||||||||
Portfolio turnover rate | 137 | % | 127 | % | 161 | % | 165 | % | 277 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 27 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
CONSUMER PRODUCTS FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies engaged in manufacturing finished goods and services both domestically and internationally (“Consumer Products Companies”).
For the year ended December 31, 2017, Consumer Products Fund returned 11.53%, compared with a return of 21.83% for the S&P 500 Index. The S&P 500 Consumer Staples Index returned 13.49%.
The beverages industry was the largest contributor to the Fund’s return for the period, followed by the household products industry. No industry detracted. The food &staples retailing industry contributed the least.
Fund performance for the year got the biggest boost from and Estee Lauder Companies, Inc. Class A, Constellation Brands, Inc. Class A, and Philip Morris International, Inc. The Fund’s weakest performers during the year were Kroger Co., Avon Products, Inc., and Kraft Heinz Co.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 29, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Procter & Gamble Co. | 5.1% |
Coca-Cola Co. | 4.7% |
PepsiCo, Inc. | 4.4% |
Philip Morris International, Inc. | 4.2% |
Altria Group, Inc. | 3.9% |
Kraft Heinz Co. | 3.2% |
Colgate-Palmolive Co. | 2.7% |
Mondelez International, Inc. — Class A | 2.6% |
Estee Lauder Companies, Inc. — Class A | 2.3% |
Constellation Brands, Inc. — Class A | 2.2% |
Top Ten Total | 35.3% |
“Ten Largest Holdings” excludes any temporary cash investments. |
28 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Consumer Products Fund | 11.53% | 12.52% | 9.13% |
S&P 500 Consumer Staples Index | 13.49% | 13.27% | 10.07% |
S&P 500 Index | 21.83% | 15.79% | 8.50% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and S&P 500 Consumer Staples Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 29 |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
CONSUMER PRODUCTS FUND |
Shares | Value | |||||||
COMMON STOCKS† - 99.3% | ||||||||
Food - 40.4% | ||||||||
Kraft Heinz Co. | 6,613 | $ | 514,227 | |||||
Mondelez International, Inc. — Class A | 9,869 | 422,393 | ||||||
General Mills, Inc. | 5,342 | 316,727 | ||||||
Tyson Foods, Inc. — Class A | 3,712 | 300,932 | ||||||
Sysco Corp. | 4,886 | 296,727 | ||||||
Kroger Co. | 9,666 | 265,332 | ||||||
Hershey Co. | 2,294 | 260,392 | ||||||
Kellogg Co. | 3,816 | 259,412 | ||||||
Hormel Foods Corp. | 6,353 | 231,186 | ||||||
Conagra Brands, Inc. | 5,550 | 209,069 | ||||||
JM Smucker Co. | 1,661 | 206,363 | ||||||
Campbell Soup Co. | 4,191 | 201,629 | ||||||
McCormick & Company, Inc. | 1,915 | 195,158 | ||||||
Ingredion, Inc. | 1,198 | 167,480 | ||||||
Lamb Weston Holdings, Inc. | 2,672 | 150,834 | ||||||
BRF S.A. ADR* | 13,190 | 148,519 | ||||||
US Foods Holding Corp.* | 4,519 | 144,292 | ||||||
Pinnacle Foods, Inc. | 2,420 | 143,917 | ||||||
Pilgrim’s Pride Corp.* | 4,487 | 139,366 | ||||||
Blue Buffalo Pet Products, Inc.* | 4,070 | 133,455 | ||||||
Snyder’s-Lance, Inc. | 2,630 | 131,710 | ||||||
Post Holdings, Inc.* | 1,520 | 120,430 | ||||||
Hain Celestial Group, Inc.* | 2,656 | 112,588 | ||||||
Flowers Foods, Inc. | 5,414 | 104,544 | ||||||
Performance Food Group Co.* | 3,040 | 100,624 | ||||||
Lancaster Colony Corp. | 773 | 99,879 | ||||||
Sprouts Farmers Market, Inc.* | 3,960 | 96,426 | ||||||
Darling Ingredients, Inc.* | 5,166 | 93,660 | ||||||
TreeHouse Foods, Inc.* | 1,859 | 91,946 | ||||||
J&J Snack Foods Corp. | 591 | 89,732 | ||||||
Sanderson Farms, Inc. | 620 | 86,044 | ||||||
B&G Foods, Inc.1 | 2,401 | 84,395 | ||||||
United Natural Foods, Inc.* | 1,693 | 83,414 | ||||||
Fresh Del Monte Produce, Inc. | 1,720 | 81,992 | ||||||
Cal-Maine Foods, Inc.* | 1,765 | 78,454 | ||||||
Hostess Brands, Inc.* | 5,190 | 76,864 | ||||||
Calavo Growers, Inc.1 | 835 | 70,474 | ||||||
Bob Evans Farms, Inc. | 850 | 66,997 | ||||||
Dean Foods Co. | 4,747 | 54,875 | ||||||
SUPERVALU, Inc.* | 2,310 | 49,896 | ||||||
Total Food | 6,482,354 | |||||||
Beverages - 23.9% | ||||||||
Coca-Cola Co. | 16,242 | 745,183 | ||||||
PepsiCo, Inc. | 5,811 | 696,855 | ||||||
Constellation Brands, Inc. — Class A | 1,576 | 360,226 | ||||||
Monster Beverage Corp.* | 5,024 | 317,969 | ||||||
Brown-Forman Corp. — Class B | 4,049 | 278,045 | ||||||
Anheuser-Busch InBev S.A. ADR | 2,078 | 231,822 | ||||||
Dr Pepper Snapple Group, Inc. | 2,308 | 224,014 | ||||||
Molson Coors Brewing Co. — Class B | 2,727 | 223,805 | ||||||
Coca-Cola European Partners plc | 4,336 | 172,789 | ||||||
Fomento Economico Mexicano SAB de CV ADR | 1,673 | 157,095 | ||||||
Diageo plc ADR | 1,067 | 155,814 | ||||||
National Beverage Corp. | 1,131 | 110,205 | ||||||
Boston Beer Company, Inc. — Class A* | 410 | 78,351 | ||||||
Coca-Cola Bottling Company Consolidated | 330 | 71,036 | ||||||
Total Beverages | 3,823,209 | |||||||
Cosmetics & Personal Care - 13.1% | ||||||||
Procter & Gamble Co. | 8,894 | 817,181 | ||||||
Colgate-Palmolive Co. | 5,805 | 437,987 | ||||||
Estee Lauder Companies, Inc. — Class A | 2,868 | 364,924 | ||||||
Coty, Inc. — Class A | 10,795 | 214,713 | ||||||
Unilever N.V. — Class Y | 3,003 | 169,129 | ||||||
Edgewell Personal Care Co.* | 1,620 | 96,212 | ||||||
Total Cosmetics & Personal Care | 2,100,146 | |||||||
Agriculture - 12.5% | ||||||||
Philip Morris International, Inc. | 6,430 | 679,329 | ||||||
Altria Group, Inc. | 8,643 | 617,197 | ||||||
Archer-Daniels-Midland Co. | 6,089 | 244,047 | ||||||
British American Tobacco plc ADR | 3,120 | 209,009 | ||||||
Bunge Ltd. | 2,380 | 159,650 | ||||||
Vector Group Ltd. | 4,071 | 91,109 | ||||||
Total Agriculture | 2,000,341 | |||||||
Household Products & Housewares - 6.2% | ||||||||
Kimberly-Clark Corp. | 2,902 | 350,155 | ||||||
Clorox Co. | 1,585 | 235,753 | ||||||
Church & Dwight Company, Inc. | 3,839 | 192,603 | ||||||
Spectrum Brands Holdings, Inc. | 1,195 | 134,318 | ||||||
Central Garden & Pet Co. — Class A* | 2,000 | 75,420 | ||||||
Total Household Products & Housewares | 988,249 | |||||||
Retail - 1.3% | ||||||||
Casey’s General Stores, Inc. | 947 | 106,007 | ||||||
Nu Skin Enterprises, Inc. — Class A | 1,488 | 101,527 | ||||||
Total Retail | 207,534 | |||||||
Pharmaceuticals - 0.8% | ||||||||
Herbalife Ltd.*,1 | 1,871 | 126,704 | ||||||
Holding Companies-Diversified - 0.6% | ||||||||
HRG Group, Inc.* | 5,800 | 98,310 | ||||||
Electrical Components & Equipment - 0.5% | ||||||||
Energizer Holdings, Inc. | 1,860 | 89,243 | ||||||
Total Common Stocks | ||||||||
(Cost $9,372,052) | 15,916,090 | |||||||
RIGHTS††† - 0.0% | ||||||||
PDC | ||||||||
Expires 03/01/18*,5 | 7,547 | — | ||||||
Casa Ley | ||||||||
Expires 01/17/19*,5 | 7,547 | — | ||||||
Total Rights | ||||||||
(Cost $1,815) | — |
30 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
CONSUMER PRODUCTS FUND |
Face Amount | Value | |||||||
REPURCHASE AGREEMENTS††,2 - 0.5% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | $ | 51,523 | $ | 51,523 | ||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 27,498 | 27,498 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $79,021) | 79,021 |
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 1.4% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%4 | 219,984 | 219,984 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $219,984) | 219,984 | |||||||
Total Investments - 101.2% | ||||||||
(Cost $9,672,872) | $ | 16,215,095 | ||||||
Other Assets & Liabilities, net - (1.2)% | (191,412 | ) | ||||||
Total Net Assets - 100.0% | $ | 16,023,683 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 3. |
†† | Value determined based on Level 2 inputs — See Note 3. |
††† | Value determined based on Level 3 inputs — See Note 3. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 5. |
2 | Repurchase Agreements — See Note 4. |
3 | Securities lending collateral — See Note 5. |
4 | Rate indicated is the 7 day yield as of December 31, 2017. |
5 | Security was fair valued by the Valuation Committee at December 31, 2017. The total market value of fair valued securities amounts to $0, (cost $1,815) or 0.0% of total net assets. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 15,916,090 | $ | — | $ | — | $ | 15,916,090 | ||||||||
Repurchase Agreements | — | 79,021 | — | 79,021 | ||||||||||||
Rights | — | — | — | * | — | |||||||||||
Securities Lending Collateral | 219,984 | — | — | 219,984 | ||||||||||||
Total Assets | $ | 16,136,074 | $ | 79,021 | $ | — | $ | 16,215,095 |
* | Securities have a market value of $0. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 31 |
CONSUMER PRODUCTS FUND |
STATEMENT OF ASSETS AND LIABILITIES | |
December 31, 2017 |
Assets: | ||||
Investments, at value - including $208,651 of securities loaned (cost $9,593,851) | $ | 16,136,074 | ||
Repurchase agreements, at value (cost $79,021) | 79,021 | |||
Receivables: | ||||
Fund shares sold | 43,576 | |||
Dividends | 29,639 | |||
Foreign tax reclaims | 2,643 | |||
Securities lending income | 324 | |||
Interest | 9 | |||
Total assets | 16,291,286 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities loaned | 219,984 | |||
Management fees | 11,367 | |||
Fund shares redeemed | 7,639 | |||
Transfer agent and administrative fees | 3,343 | |||
Investor service fees | 3,343 | |||
Portfolio accounting fees | 1,338 | |||
Miscellaneous | 20,589 | |||
Total liabilities | 267,603 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 16,023,683 | ||
Net assets consist of: | ||||
Paid in capital | $ | 9,921,484 | ||
Undistributed net investment income | 93,606 | |||
Accumulated net realized loss on investments | (533,630 | ) | ||
Net unrealized appreciation on investments | 6,542,223 | |||
Net assets | $ | 16,023,683 | ||
Capital shares outstanding | 241,667 | |||
Net asset value per share | $ | 66.30 |
STATEMENT OF OPERATIONS | |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $561) | $ | 337,380 | ||
Interest | 695 | |||
Income from securities lending, net | 5,812 | |||
Other income | 129 | |||
Total investment income | 344,016 | |||
Expenses: | ||||
Management fees | 148,523 | |||
Investor service fees | 43,683 | |||
Transfer agent and administrative fees | 43,683 | |||
Professional fees | 18,980 | |||
Portfolio accounting fees | 17,473 | |||
Custodian fees | 3,458 | |||
Trustees’ fees* | 2,918 | |||
Line of credit fees | 2 | |||
Miscellaneous | 18,929 | |||
Total expenses | 297,649 | |||
Net investment income | 46,367 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 1,413,048 | |||
Net realized gain | 1,413,048 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 291,702 | |||
Net change in unrealized appreciation (depreciation) | 291,702 | |||
Net realized and unrealized gain | 1,704,750 | |||
Net increase in net assets resulting from operations | $ | 1,751,117 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
32 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
CONSUMER PRODUCTS FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 46,367 | $ | 234,084 | ||||
Net realized gain on investments | 1,413,048 | 4,141,037 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 291,702 | (2,553,550 | ) | |||||
Net increase in net assets resulting from operations | 1,751,117 | 1,821,571 | ||||||
Distributions to shareholders from: | ||||||||
Net investment income | (186,845 | ) | (239,147 | ) | ||||
Net realized gains | (526,120 | ) | (1,667,649 | ) | ||||
Total distributions to shareholders | (712,965 | ) | (1,906,796 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 25,652,415 | 61,911,706 | ||||||
Distributions reinvested | 712,965 | 1,906,796 | ||||||
Cost of shares redeemed | (29,789,629 | ) | (77,804,973 | ) | ||||
Net decrease from capital share transactions | (3,424,249 | ) | (13,986,471 | ) | ||||
Net decrease in net assets | (2,386,097 | ) | (14,071,696 | ) | ||||
Net assets: | ||||||||
Beginning of year | 18,409,780 | 32,481,476 | ||||||
End of year | $ | 16,023,683 | $ | 18,409,780 | ||||
Undistributed net investment income at end of year | $ | 93,606 | $ | 234,084 | ||||
Capital share activity: | ||||||||
Shares sold | 393,943 | 977,795 | ||||||
Shares issued from reinvestment of distributions | 11,492 | 28,860 | ||||||
Shares redeemed | (461,696 | ) | (1,236,346 | ) | ||||
Net decrease in shares | (56,261 | ) | (229,691 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 33 |
CONSUMER PRODUCTS FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 61.79 | $ | 61.56 | $ | 60.19 | $ | 56.94 | $ | 45.02 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .17 | .44 | .58 | .42 | .38 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 6.79 | 3.10 | 3.14 | 6.72 | 12.31 | |||||||||||||||
Total from investment operations | 6.96 | 3.54 | 3.72 | 7.14 | 12.69 | |||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.64 | ) | (.42 | ) | (.34 | ) | (.30 | ) | (.77 | ) | ||||||||||
Net realized gains | (1.81 | ) | (2.89 | ) | (2.01 | ) | (3.59 | ) | — | |||||||||||
Total distributions | (2.45 | ) | (3.31 | ) | (2.35 | ) | (3.89 | ) | (.77 | ) | ||||||||||
Net asset value, end of period | $ | 66.30 | $ | 61.79 | $ | 61.56 | $ | 60.19 | $ | 56.94 | ||||||||||
Total Returnb | 11.53 | % | 5.42 | % | 6.22 | % | 12.63 | % | 28.25 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 16,024 | $ | 18,410 | $ | 32,481 | $ | 26,090 | $ | 15,448 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.27 | % | 0.68 | % | 0.95 | % | 0.70 | % | 0.72 | % | ||||||||||
Total expenses | 1.70 | % | 1.65 | % | 1.61 | % | 1.66 | % | 1.64 | % | ||||||||||
Portfolio turnover rate | 133 | % | 161 | % | 225 | % | 194 | % | 438 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
34 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
ELECTRONICS FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that are involved in the electronics sector, including semiconductor manufacturers and distributors, and makers and vendors of other electronic components and devices (“Electronics Companies”).
For the year ended December 31, 2017, Electronics Fund returned 31.06%, compared with a return of 21.83% for the S&P 500 Index. The S&P 500 Information Technology Index returned 38.83%.
The semiconductors group accounted for almost all of the Fund by weight, and was the largest contributor to return. The semiconductor equipment industry also contributed to return. Only the communications equipment category detracted.
For the year, Fund performance got the biggest boost from NVIDIA Corp., Micron Technology, Inc., and Applied Materials, Inc. Holdings detracting the most from the Fund’s performance for the period were Xperi Corp., Acadia Communications, Inc., and Veeco Instruments, Inc.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: August 3, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Intel Corp. | 8.3% |
NVIDIA Corp. | 5.9% |
Texas Instruments, Inc. | 5.7% |
Broadcom Ltd. | 5.6% |
QUALCOMM, Inc. | 5.3% |
Applied Materials, Inc. | 4.1% |
Micron Technology, Inc. | 3.7% |
Analog Devices, Inc. | 3.2% |
Lam Research Corp. | 3.0% |
Microchip Technology, Inc. | 2.5% |
Top Ten Total | 47.3% |
“Ten Largest Holdings” excludes any temporary cash investments. |
THE RYDEX FUNDS ANNUAL REPORT | 35 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Electronics Fund | 31.06% | 22.69% | 8.22% |
S&P 500 Information Technology Index | 38.83% | 20.90% | 11.90% |
S&P 500 Index | 21.83% | 15.79% | 8.50% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and S&P 500 Information Technology Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
36 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
ELECTRONICS FUND |
Shares | Value | |||||||
COMMON STOCKS† - 99.3% | ||||||||
Semiconductors - 93.2% | ||||||||
Intel Corp. | 20,246 | $ | 934,555 | |||||
NVIDIA Corp. | 3,433 | 664,285 | ||||||
Texas Instruments, Inc. | 6,175 | 644,917 | ||||||
Broadcom Ltd. | 2,455 | 630,689 | ||||||
QUALCOMM, Inc. | 9,262 | 592,953 | ||||||
Applied Materials, Inc. | 8,906 | 455,275 | ||||||
Micron Technology, Inc.* | 10,201 | 419,465 | ||||||
Analog Devices, Inc. | 4,061 | 361,551 | ||||||
Lam Research Corp. | 1,838 | 338,321 | ||||||
Microchip Technology, Inc. | 3,210 | 282,095 | ||||||
Skyworks Solutions, Inc. | 2,684 | 254,846 | ||||||
Xilinx, Inc. | 3,762 | 253,634 | ||||||
KLA-Tencor Corp. | 2,413 | 253,534 | ||||||
Maxim Integrated Products, Inc. | 4,549 | 237,822 | ||||||
NXP Semiconductor N.V.* | 1,914 | 224,110 | ||||||
Advanced Micro Devices, Inc.*,1 | 18,916 | 194,456 | ||||||
ON Semiconductor Corp.* | 9,139 | 191,371 | ||||||
Taiwan Semiconductor Manufacturing Company Ltd. ADR | 4,812 | 190,796 | ||||||
Marvell Technology Group Ltd. | 8,668 | 186,102 | ||||||
Teradyne, Inc. | 4,323 | 181,004 | ||||||
Qorvo, Inc.* | 2,653 | 176,690 | ||||||
ASML Holding N.V. — Class G | 958 | 166,520 | ||||||
Microsemi Corp.* | 2,974 | 153,607 | ||||||
Cavium, Inc.* | 1,764 | 147,876 | ||||||
STMicroelectronics N.V. — Class Y | 6,520 | 142,397 | ||||||
MKS Instruments, Inc. | 1,505 | 142,222 | ||||||
Himax Technologies, Inc. ADR1 | 13,580 | 141,504 | ||||||
Cypress Semiconductor Corp. | 9,098 | 138,653 | ||||||
Monolithic Power Systems, Inc. | 1,184 | 133,034 | ||||||
Entegris, Inc. | 4,246 | 129,291 | ||||||
Integrated Device Technology, Inc.* | 4,119 | 122,458 | ||||||
Silicon Laboratories, Inc.* | 1,342 | 118,499 | ||||||
Cirrus Logic, Inc.* | 2,207 | 114,455 | ||||||
Cabot Microelectronics Corp. | 1,030 | 96,902 | ||||||
Semtech Corp.* | 2,783 | 95,179 | ||||||
Amkor Technology, Inc.* | 9,365 | 94,118 | ||||||
MACOM Technology Solutions Holdings, Inc.*,1 | 2,816 | 91,633 | ||||||
Power Integrations, Inc.1 | 1,243 | 91,423 | ||||||
Ambarella, Inc.* | 1,475 | 86,656 | ||||||
Brooks Automation, Inc. | 3,379 | 80,589 | ||||||
Inphi Corp.*,1 | 2,095 | 76,677 | ||||||
Rambus, Inc.* | 5,353 | 76,120 | ||||||
Synaptics, Inc.* | 1,870 | 74,688 | ||||||
Xperi Corp. | 3,001 | 73,224 | ||||||
Axcelis Technologies, Inc.* | 2,005 | 57,543 | ||||||
Ultra Clean Holdings, Inc.* | 2,485 | 57,379 | ||||||
Veeco Instruments, Inc.* | 3,767 | 55,940 | ||||||
Impinj, Inc.* | 1,810 | 40,779 | ||||||
Total Semiconductors | 10,467,837 | |||||||
Energy-Alternate Sources - 1.4% | ||||||||
First Solar, Inc.* | 2,399 | 161,980 | ||||||
Electrical Components & Equipment - 1.4% | ||||||||
Advanced Energy Industries, Inc.* | 1,475 | 99,533 | ||||||
SunPower Corp. — Class A*,1 | 7,255 | 61,160 | ||||||
Total Electrical Components & Equipment | 160,693 | |||||||
Chemicals - 1.1% | ||||||||
Versum Materials, Inc. | 3,370 | 127,554 | ||||||
Building Materials - 1.1% | ||||||||
Cree, Inc.* | 3,316 | 123,156 | ||||||
Telecommunications - 0.6% | ||||||||
Acacia Communications, Inc.*,1 | 1,907 | 69,091 | ||||||
Machinery-Diversified - 0.5% | ||||||||
Ichor Holdings Ltd.* | 2,000 | 49,200 | ||||||
Total Common Stocks | ||||||||
(Cost $6,608,993) | 11,159,511 |
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.6% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | $ | 42,843 | 42,843 | |||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 22,865 | 22,865 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $65,708) | 65,708 |
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 3.4% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%4 | 376,680 | 376,680 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $376,680) | 376,680 | |||||||
Total Investments - 103.3% | ||||||||
(Cost $7,051,381) | $ | 11,601,899 | ||||||
Other Assets & Liabilities, net - (3.3)% | (366,339 | ) | ||||||
Total Net Assets - 100.0% | $ | 11,235,560 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 37 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
ELECTRONICS FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 3. |
†† | Value determined based on Level 2 inputs — See Note 3. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 5. |
2 | Repurchase Agreements — See Note 4. |
3 | Securities lending collateral — See Note 5. |
4 | Rate indicated is the 7 day yield as of December 31, 2017. |
ADR — American Depositary Receipt | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 11,159,511 | $ | — | $ | — | $ | 11,159,511 | ||||||||
Repurchase Agreements | — | 65,708 | — | 65,708 | ||||||||||||
Securities Lending Collateral | 376,680 | — | — | 376,680 | ||||||||||||
Total Assets | $ | 11,536,191 | $ | 65,708 | $ | — | $ | 11,601,899 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
38 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
ELECTRONICS FUND |
STATEMENT OF ASSETS AND LIABILITIES | |
December 31, 2017 |
Assets: | ||||
Investments, at value - including $354,704 of securities loaned (cost $6,985,673) | $ | 11,536,191 | ||
Repurchase agreements, at value (cost $65,708) | 65,708 | |||
Cash | 4,314 | |||
Receivables: | ||||
Securities sold | 109,153 | |||
Dividends | 2,933 | |||
Securities lending income | 931 | |||
Fund shares sold | 87 | |||
Interest | 8 | |||
Total assets | 11,719,325 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities loaned | 376,680 | |||
Fund shares redeemed | 74,574 | |||
Management fees | 8,661 | |||
Transfer agent and administrative fees | 2,548 | |||
Investor service fees | 2,548 | |||
Portfolio accounting fees | 1,019 | |||
Miscellaneous | 17,735 | |||
Total liabilities | 483,765 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 11,235,560 | ||
Net assets consist of: | ||||
Paid in capital | $ | 8,089,376 | ||
Undistributed net investment income | — | |||
Accumulated net realized loss on investments | (1,404,334 | ) | ||
Net unrealized appreciation on investments | 4,550,518 | |||
Net assets | $ | 11,235,560 | ||
Capital shares outstanding | 140,643 | |||
Net asset value per share | $ | 79.89 |
STATEMENT OF OPERATIONS | |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $34) | $ | 110,932 | ||
Interest | 518 | |||
Income from securities lending, net | 12,030 | |||
Total investment income | 123,480 | |||
Expenses: | ||||
Management fees | 85,752 | |||
Investor service fees | 25,221 | |||
Transfer agent and administrative fees | 25,221 | |||
Professional fees | 13,867 | |||
Portfolio accounting fees | 10,089 | |||
Custodian fees | 1,654 | |||
Trustees’ fees* | 1,042 | |||
Line of credit fees | 22 | |||
Miscellaneous | 9,118 | |||
Total expenses | 171,986 | |||
Net investment loss | (48,506 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 641,050 | |||
Net realized gain | 641,050 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 1,682,021 | |||
Net change in unrealized appreciation (depreciation) | 1,682,021 | |||
Net realized and unrealized gain | 2,323,071 | |||
Net increase in net assets resulting from operations | $ | 2,274,565 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 39 |
ELECTRONICS FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (48,506 | ) | $ | (9,676 | ) | ||
Net realized gain on investments | 641,050 | 584,086 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 1,682,021 | 694,823 | ||||||
Net increase in net assets resulting from operations | 2,274,565 | 1,269,233 | ||||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 35,241,512 | 27,911,794 | ||||||
Cost of shares redeemed | (34,989,891 | ) | (25,845,937 | ) | ||||
Net increase from capital share transactions | 251,621 | 2,065,857 | ||||||
Net increase in net assets | 2,526,186 | 3,335,090 | ||||||
Net assets: | ||||||||
Beginning of year | 8,709,374 | 5,374,284 | ||||||
End of year | $ | 11,235,560 | $ | 8,709,374 | ||||
Undistributed net investment income at end of year | $ | — | $ | — | ||||
Capital share activity: | ||||||||
Shares sold | 485,493 | 517,839 | ||||||
Shares redeemed | (487,740 | ) | (484,563 | ) | ||||
Net increase (decrease) in shares | (2,247 | ) | 33,276 |
40 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
ELECTRONICS FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 60.95 | $ | 49.03 | $ | 48.01 | $ | 38.81 | $ | 28.78 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.34 | ) | (.07 | ) | (.15 | ) | (.01 | ) | — | b | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 19.28 | 11.99 | 1.17 | 9.21 | 10.12 | |||||||||||||||
Total from investment operations | 18.94 | 11.92 | 1.02 | 9.20 | 10.12 | |||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | — | — | — | — | (.09 | ) | ||||||||||||||
Total distributions | — | — | — | — | (.09 | ) | ||||||||||||||
Net asset value, end of period | $ | 79.89 | $ | 60.95 | $ | 49.03 | $ | 48.01 | $ | 38.81 | ||||||||||
Total Returnc | 31.06 | % | 24.34 | % | 2.10 | % | 23.74 | % | 35.05 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 11,236 | $ | 8,709 | $ | 5,374 | $ | 7,410 | $ | 3,261 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.48 | %) | (0.14 | %) | (0.31 | %) | (0.01 | %) | 0.02 | % | ||||||||||
Total expenses | 1.70 | % | 1.66 | % | 1.59 | % | 1.66 | % | 1.64 | % | ||||||||||
Portfolio turnover rate | 327 | % | 362 | % | 351 | % | 381 | % | 745 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Net investment income is less than $0.01 per share. |
c | Total return does not reflect the impact of any additional fees charged by insurance companies. |
d | Reverse share split — Per share amounts for the periods presented through December 31, 2013 have been restated to reflect a 1:10 reverse share split effective April 5, 2013. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 41 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
ENERGY FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies involved in the energy field, including the exploration, production, and development of oil, gas, coal, and alternative sources of energy (“Energy Companies”).
For the year ended December 31, 2017, Energy Fund returned (6.26%), compared with the 21.83% return of the S&P 500 Index. The S&P 500 Energy Index returned (1.01%).
The oil, gas & consumable fuels industry was the largest contributor to return, followed by the gas utilities industry. The energy equipment & services industry was the largest detractor from return, followed by the industrial conglomerates industry.
Valero Energy Corp., Chevron Corp., and Marathon Petroleum Corp. contributed the most to the Fund’s return for the year. Holdings detracting the most from performance were Schlumberger NV, Baker Hughes Class A, and Range Resources Corp.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 29, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Exxon Mobil Corp. | 6.1% |
Chevron Corp. | 5.0% |
Schlumberger Ltd. | 3.2% |
ConocoPhillips | 2.7% |
EOG Resources, Inc. | 2.6% |
Occidental Petroleum Corp. | 2.5% |
Phillips 66 | 2.3% |
Halliburton Co. | 2.2% |
Valero Energy Corp. | 2.1% |
Kinder Morgan, Inc. | 2.0% |
Top Ten Total | 30.7% |
“Ten Largest Holdings” excludes any temporary cash investments. |
42 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Energy Fund | (6.26%) | (2.90%) | (2.96%) |
S&P 500 Energy Index | (1.01%) | 2.78% | 1.16% |
S&P 500 Index | 21.83% | 15.79% | 8.50% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and S&P 500 Energy Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 43 |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
ENERGY FUND |
Shares | Value | |||||||
�� | ||||||||
COMMON STOCKS† - 99.8% | ||||||||
Oil & Gas - 74.1% | ||||||||
Exxon Mobil Corp. | 12,564 | $ | 1,050,863 | |||||
Chevron Corp. | 6,989 | 874,953 | ||||||
ConocoPhillips | 8,468 | 464,809 | ||||||
EOG Resources, Inc. | 4,200 | 453,222 | ||||||
Occidental Petroleum Corp. | 5,828 | 429,290 | ||||||
Phillips 66 | 3,974 | 401,970 | ||||||
Valero Energy Corp. | 3,955 | 363,504 | ||||||
Marathon Petroleum Corp. | 4,861 | 320,729 | ||||||
Anadarko Petroleum Corp. | 5,912 | 317,120 | ||||||
Pioneer Natural Resources Co. | 1,815 | 313,723 | ||||||
Transocean Ltd.* | 28,568 | 305,106 | ||||||
Concho Resources, Inc.* | 1,804 | 270,997 | ||||||
Devon Energy Corp. | 6,479 | 268,231 | ||||||
Continental Resources, Inc.* | 4,918 | 260,506 | ||||||
Royal Dutch Shell plc — Class A ADR | 3,678 | 245,359 | ||||||
Andeavor | 2,087 | 238,628 | ||||||
BP plc ADR | 5,505 | 231,375 | ||||||
Apache Corp. | 5,466 | 230,775 | ||||||
Petroleo Brasileiro S.A. ADR* | 21,846 | 224,795 | ||||||
Marathon Oil Corp. | 13,209 | 223,628 | ||||||
Hess Corp. | 4,628 | 219,691 | ||||||
Noble Energy, Inc. | 7,510 | 218,841 | ||||||
Equities Corp. | 3,718 | 211,629 | ||||||
Diamondback Energy, Inc.* | 1,652 | 208,565 | ||||||
Cabot Oil & Gas Corp. — Class A | 7,052 | 201,687 | ||||||
Cimarex Energy Co. | 1,614 | 196,924 | ||||||
Encana Corp. | 13,314 | 177,476 | ||||||
Parsley Energy, Inc. — Class A* | 6,010 | 176,934 | ||||||
HollyFrontier Corp. | 3,405 | 174,404 | ||||||
Suncor Energy, Inc. | 4,740 | 174,053 | ||||||
Helmerich & Payne, Inc.1 | 2,396 | 154,877 | ||||||
RSP Permian, Inc.* | 3,630 | 147,668 | ||||||
Newfield Exploration Co.* | 4,453 | 140,403 | ||||||
WPX Energy, Inc.* | 9,766 | 137,408 | ||||||
Energen Corp.* | 2,339 | 134,656 | ||||||
Antero Resources Corp.* | 7,040 | 133,760 | ||||||
Murphy Oil Corp. | 4,280 | 132,894 | ||||||
Centennial Resource Development, Inc. — Class A* | 6,570 | 130,086 | ||||||
Patterson-UTI Energy, Inc. | 5,481 | 126,118 | ||||||
PBF Energy, Inc. — Class A | 3,245 | 115,035 | ||||||
Range Resources Corp. | 6,675 | 113,876 | ||||||
PDC Energy, Inc.* | 2,128 | 109,677 | ||||||
Matador Resources Co.* | 3,480 | 108,332 | ||||||
Canadian Natural Resources Ltd. | 2,974 | 106,231 | ||||||
CNX Resources Corp.* | 6,936 | 101,474 | ||||||
Delek US Holdings, Inc. | 2,800 | 97,832 | ||||||
Diamond Offshore Drilling, Inc.*,1 | 5,000 | 92,950 | ||||||
Callon Petroleum Co.* | 7,460 | 90,639 | ||||||
Southwestern Energy Co.* | 16,101 | 89,844 | ||||||
Laredo Petroleum, Inc.* | 8,314 | 88,212 | ||||||
SM Energy Co. | 3,968 | 87,613 | ||||||
Whiting Petroleum Corp.* | 3,294 | 87,225 | ||||||
QEP Resources, Inc.* | 8,824 | 84,446 | ||||||
Kosmos Energy Ltd.* | 12,320 | 84,392 | ||||||
Extraction Oil & Gas, Inc.* | 5,844 | 83,628 | ||||||
Nabors Industries Ltd. | 12,046 | 82,274 | ||||||
Gulfport Energy Corp.* | 6,411 | 81,804 | ||||||
Rowan Companies plc — Class A* | 5,207 | 81,542 | ||||||
SRC Energy, Inc.* | 9,317 | 79,474 | ||||||
Carrizo Oil & Gas, Inc.* | 3,421 | 72,799 | ||||||
Ultra Petroleum Corp.* | 8,000 | 72,480 | ||||||
Oasis Petroleum, Inc.* | 8,561 | 71,998 | ||||||
Halcon Resources Corp.* | 7,700 | 58,289 | ||||||
Total Oil & Gas | 12,829,723 | |||||||
Oil & Gas Services - 12.5% | ||||||||
Schlumberger Ltd. | 8,103 | 546,061 | ||||||
Halliburton Co. | 7,646 | 373,660 | ||||||
Baker Hughes a GE Co. | 10,731 | 339,529 | ||||||
National Oilwell Varco, Inc. | 5,895 | 212,338 | ||||||
TechnipFMC plc | 5,353 | 167,602 | ||||||
RPC, Inc.1 | 5,150 | 131,480 | ||||||
Core Laboratories N.V.1 | 937 | 102,648 | ||||||
Oceaneering International, Inc. | 3,932 | 83,123 | ||||||
Dril-Quip, Inc.* | 1,607 | 76,654 | ||||||
McDermott International, Inc.* | 10,833 | 71,281 | ||||||
Superior Energy Services, Inc.* | 7,084 | 68,219 | ||||||
Total Oil & Gas Services | 2,172,595 | |||||||
Pipelines - 10.1% | ||||||||
Kinder Morgan, Inc. | 19,569 | 353,612 | ||||||
Williams Companies, Inc. | 9,372 | 285,752 | ||||||
ONEOK, Inc. | 4,709 | 251,696 | ||||||
Cheniere Energy, Inc.* | 3,919 | 210,999 | ||||||
Targa Resources Corp. | 3,770 | 182,543 | ||||||
Enbridge, Inc. | 3,654 | 142,908 | ||||||
Plains GP Holdings, LP — Class A | 6,481 | 142,258 | ||||||
TransCanada Corp. | 1,890 | 91,930 | ||||||
SemGroup Corp. — Class A | 3,003 | 90,691 | ||||||
Total Pipelines | 1,752,389 | |||||||
Coal - 1.2% | ||||||||
Peabody Energy Corp.* | 3,000 | 118,110 | ||||||
Arch Coal, Inc. — Class A | 880 | 81,981 | ||||||
Total Coal | 200,091 | |||||||
Metal Fabricate & Hardware - 0.6% | ||||||||
Tenaris S.A. ADR | 3,102 | 98,829 | ||||||
Transportation - 0.6% | ||||||||
Golar LNG Ltd. | 3,212 | 95,750 | ||||||
Mining - 0.5% | ||||||||
US Silica Holdings, Inc. | 2,721 | 88,596 | ||||||
Energy-Alternate Sources - 0.2% | ||||||||
Green Plains, Inc. | 2,263 | 38,131 | ||||||
Total Common Stocks | ||||||||
(Cost $8,908,786) | 17,276,104 |
44 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
ENERGY FUND |
Face Amount | Value | |||||||
REPURCHASE AGREEMENTS††,2 - 0.6% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | $ | 72,079 | $ | 72,079 | ||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 38,469 | 38,469 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $110,548) | 110,548 |
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 2.1% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%4 | 361,857 | 361,857 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $361,857) | 361,857 | |||||||
Total Investments - 102.5% | ||||||||
(Cost $9,381,191) | $ | 17,748,509 | ||||||
Other Assets & Liabilities, net - (2.5)% | (430,551 | ) | ||||||
Total Net Assets - 100.0% | $ | 17,317,958 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 3. |
†† | Value determined based on Level 2 inputs — See Note 3. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 5. |
2 | Repurchase Agreements — See Note 4. |
3 | Securities lending collateral — See Note 5. |
4 | Rate indicated is the 7 day yield as of December 31, 2017. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 17,276,104 | $ | — | $ | — | $ | 17,276,104 | ||||||||
Repurchase Agreements | — | 110,548 | — | 110,548 | ||||||||||||
Securities Lending Collateral | 361,857 | — | — | 361,857 | ||||||||||||
Total Assets | $ | 17,637,961 | $ | 110,548 | $ | — | $ | 17,748,509 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 45 |
ENERGY FUND |
STATEMENT OF ASSETS AND LIABILITIES | |
December 31, 2017 |
Assets: | ||||
Investments, at value - including $351,530 of securities loaned (cost $9,270,643) | $ | 17,637,961 | ||
Repurchase agreements, at value (cost $110,548) | 110,548 | |||
Cash | 166 | |||
Receivables: | ||||
Dividends | 11,298 | |||
Securities lending income | 943 | |||
Investment adviser | 47 | |||
Interest | 13 | |||
Total assets | 17,760,976 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities loaned | 361,857 | |||
Fund shares redeemed | 34,803 | |||
Management fees | 12,135 | |||
Transfer agent and administrative fees | 3,569 | |||
Investor service fees | 3,569 | |||
Portfolio accounting fees | 1,428 | |||
Miscellaneous | 25,657 | |||
Total liabilities | 443,018 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 17,317,958 | ||
Net assets consist of: | ||||
Paid in capital | $ | 19,226,169 | ||
Undistributed net investment income | 131,623 | |||
Accumulated net realized loss on investments | (10,407,152 | ) | ||
Net unrealized appreciation on investments | 8,367,318 | |||
Net assets | $ | 17,317,958 | ||
Capital shares outstanding | 232,218 | |||
Net asset value per share | $ | 74.58 |
STATEMENT OF OPERATIONS | |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $4,259) | $ | 483,350 | ||
Interest | 869 | |||
Income from securities lending, net | 7,706 | |||
Total investment income | 491,925 | |||
Expenses: | ||||
Management fees | 170,635 | |||
Investor service fees | 50,187 | |||
Transfer agent and administrative fees | 50,187 | |||
Professional fees | 28,731 | |||
Portfolio accounting fees | 20,074 | |||
Custodian fees | 3,555 | |||
Trustees’ fees* | 2,619 | |||
Line of credit fees | 99 | |||
Miscellaneous | 16,059 | |||
Total expenses | 342,146 | |||
Net investment income | 149,779 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 862,529 | |||
Net realized gain | 862,529 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (3,472,763 | ) | ||
Net change in unrealized appreciation (depreciation) | (3,472,763 | ) | ||
Net realized and unrealized loss | (2,610,234 | ) | ||
Net decrease in net assets resulting from operations | $ | (2,460,455 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
46 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
ENERGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 149,779 | $ | 101,689 | ||||
Net realized gain (loss) on investments | 862,529 | (2,039,832 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | (3,472,763 | ) | 8,926,153 | |||||
Net increase (decrease) in net assets resulting from operations | (2,460,455 | ) | 6,988,010 | |||||
Distributions to shareholders from: | ||||||||
Net investment income | (110,100 | ) | (213,292 | ) | ||||
Total distributions to shareholders | (110,100 | ) | (213,292 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 117,598,047 | 78,330,244 | ||||||
Distributions reinvested | 110,100 | 213,292 | ||||||
Cost of shares redeemed | (125,936,864 | ) | (76,883,259 | ) | ||||
Net increase (decrease) from capital share transactions | (8,228,717 | ) | 1,660,277 | |||||
Net increase (decrease) in net assets | (10,799,272 | ) | 8,434,995 | |||||
Net assets: | ||||||||
Beginning of year | 28,117,230 | 19,682,235 | ||||||
End of year | $ | 17,317,958 | $ | 28,117,230 | ||||
Undistributed net investment income at end of year | $ | 131,623 | $ | 110,100 | ||||
Capital share activity: | ||||||||
Shares sold | 1,574,560 | 1,123,475 | * | |||||
Shares issued from reinvestment of distributions | 1,707 | 3,004 | * | |||||
Shares redeemed | (1,695,100 | ) | (1,095,831 | )* | ||||
Net increase (decrease) in shares | (118,833 | ) | 30,648 | * |
* | Capital share activity for the periods presented through December 31, 2016, has been restated to reflect a 1:4 reverse share split effective December 1, 2016 — See Note 9. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 47 |
ENERGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 80.09 | $ | 61.43 | $ | 90.41 | $ | 123.98 | $ | 102.07 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .53 | .08 | .76 | .48 | .20 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | (5.61 | ) | 18.72 | (27.58 | ) | (21.93 | ) | 23.75 | ||||||||||||
Total from investment operations | (5.08 | ) | 18.80 | (26.82 | ) | (21.45 | ) | 23.95 | ||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.43 | ) | (.14 | ) | (.36 | ) | (.12 | ) | (.24 | ) | ||||||||||
Net realized gains | — | — | (1.80 | ) | (12.00 | ) | (1.80 | ) | ||||||||||||
Total distributions | (.43 | ) | (.14 | ) | (2.16 | ) | (12.12 | ) | (2.04 | ) | ||||||||||
Net asset value, end of period | $ | 74.58 | $ | 80.09 | $ | 61.43 | $ | 90.41 | $ | 123.98 | ||||||||||
Total Returnb | (6.26 | %) | 31.37 | % | (30.22 | %) | (18.62 | %) | 23.47 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 17,318 | $ | 28,117 | $ | 19,682 | $ | 26,560 | $ | 21,913 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.75 | % | 0.42 | % | 0.91 | % | 0.38 | % | 0.18 | % | ||||||||||
Total expenses | 1.70 | % | 1.66 | % | 1.60 | % | 1.66 | % | 1.64 | % | ||||||||||
Portfolio turnover rate | 573 | % | 293 | % | 121 | % | 214 | % | 190 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Reverse share split — Per share amounts for the periods presented through December 31, 2016 have been restated to reflect a 1:4 reverse share split effective December 1, 2016 — See Note 9. |
48 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
ENERGY SERVICES FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that are involved in the energy services field, including those that provide services and equipment in the areas of oil, coal, and gas exploration and production (“Energy Services Companies”).
For the year ended December 31, 2017, Energy Services Fund returned (18.64%), compared with the S&P 500 Index, which returned 21.83%. The S&P 500 Energy Index returned (1.01%).
The two industries that compose this Fund both detracted from return. The oil & gas equipment & services industry detracted the most, followed by the oil & gas drilling industry.
RPC, Inc., ProPetro Holding Corp., and Keane Group, Inc. were the Fund’s best-performing holdings for the year. The Fund’s worst-performing holdings included Schlumberger NV, Baker Hughes Class A, and Nabors Industries Ltd.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 2, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Halliburton Co. | 10.2% |
Schlumberger Ltd. | 9.8% |
Baker Hughes a GE Co. | 9.7% |
National Oilwell Varco, Inc. | 6.2% |
Transocean Ltd. | 5.9% |
Helmerich & Payne, Inc. | 4.5% |
TechnipFMC plc | 3.9% |
RPC, Inc. | 3.8% |
Patterson-UTI Energy, Inc. | 3.7% |
Core Laboratories N.V. | 2.9% |
Top Ten Total | 60.6% |
“Ten Largest Holdings” excludes any temporary cash investments. |
THE RYDEX FUNDS ANNUAL REPORT | 49 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Energy Services Fund | (18.64%) | (9.74%) | (7.20%) |
S&P 500 Energy Index | (1.01%) | 2.78% | 1.16% |
S&P 500 Index | 21.83% | 15.79% | 8.50% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and S&P 500 Energy Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
50 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
ENERGY SERVICES FUND |
Shares | Value | |||||||
COMMON STOCKS† - 100.2% | ||||||||
Oil & Gas Services - 67.1% | ||||||||
Halliburton Co. | 18,817 | $ | 919,587 | |||||
Schlumberger Ltd. | 13,160 | 886,852 | ||||||
Baker Hughes a GE Co. | 27,784 | 879,086 | ||||||
National Oilwell Varco, Inc. | 15,535 | 559,571 | ||||||
TechnipFMC plc | 11,164 | 349,545 | ||||||
RPC, Inc.1 | 13,565 | 346,314 | ||||||
Core Laboratories N.V.1 | 2,367 | 259,305 | ||||||
Oceaneering International, Inc. | 10,347 | 218,736 | ||||||
C&J Energy Services, Inc.* | 6,528 | 218,492 | ||||||
Dril-Quip, Inc.* | 4,235 | 202,009 | ||||||
Forum Energy Technologies, Inc.* | 12,675 | 197,096 | ||||||
ProPetro Holding Corp.* | 9,720 | 195,955 | ||||||
Oil States International, Inc.* | 6,865 | 194,280 | ||||||
McDermott International, Inc.* | 28,529 | 187,721 | ||||||
Superior Energy Services, Inc.* | 18,670 | 179,792 | ||||||
Helix Energy Solutions Group, Inc.* | 21,440 | 161,658 | ||||||
Basic Energy Services, Inc.* | 4,868 | 114,252 | ||||||
Total Oil & Gas Services | 6,070,251 | |||||||
Oil & Gas - 23.4% | ||||||||
Transocean Ltd.* | 50,329 | 537,514 | ||||||
Helmerich & Payne, Inc.1 | 6,310 | 407,878 | ||||||
Patterson-UTI Energy, Inc. | 14,451 | 332,517 | ||||||
Diamond Offshore Drilling, Inc.*,1 | 13,169 | 244,812 | ||||||
Nabors Industries Ltd. | 31,738 | 216,771 | ||||||
Rowan Companies plc — Class A* | 13,711 | 214,714 | ||||||
Unit Corp.* | 7,343 | 161,546 | ||||||
Total Oil & Gas | 2,115,752 | |||||||
Mining - 4.3% | ||||||||
US Silica Holdings, Inc. | 7,180 | 233,781 | ||||||
Fairmount Santrol Holdings, Inc.*,1 | 30,499 | 159,509 | ||||||
Total Mining | 393,290 | |||||||
Metal Fabricate & Hardware - 2.8% | ||||||||
Tenaris S.A. ADR | 7,784 | 247,998 | ||||||
Engineering & Construction - 2.6% | ||||||||
Keane Group, Inc.*,1 | 12,550 | 238,576 | ||||||
Total Common Stocks | ||||||||
(Cost $5,638,097) | 9,065,867 |
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.5% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | $ | 28,386 | 28,386 | |||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 15,150 | 15,150 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $43,536) | 43,536 |
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 10.0% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%4 | 907,157 | 907,157 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $907,157) | 907,157 | |||||||
Total Investments - 110.7% | ||||||||
(Cost $6,588,790) | $ | 10,016,560 | ||||||
Other Assets & Liabilities, net - (10.7)% | (969,758 | ) | ||||||
Total Net Assets - 100.0% | $ | 9,046,802 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 3. |
†† | Value determined based on Level 2 inputs — See Note 3. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 5. |
2 | Repurchase Agreements — See Note 4. |
3 | Securities lending collateral — See Note 5. |
4 | Rate indicated is the 7 day yield as of December 31, 2017. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 51 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
ENERGY SERVICES FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 9,065,867 | $ | — | $ | — | $ | 9,065,867 | ||||||||
Repurchase Agreements | — | 43,536 | — | 43,536 | ||||||||||||
Securities Lending Collateral | 907,157 | — | — | 907,157 | ||||||||||||
Total Assets | $ | 9,973,024 | $ | 43,536 | $ | — | $ | 10,016,560 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
52 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
ENERGY SERVICES FUND |
STATEMENT OF ASSETS AND LIABILITIES | |
December 31, 2017 |
Assets: | ||||
Investments, at value - including $880,166 of securities loaned (cost $6,545,254) | $ | 9,973,024 | ||
Repurchase agreements, at value (cost $43,536) | 43,536 | |||
Receivables: | ||||
Fund shares sold | 197,648 | |||
Dividends | 9,621 | |||
Securities lending income | 1,531 | |||
Interest | 5 | |||
Total assets | 10,225,365 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities loaned | 907,157 | |||
Securities purchased | 181,263 | |||
Fund shares redeemed | 64,458 | |||
Management fees | 5,949 | |||
Transfer agent and administrative fees | 1,750 | |||
Investor service fees | 1,750 | |||
Portfolio accounting fees | 700 | |||
Miscellaneous | 15,536 | |||
Total liabilities | 1,178,563 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 9,046,802 | ||
Net assets consist of: | ||||
Paid in capital | $ | 14,716,383 | ||
Undistributed net investment income | 203,149 | |||
Accumulated net realized loss on investments | (9,300,500 | ) | ||
Net unrealized appreciation on investments | 3,427,770 | |||
Net assets | $ | 9,046,802 | ||
Capital shares outstanding | 157,068 | |||
Net asset value per share | $ | 57.60 |
STATEMENT OF OPERATIONS | |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $665) | $ | 366,033 | ||
Interest | 503 | |||
Income from securities lending, net | 11,717 | |||
Total investment income | 378,253 | |||
Expenses: | ||||
Management fees | 88,678 | |||
Investor service fees | 26,082 | |||
Transfer agent and administrative fees | 26,081 | |||
Professional fees | 15,177 | |||
Portfolio accounting fees | 10,433 | |||
Custodian fees | 1,889 | |||
Trustees’ fees* | 1,363 | |||
Line of credit fees | 8 | |||
Miscellaneous | 8,066 | |||
Total expenses | 177,777 | |||
Net investment income | 200,476 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (606,661 | ) | ||
Net realized loss | (606,661 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (2,250,644 | ) | ||
Net change in unrealized appreciation (depreciation) | (2,250,644 | ) | ||
Net realized and unrealized loss | (2,857,305 | ) | ||
Net decrease in net assets resulting from operations | $ | (2,656,829 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 53 |
ENERGY SERVICES FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | 200,476 | $ | (30,093 | ) | |||
Net realized loss on investments | (606,661 | ) | (1,276,203 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | (2,250,644 | ) | 3,530,932 | |||||
Net increase (decrease) in net assets resulting from operations | (2,656,829 | ) | 2,224,636 | |||||
Distributions to shareholders from: | ||||||||
Net investment income | — | (118,384 | ) | |||||
Total distributions to shareholders | — | (118,384 | ) | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 38,145,435 | 35,269,693 | ||||||
Distributions reinvested | — | 118,384 | ||||||
Cost of shares redeemed | (40,212,231 | ) | (35,199,321 | ) | ||||
Net increase (decrease) from capital share transactions | (2,066,796 | ) | 188,756 | |||||
Net increase (decrease) in net assets | (4,723,625 | ) | 2,295,008 | |||||
Net assets: | ||||||||
Beginning of year | 13,770,427 | 11,475,419 | ||||||
End of year | $ | 9,046,802 | $ | 13,770,427 | ||||
Undistributed net investment income at end of year | $ | 203,149 | $ | — | ||||
Capital share activity: | ||||||||
Shares sold | 668,004 | 593,091 | * | |||||
Shares issued from reinvestment of distributions | — | 1,921 | * | |||||
Shares redeemed | (705,427 | ) | (598,357 | )* | ||||
Net decrease in shares | (37,423 | ) | (3,345 | )* |
* | Capital share activity for the periods presented through December 31, 2016, has been restated to reflect a 1:6 reverse share split effective December 1, 2016 — See Note 9. |
54 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
ENERGY SERVICES FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 70.80 | $ | 58.00 | $ | 85.24 | $ | 132.25 | $ | 111.01 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | 1.11 | (.03 | ) | .66 | .36 | (.54 | ) | |||||||||||||
Net gain (loss) on investments (realized and unrealized) | (14.31 | ) | 12.92 | (27.60 | ) | (37.41 | ) | 27.12 | ||||||||||||
Total from investment operations | (13.20 | ) | 12.89 | (26.94 | ) | (37.05 | ) | 26.58 | ||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | — | (.09 | ) | (.30 | ) | — | — | |||||||||||||
Net realized gains | — | — | — | (9.96 | ) | (5.34 | ) | |||||||||||||
Total distributions | — | (.09 | ) | (.30 | ) | (9.96 | ) | (5.34 | ) | |||||||||||
Net asset value, end of period | $ | 57.60 | $ | 70.80 | $ | 58.00 | $ | 85.24 | $ | 132.25 | ||||||||||
Total Returnb | (18.64 | %) | 23.15 | % | (31.70 | %) | (29.34 | %) | 23.89 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 9,047 | $ | 13,770 | $ | 11,475 | $ | 15,843 | $ | 16,101 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.92 | % | (0.26 | %) | 0.85 | % | 0.29 | % | (0.42 | %) | ||||||||||
Total expenses | 1.70 | % | 1.66 | % | 1.60 | % | 1.66 | % | 1.64 | % | ||||||||||
Portfolio turnover rate | 338 | % | 291 | % | 175 | % | 220 | % | 261 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Reverse Share Split — Per share amounts for the periods presented through December 31, 2016 have been restated to reflect a 1:6 reverse share split effective December 1, 2016 — See Note 9. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 55 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
FINANCIAL SERVICES FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that are involved in the financial services sector (“Financial Services Companies”).
For the year ended December 31, 2017, Financial Services Fund returned 15.57%, while the S&P 500 Index returned 21.83% over the same period. The S&P 500 Financials Index returned 22.18%.
Capital markets was the largest contributor to return, followed by banks. The real estate management & development industry contributed the least to return, followed by mortgage real estate investment trusts.
Bank of America Corp., JPMorgan Chase & Co., and Berkshire Hathaway, Inc. Class B were the best-performing holdings in the Fund for the year. The worst-performing holdings for the period were AmTrust Financial Services, Inc., DDR Corp., and Kimco Realty Corp.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: July 20, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Berkshire Hathaway, Inc. — Class B | 2.6% |
JPMorgan Chase & Co. | 2.3% |
Bank of America Corp. | 2.1% |
Wells Fargo & Co. | 2.1% |
Citigroup, Inc. | 1.7% |
Goldman Sachs Group, Inc. | 1.2% |
Morgan Stanley | 1.2% |
U.S. Bancorp | 1.1% |
American Express Co. | 1.1% |
BlackRock, Inc. — Class A | 1.1% |
Top Ten Total | 16.5% |
“Ten Largest Holdings” excludes any temporary cash investments. |
56 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Financial Services Fund | 15.57% | 13.04% | 3.20% |
S&P 500 Financials Index | 22.18% | 18.21% | 3.78% |
S&P 500 Index | 21.83% | 15.79% | 8.50% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and S&P 500 Financials Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 57 |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
FINANCIAL SERVICES FUND |
Shares | Value | |||||||
COMMON STOCKS† - 98.7% | ||||||||
Banks - 28.9% | ||||||||
JPMorgan Chase & Co. | 3,532 | $ | 377,712 | |||||
Bank of America Corp. | 11,703 | 345,473 | ||||||
Wells Fargo & Co. | 5,652 | 342,907 | ||||||
Citigroup, Inc. | 3,630 | 270,108 | ||||||
Goldman Sachs Group, Inc. | 770 | 196,165 | ||||||
Morgan Stanley | 3,602 | 188,997 | ||||||
U.S. Bancorp | 3,369 | 180,511 | ||||||
PNC Financial Services Group, Inc. | 1,119 | 161,460 | ||||||
Bank of New York Mellon Corp. | 2,666 | 143,591 | ||||||
Capital One Financial Corp. | 1,385 | 137,918 | ||||||
BB&T Corp. | 2,455 | 122,063 | ||||||
State Street Corp. | 1,198 | 116,937 | ||||||
SunTrust Banks, Inc. | 1,683 | 108,705 | ||||||
M&T Bank Corp. | 580 | 99,174 | ||||||
Northern Trust Corp. | 945 | 94,396 | ||||||
Banco Bradesco S.A. ADR | 9,072 | 92,897 | ||||||
KeyCorp | 4,564 | 92,056 | ||||||
Fifth Third Bancorp | 2,971 | 90,140 | ||||||
Citizens Financial Group, Inc. | 2,127 | 89,291 | ||||||
Regions Financial Corp. | 5,099 | 88,111 | ||||||
Popular, Inc. | 2,370 | 84,111 | ||||||
Huntington Bancshares, Inc. | 5,333 | 77,648 | ||||||
Comerica, Inc. | 886 | 76,914 | ||||||
First Republic Bank | 818 | 70,872 | ||||||
SVB Financial Group* | 289 | 67,560 | ||||||
Zions Bancorporation | 1,243 | 63,182 | ||||||
East West Bancorp, Inc. | 964 | 58,640 | ||||||
Signature Bank* | 394 | 54,080 | ||||||
Bank of the Ozarks | 1,039 | 50,340 | ||||||
First Horizon National Corp. | 2,518 | 50,335 | ||||||
PacWest Bancorp | 994 | 50,098 | ||||||
Commerce Bancshares, Inc. | 858 | 47,911 | ||||||
CIT Group, Inc. | 970 | 47,753 | ||||||
Western Alliance Bancorporation* | 840 | 47,561 | ||||||
Cullen/Frost Bankers, Inc. | 501 | 47,420 | ||||||
Synovus Financial Corp. | 972 | 46,598 | ||||||
Pinnacle Financial Partners, Inc. | 671 | 44,487 | ||||||
Umpqua Holdings Corp. | 2,023 | 42,078 | ||||||
Wintrust Financial Corp. | 507 | 41,762 | ||||||
Texas Capital Bancshares, Inc.* | 467 | 41,516 | ||||||
BankUnited, Inc. | 1,010 | 41,127 | ||||||
Hancock Holding Co. | 821 | 40,639 | ||||||
IBERIABANK Corp. | 524 | 40,610 | ||||||
Home BancShares, Inc. | 1,725 | 40,106 | ||||||
MB Financial, Inc. | 854 | 38,020 | ||||||
United Bankshares, Inc. | 1,070 | 37,182 | ||||||
Fulton Financial Corp. | 1,943 | 34,780 | ||||||
Total Banks | 4,721,942 | |||||||
REITs - 28.8% | ||||||||
American Tower Corp. — Class A | 1,054 | 150,374 | ||||||
Simon Property Group, Inc. | 850 | 145,979 | ||||||
Crown Castle International Corp. | 1,170 | 129,882 | ||||||
Equinix, Inc. | 259 | 117,384 | ||||||
Public Storage | 552 | 115,368 | ||||||
Prologis, Inc. | 1,752 | 113,022 | ||||||
Weyerhaeuser Co. | 2,843 | 100,244 | ||||||
AvalonBay Communities, Inc. | 532 | 94,914 | ||||||
Digital Realty Trust, Inc. | 827 | 94,195 | ||||||
Welltower, Inc. | 1,462 | 93,232 | ||||||
Equity Residential | 1,455 | 92,785 | ||||||
GGP, Inc. | 3,913 | 91,525 | ||||||
Boston Properties, Inc. | 681 | 88,550 | ||||||
Ventas, Inc. | 1,462 | 87,735 | ||||||
SBA Communications Corp.* | 516 | 84,294 | ||||||
Realty Income Corp. | 1,386 | 79,030 | ||||||
Vornado Realty Trust | 971 | 75,913 | ||||||
Essex Property Trust, Inc. | 313 | 75,549 | ||||||
Host Hotels & Resorts, Inc. | 3,759 | 74,616 | ||||||
Annaly Capital Management, Inc. | 6,027 | 71,661 | ||||||
Alexandria Real Estate Equities, Inc. | 531 | 69,343 | ||||||
Invitation Homes, Inc. | 2,878 | 67,834 | ||||||
Regency Centers Corp. | 978 | 67,658 | ||||||
HCP, Inc. | 2,584 | 67,391 | ||||||
Mid-America Apartment Communities, Inc. | 649 | 65,263 | ||||||
Extra Space Storage, Inc. | 731 | 63,926 | ||||||
UDR, Inc. | 1,601 | 61,671 | ||||||
SL Green Realty Corp. | 611 | 61,668 | ||||||
Macerich Co. | 933 | 61,279 | ||||||
Federal Realty Investment Trust | 458 | 60,827 | ||||||
Duke Realty Corp. | 2,209 | 60,107 | ||||||
Iron Mountain, Inc. | 1,562 | 58,934 | ||||||
Camden Property Trust | 613 | 56,433 | ||||||
Gaming and Leisure Properties, Inc. | 1,484 | 54,908 | ||||||
AGNC Investment Corp. | 2,705 | 54,614 | ||||||
Kimco Realty Corp. | 3,001 | 54,468 | ||||||
Equity LifeStyle Properties, Inc. | 599 | 53,323 | ||||||
VEREIT, Inc. | 6,841 | 53,291 | ||||||
Kilroy Realty Corp. | 698 | 52,106 | ||||||
Sun Communities, Inc. | 560 | 51,957 | ||||||
Douglas Emmett, Inc. | 1,259 | 51,695 | ||||||
Lamar Advertising Co. — Class A | 691 | 51,300 | ||||||
Apartment Investment & Management Co. — Class A | 1,161 | 50,747 | ||||||
National Retail Properties, Inc. | 1,172 | 50,548 | ||||||
Forest City Realty Trust, Inc. — Class A | 2,048 | 49,357 | ||||||
Park Hotels & Resorts, Inc. | 1,693 | 48,674 | ||||||
American Homes 4 Rent — Class A | 2,226 | 48,616 | ||||||
Liberty Property Trust | 1,128 | 48,515 | ||||||
Healthcare Trust of America, Inc. — Class A | 1,595 | 47,914 | ||||||
Brixmor Property Group, Inc. | 2,553 | 47,639 | ||||||
Colony NorthStar, Inc. — Class A | 4,115 | 46,952 | ||||||
CyrusOne, Inc. | 769 | 45,779 | ||||||
Starwood Property Trust, Inc. | 2,140 | 45,689 | ||||||
DCT Industrial Trust, Inc. | 775 | 45,554 | ||||||
New Residential Investment Corp. | 2,543 | 45,469 | ||||||
Omega Healthcare Investors, Inc.1 | 1,647 | 45,358 | ||||||
CoreSite Realty Corp. | 394 | 44,877 | ||||||
Hudson Pacific Properties, Inc. | 1,305 | 44,696 |
58 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
FINANCIAL SERVICES FUND |
Shares | Value | |||||||
American Campus Communities, Inc. | 1,086 | $ | 44,559 | |||||
CubeSmart | 1,512 | 43,727 | ||||||
STORE Capital Corp. | 1,670 | 43,487 | ||||||
Hospitality Properties Trust | 1,448 | 43,223 | ||||||
Senior Housing Properties Trust | 2,174 | 41,632 | ||||||
Weingarten Realty Investors | 1,234 | 40,562 | ||||||
Gramercy Property Trust | 1,484 | 39,563 | ||||||
Spirit Realty Capital, Inc. | 4,570 | 39,211 | ||||||
Life Storage, Inc. | 440 | 39,191 | ||||||
DDR Corp. | 4,345 | 38,931 | ||||||
RLJ Lodging Trust | 1,757 | 38,601 | ||||||
Sunstone Hotel Investors, Inc. | 2,268 | 37,490 | ||||||
Uniti Group, Inc.1 | 1,960 | 34,868 | ||||||
Sabra Health Care REIT, Inc. | 1,857 | 34,856 | ||||||
LaSalle Hotel Properties | 1,221 | 34,273 | ||||||
Tanger Factory Outlet Centers, Inc.1 | 1,195 | 31,679 | ||||||
Retail Opportunity Investments Corp. | 1,470 | 29,327 | ||||||
Potlatch Corp. | 550 | 27,445 | ||||||
Total REITs | 4,715,257 | |||||||
Insurance - 20.8% | ||||||||
Berkshire Hathaway, Inc. — Class B* | 2,176 | 431,327 | ||||||
Everest Re Group Ltd. | 688 | 152,227 | ||||||
American International Group, Inc. | 2,379 | 141,741 | ||||||
MetLife, Inc. | 2,732 | 138,130 | ||||||
Prudential Financial, Inc. | 1,178 | 135,446 | ||||||
Chubb Ltd. | 844 | 123,334 | ||||||
Marsh & McLennan Companies, Inc. | 1,515 | 123,306 | ||||||
Willis Towers Watson plc | 814 | 122,662 | ||||||
Allstate Corp. | 1,155 | 120,940 | ||||||
Travelers Companies, Inc. | 884 | 119,906 | ||||||
Aflac, Inc. | 1,297 | 113,851 | ||||||
Progressive Corp. | 2,000 | 112,640 | ||||||
XL Group Ltd. | 3,021 | 106,218 | ||||||
Aon plc | 732 | 98,088 | ||||||
Arch Capital Group Ltd.* | 1,039 | 94,310 | ||||||
Principal Financial Group, Inc. | 1,242 | 87,635 | ||||||
Hartford Financial Services Group, Inc. | 1,554 | 87,459 | ||||||
Lincoln National Corp. | 1,046 | 80,406 | ||||||
Markel Corp.* | 70 | 79,739 | ||||||
Loews Corp. | 1,588 | 79,448 | ||||||
Cincinnati Financial Corp. | 913 | 68,448 | ||||||
Unum Group | 1,230 | 67,515 | ||||||
Arthur J Gallagher & Co. | 1,019 | 64,482 | ||||||
American Financial Group, Inc. | 565 | 61,325 | ||||||
Athene Holding Ltd. — Class A* | 1,184 | 61,225 | ||||||
Reinsurance Group of America, Inc. — Class A | 390 | 60,813 | ||||||
Alleghany Corp.* | 100 | 59,609 | ||||||
Voya Financial, Inc. | 1,204 | 59,562 | ||||||
WR Berkley Corp. | 804 | 57,606 | ||||||
Brown & Brown, Inc. | 1,014 | 52,180 | ||||||
Brighthouse Financial, Inc.* | 870 | 51,017 | ||||||
First American Financial Corp. | 860 | 48,194 | ||||||
Assurant, Inc. | 450 | 45,378 | ||||||
MGIC Investment Corp.* | 3,011 | 42,485 | ||||||
Radian Group, Inc. | 1,897 | 39,097 | ||||||
MBIA, Inc.*,1 | 2,060 | 15,079 | ||||||
Total Insurance | 3,402,828 | |||||||
Diversified Financial Services - 14.5% | ||||||||
American Express Co. | 1,816 | 180,347 | ||||||
BlackRock, Inc. — Class A | 351 | 180,312 | ||||||
Charles Schwab Corp. | 3,189 | 163,819 | ||||||
CME Group, Inc. — Class A | 923 | 134,804 | ||||||
Intercontinental Exchange, Inc. | 1,768 | 124,750 | ||||||
Synchrony Financial | 2,808 | 108,417 | ||||||
TD Ameritrade Holding Corp. | 2,045 | 104,561 | ||||||
Discover Financial Services | 1,359 | 104,534 | ||||||
T. Rowe Price Group, Inc. | 952 | 99,893 | ||||||
Ameriprise Financial, Inc. | 577 | 97,784 | ||||||
Interactive Brokers Group, Inc. — Class A | 1,610 | 95,328 | ||||||
Franklin Resources, Inc. | 2,192 | 94,979 | ||||||
Cboe Global Markets, Inc. | 578 | 72,013 | ||||||
E*TRADE Financial Corp.* | 1,437 | 71,232 | ||||||
Ally Financial, Inc. | 2,410 | 70,276 | ||||||
Raymond James Financial, Inc. | 781 | 69,743 | ||||||
Nasdaq, Inc. | 886 | 68,072 | ||||||
Affiliated Managers Group, Inc. | 324 | 66,501 | ||||||
SEI Investments Co. | 918 | 65,968 | ||||||
Invesco Ltd. | 1,554 | 56,783 | ||||||
Credit Acceptance Corp.*,1 | 159 | 51,433 | ||||||
Santander Consumer USA Holdings, Inc. | 2,710 | 50,460 | ||||||
LPL Financial Holdings, Inc. | 793 | 45,312 | ||||||
SLM Corp.* | 3,861 | 43,629 | ||||||
Legg Mason, Inc. | 931 | 39,084 | ||||||
BGC Partners, Inc. — Class A | 2,549 | 38,516 | ||||||
Navient Corp. | 2,799 | 37,283 | ||||||
Evercore, Inc. — Class A | 410 | 36,900 | ||||||
Total Diversified Financial Services | 2,372,733 | |||||||
Commercial Services - 2.0% | ||||||||
S&P Global, Inc. | 751 | 127,219 | ||||||
Moody’s Corp. | 693 | 102,294 | ||||||
MarketAxess Holdings, Inc. | 269 | 54,271 | ||||||
LendingTree, Inc.* | 125 | 42,556 | ||||||
Total Commercial Services | 326,340 | |||||||
Savings & Loans - 1.1% | ||||||||
People’s United Financial, Inc. | 2,668 | 49,892 | ||||||
New York Community Bancorp, Inc. | 3,767 | 49,046 | ||||||
Sterling Bancorp | 1,860 | 45,756 | ||||||
Investors Bancorp, Inc. | 2,885 | 40,044 | ||||||
Total Savings & Loans | 184,738 | |||||||
Real Estate - 1.0% | ||||||||
CBRE Group, Inc. — Class A* | 1,720 | 74,493 | ||||||
Jones Lang LaSalle, Inc. | 345 | 51,381 | ||||||
Realogy Holdings Corp. | 1,370 | 36,305 | ||||||
Total Real Estate | 162,179 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 59 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
FINANCIAL SERVICES FUND |
Shares | Value | |||||||
Investment Companies - 0.5% | ||||||||
Ares Capital Corp. | 3,127 | $ | 49,156 | |||||
Prospect Capital Corp.1 | 4,450 | 29,993 | ||||||
Total Investment Companies | 79,149 | |||||||
Software - 0.4% | ||||||||
MSCI, Inc. — Class A | 511 | 64,662 | ||||||
Holding Companies-Diversified - 0.4% | ||||||||
Leucadia National Corp. | 2,280 | 60,397 | ||||||
Media - 0.3% | ||||||||
FactSet Research Systems, Inc. | 269 | 51,853 | ||||||
Total Common Stocks | ||||||||
(Cost $11,066,816) | 16,142,078 | |||||||
PREFERRED STOCKS† - 0.6% | ||||||||
Banks - 0.6% | ||||||||
Itau Unibanco Holding S.A. ADR | 7,824 | 101,712 | ||||||
Total Preferred Stocks | ||||||||
(Cost $69,896) | 101,712 |
Face Amount | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.4% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | $ | 43,700 | 43,700 | |||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 23,323 | 23,323 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $67,023) | 67,023 |
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 0.9% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%4 | 148,443 | 148,443 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $148,443) | 148,443 | |||||||
Total Investments - 100.6% | ||||||||
(Cost $11,352,178) | $ | 16,459,256 | ||||||
Other Assets & Liabilities, net - (0.6)% | (101,956 | ) | ||||||
Total Net Assets - 100.0% | $ | 16,357,300 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 3. |
†† | Value determined based on Level 2 inputs — See Note 3. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 5. |
2 | Repurchase Agreements — See Note 4. |
3 | Securities lending collateral — See Note 5. |
4 | Rate indicated is the 7 day yield as of December 31, 2017. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 16,142,078 | $ | — | $ | — | $ | 16,142,078 | ||||||||
Preferred Stocks | 101,712 | — | — | 101,712 | ||||||||||||
Repurchase Agreements | — | 67,023 | — | 67,023 | ||||||||||||
Securities Lending Collateral | 148,443 | — | — | 148,443 | ||||||||||||
Total Assets | $ | 16,392,233 | $ | 67,023 | $ | — | $ | 16,459,256 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
60 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
FINANCIAL SERVICES FUND |
STATEMENT OF ASSETS AND LIABILITIES | |
December 31, 2017 |
Assets: | ||||
Investments, at value - including $140,561 of securities loaned (cost $11,285,155) | $ | 16,392,233 | ||
Repurchase agreements, at value (cost $67,023) | 67,023 | |||
Receivables: | ||||
Fund shares sold | 50,294 | |||
Dividends | 46,063 | |||
Foreign tax reclaims | 760 | |||
Securities lending income | 82 | |||
Interest | 8 | |||
Total assets | 16,556,463 | |||
Liabilities: | ||||
Overdraft due to custodian bank | 557 | |||
Payable for: | ||||
Return of securities loaned | 148,443 | |||
Management fees | 10,896 | |||
Transfer agent and administrative fees | 3,205 | |||
Investor service fees | 3,205 | |||
Portfolio accounting fees | 1,282 | |||
Fund shares redeemed | 517 | |||
Miscellaneous | 31,058 | |||
Total liabilities | 199,163 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 16,357,300 | ||
Net assets consist of: | ||||
Paid in capital | $ | 13,269,889 | ||
Undistributed net investment income | 104,469 | |||
Accumulated net realized loss on investments | (2,124,136 | ) | ||
Net unrealized appreciation on investments | 5,107,078 | |||
Net assets | $ | 16,357,300 | ||
Capital shares outstanding | 193,653 | |||
Net asset value per share | $ | 84.47 |
STATEMENT OF OPERATIONS | |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $906) | $ | 404,100 | ||
Interest | 774 | |||
Income from securities lending, net | 1,029 | |||
Total investment income | 405,903 | |||
Expenses: | ||||
Management fees | 127,668 | |||
Investor service fees | 37,549 | |||
Transfer agent and administrative fees | 37,549 | |||
Professional fees | 21,806 | |||
Portfolio accounting fees | 15,019 | |||
Custodian fees | 2,472 | |||
Trustees’ fees* | 1,540 | |||
Line of credit fees | 110 | |||
Miscellaneous | 12,309 | |||
Total expenses | 256,022 | |||
Net investment income | 149,881 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 925,229 | |||
Net realized gain | 925,229 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 765,877 | |||
Net change in unrealized appreciation (depreciation) | 765,877 | |||
Net realized and unrealized gain | 1,691,106 | |||
Net increase in net assets resulting from operations | $ | 1,840,987 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 61 |
FINANCIAL SERVICES FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | 149,881 | $ | (156 | ) | |||
Net realized gain on investments | 925,229 | 263,909 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 765,877 | 902,723 | ||||||
Net increase in net assets resulting from operations | 1,840,987 | 1,166,476 | ||||||
Distributions to shareholders from: | ||||||||
Net investment income | (71,565 | ) | (122,357 | ) | ||||
Total distributions to shareholders | (71,565 | ) | (122,357 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 57,801,599 | 33,508,306 | ||||||
Distributions reinvested | 71,565 | 122,357 | ||||||
Cost of shares redeemed | (59,515,447 | ) | (32,407,307 | ) | ||||
Net increase (decrease) from capital share transactions | (1,642,283 | ) | 1,223,356 | |||||
Net increase in net assets | 127,139 | 2,267,475 | ||||||
Net assets: | ||||||||
Beginning of year | 16,230,161 | 13,962,686 | ||||||
End of year | $ | 16,357,300 | $ | 16,230,161 | ||||
Undistributed net investment income at end of year | $ | 104,469 | $ | 25,469 | ||||
Capital share activity: | ||||||||
Shares sold | 733,065 | 501,554 | * | |||||
Shares issued from reinvestment of distributions | 927 | 1,883 | * | |||||
Shares redeemed | (761,395 | ) | (499,005 | )* | ||||
Net increase (decrease) in shares | (27,403 | ) | 4,432 | * |
* | Capital share activity for the year ended December 31, 2016, has been restated to reflect a 1:3 reverse share split effective December 1, 2016 — See Note 9. |
62 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
FINANCIAL SERVICES FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 73.42 | $ | 64.46 | $ | 67.34 | $ | 60.15 | $ | 47.43 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .77 | — | b | .72 | .27 | .30 | ||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 10.63 | 9.32 | (3.36 | ) | 7.28 | 12.75 | ||||||||||||||
Total from investment operations | 11.40 | 9.32 | (2.64 | ) | 7.55 | 13.05 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.35 | ) | (.36 | ) | (.24 | ) | (.36 | ) | (.33 | ) | ||||||||||
Total distributions | (.35 | ) | (.36 | ) | (.24 | ) | (.36 | ) | (.33 | ) | ||||||||||
Net asset value, end of period | $ | 84.47 | $ | 73.42 | $ | 64.46 | $ | 67.34 | $ | 60.15 | ||||||||||
Total Returnc | 15.57 | % | 15.83 | % | (3.99 | %) | 12.58 | % | 27.55 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 16,357 | $ | 16,230 | $ | 13,963 | $ | 13,743 | $ | 8,943 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.00 | % | — | e | 1.09 | % | 0.41 | % | 0.55 | % | ||||||||||
Total expenses | 1.70 | % | 1.66 | % | 1.60 | % | 1.66 | % | 1.64 | % | ||||||||||
Portfolio turnover rate | 364 | % | 329 | % | 213 | % | 215 | % | 409 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Net investment income is less than $0.01 per share. |
c | Total return does not reflect the impact of any additional fees charged by insurance companies. |
d | Reverse Share Split — Per share amounts for the periods presented through December 31, 2016 have been restated to reflect a 1:3 reverse share split effective December 1, 2016 — See Note 9. |
e | Less than 0.01%. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 63 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
HEALTH CARE FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that are involved in the health care industry (“Health Care Companies”).
For the year ended December 31, 2017, Health Care Fund returned 22.86%, compared with a 21.83% return for the S&P 500 Index. The S&P 500 Health Care Index returned 22.08%.
The Fund is mostly composed of four large industries: pharmaceuticals, biotechnology, health care providers, and health care equipment. All industries contributed to return, led by biotechnology and health care equipment. Health care technology contributed least.
The best-performing holdings in the Fund were AbbVie, Inc., UnitedHealth Group, Inc., and Abbott Laboratories. The worst-performing holdings in the Fund included Endo International Plc, Teva Pharmaceutical Industries Ltd. ADR, and Mallinckrodt Plc.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: June 19, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Johnson & Johnson | 3.2% |
Pfizer, Inc. | 2.4% |
UnitedHealth Group, Inc. | 2.4% |
AbbVie, Inc. | 2.0% |
Merck & Company, Inc. | 2.0% |
Amgen, Inc. | 1.8% |
Abbott Laboratories | 1.7% |
Bristol-Myers Squibb Co. | 1.6% |
Eli Lilly & Co. | 1.6% |
Gilead Sciences, Inc. | 1.5% |
Top Ten Total | 20.2% |
“Ten Largest Holdings” excludes any temporary cash investments. |
64 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Health Care Fund | 22.86% | 15.43% | 9.66% |
S&P 500 Health Care Index | 22.08% | 17.62% | 11.02% |
S&P 500 Index | 21.83% | 15.79% | 8.50% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and S&P 500 Health Care Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 65 |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
HEALTH CARE FUND |
Shares | Value | |||||||
COMMON STOCKS† - 99.6% | ||||||||
Pharmaceuticals - 34.5% | ||||||||
Johnson & Johnson | 5,145 | $ | 718,859 | |||||
Pfizer, Inc. | 15,077 | 546,089 | ||||||
AbbVie, Inc. | 4,799 | 464,111 | ||||||
Merck & Company, Inc. | 8,163 | 459,332 | ||||||
Bristol-Myers Squibb Co. | 5,998 | 367,557 | ||||||
Eli Lilly & Co. | 4,217 | 356,168 | ||||||
Allergan plc | 1,615 | 264,182 | ||||||
Shire plc ADR | 1,699 | 263,549 | ||||||
Teva Pharmaceutical Industries Ltd. ADR | 13,416 | 254,233 | ||||||
Express Scripts Holding Co.* | 3,398 | 253,627 | ||||||
Zoetis, Inc. | 3,086 | 222,315 | ||||||
McKesson Corp. | 1,382 | 215,523 | ||||||
AstraZeneca plc ADR | 5,328 | 184,882 | ||||||
Mylan N.V.* | 4,313 | 182,483 | ||||||
Alkermes plc* | 3,292 | 180,171 | ||||||
GlaxoSmithKline plc ADR | 5,002 | 177,421 | ||||||
Perrigo Company plc | 2,024 | 176,412 | ||||||
Novartis AG ADR | 2,073 | 174,049 | ||||||
AmerisourceBergen Corp. — Class A | 1,874 | 172,071 | ||||||
Jazz Pharmaceuticals plc* | 1,271 | 171,140 | ||||||
Novo Nordisk A/S ADR | 3,159 | 169,544 | ||||||
Cardinal Health, Inc. | 2,670 | 163,591 | ||||||
Nektar Therapeutics* | 1,970 | 117,648 | ||||||
Neurocrine Biosciences, Inc.* | 1,360 | 105,522 | ||||||
Valeant Pharmaceuticals International, Inc.* | 4,754 | 98,788 | ||||||
PRA Health Sciences, Inc.* | 1,030 | 93,802 | ||||||
Catalent, Inc.* | 2,160 | 88,733 | ||||||
DexCom, Inc.* | 1,475 | 84,650 | ||||||
TESARO, Inc.* | 970 | 80,384 | ||||||
Akorn, Inc.* | 2,343 | 75,515 | ||||||
Premier, Inc. — Class A* | 2,577 | 75,223 | ||||||
Sarepta Therapeutics, Inc.* | 1,299 | 72,276 | ||||||
Clovis Oncology, Inc.* | 1,050 | 71,400 | ||||||
Portola Pharmaceuticals, Inc.* | 1,340 | 65,231 | ||||||
Array BioPharma, Inc.* | 5,032 | 64,410 | ||||||
Agios Pharmaceuticals, Inc.* | 1,059 | 60,543 | ||||||
Horizon Pharma plc* | 3,962 | 57,845 | ||||||
Aerie Pharmaceuticals, Inc.* | 950 | 56,763 | ||||||
Ironwood Pharmaceuticals, Inc. — Class A* | 3,720 | 55,763 | ||||||
Supernus Pharmaceuticals, Inc.* | 1,390 | 55,392 | ||||||
Corcept Therapeutics, Inc.* | 3,040 | 54,902 | ||||||
Mallinckrodt plc* | 2,350 | 53,016 | ||||||
Pacira Pharmaceuticals, Inc.* | 1,154 | 52,680 | ||||||
Global Blood Therapeutics, Inc.* | 1,190 | 46,827 | ||||||
Zogenix, Inc.* | 1,140 | 45,657 | ||||||
Impax Laboratories, Inc.* | 2,519 | 41,941 | ||||||
Total Pharmaceuticals | 7,812,220 | |||||||
Healthcare-Products - 22.3% | ||||||||
Abbott Laboratories | 6,641 | 379,002 | ||||||
Thermo Fisher Scientific, Inc. | 1,711 | 324,885 | ||||||
Becton Dickinson and Co. | 1,504 | 321,894 | ||||||
Danaher Corp. | 3,235 | 300,273 | ||||||
Stryker Corp. | 1,860 | 288,002 | ||||||
Medtronic plc | 3,334 | 269,220 | ||||||
Intuitive Surgical, Inc.* | 657 | 239,766 | ||||||
Baxter International, Inc. | 3,443 | 222,555 | ||||||
Boston Scientific Corp.* | 8,728 | 216,367 | ||||||
Zimmer Biomet Holdings, Inc. | 1,575 | 190,055 | ||||||
Edwards Lifesciences Corp.* | 1,593 | 179,547 | ||||||
Align Technology, Inc.* | 709 | 157,533 | ||||||
Dentsply Sirona, Inc. | 2,218 | 146,011 | ||||||
IDEXX Laboratories, Inc.* | 880 | 137,614 | ||||||
ResMed, Inc. | 1,528 | 129,406 | ||||||
Teleflex, Inc. | 507 | 126,152 | ||||||
Hologic, Inc.* | 2,931 | 125,300 | ||||||
Henry Schein, Inc.* | 1,786 | 124,806 | ||||||
Varian Medical Systems, Inc.* | 1,084 | 120,487 | ||||||
Cooper Companies, Inc. | 545 | 118,745 | ||||||
ABIOMED, Inc.* | 570 | 106,824 | ||||||
West Pharmaceutical Services, Inc. | 1,033 | 101,926 | ||||||
Hill-Rom Holdings, Inc. | 1,060 | 89,347 | ||||||
Bio-Techne Corp. | 650 | 84,207 | ||||||
ICU Medical, Inc.* | 370 | 79,920 | ||||||
Masimo Corp.* | 930 | 78,864 | ||||||
Insulet Corp.* | 1,080 | 74,520 | ||||||
Integra LifeSciences Holdings Corp.* | 1,510 | 72,269 | ||||||
Patterson Companies, Inc. | 1,932 | 69,803 | ||||||
NuVasive, Inc.* | 1,119 | 65,450 | ||||||
OPKO Health, Inc.*,1 | 12,443 | 60,971 | ||||||
MiMedx Group, Inc.*,1 | 3,670 | 46,279 | ||||||
Total Healthcare-Products | 5,048,000 | |||||||
Biotechnology - 22.2% | ||||||||
Amgen, Inc. | 2,384 | 414,578 | ||||||
Gilead Sciences, Inc. | 4,856 | 347,884 | ||||||
Celgene Corp.* | 3,163 | 330,091 | ||||||
Biogen, Inc.* | 949 | 302,323 | ||||||
Vertex Pharmaceuticals, Inc.* | 1,603 | 240,225 | ||||||
Regeneron Pharmaceuticals, Inc.* | 629 | 236,479 | ||||||
Illumina, Inc.* | 991 | 216,524 | ||||||
Alexion Pharmaceuticals, Inc.* | 1,690 | 202,107 | ||||||
Incyte Corp.* | 1,747 | 165,458 | ||||||
BioMarin Pharmaceutical, Inc.* | 1,610 | 143,564 | ||||||
Alnylam Pharmaceuticals, Inc.* | 1,057 | 134,292 | ||||||
Exelixis, Inc.* | 4,010 | 121,904 | ||||||
Seattle Genetics, Inc.* | 1,990 | 106,465 | ||||||
Sage Therapeutics, Inc.* | 610 | 100,473 | ||||||
United Therapeutics Corp.* | 670 | 99,126 | ||||||
Bio-Rad Laboratories, Inc. — Class A* | 410 | 97,855 | ||||||
Exact Sciences Corp.* | 1,842 | 96,779 | ||||||
Ionis Pharmaceuticals, Inc.* | 1,850 | 93,055 | ||||||
Bluebird Bio, Inc.* | 520 | 92,612 | ||||||
Bioverativ, Inc.* | 1,669 | 89,992 | ||||||
Charles River Laboratories International, Inc.* | 810 | 88,654 | ||||||
Juno Therapeutics, Inc.* | 1,928 | 88,129 | ||||||
FibroGen, Inc.* | 1,630 | 77,262 | ||||||
Avexis, Inc.* | 690 | 76,362 |
66 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
HEALTH CARE FUND |
Shares | Value | |||||||
ACADIA Pharmaceuticals, Inc.* | 2,428 | $ | 73,107 | |||||
Puma Biotechnology, Inc.* | 720 | 71,172 | ||||||
Immunomedics, Inc.*,1 | 4,160 | 67,226 | ||||||
Spark Therapeutics, Inc.*,1 | 1,300 | 66,846 | ||||||
Halozyme Therapeutics, Inc.* | 3,210 | 65,035 | ||||||
Ligand Pharmaceuticals, Inc. — Class B* | 470 | 64,357 | ||||||
Amicus Therapeutics, Inc.* | 4,226 | 60,812 | ||||||
Myriad Genetics, Inc.* | 1,755 | 60,275 | ||||||
Insmed, Inc.* | 1,920 | 59,866 | ||||||
Loxo Oncology, Inc.* | 710 | 59,768 | ||||||
Medicines Co.* | 1,986 | 54,297 | ||||||
Blueprint Medicines Corp.* | 720 | 54,295 | ||||||
Ultragenyx Pharmaceutical, Inc.* | 1,160 | 53,801 | ||||||
Esperion Therapeutics, Inc.* | 810 | 53,330 | ||||||
Radius Health, Inc.* | 1,430 | 45,431 | ||||||
Intercept Pharmaceuticals, Inc.*,1 | 762 | 44,516 | ||||||
Dynavax Technologies Corp.* | 2,120 | 39,644 | ||||||
Acorda Therapeutics, Inc.* | 1,815 | 38,932 | ||||||
ImmunoGen, Inc.* | 5,480 | 35,127 | ||||||
Total Biotechnology | 5,030,030 | |||||||
Healthcare-Services - 15.3% | ||||||||
UnitedHealth Group, Inc. | 2,476 | 545,859 | ||||||
Aetna, Inc. | 1,586 | 286,099 | ||||||
Anthem, Inc. | 1,252 | 281,712 | ||||||
Cigna Corp. | 1,298 | 263,611 | ||||||
Humana, Inc. | 904 | 224,255 | ||||||
HCA Healthcare, Inc.* | 2,429 | 213,363 | ||||||
IQVIA Holdings, Inc.* | 1,700 | 166,430 | ||||||
Centene Corp.* | 1,580 | 159,390 | ||||||
Laboratory Corporation of America Holdings* | 968 | 154,406 | ||||||
DaVita, Inc.* | 1,906 | 137,708 | ||||||
Quest Diagnostics, Inc. | 1,396 | 137,492 | ||||||
Universal Health Services, Inc. — Class B | 1,106 | 125,365 | ||||||
WellCare Health Plans, Inc.* | 560 | 112,622 | ||||||
MEDNAX, Inc.* | 1,610 | 86,038 | ||||||
Encompass Health Corp. | 1,700 | 83,997 | ||||||
Molina Healthcare, Inc.* | 1,060 | 81,281 | ||||||
Envision Healthcare Corp.* | 2,234 | 77,207 | ||||||
Acadia Healthcare Company, Inc.* | 1,976 | 64,477 | ||||||
Teladoc, Inc.*,1 | 1,660 | 57,851 | ||||||
LifePoint Health, Inc.* | 1,086 | 54,083 | ||||||
Amedisys, Inc.* | 970 | 51,129 | ||||||
Tenet Healthcare Corp.*,1 | 3,162 | 47,936 | ||||||
Tivity Health, Inc.* | 1,280 | 46,784 | ||||||
Total Healthcare-Services | 3,459,095 | |||||||
Electronics - 2.5% | ||||||||
Agilent Technologies, Inc. | 2,597 | 173,921 | ||||||
Mettler-Toledo International, Inc.* | 244 | 151,163 | ||||||
Waters Corp.* | 763 | 147,404 | ||||||
PerkinElmer, Inc. | 1,473 | 107,706 | ||||||
Total Electronics | 580,194 | |||||||
Software - 2.2% | ||||||||
Cerner Corp.* | 2,580 | 173,866 | ||||||
Veeva Systems, Inc. — Class A* | 1,873 | 103,540 | ||||||
athenahealth, Inc.*,1 | 660 | 87,806 | ||||||
Medidata Solutions, Inc.* | 1,115 | 70,658 | ||||||
Allscripts Healthcare Solutions, Inc.* | 4,228 | 61,517 | ||||||
Total Software | 497,387 | |||||||
Commercial Services - 0.6% | ||||||||
Incorporated Research Holdings, Inc. — Class A* | 1,865 | 81,314 | ||||||
HealthEquity, Inc.* | 1,420 | 66,257 | ||||||
Total Commercial Services | 147,571 | |||||||
Total Common Stocks | ||||||||
(Cost $10,807,645) | 22,574,497 | |||||||
RIGHTS†††- 0.0% | ||||||||
Dyax Corp. | ||||||||
Expires 03/06/18*,5 | 3,790 | — | ||||||
Total Rights | ||||||||
(Cost $—) | — |
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.2% | ||||||||
JPMorgan Chase &Co. | $ | 25,929 | 25,929 | |||||
Bank of America Merrill Lynch | 13,838 | 13,838 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $39,767) | 39,767 |
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 1.6% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%4 | 355,070 | 355,070 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $355,070) | 355,070 | |||||||
Total Investments - 101.4% | ||||||||
(Cost $11,202,482) | $ | 22,969,334 | ||||||
Other Assets & Liabilities, net - (1.4)% | (311,988 | ) | ||||||
Total Net Assets - 100.0% | $ | 22,657,346 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 67 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
HEALTH CARE FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 3. |
†† | Value determined based on Level 2 inputs — See Note 3. |
††† | Value determined based on Level 3 inputs — See Note 3. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 5. |
2 | Repurchase Agreements — See Note 4. |
3 | Securities lending collateral — See Note 5. |
4 | Rate indicated is the 7 day yield as of December 31, 2017. |
5 | Security was fair valued by the Valuation Committee at December 31, 2017. The total market value of fair valued securities amounts to $0, (cost $0) or 0.0% of total net assets. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 22,574,497 | $ | — | $ | — | $ | 22,574,497 | ||||||||
Repurchase Agreements | — | 39,767 | — | 39,767 | ||||||||||||
Rights | — | — | — | * | — | |||||||||||
Securities Lending Collateral | 355,070 | — | — | 355,070 | ||||||||||||
Total Assets | $ | 22,929,567 | $ | 39,767 | $ | — | $ | 22,969,334 |
* | Security has a market value of $0. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
68 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
HEALTH CARE FUND |
STATEMENT OF ASSETS AND LIABILITIES | |
December 31, 2017 |
Assets: | ||||
Investments, at value - including $337,396 of securities loaned (cost $11,162,715) | $ | 22,929,567 | ||
Repurchase agreements, at value (cost $39,767) | 39,767 | |||
Receivables: | ||||
Securities sold | 123,280 | |||
Fund shares sold | 64,031 | |||
Dividends | 13,051 | |||
Foreign tax reclaims | 1,082 | |||
Securities lending income | 310 | |||
Interest | 5 | |||
Total assets | 23,171,093 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities loaned | 355,070 | |||
Fund shares redeemed | 96,254 | |||
Management fees | 16,459 | |||
Transfer agent and administrative fees | 4,841 | |||
Investor service fees | 4,841 | |||
Portfolio accounting fees | 1,936 | |||
Miscellaneous | 34,346 | |||
Total liabilities | 513,747 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 22,657,346 | ||
Net assets consist of: | ||||
Paid in capital | $ | 13,091,918 | ||
Undistributed net investment income | — | |||
Accumulated net realized loss on investments | (2,201,424 | ) | ||
Net unrealized appreciation on investments | 11,766,852 | |||
Net assets | $ | 22,657,346 | ||
Capital shares outstanding | 362,936 | |||
Net asset value per share | $ | 62.43 |
STATEMENT OF OPERATIONS | |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $527) | $ | 229,916 | ||
Interest | 1,255 | |||
Income from securities lending, net | 3,054 | |||
Total investment income | 234,225 | |||
Expenses: | ||||
Management fees | 204,798 | |||
Investor service fees | 60,234 | |||
Transfer agent and administrative fees | 60,234 | |||
Professional fees | 35,996 | |||
Portfolio accounting fees | 24,094 | |||
Custodian fees | 4,243 | |||
Trustees’ fees* | 3,145 | |||
Line of credit fees | 27 | |||
Miscellaneous | 17,930 | |||
Total expenses | 410,701 | |||
Net investment loss | (176,476 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 1,060,371 | |||
Net realized gain | 1,060,371 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 3,512,248 | |||
Net change in unrealized appreciation (depreciation) | 3,512,248 | |||
Net realized and unrealized gain | 4,572,619 | |||
Net increase in net assets resulting from operations | $ | 4,396,143 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 69 |
HEALTH CARE FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (176,476 | ) | $ | (158,701 | ) | ||
Net realized gain on investments | 1,060,371 | 3,405,728 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 3,512,248 | (6,935,740 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 4,396,143 | (3,688,713 | ) | |||||
Distributions to shareholders from: | ||||||||
Net realized gains | (1,042,418 | ) | (911,972 | ) | ||||
Total distributions to shareholders | (1,042,418 | ) | (911,972 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 40,295,378 | 32,682,719 | ||||||
Distributions reinvested | 1,042,418 | 911,972 | ||||||
Cost of shares redeemed | (40,812,108 | ) | (47,065,343 | ) | ||||
Net increase (decrease) from capital share transactions | 525,688 | (13,470,652 | ) | |||||
Net increase (decrease) in net assets | 3,879,413 | (18,071,337 | ) | |||||
Net assets: | ||||||||
Beginning of year | 18,777,933 | 36,849,270 | ||||||
End of year | $ | 22,657,346 | $ | 18,777,933 | ||||
Undistributed net investment income at end of year | $ | — | $ | — | ||||
Capital share activity: | ||||||||
Shares sold | 675,760 | 587,825 | ||||||
Shares issued from reinvestment of distributions | 17,299 | 16,245 | ||||||
Shares redeemed | (687,013 | ) | (856,576 | ) | ||||
Net increase (decrease) in shares | 6,046 | (252,506 | ) |
70 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
HEALTH CARE FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 52.62 | $ | 60.47 | $ | 58.82 | $ | 48.91 | $ | 34.54 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.44 | ) | (.37 | ) | (.30 | ) | (.31 | ) | (.14 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 12.39 | (5.36 | ) | 3.11 | 12.29 | 14.59 | ||||||||||||||
Total from investment operations | 11.95 | (5.73 | ) | 2.81 | 11.98 | 14.45 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | — | — | — | — | (.08 | ) | ||||||||||||||
Net realized gains | (2.14 | ) | (2.12 | ) | (1.16 | ) | (2.07 | ) | — | |||||||||||
Total distributions | (2.14 | ) | (2.12 | ) | (1.16 | ) | (2.07 | ) | (.08 | ) | ||||||||||
Net asset value, end of period | $ | 62.43 | $ | 52.62 | $ | 60.47 | $ | 58.82 | $ | 48.91 | ||||||||||
Total Returnb | 22.86 | % | (9.70 | %) | 4.53 | % | 24.62 | % | 41.81 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 22,657 | $ | 18,778 | $ | 36,849 | $ | 43,294 | $ | 30,105 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.73 | %) | (0.67 | %) | (0.47 | %) | (0.57 | %) | (0.34 | %) | ||||||||||
Total expenses | 1.70 | % | 1.66 | % | 1.59 | % | 1.66 | % | 1.63 | % | ||||||||||
Portfolio turnover rate | 156 | % | 146 | % | 154 | % | 176 | % | 277 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 71 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
INTERNET FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that provide products or services designed for or related to the Internet (“Internet Companies”).
For the year ended December 31, 2017, Internet Fund returned 33.96%, compared with a return of 21.83% for the S&P 500 Index. The S&P 500 Information Technology Index returned 38.83%.
The Internet software & services industry contributed the most to the Fund’s return for the period, followed by the Internet & direct marketing retail industry. The only detractor from the Fund’s return for the period was the consumer finance industry.
Amazon.com, Inc., Facebook, Inc. Class A, and Alphabet, Inc. Class A added the most to Fund performance for the year. Pandora Media, Inc., Finisar Corp., and TripAdvisor, Inc. detracted the most from the Fund’s return for the period.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 24, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Alphabet, Inc. — Class A | 6.7% |
Amazon.com, Inc. | 5.9% |
Facebook, Inc. — Class A | 5.7% |
Alibaba Group Holding Ltd. ADR | 3.5% |
Cisco Systems, Inc. | 3.5% |
Broadcom Ltd. | 2.6% |
QUALCOMM, Inc. | 2.4% |
PayPal Holdings, Inc. | 2.4% |
Netflix, Inc. | 2.3% |
Priceline Group, Inc. | 2.3% |
Top Ten Total | 37.3% |
“Ten Largest Holdings” excludes any temporary cash investments. |
72 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Internet Fund | 33.96% | 18.51% | 10.49% |
S&P 500 Information Technology Index | 38.83% | 20.90% | 11.90% |
S&P 500 Index | 21.83% | 15.79% | 8.50% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Information Technology Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 73 |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
INTERNET FUND |
Shares | Value | |||||||
COMMON STOCKS† - 99.3% | ||||||||
Internet - 55.2% | ||||||||
Alphabet, Inc. — Class A* | 573 | $ | 603,598 | |||||
Amazon.com, Inc.* | 453 | 529,770 | ||||||
Facebook, Inc. — Class A* | 2,871 | 506,617 | ||||||
Alibaba Group Holding Ltd. ADR* | 1,807 | 311,581 | ||||||
Netflix, Inc.* | 1,087 | 208,661 | ||||||
Priceline Group, Inc.* | 118 | 205,053 | ||||||
Baidu, Inc. ADR* | 762 | 178,468 | ||||||
JD.com, Inc. ADR* | 4,099 | 169,781 | ||||||
eBay, Inc.* | 3,765 | 142,091 | ||||||
Ctrip.com International Ltd. ADR* | 2,469 | 108,883 | ||||||
Twitter, Inc.* | 4,044 | 97,096 | ||||||
Expedia, Inc. | 806 | 96,535 | ||||||
Symantec Corp. | 3,260 | 91,476 | ||||||
Palo Alto Networks, Inc.* | 571 | 82,761 | ||||||
MercadoLibre, Inc. | 253 | 79,609 | ||||||
VeriSign, Inc.* | 661 | 75,645 | ||||||
IAC/InterActiveCorp* | 592 | 72,390 | ||||||
Weibo Corp. ADR* | 675 | 69,835 | ||||||
Match Group, Inc.*,1 | 2,203 | 68,976 | ||||||
GoDaddy, Inc. — Class A* | 1,312 | 65,967 | ||||||
F5 Networks, Inc.* | 486 | 63,773 | ||||||
SINA Corp.* | 630 | 63,195 | ||||||
YY, Inc. ADR* | 558 | 63,087 | ||||||
Shopify, Inc. — Class A* | 619 | 62,519 | ||||||
Zillow Group, Inc. — Class A* | 1,531 | 62,373 | ||||||
Zillow Group, Inc. — Class C* | 1,518 | 62,117 | ||||||
Wayfair, Inc. — Class A* | 763 | 61,246 | ||||||
GrubHub, Inc.* | 775 | 55,645 | ||||||
Autohome, Inc. ADR* | 860 | 55,616 | ||||||
Bitauto Holdings Ltd. ADR*,1 | 1,690 | 53,742 | ||||||
Baozun, Inc. ADR*,1 | 1,690 | 53,336 | ||||||
58.com, Inc. ADR* | 741 | 53,033 | ||||||
TripAdvisor, Inc.* | 1,393 | 48,003 | ||||||
Stamps.com, Inc.* | 224 | 42,112 | ||||||
Yelp, Inc. — Class A* | 1,002 | 42,044 | ||||||
Liberty Expedia Holdings, Inc. — Class A* | 822 | 36,439 | ||||||
Etsy, Inc.* | 1,736 | 35,501 | ||||||
Groupon, Inc. — Class A* | 6,920 | 35,292 | ||||||
Cars.com, Inc.*,1 | 1,165 | 33,599 | ||||||
Cogent Communications Holdings, Inc. | 714 | 32,344 | ||||||
Shutterfly, Inc.* | 596 | 29,651 | ||||||
Trade Desk, Inc. — Class A*,1 | 633 | 28,947 | ||||||
Overstock.com, Inc.*,1 | 430 | 27,477 | ||||||
TrueCar, Inc.* | 2,210 | 24,752 | ||||||
Pandora Media, Inc.*,1 | 4,936 | 23,792 | ||||||
Blucora, Inc.* | 1,010 | 22,321 | ||||||
Total Internet | 4,936,749 | |||||||
Software - 12.6% | ||||||||
salesforce.com, Inc.* | 1,868 | 190,966 | ||||||
Intuit, Inc. | 916 | 144,527 | ||||||
NetEase, Inc. ADR | 311 | 107,317 | ||||||
Red Hat, Inc.* | 842 | 101,124 | ||||||
Citrix Systems, Inc.* | 937 | 82,456 | ||||||
Akamai Technologies, Inc.* | 1,231 | 80,064 | ||||||
Momo, Inc. ADR* | 2,711 | 66,365 | ||||||
Veeva Systems, Inc. — Class A* | 1,127 | 62,301 | ||||||
j2 Global, Inc. | 567 | 42,542 | ||||||
2U, Inc.* | 642 | 41,415 | ||||||
Box, Inc. — Class A* | 1,828 | 38,607 | ||||||
New Relic, Inc.* | 667 | 38,533 | ||||||
Allscripts Healthcare Solutions, Inc.* | 2,523 | 36,710 | ||||||
Twilio, Inc. — Class A*,1 | 1,375 | 32,450 | ||||||
Cornerstone OnDemand, Inc.* | 910 | 32,150 | ||||||
Hortonworks, Inc.* | 1,340 | 26,947 | ||||||
Total Software | 1,124,474 | |||||||
Telecommunications - 12.3% | ||||||||
Cisco Systems, Inc. | 8,086 | 309,694 | ||||||
Arista Networks, Inc.* | 401 | 94,468 | ||||||
Motorola Solutions, Inc. | 941 | 85,010 | ||||||
Juniper Networks, Inc. | 2,588 | 73,758 | ||||||
CommScope Holding Company, Inc.* | 1,569 | 59,355 | ||||||
Ubiquiti Networks, Inc.*,1 | 808 | 57,384 | ||||||
LogMeIn, Inc. | 468 | 53,586 | ||||||
ViaSat, Inc.*,1 | 646 | 48,353 | ||||||
ARRIS International plc* | 1,791 | 46,011 | ||||||
Ciena Corp.* | 1,785 | 37,360 | ||||||
InterDigital, Inc. | 488 | 37,161 | ||||||
Finisar Corp.* | 1,644 | 33,455 | ||||||
NETGEAR, Inc.* | 551 | 32,371 | ||||||
Viavi Solutions, Inc.* | 3,590 | 31,377 | ||||||
Extreme Networks, Inc.* | 2,133 | 26,705 | ||||||
Acacia Communications, Inc.*,1 | 677 | 24,528 | ||||||
Gogo, Inc.*,1 | 2,037 | 22,977 | ||||||
Oclaro, Inc.*,1 | 3,383 | 22,802 | ||||||
Total Telecommunications | 1,096,355 | |||||||
Semiconductors - 5.0% | ||||||||
Broadcom Ltd. | 889 | 228,384 | ||||||
QUALCOMM, Inc. | 3,374 | 216,003 | ||||||
Total Semiconductors | 444,387 | |||||||
Commercial Services - 4.6% | ||||||||
PayPal Holdings, Inc.* | 2,877 | 211,805 | ||||||
CoStar Group, Inc.* | 245 | 72,753 | ||||||
Live Nation Entertainment, Inc.* | 1,542 | 65,643 | ||||||
Alarm.com Holdings, Inc.* | 810 | 30,577 | ||||||
NutriSystem, Inc. | 555 | 29,193 | ||||||
Total Commercial Services | 409,971 | |||||||
Computers - 2.8% | ||||||||
Check Point Software Technologies Ltd.* | 663 | 68,700 | ||||||
BlackBerry Ltd.* | 4,960 | 55,403 | ||||||
Nutanix, Inc. — Class A* | 1,483 | 52,320 | ||||||
NetScout Systems, Inc.* | 1,234 | 37,576 | ||||||
Lumentum Holdings, Inc.* | 739 | 36,137 | ||||||
Total Computers | 250,136 | |||||||
Media - 2.1% | ||||||||
Time Warner, Inc. | 2,082 | 190,440 |
74 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
INTERNET FUND |
Shares | Value | |||||||
REITs - 1.5% | ||||||||
Equinix, Inc. | 290 | $ | 131,434 | |||||
Diversified Financial Services - 1.4% | ||||||||
E*TRADE Financial Corp.* | 1,653 | 81,939 | ||||||
BGC Partners, Inc. — Class A | 2,969 | 44,861 | ||||||
Total Diversified Financial Services | 126,800 | |||||||
Aerospace & Defense - 1.0% | ||||||||
Harris Corp. | 652 | 92,356 | ||||||
Retail - 0.6% | ||||||||
HSN, Inc. | 819 | 33,047 | ||||||
PetMed Express, Inc. | 500 | 22,750 | ||||||
Total Retail | 55,797 | |||||||
Electronics - 0.2% | ||||||||
Applied Optoelectronics, Inc.*,1 | 471 | 17,813 | ||||||
Total Common Stocks | ||||||||
(Cost $4,455,449) | 8,876,712 |
Face Amount | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.8% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | $ | 44,599 | 44,599 | |||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 23,803 | 23,803 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $68,402) | 68,402 |
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 4.0% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%4 | 363,295 | 363,295 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $363,295) | 363,295 | |||||||
Total Investments - 104.1% | ||||||||
(Cost $4,887,146) | $ | 9,308,409 | ||||||
Other Assets & Liabilities, net - (4.1)% | (365,451 | ) | ||||||
Total Net Assets - 100.0% | $ | 8,942,958 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 3. |
†† | Value determined based on Level 2 inputs — See Note 3. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 5. |
2 | Repurchase Agreements — See Note 4. |
3 | Securities lending collateral — See Note 5. |
4 | Rate indicated is the 7 day yield as of December 31, 2017. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 75 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
INTERNET FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 8,876,712 | $ | — | $ | — | $ | 8,876,712 | ||||||||
Repurchase Agreements | — | 68,402 | — | 68,402 | ||||||||||||
Securities Lending Collateral | 363,295 | — | — | 363,295 | ||||||||||||
Total Assets | $ | 9,240,007 | $ | 68,402 | $ | — | $ | 9,308,409 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
76 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INTERNET FUND |
STATEMENT OF ASSETS AND LIABILITIES | |
December 31, 2017 |
Assets: | ||||
Investments, at value - including $347,531 of securities loaned (cost $4,818,744) | $ | 9,240,007 | ||
Repurchase agreements, at value (cost $68,402) | 68,402 | |||
Cash | 1,749 | |||
Receivables: | ||||
Fund shares sold | 18,664 | |||
Securities lending income | 996 | |||
Dividends | 541 | |||
Investment adviser | 35 | |||
Interest | 8 | |||
Total assets | 9,330,402 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities loaned | 363,295 | |||
Management fees | 6,552 | |||
Transfer agent and administrative fees | 1,927 | |||
Investor service fees | 1,927 | |||
Portfolio accounting fees | 771 | |||
Fund shares redeemed | 62 | |||
Miscellaneous | 12,910 | |||
Total liabilities | 387,444 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 8,942,958 | ||
Net assets consist of: | ||||
Paid in capital | $ | 5,233,202 | ||
Accumulated net investment loss | (14,804 | ) | ||
Accumulated net realized loss on investments | (696,703 | ) | ||
Net unrealized appreciation on investments | 4,421,263 | |||
Net assets | $ | 8,942,958 | ||
Capital shares outstanding | 102,984 | |||
Net asset value per share | $ | 86.84 |
STATEMENT OF OPERATIONS | |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $365) | $ | 57,163 | ||
Interest | 503 | |||
Income from securities lending, net | 10,686 | |||
Total investment income | 68,352 | |||
Expenses: | ||||
Management fees | 83,926 | |||
Investor service fees | 24,684 | |||
Transfer agent and administrative fees | 24,684 | |||
Professional fees | 14,410 | |||
Portfolio accounting fees | 9,874 | |||
Custodian fees | 1,574 | |||
Trustees’ fees* | 1,115 | |||
Line of credit fees | 88 | |||
Miscellaneous | 8,026 | |||
Total expenses | 168,381 | |||
Net investment loss | (100,029 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 1,056,051 | |||
Net realized gain | 1,056,051 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 1,693,938 | |||
Net change in unrealized appreciation (depreciation) | 1,693,938 | |||
Net realized and unrealized gain | 2,749,989 | |||
Net increase in net assets resulting from operations | $ | 2,649,960 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 77 |
INTERNET FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (100,029 | ) | $ | (60,858 | ) | ||
Net realized gain on investments | 1,056,051 | 275,024 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 1,693,938 | (884,620 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 2,649,960 | (670,454 | ) | |||||
Distributions to shareholders from: | ||||||||
Net realized gains | (55,537 | ) | (710,959 | ) | ||||
Total distributions to shareholders | (55,537 | ) | (710,959 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 40,413,575 | 33,908,927 | ||||||
Distributions reinvested | 55,537 | 710,959 | ||||||
Cost of shares redeemed | (42,605,993 | ) | (37,788,678 | ) | ||||
Net decrease from capital share transactions | (2,136,881 | ) | (3,168,792 | ) | ||||
Net increase (decrease) in net assets | 457,542 | (4,550,205 | ) | |||||
Net assets: | ||||||||
Beginning of year | 8,485,416 | 13,035,621 | ||||||
End of year | $ | 8,942,958 | $ | 8,485,416 | ||||
Accumulated net investment loss at end of year | $ | (14,804 | ) | $ | (15,962 | ) | ||
Capital share activity: | ||||||||
Shares sold | 514,563 | 513,963 | * | |||||
Shares issued from reinvestment of distributions | 706 | 11,587 | * | |||||
Shares redeemed | (542,567 | ) | (579,907 | )* | ||||
Net decrease in shares | (27,298 | ) | (54,357 | )* |
* | Capital share activity for the year ended December 31, 2016, has been restated to reflect a 1:4 reverse share split effective December 1, 2016 — See Note 9. |
78 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INTERNET FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 65.13 | $ | 70.60 | $ | 79.11 | $ | 85.98 | $ | 57.97 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.79 | ) | (.14 | ) | (.76 | ) | (.92 | ) | (.76 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 22.88 | (3.30 | ) | 7.29 | 2.61 | 30.33 | ||||||||||||||
Total from investment operations | 22.09 | (3.44 | ) | 6.53 | 1.69 | 29.57 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (.38 | ) | (2.03 | ) | (15.04 | ) | (8.56 | ) | (1.56 | ) | ||||||||||
Total distributions | (.38 | ) | (2.03 | ) | (15.04 | ) | (8.56 | ) | (1.56 | ) | ||||||||||
Net asset value, end of period | $ | 86.84 | $ | 65.13 | $ | 70.60 | $ | 79.11 | $ | 85.98 | ||||||||||
Total Returnb | 33.96 | % | 4.44 | % | 8.36 | % | 1.96 | % | 51.23 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 8,943 | $ | 8,485 | $ | 13,036 | $ | 6,624 | $ | 15,617 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (1.01 | %) | (0.78 | %) | (1.03 | %) | (1.06 | %) | (1.07 | %) | ||||||||||
Total expenses | 1.71 | % | 1.66 | % | 1.61 | % | 1.66 | % | 1.63 | % | ||||||||||
Portfolio turnover rate | 365 | % | 384 | % | 363 | % | 283 | % | 311 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Reverse share split — Per share amounts for the periods presented through December 31, 2016 have been restated to reflect a 1:4 reverse share split effective December 1, 2016 — See Note 9. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 79 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
LEISURE FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies engaged in leisure and entertainment businesses (“Leisure Companies”).
For the year ended December 31, 2017, Leisure Fund returned 20.11%, compared with a return of 21.83% for the S&P 500 Index. The S&P 500 Consumer Discretionary Index returned 22.98%.
The hotels, restaurants & leisure industry and the media industry contributed the most to the Fund’s return for the period. The leisure products industry detracted the most, followed by the automobiles industry.
Holdings that contributed the most to the Fund’s return were McDonald’s Corp., Activision Blizzard, Inc., and Marriott International, Inc. Class A. Mattel, Inc., Vista Outdoor, Inc., and AMC Entertainment Holdings, Inc. were the holdings detracting the most from return.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 22, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Comcast Corp. — Class A | 3.6% |
Philip Morris International, Inc. | 3.3% |
Walt Disney Co. | 3.3% |
Altria Group, Inc. | 3.0% |
McDonald's Corp. | 3.0% |
Charter Communications, Inc. — Class A | 2.5% |
Starbucks Corp. | 2.3% |
Time Warner, Inc. | 2.2% |
Twenty-First Century Fox, Inc. — Class A | 2.1% |
Las Vegas Sands Corp. | 1.9% |
Top Ten Total | 27.2% |
“Ten Largest Holdings” excludes any temporary cash investments. |
80 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Leisure Fund | 20.11% | 15.10% | 8.58% |
S&P 500 Consumer Discretionary Index | 22.98% | 17.64% | 13.52% |
S&P 500 Index | 21.83% | 15.79% | 8.50% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Consumer Discretionary Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 81 |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
LEISURE FUND |
Shares | Value | |||||||
COMMON STOCKS† - 100.2% | ||||||||
Media - 29.4% | ||||||||
Comcast Corp. — Class A | 8,503 | $ | 340,545 | |||||
Walt Disney Co. | 2,881 | 309,736 | ||||||
Charter Communications, Inc. — Class A* | 693 | 232,820 | ||||||
Time Warner, Inc. | 2,273 | 207,911 | ||||||
Twenty-First Century Fox, Inc. — Class A | 5,708 | 197,097 | ||||||
CBS Corp. — Class B | 2,041 | 120,419 | ||||||
Sirius XM Holdings, Inc.1 | 22,148 | 118,713 | ||||||
DISH Network Corp. — Class A* | 2,361 | 112,738 | ||||||
Altice USA, Inc. — Class A* | 4,770 | 101,267 | ||||||
Liberty Broadband Corp. — Class C* | 1,110 | 94,528 | ||||||
Discovery Communications, Inc. — Class A*,1 | 4,094 | 91,624 | ||||||
Viacom, Inc. — Class B | 2,888 | 88,979 | ||||||
Scripps Networks Interactive, Inc. — Class A | 980 | 83,672 | ||||||
Grupo Televisa SAB ADR | 4,022 | 75,091 | ||||||
News Corp. — Class A | 4,606 | 74,663 | ||||||
Sinclair Broadcast Group, Inc. — Class A | 1,296 | 49,054 | ||||||
Nexstar Media Group, Inc. — Class A | 612 | 47,858 | ||||||
Tribune Media Co. — Class A | 1,111 | 47,184 | ||||||
Cable One, Inc. | 67 | 47,124 | ||||||
AMC Networks, Inc. — Class A* | 815 | 44,075 | ||||||
TEGNA, Inc. | 3,071 | 43,240 | ||||||
New York Times Co. — Class A | 2,283 | 42,236 | ||||||
Meredith Corp. | 593 | 39,168 | ||||||
World Wrestling Entertainment, Inc. — Class A | 1,210 | 37,002 | ||||||
Time, Inc. | 1,795 | 33,118 | ||||||
Gray Television, Inc.* | 1,915 | 32,076 | ||||||
MSG Networks, Inc. — Class A* | 1,514 | 30,659 | ||||||
Scholastic Corp. | 719 | 28,839 | ||||||
Total Media | 2,771,436 | |||||||
Retail - 17.1% | ||||||||
McDonald’s Corp. | 1,660 | 285,719 | ||||||
Starbucks Corp. | 3,790 | 217,660 | ||||||
Yum! Brands, Inc. | 1,579 | 128,862 | ||||||
Darden Restaurants, Inc. | 914 | 87,762 | ||||||
Restaurant Brands International, Inc. | 1,413 | 86,871 | ||||||
Yum China Holdings, Inc. | 2,129 | 85,203 | ||||||
Domino’s Pizza, Inc. | 381 | 71,994 | ||||||
Chipotle Mexican Grill, Inc. — Class A* | 224 | 64,743 | ||||||
Dunkin’ Brands Group, Inc. | 938 | 60,473 | ||||||
Wendy’s Co. | 3,083 | 50,623 | ||||||
Texas Roadhouse, Inc. — Class A | 924 | 48,676 | ||||||
Cracker Barrel Old Country Store, Inc.1 | 305 | 48,461 | ||||||
Jack in the Box, Inc. | 417 | 40,912 | ||||||
Buffalo Wild Wings, Inc.* | 238 | 37,211 | ||||||
Cheesecake Factory, Inc.1 | 749 | 36,087 | ||||||
Dave & Buster’s Entertainment, Inc.* | 654 | 36,081 | ||||||
Bloomin’ Brands, Inc. | 1,619 | 34,550 | ||||||
Papa John’s International, Inc. | 592 | 33,217 | ||||||
Brinker International, Inc.1 | 832 | 32,315 | ||||||
Shake Shack, Inc. — Class A* | 693 | 29,938 | ||||||
Sonic Corp.1 | 929 | 25,529 | ||||||
Wingstop, Inc. | 634 | 24,713 | ||||||
Red Robin Gourmet Burgers, Inc.* | 376 | 21,206 | ||||||
BJ’s Restaurants, Inc. | 580 | 21,112 | ||||||
Total Retail | 1,609,918 | |||||||
Lodging - 13.3% | ||||||||
Las Vegas Sands Corp. | 2,578 | 179,145 | ||||||
Marriott International, Inc. — Class A | 1,306 | 177,263 | ||||||
Hilton Worldwide Holdings, Inc. | 1,586 | 126,658 | ||||||
MGM Resorts International | 3,188 | 106,447 | ||||||
Wynn Resorts Ltd. | 594 | 100,143 | ||||||
Melco Resorts & Entertainment Ltd. ADR | 3,345 | 97,139 | ||||||
Wyndham Worldwide Corp. | 729 | 84,469 | ||||||
Hyatt Hotels Corp. — Class A* | 1,008 | 74,128 | ||||||
Caesars Entertainment Corp.* | 5,732 | 72,510 | ||||||
Choice Hotels International, Inc. | 659 | 51,138 | ||||||
Boyd Gaming Corp. | 1,456 | 51,033 | ||||||
Hilton Grand Vacations, Inc.*,1 | 1,184 | 49,669 | ||||||
ILG, Inc. | 1,598 | 45,511 | ||||||
La Quinta Holdings, Inc.* | 1,987 | 36,680 | ||||||
Total Lodging | 1,251,933 | |||||||
Entertainment - 8.9% | ||||||||
Vail Resorts, Inc.1 | 329 | 69,903 | ||||||
IMAX Corp.* | 2,967 | 68,686 | ||||||
Lions Gate Entertainment Corp. — Class A* | 1,983 | 67,045 | ||||||
Six Flags Entertainment Corp. | 855 | 56,917 | ||||||
International Game Technology plc | 2,084 | 55,247 | ||||||
Madison Square Garden Co. — Class A* | 254 | 53,556 | ||||||
Scientific Games Corp. — Class A* | 1,017 | 52,172 | ||||||
Red Rock Resorts, Inc. — Class A | 1,458 | 49,193 | ||||||
Cinemark Holdings, Inc. | 1,377 | 47,947 | ||||||
Regal Entertainment Group — Class A | 2,035 | 46,825 | ||||||
Churchill Downs, Inc. | 201 | 46,773 | ||||||
Marriott Vacations Worldwide Corp. | 337 | 45,566 | ||||||
Penn National Gaming, Inc.* | 1,368 | 42,859 | ||||||
Eldorado Resorts, Inc.* | 1,164 | 38,587 | ||||||
Pinnacle Entertainment, Inc.* | 1,048 | 34,301 | ||||||
AMC Entertainment Holdings, Inc. — Class A1 | 2,218 | 33,492 | ||||||
SeaWorld Entertainment, Inc.*,1 | 2,010 | 27,276 | ||||||
Total Entertainment | 836,345 | |||||||
Leisure Time - 8.8% | ||||||||
Carnival plc ADR | 2,540 | 168,351 | ||||||
Carnival Corp. | 2,535 | 168,248 | ||||||
Royal Caribbean Cruises Ltd. | 1,000 | 119,280 | ||||||
Norwegian Cruise Line Holdings Ltd.* | 1,592 | 84,774 | ||||||
Harley-Davidson, Inc.1 | 1,419 | 72,199 | ||||||
Polaris Industries, Inc. | 540 | 66,955 | ||||||
Brunswick Corp. | 960 | 53,011 | ||||||
Planet Fitness, Inc. — Class A* | 1,385 | 47,962 | ||||||
Callaway Golf Co. | 1,989 | 27,707 |
82 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
LEISURE FUND |
Shares | Value | |||||||
Vista Outdoor, Inc.* | 1,593 | $ | 23,210 | |||||
Total Leisure Time | 831,697 | |||||||
Agriculture - 7.3% | ||||||||
Philip Morris International, Inc. | 2,982 | 315,048 | ||||||
Altria Group, Inc. | 4,002 | 285,783 | ||||||
British American Tobacco plc ADR | 1,303 | 87,288 | ||||||
Total Agriculture | 688,119 | |||||||
Beverages - 6.4% | ||||||||
Constellation Brands, Inc. — Class A | 735 | 167,999 | ||||||
Brown-Forman Corp. — Class B | 1,876 | 128,825 | ||||||
Molson Coors Brewing Co. — Class B | 1,264 | 103,737 | ||||||
Anheuser-Busch InBev S.A. ADR | 826 | 92,149 | ||||||
Diageo plc ADR | 515 | 75,205 | ||||||
Boston Beer Company, Inc. — Class A* | 183 | 34,971 | ||||||
Total Beverages | 602,886 | |||||||
Software - 4.1% | ||||||||
Activision Blizzard, Inc. | 2,667 | 168,874 | ||||||
Electronic Arts, Inc.* | 1,294 | 135,948 | ||||||
Take-Two Interactive Software, Inc.* | 784 | 86,068 | ||||||
Total Software | 390,890 | |||||||
Toys, Games & Hobbies - 1.5% | ||||||||
Hasbro, Inc. | 891 | 80,983 | ||||||
Mattel, Inc.1 | 3,634 | 55,891 | ||||||
Total Toys, Games & Hobbies | 136,874 | |||||||
Food Service - 0.8% | ||||||||
Aramark | 1,850 | 79,069 | ||||||
Commercial Services - 0.8% | ||||||||
Live Nation Entertainment, Inc.* | 1,690 | 71,943 | ||||||
REITs - 0.6% | ||||||||
Park Hotels & Resorts, Inc. | 2,139 | 61,496 | ||||||
Miscellaneous Manufacturing - 0.5% | ||||||||
Sturm Ruger & Company, Inc. | 446 | 24,909 | ||||||
American Outdoor Brands Corp.* | 1,522 | 19,542 | ||||||
Total Miscellaneous Manufacturing | 44,451 | |||||||
Internet - 0.4% | ||||||||
Cars.com, Inc.*,1 | 1,264 | 36,454 | ||||||
Food - 0.3% | ||||||||
Bob Evans Farms, Inc. | 385 | 30,346 | ||||||
Total Common Stocks | ||||||||
(Cost $6,932,005) | 9,443,857 | |||||||
RIGHTS††† - 0.0% | ||||||||
Nexstar Media Group, Inc. | ||||||||
Expires 01/18/19*,5 | 1,910 | — | ||||||
Total Rights | ||||||||
(Cost $—) | — | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.6% | ||||||||
JPMorgan Chase & Co. | $ | 36,440 | 36,440 | |||||
Bank of America Merrill Lynch | 19,448 | 19,448 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $55,888) | 55,888 |
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 5.3% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%4 | 505,256 | 505,256 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $505,256) | 505,256 | |||||||
Total Investments - 106.1% | ||||||||
(Cost $7,493,149) | $ | 10,005,001 | ||||||
Other Assets & Liabilities, net - (6.1)% | (578,446 | ) | ||||||
Total Net Assets - 100.0% | $ | 9,426,555 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 3. |
†† | Value determined based on Level 2 inputs — See Note 3. |
††† | Value determined based on Level 3 inputs — See Note 3. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 5. |
2 | Repurchase Agreements — See Note 4. |
3 | Securities lending collateral — See Note 5. |
4 | Rate indicated is the 7 day yield as of December 31, 2017. |
5 | Security was fair valued by the Valuation Committee at December 31, 2017. The total market value of fair valued securities amounts to $0, (cost $0) or 0.0% of total net assets. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 83 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
LEISURE FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 9,443,857 | $ | — | $ | — | $ | 9,443,857 | ||||||||
Repurchase Agreements | — | 55,888 | — | 55,888 | ||||||||||||
Rights | — | — | — | * | — | |||||||||||
Securities Lending Collateral | 505,256 | — | — | 505,256 | ||||||||||||
Total Assets | $ | 9,949,113 | $ | 55,888 | $ | — | $ | 10,005,001 |
* | Security has a market value of $0. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
84 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
LEISURE FUND |
STATEMENT OF ASSETS AND LIABILITIES | |
December 31, 2017 |
Assets: | ||||
Investments, at value - including $482,110 of securities loaned (cost $7,437,261) | $ | 9,949,113 | ||
Repurchase agreements, at value (cost $55,888) | 55,888 | |||
Receivables: | ||||
Fund shares sold | 445,122 | |||
Dividends | 12,467 | |||
Foreign tax reclaims | 1,003 | |||
Securities lending income | 371 | |||
Interest | 7 | |||
Total assets | 10,463,971 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities loaned | 505,256 | |||
Fund shares redeemed | 395,037 | |||
Securities purchased | 113,570 | |||
Management fees | 6,138 | |||
Transfer agent and administrative fees | 1,805 | |||
Investor service fees | 1,805 | |||
Portfolio accounting fees | 722 | |||
Miscellaneous | 13,083 | |||
Total liabilities | 1,037,416 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 9,426,555 | ||
Net assets consist of: | ||||
Paid in capital | $ | 7,339,582 | ||
Undistributed net investment income | 25,101 | |||
Accumulated net realized loss on investments | (449,980 | ) | ||
Net unrealized appreciation on investments | 2,511,852 | |||
Net assets | $ | 9,426,555 | ||
Capital shares outstanding | 95,870 | |||
Net asset value per share | $ | 98.33 |
STATEMENT OF OPERATIONS | |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $298) | $ | 156,180 | ||
Interest | 354 | |||
Income from securities lending, net | 4,064 | |||
Total investment income | 160,598 | |||
Expenses: | ||||
Management fees | 69,509 | |||
Investor service fees | 20,444 | |||
Transfer agent and administrative fees | 20,444 | |||
Professional fees | 11,241 | |||
Portfolio accounting fees | 8,177 | |||
Custodian fees | 1,472 | |||
Trustees’ fees* | 1,024 | |||
Miscellaneous | 6,994 | |||
Total expenses | 139,305 | |||
Net investment income | 21,293 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 890,275 | |||
Net realized gain | 890,275 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 579,319 | |||
Net change in unrealized appreciation (depreciation) | 579,319 | |||
Net realized and unrealized gain | 1,469,594 | |||
Net increase in net assets resulting from operations | $ | 1,490,887 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 85 |
LEISURE FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 21,293 | $ | 17,941 | ||||
Net realized gain on investments | 890,275 | 1,522,852 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 579,319 | (1,476,042 | ) | |||||
Net increase in net assets resulting from operations | 1,490,887 | 64,751 | ||||||
Distributions to shareholders from: | ||||||||
Net investment income | (20,573 | ) | (33,853 | ) | ||||
Net realized gains | (16,439 | ) | (101,294 | ) | ||||
Total distributions to shareholders | (37,012 | ) | (135,147 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 26,102,966 | 43,130,973 | ||||||
Distributions reinvested | 37,012 | 135,147 | ||||||
Cost of shares redeemed | (26,958,562 | ) | (48,168,571 | ) | ||||
Net decrease from capital share transactions | (818,584 | ) | (4,902,451 | ) | ||||
Net increase (decrease) in net assets | 635,291 | (4,972,847 | ) | |||||
Net assets: | ||||||||
Beginning of year | 8,791,264 | 13,764,111 | ||||||
End of year | $ | 9,426,555 | $ | 8,791,264 | ||||
Undistributed net investment income at end of year | $ | 25,101 | $ | 24,670 | ||||
Capital share activity: | ||||||||
Shares sold | 284,482 | 548,278 | ||||||
Shares issued from reinvestment of distributions | 401 | 1,700 | ||||||
Shares redeemed | (295,944 | ) | (623,105 | ) | ||||
Net decrease in shares | (11,061 | ) | (73,127 | ) |
86 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
LEISURE FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 82.21 | $ | 76.44 | $ | 87.81 | $ | 95.41 | $ | 67.43 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .24 | .18 | .28 | .12 | .11 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 16.28 | 7.07 | .87 | 6.53 | 28.45 | |||||||||||||||
Total from investment operations | 16.52 | 7.25 | 1.15 | 6.65 | 28.56 | |||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.22 | ) | (.37 | ) | (.07 | ) | (.22 | ) | (.58 | ) | ||||||||||
Net realized gains | (.18 | ) | (1.11 | ) | (12.45 | ) | (14.03 | ) | — | |||||||||||
Total distributions | (.40 | ) | (1.48 | ) | (12.52 | ) | (14.25 | ) | (.58 | ) | ||||||||||
Net asset value, end of period | $ | 98.33 | $ | 82.21 | $ | 76.44 | $ | 87.81 | $ | 95.41 | ||||||||||
Total Returnb | 20.11 | % | 9.56 | % | 0.30 | % | 7.49 | % | 42.41 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 9,427 | $ | 8,791 | $ | 13,764 | $ | 8,150 | $ | 11,866 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.26 | % | 0.23 | % | 0.34 | % | 0.13 | % | 0.14 | % | ||||||||||
Total expenses | 1.70 | % | 1.66 | % | 1.60 | % | 1.66 | % | 1.64 | % | ||||||||||
Portfolio turnover rate | 303 | % | 530 | % | 288 | % | 339 | % | 219 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 87 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
PRECIOUS METALS FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in U.S. and foreign companies that are involved in the precious metals sector, including exploration, mining, production and development, and other precious metals-related services (“Precious Metals Companies”).
For the year ended December 31, 2017, Precious Metals Fund returned 7.08%, compared with the 21.83% return of the S&P 500 Index. The S&P 500 Materials Index returned 23.84%.
Metals & mining companies account for most of the holdings in the portfolio. Of these, the copper industry and the gold industry contributed to return. The silver industry was the only detractor.
Freeport-McMoRan, Inc., Franco-Nevada Corp., and Randgold Resources Ltd. ADR were the leading contributors to return. Eldorado Gold Corp., Tahoe Resources, Inc., and Barrick Gold Corp. detracted the most from return.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 29, 1997 |
Ten Largest Holdings (% of Total Net Assets) | |
Freeport-McMoRan, Inc. | 7.9% |
Newmont Mining Corp. | 6.5% |
Barrick Gold Corp. | 6.2% |
Franco-Nevada Corp. | 5.7% |
Goldcorp, Inc. | 5.2% |
Agnico Eagle Mines Ltd. | 5.1% |
Wheaton Precious Metals Corp. | 4.4% |
Randgold Resources Ltd. ADR | 4.3% |
VanEck Vectors Junior Gold Miners ETF | 4.2% |
Royal Gold, Inc. | 3.1% |
Top Ten Total | 52.6% |
“Ten Largest Holdings” excludes any temporary cash investments. |
88 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Precious Metals Fund | 7.08% | (11.28%) | (6.58%) |
S&P 500 Materials Index | 23.84% | 12.20% | 6.17% |
S&P 500 Index | 21.83% | 15.79% | 8.50% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Materials Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 89 |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
PRECIOUS METALS FUND |
Shares | Value | |||||||
COMMON STOCKS† - 95.6% | ||||||||
Mining - 95.6% | ||||||||
Freeport-McMoRan, Inc.* | 125,244 | $ | 2,374,626 | |||||
Newmont Mining Corp. | 52,408 | 1,966,348 | ||||||
Barrick Gold Corp. | 128,590 | 1,860,697 | ||||||
Franco-Nevada Corp. | 21,670 | 1,732,516 | ||||||
Goldcorp, Inc. | 123,308 | 1,574,643 | ||||||
Agnico Eagle Mines Ltd. | 33,345 | 1,539,872 | ||||||
Wheaton Precious Metals Corp. | 60,213 | 1,332,514 | ||||||
Randgold Resources Ltd. ADR | 13,199 | 1,305,249 | ||||||
Royal Gold, Inc. | 11,221 | 921,469 | ||||||
AngloGold Ashanti Ltd. ADR | 86,266 | 879,051 | ||||||
Pan American Silver Corp. | 51,172 | 796,236 | ||||||
Kirkland Lake Gold Ltd. | 51,410 | 789,658 | ||||||
Kinross Gold Corp.* | 171,764 | 742,020 | ||||||
Osisko Gold Royalties Ltd.1 | 63,160 | 730,130 | ||||||
IAMGOLD Corp.* | 117,607 | 685,649 | ||||||
Sibanye Gold Ltd. ADR1 | 134,381 | 678,624 | ||||||
Alamos Gold, Inc. — Class A | 103,251 | 672,164 | ||||||
Compania de Minas Buenaventura S.A.A ADR | 44,314 | 625,714 | ||||||
Pretium Resources, Inc.*,1 | 54,018 | 616,345 | ||||||
Gold Fields Ltd. ADR1 | 139,623 | 600,379 | ||||||
Yamana Gold, Inc. | 188,717 | 588,797 | ||||||
B2Gold Corp.* | 184,761 | 572,759 | ||||||
Tahoe Resources, Inc. | 105,759 | 506,586 | ||||||
Coeur Mining, Inc.* | 64,206 | 481,545 | ||||||
New Gold, Inc.* | 138,937 | 457,103 | ||||||
SSR Mining, Inc.* | 49,675 | 436,643 | ||||||
First Majestic Silver Corp.* | 62,928 | 424,135 | ||||||
Hecla Mining Co. | 103,792 | 412,054 | ||||||
MAG Silver Corp.* | 33,202 | 410,377 | ||||||
Sandstorm Gold Ltd.*,1 | 81,764 | 408,002 | ||||||
Fortuna Silver Mines, Inc.* | 73,340 | 382,835 | ||||||
Novagold Resources, Inc.*,1 | 92,915 | 365,156 | ||||||
Seabridge Gold, Inc.*,1 | 30,746 | 347,430 | ||||||
Klondex Mines Ltd.* | 92,470 | 241,347 | ||||||
Endeavour Silver Corp.*,1 | 89,479 | 213,855 | ||||||
Gold Resource Corp. | 44,121 | 194,132 | ||||||
Total Mining | 28,866,660 | |||||||
Total Common Stocks | ||||||||
(Cost $18,843,951) | 28,866,660 | |||||||
EXCHANGE-TRADED FUNDS† - 4.2% | ||||||||
VanEck Vectors Junior Gold Miners ETF | 37,264 | 1,271,820 | ||||||
Total Exchange-Traded Funds | ||||||||
(Cost $905,378) | 1,271,820 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.2% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | $ | 46,601 | 46,601 | |||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 24,871 | 24,871 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $71,472) | 71,472 |
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 6.7% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%4 | 2,030,580 | 2,030,580 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $2,030,580) | 2,030,580 | |||||||
Total Investments - 106.7% | ||||||||
(Cost $21,851,381) | $ | 32,240,532 | ||||||
Other Assets & Liabilities, net - (6.7)% | (2,039,312 | ) | ||||||
Total Net Assets - 100.0% | $ | 30,201,220 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 3. |
†† | Value determined based on Level 2 inputs — See Note 3. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 5. |
2 | Repurchase Agreements — See Note 4. |
3 | Securities lending collateral — See Note 5. |
4 | Rate indicated is the 7 day yield as of December 31, 2017. |
ADR — American Depositary Receipt | |
See Sector Classification in Other Information section. |
90 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
PRECIOUS METALS FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 28,866,660 | $ | — | $ | — | $ | 28,866,660 | ||||||||
Exchange-Traded Funds | 1,271,820 | — | — | 1,271,820 | ||||||||||||
Repurchase Agreements | — | 71,472 | — | 71,472 | ||||||||||||
Securities Lending Collateral | 2,030,580 | — | — | 2,030,580 | ||||||||||||
Total Assets | $ | 32,169,060 | $ | 71,472 | $ | — | $ | 32,240,532 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 91 |
PRECIOUS METALS FUND |
STATEMENT OF ASSETS AND LIABILITIES | |
December 31, 2017 |
Assets: | ||||
Investments, at value - including $1,904,191 of securities loaned (cost $21,779,909) | $ | 32,169,060 | ||
Repurchase agreements, at value (cost $71,472) | 71,472 | |||
Foreign currency, at value (cost $17,434) | 17,434 | |||
Receivables: | ||||
Fund shares sold | 8,308,248 | |||
Securities sold | 21,770 | |||
Dividends | 2,457 | |||
Securities lending income | 612 | |||
Foreign tax reclaims | 310 | |||
Interest | 8 | |||
Total assets | 40,591,371 | |||
Liabilities: | ||||
Payable for: | ||||
Securities purchased | 8,182,593 | |||
Return of securities loaned | 2,030,580 | |||
Deferred foreign capital gain taxes | 103,613 | |||
Fund shares redeemed | 16,939 | |||
Management fees | 14,099 | |||
Transfer agent and administrative fees | 4,700 | |||
Investor service fees | 4,700 | |||
Portfolio accounting fees | 1,880 | |||
Miscellaneous | 31,047 | |||
Total liabilities | 10,390,151 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 30,201,220 | ||
Net assets consist of: | ||||
Paid in capital | $ | 42,668,562 | ||
Accumulated net investment loss | (961,313 | ) | ||
Accumulated net realized loss on investments and foreign currency | (21,895,180 | ) | ||
Net unrealized appreciation on investments | 10,389,151 | |||
Net assets | $ | 30,201,220 | ||
Capital shares outstanding | 996,811 | |||
Net asset value per share | $ | 30.30 |
STATEMENT OF OPERATIONS | |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $13,518) | $ | 147,015 | ||
Interest | 1,900 | |||
Income from securities lending, net | 25,728 | |||
Total investment income | 174,643 | |||
Expenses: | ||||
Management fees | 193,453 | |||
Investor service fees | 64,484 | |||
Transfer agent and administrative fees | 64,484 | |||
Professional fees | 34,358 | |||
Portfolio accounting fees | 25,794 | |||
Custodian fees | 4,475 | |||
Trustees’ fees* | 3,403 | |||
Line of credit fees | 237 | |||
Miscellaneous | 23,360 | |||
Total expenses | 414,048 | |||
Net investment loss | (239,405 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 477,631 | a | ||
Foreign currency | (13 | ) | ||
Net realized gain on investments and foreign currency | 477,618 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 797,473 | |||
Net change in unrealized appreciation (depreciation) | 797,473 | |||
Net realized and unrealized gain on investments and foreign currency | 1,275,091 | |||
Net increase in net assets resulting from operations | $ | 1,035,686 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
a | Net of foreign capital gain taxes of $103,613. |
92 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PRECIOUS METALS FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (239,405 | ) | $ | (277,469 | ) | ||
Net realized gain on investments and foreign currency | 477,618 | 2,667,893 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 797,473 | 7,821,438 | ||||||
Net increase in net assets resulting from operations | 1,035,686 | 10,211,862 | ||||||
Distributions to shareholders from: | ||||||||
Net investment income | (1,123,988 | ) | — | |||||
Total distributions to shareholders | (1,123,988 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 188,066,776 | 99,225,855 | ||||||
Distributions reinvested | 1,123,988 | — | ||||||
Cost of shares redeemed | (181,573,076 | ) | (102,966,872 | ) | ||||
Net increase (decrease) from capital share transactions | 7,617,688 | (3,741,017 | ) | |||||
Net increase in net assets | 7,529,386 | 6,470,845 | ||||||
Net assets: | ||||||||
Beginning of year | 22,671,834 | 16,200,989 | ||||||
End of year | $ | 30,201,220 | $ | 22,671,834 | ||||
Accumulated net investment loss at end of year | $ | (961,313 | ) | $ | (167,015 | ) | ||
Capital share activity: | ||||||||
Shares sold | 6,114,108 | 3,116,390 | ||||||
Shares issued from reinvestment of distributions | 39,549 | — | ||||||
Shares redeemed | (5,919,754 | ) | (3,256,149 | ) | ||||
Net increase (decrease) in shares | 233,903 | (139,759 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 93 |
PRECIOUS METALS FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended | Year Ended | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 29.72 | $ | 17.95 | $ | 27.60 | $ | 33.43 | $ | 62.84 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.29 | ) | (.29 | ) | (.12 | ) | (.11 | ) | .25 | |||||||||||
Net gain (loss) on investments (realized and unrealized) | 2.29 | 12.06 | (8.01 | ) | (5.67 | ) | (29.21 | ) | ||||||||||||
Total from investment operations | 2.00 | 11.77 | (8.13 | ) | (5.78 | ) | (28.96 | ) | ||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (1.42 | ) | — | (1.52 | ) | (.05 | ) | (.45 | ) | |||||||||||
Total distributions | (1.42 | ) | — | (1.52 | ) | (.05 | ) | (.45 | ) | |||||||||||
Net asset value, end of period | $ | 30.30 | $ | 29.72 | $ | 17.95 | $ | 27.60 | $ | 33.43 | ||||||||||
Total Returnb | 7.08 | % | 65.52 | % | (30.37 | %) | (17.34 | %) | (46.10 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 30,201 | $ | 22,672 | $ | 16,201 | $ | 18,313 | $ | 22,538 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.93 | %) | (0.90 | %) | (0.50 | %) | (0.32 | %) | 0.54 | % | ||||||||||
Total expensesc | 1.61 | % | 1.56 | % | 1.50 | % | 1.56 | % | 1.54 | % | ||||||||||
Portfolio turnover rate | 691 | % | 298 | % | 203 | % | 168 | % | 193 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c d | Does not include expenses of the underlying funds in which the Fund invests. Reverse share split — Per share amounts for the periods presented through December 31, 2014 have been restated to reflect a 1:5 reverse share split effective January 24, 2014. |
94 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
REAL ESTATE FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that are involved in the real estate industry, including real estate investment trusts (“REITs”) (collectively, “Real Estate Companies”).
For the year ended December 31, 2017, Real Estate Fund returned 6.65%, compared to a return of 21.83% for the S&P 500 Index. The MSCI U.S. REIT Index returned 5.07%.
Within the Fund, the real estate investment trust (REIT) industry composes almost all the portfolio. Equity REITs were the leading contributor to return, followed by the mortgage REITs industry. No industry detracted from return. The thrifts & mortgage finance industry contributed the least.
American Tower Corp., Crown Castle International Corp., and Equinix, Inc. were the best-performing holdings in the Fund for the year. The worst-performing holdings for the period were DDR Corp., Kimco Realty Corp., and CBL & Associates Properties, Inc.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: October 1, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
American Tower Corp. — Class A | 2.2% |
Simon Property Group, Inc. | 2.1% |
Crown Castle International Corp. | 1.9% |
Equinix, Inc. | 1.7% |
Public Storage | 1.7% |
Prologis, Inc. | 1.6% |
Weyerhaeuser Co. | 1.5% |
AvalonBay Communities, Inc. | 1.4% |
Digital Realty Trust, Inc. | 1.4% |
Welltower, Inc. | 1.4% |
Top Ten Total | 16.9% |
“Ten Largest Holdings” excludes any temporary cash investments. |
THE RYDEX FUNDS ANNUAL REPORT | 95 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Real Estate Fund | 6.65% | 7.57% | 4.75% |
MSCI U.S. REIT Index | 5.07% | 9.34% | 7.44% |
S&P 500 Index | 21.83% | 15.79% | 8.50% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the MSCI U.S. REIT Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
96 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
REAL ESTATE FUND |
Shares | Value | |||||||
COMMON STOCKS† - 99.6% | ||||||||
REITs - 95.6% | ||||||||
REITs-Diversified - 23.6% | ||||||||
American Tower Corp. — Class A | 1,583 | $ | 225,847 | |||||
Crown Castle International Corp. | 1,755 | 194,823 | ||||||
Equinix, Inc. | 388 | 175,849 | ||||||
Weyerhaeuser Co. | 4,251 | 149,890 | ||||||
Digital Realty Trust, Inc. | 1,237 | 140,894 | ||||||
SBA Communications Corp.* | 776 | 126,767 | ||||||
Vornado Realty Trust | 1,445 | 112,970 | ||||||
Duke Realty Corp. | 3,309 | 90,038 | ||||||
Gaming and Leisure Properties, Inc. | 2,230 | 82,510 | ||||||
WP Carey, Inc. | 1,147 | 79,028 | ||||||
Lamar Advertising Co. — Class A | 1,037 | 76,987 | ||||||
Forest City Realty Trust, Inc. — Class A | 3,062 | 73,794 | ||||||
Colony NorthStar, Inc. — Class A | 6,147 | 70,137 | ||||||
New Residential Investment Corp. | 3,799 | 67,926 | ||||||
CoreSite Realty Corp. | 595 | 67,770 | ||||||
STORE Capital Corp. | 2,508 | 65,308 | ||||||
EPR Properties | 958 | 62,711 | ||||||
Rayonier, Inc. | 1,865 | 58,990 | ||||||
Cousins Properties, Inc. | 6,122 | 56,628 | ||||||
PS Business Parks, Inc. | 425 | 53,163 | ||||||
Outfront Media, Inc. | 2,253 | 52,270 | ||||||
Uniti Group, Inc.1 | 2,932 | 52,160 | ||||||
Retail Properties of America, Inc. — Class A | 3,867 | 51,972 | ||||||
GEO Group, Inc. | 2,126 | 50,174 | ||||||
CoreCivic, Inc. | 2,155 | 48,487 | ||||||
STAG Industrial, Inc. | 1,720 | 47,008 | ||||||
Washington Real Estate Investment Trust | 1,457 | 45,342 | ||||||
Potlatch Corp. | 828 | 41,317 | ||||||
Total REITs-Diversified | 2,420,760 | |||||||
REITs-Office Property - 11.8% | ||||||||
Boston Properties, Inc. | 1,017 | 132,241 | ||||||
Alexandria Real Estate Equities, Inc. | 799 | 104,341 | ||||||
SL Green Realty Corp. | 911 | 91,947 | ||||||
VEREIT, Inc. | 10,236 | 79,738 | ||||||
Kilroy Realty Corp. | 1,060 | 79,129 | ||||||
Douglas Emmett, Inc. | 1,889 | 77,562 | ||||||
Hudson Pacific Properties, Inc. | 1,956 | 66,993 | ||||||
Highwoods Properties, Inc. | 1,305 | 66,438 | ||||||
JBG SMITH Properties | 1,710 | 59,388 | ||||||
Equity Commonwealth* | 1,870 | 57,054 | ||||||
Paramount Group, Inc. | 3,594 | 56,965 | ||||||
Empire State Realty Trust, Inc. — Class A | 2,581 | 52,988 | ||||||
Brandywine Realty Trust | 2,880 | 52,387 | ||||||
Corporate Office Properties Trust | 1,754 | 51,217 | ||||||
Columbia Property Trust, Inc. | 2,147 | 49,274 | ||||||
Piedmont Office Realty Trust, Inc. — Class A | 2,472 | 48,476 | ||||||
Mack-Cali Realty Corp. | 1,888 | 40,705 | ||||||
Government Properties Income Trust | 2,142 | 39,713 | ||||||
Total REITs-Office Property | 1,206,556 | |||||||
REITs-Apartments - 10.1% | ||||||||
AvalonBay Communities, Inc. | 810 | 144,512 | ||||||
Equity Residential | 2,177 | 138,827 | ||||||
Essex Property Trust, Inc. | 475 | 114,651 | ||||||
Invitation Homes, Inc. | 4,311 | 101,610 | ||||||
Mid-America Apartment Communities, Inc. | 979 | 98,448 | ||||||
UDR, Inc. | 2,400 | 92,448 | ||||||
Camden Property Trust | 929 | 85,524 | ||||||
Apartment Investment & Management Co. — Class A | 1,730 | 75,618 | ||||||
American Homes 4 Rent — Class A | 3,333 | 72,793 | ||||||
American Campus Communities, Inc. | 1,627 | 66,756 | ||||||
Education Realty Trust, Inc. | 1,333 | 46,548 | ||||||
Total REITs-Apartments | 1,037,735 | |||||||
REITs-Health Care - 8.9% | ||||||||
Welltower, Inc. | 2,192 | 139,784 | ||||||
Ventas, Inc. | 2,184 | 131,062 | ||||||
HCP, Inc. | 3,860 | 100,669 | ||||||
Healthcare Trust of America, Inc. — Class A | 2,386 | 71,675 | ||||||
Omega Healthcare Investors, Inc.1 | 2,475 | 68,161 | ||||||
Medical Properties Trust, Inc. | 4,762 | 65,620 | ||||||
Senior Housing Properties Trust | 3,259 | 62,410 | ||||||
Healthcare Realty Trust, Inc. | 1,808 | 58,073 | ||||||
Physicians Realty Trust | 2,906 | 52,279 | ||||||
Sabra Health Care REIT, Inc. | 2,783 | 52,237 | ||||||
National Health Investors, Inc. | 670 | 50,505 | ||||||
Quality Care Properties, Inc.* | 2,397 | 33,103 | ||||||
CareTrust REIT, Inc. | 1,913 | 32,062 | ||||||
Total REITs-Health Care | 917,640 | |||||||
REITs-Hotels - 7.6% | ||||||||
Host Hotels & Resorts, Inc. | 5,623 | 111,617 | ||||||
MGM Growth Properties LLC — Class A1 | 2,740 | 79,871 | ||||||
Park Hotels & Resorts, Inc. | 2,538 | 72,968 | ||||||
Hospitality Properties Trust | 2,164 | 64,595 | ||||||
Apple Hospitality REIT, Inc. | 3,130 | 61,379 | ||||||
RLJ Lodging Trust | 2,636 | 57,913 | ||||||
Sunstone Hotel Investors, Inc. | 3,398 | 56,169 | ||||||
Ryman Hospitality Properties, Inc. | 803 | 55,423 | ||||||
LaSalle Hotel Properties | 1,828 | 51,312 | ||||||
Pebblebrook Hotel Trust | 1,243 | 46,202 | ||||||
Xenia Hotels & Resorts, Inc. | 2,050 | 44,260 | ||||||
DiamondRock Hospitality Co. | 3,896 | 43,986 | ||||||
Summit Hotel Properties, Inc. | 2,430 | 37,009 | ||||||
Total REITs-Hotels | 782,704 | |||||||
REITs-Warehouse/Industries - 6.6% | ||||||||
Prologis, Inc. | 2,621 | 169,081 | ||||||
Liberty Property Trust | 1,693 | 72,816 | ||||||
DCT Industrial Trust, Inc. | 1,158 | 68,067 | ||||||
CyrusOne, Inc. | 1,142 | 67,983 | ||||||
Gramercy Property Trust | 2,217 | 59,105 | ||||||
First Industrial Realty Trust, Inc. | 1,780 | 56,017 | ||||||
EastGroup Properties, Inc.1 | 574 | 50,730 | ||||||
QTS Realty Trust, Inc. — Class A | 874 | 47,336 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 97 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
REAL ESTATE FUND |
Shares | Value | |||||||
Rexford Industrial Realty, Inc. | 1,470 | $ | 42,865 | |||||
Terreno Realty Corp. | 1,130 | 39,618 | ||||||
Total REITs-Warehouse/Industries | 673,618 | |||||||
REITs-Regional Malls - 6.3% | ||||||||
Simon Property Group, Inc. | 1,279 | 219,655 | ||||||
GGP, Inc. | 5,864 | 137,159 | ||||||
Macerich Co. | 1,405 | 92,280 | ||||||
Taubman Centers, Inc. | 950 | 62,159 | ||||||
Tanger Factory Outlet Centers, Inc.1 | 1,799 | 47,691 | ||||||
Washington Prime Group, Inc. | 4,867 | 34,653 | ||||||
CBL & Associates Properties, Inc.1 | 5,196 | 29,409 | ||||||
Pennsylvania Real Estate Investment Trust | 2,321 | 27,597 | ||||||
Total REITs-Regional Malls | 650,603 | |||||||
REITs-Shopping Centers - 6.3% | ||||||||
Regency Centers Corp. | 1,465 | 101,349 | ||||||
Federal Realty Investment Trust | 691 | 91,772 | ||||||
Kimco Realty Corp. | 4,485 | 81,403 | ||||||
Brixmor Property Group, Inc. | 3,822 | 71,319 | ||||||
Weingarten Realty Investors | 1,855 | 60,974 | ||||||
DDR Corp. | 6,507 | 58,303 | ||||||
Urban Edge Properties | 1,979 | 50,445 | ||||||
Acadia Realty Trust | 1,630 | 44,597 | ||||||
Retail Opportunity Investments Corp. | 2,203 | 43,950 | ||||||
Kite Realty Group Trust | 1,935 | 37,926 | ||||||
Total REITs-Shopping Centers | 642,038 | |||||||
REITs-Mortgage - 5.6% | ||||||||
Annaly Capital Management, Inc. | 9,025 | 107,307 | ||||||
AGNC Investment Corp. | 4,045 | 81,669 | ||||||
Starwood Property Trust, Inc. | 3,200 | 68,320 | ||||||
Blackstone Mortgage Trust, Inc. — Class A | 1,681 | 54,095 | ||||||
Chimera Investment Corp. | 2,916 | 53,888 | ||||||
MFA Financial, Inc. | 6,490 | 51,401 | ||||||
Two Harbors Investment Corp. | 3,030 | 49,268 | ||||||
Apollo Commercial Real Estate Finance, Inc. | 2,210 | 40,774 | ||||||
Invesco Mortgage Capital, Inc. | 2,283 | 40,706 | ||||||
ARMOUR Residential REIT, Inc. | 1,170 | 30,092 | ||||||
Total REITs-Mortgage | 577,520 | |||||||
REITs-Storage - 4.7% | ||||||||
Public Storage | 828 | 173,052 | ||||||
Extra Space Storage, Inc. | 1,097 | 95,933 | ||||||
Iron Mountain, Inc. | 2,336 | 88,137 | ||||||
CubeSmart | 2,261 | 65,388 | ||||||
Life Storage, Inc. | 660 | 58,786 | ||||||
Total REITs-Storage | 481,296 | |||||||
REITs-Single Tenant - 2.5% | ||||||||
Realty Income Corp. | 2,083 | 118,773 | ||||||
National Retail Properties, Inc. | 1,764 | 76,081 | ||||||
Spirit Realty Capital, Inc. | 6,841 | 58,696 | ||||||
Total REITs-Single Tenant | 253,550 | |||||||
REITs-Manufactured Homes - 1.6% | ||||||||
Equity LifeStyle Properties, Inc. | 899 | 80,029 | ||||||
Sun Communities, Inc. | 849 | 78,770 | ||||||
Total REITs-Manufactured Homes | 158,799 | |||||||
Total REITs | 9,802,819 | |||||||
Real Estate - 4.0% | ||||||||
Real Estate Management/Services - 3.3% | ||||||||
CBRE Group, Inc. — Class A* | 2,589 | 112,129 | ||||||
Jones Lang LaSalle, Inc. | 513 | 76,401 | ||||||
Realogy Holdings Corp. | 2,048 | 54,272 | ||||||
Redfin Corp.*,1 | 1,630 | 51,052 | ||||||
Kennedy-Wilson Holdings, Inc. | 2,688 | 46,637 | ||||||
Total Real Estate Management/Services | 340,491 | |||||||
Real Estate Operations/Development - 0.7% | ||||||||
Howard Hughes Corp.* | 542 | 71,148 | ||||||
Total Real Estate | 411,639 | |||||||
Total Common Stocks | ||||||||
(Cost $5,368,134) | 10,214,458 |
Face Amount | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.3% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | $ | 22,800 | 22,800 | |||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 12,168 | 12,168 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $34,968) | 34,968 |
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 2.7% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%4 | 282,132 | 282,132 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $282,132) | 282,132 | |||||||
Total Investments - 102.6% | ||||||||
(Cost $5,685,234) | $ | 10,531,558 | ||||||
Other Assets & Liabilities, net - (2.6)% | (270,999 | ) | ||||||
Total Net Assets - 100.0% | $ | 10,260,559 |
98 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
REAL ESTATE FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 3. |
†† | Value determined based on Level 2 inputs — See Note 3. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 5. |
2 | Repurchase Agreements — See Note 4. |
3 | Securities lending collateral — See Note 5. |
4 | Rate indicated is the 7 day yield as of December 31, 2017. |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 10,214,458 | $ | — | $ | — | $ | 10,214,458 | ||||||||
Repurchase Agreements | — | 34,968 | — | 34,968 | ||||||||||||
Securities Lending Collateral | 282,132 | — | — | 282,132 | ||||||||||||
Total Assets | $ | 10,496,590 | $ | 34,968 | $ | — | $ | 10,531,558 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 99 |
REAL ESTATE FUND |
STATEMENT OF ASSETS AND LIABILITIES | |
December 31, 2017 |
Assets: | ||||
Investments, at value - including $273,745 of securities loaned (cost $5,650,266) | $ | 10,496,590 | ||
Repurchase agreements, at value (cost $34,968) | 34,968 | |||
Receivables: | ||||
Dividends | 66,631 | |||
Securities lending income | 1,345 | |||
Fund shares sold | 154 | |||
Interest | 4 | |||
Total assets | 10,599,692 | |||
Liabilities: | ||||
Overdraft due to custodian bank | 911 | |||
Payable for: | ||||
Return of securities loaned | 282,132 | |||
Fund shares redeemed | 27,148 | |||
Management fees | 7,949 | |||
Transfer agent and administrative fees | 2,338 | |||
Investor service fees | 2,338 | |||
Portfolio accounting fees | 935 | |||
Miscellaneous | 15,382 | |||
Total liabilities | 339,133 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 10,260,559 | ||
Net assets consist of: | ||||
Paid in capital | $ | 7,385,502 | ||
Undistributed net investment income | 200,572 | |||
Accumulated net realized loss on investments | (2,171,839 | ) | ||
Net unrealized appreciation on investments | 4,846,324 | |||
Net assets | $ | 10,260,559 | ||
Capital shares outstanding | 261,607 | |||
Net asset value per share | $ | 39.22 |
STATEMENT OF OPERATIONS | |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $214) | $ | 317,811 | ||
Interest | 428 | |||
Income from securities lending, net | 1,577 | |||
Total investment income | 319,816 | |||
Expenses: | ||||
Management fees | 103,234 | |||
Investor service fees | 30,363 | |||
Transfer agent and administrative fees | 30,363 | |||
Professional fees | 16,877 | |||
Portfolio accounting fees | 12,145 | |||
Custodian fees | 2,265 | |||
Trustees’ fees* | 1,789 | |||
Line of credit fees | 31 | |||
Miscellaneous | 9,935 | |||
Total expenses | 207,002 | |||
Net investment income | 112,814 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 449,599 | |||
Net realized gain | 449,599 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 69,877 | |||
Net change in unrealized appreciation (depreciation) | 69,877 | |||
Net realized and unrealized gain | 519,476 | |||
Net increase in net assets resulting from operations | $ | 632,290 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
100 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
REAL ESTATE FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 112,814 | $ | 288,667 | ||||
Net realized gain on investments | 449,599 | 1,500,341 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 69,877 | (402,997 | ) | |||||
Net increase in net assets resulting from operations | 632,290 | 1,386,011 | ||||||
Distributions to shareholders from: | ||||||||
Net investment income | (316,400 | ) | (184,035 | ) | ||||
Total distributions to shareholders | (316,400 | ) | (184,035 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 40,487,501 | 55,643,449 | ||||||
Distributions reinvested | 316,400 | 184,035 | ||||||
Cost of shares redeemed | (42,367,742 | ) | (61,844,683 | ) | ||||
Net decrease from capital share transactions | (1,563,841 | ) | (6,017,199 | ) | ||||
Net decrease in net assets | (1,247,951 | ) | (4,815,223 | ) | ||||
Net assets: | ||||||||
Beginning of year | 11,508,510 | 16,323,733 | ||||||
End of year | $ | 10,260,559 | $ | 11,508,510 | ||||
Undistributed net investment income at end of year | $ | 200,572 | $ | 404,963 | ||||
Capital share activity: | ||||||||
Shares sold | 1,047,077 | 1,515,640 | ||||||
Shares issued from reinvestment of distributions | 8,440 | 4,676 | ||||||
Shares redeemed | (1,098,982 | ) | (1,688,386 | ) | ||||
Net decrease in shares | (43,465 | ) | (168,070 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 101 |
REAL ESTATE FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 37.72 | $ | 34.50 | $ | 36.41 | $ | 30.42 | $ | 30.15 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | 0.36 | .63 | .53 | .50 | .57 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 2.11 | 2.88 | (1.44 | ) | 5.88 | .62 | ||||||||||||||
Total from investment operations | 2.47 | 3.51 | (.91 | ) | 6.38 | 1.19 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.97 | ) | (.29 | ) | (1.00 | ) | (.39 | ) | (.92 | ) | ||||||||||
Total distributions | (.97 | ) | (.29 | ) | (1.00 | ) | (.39 | ) | (.92 | ) | ||||||||||
Net asset value, end of period | $ | 39.22 | $ | 37.72 | $ | 34.50 | $ | 36.41 | $ | 30.42 | ||||||||||
Total Returnb | 6.65 | % | 10.15 | % | (2.52 | %) | 21.01 | % | 3.94 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 10,261 | $ | 11,509 | $ | 16,324 | $ | 28,021 | $ | 14,784 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.93 | % | 1.73 | % | 1.46 | % | 1.48 | % | 1.76 | % | ||||||||||
Total expenses | 1.70 | % | 1.65 | % | 1.60 | % | 1.66 | % | 1.64 | % | ||||||||||
Portfolio turnover rate | 331 | % | 279 | % | 259 | % | 277 | % | 416 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
102 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
RETAILING FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies engaged in merchandising finished goods and services, including department stores, mail order operations, and other companies involved in selling products to consumers (“Retailing Companies”).
For the year ended December 31, 2017, Retailing Fund returned 12.82%, compared with a return of 21.83% for the S&P 500 Index. The S&P 500 Consumer Discretionary Index returned 22.98%.
Within the Fund, the Internet & direct marketing retail industry contributed the most to the Fund’s return for the period, followed by the specialty retail industry. No industry detracted from return. The multiline retail industry contributed the least.
Fund performance for the year benefited most from Amazon.com, Inc., Wal-Mart Stores, Inc., and Home Depot, Inc. Rite Aid Corp., Advance Auto Parts, Inc., and Bed Bath & Beyond, Inc. were the largest detractors from the Fund’s performance for the period.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: July 23, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Amazon.com, Inc. | 8.0% |
Wal-Mart Stores, Inc. | 5.8% |
Home Depot, Inc. | 5.1% |
Netflix, Inc. | 3.2% |
Priceline Group, Inc. | 3.1% |
Lowe’s Companies, Inc. | 3.1% |
Costco Wholesale Corp. | 3.0% |
CVS Health Corp. | 2.9% |
Walgreens Boots Alliance, Inc. | 2.9% |
JD.com, Inc. ADR | 2.5% |
Top Ten Total | 39.6% |
“Ten Largest Holdings” excludes any temporary cash investments. |
THE RYDEX FUNDS ANNUAL REPORT | 103 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Retailing Fund | 12.82% | 10.50% | 9.38% |
S&P 500 Consumer Discretionary Index | 22.98% | 17.64% | 13.52% |
S&P 500 Index | 21.83% | 15.79% | 8.50% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Consumer Discretionary are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
104 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
RETAILING FUND |
Shares | Value | |||||||
COMMON STOCKS† - 99.6% | ||||||||
Retail - 69.3% | ||||||||
Wal-Mart Stores, Inc. | 4,628 | $ | 457,015 | |||||
Home Depot, Inc. | 2,130 | 403,699 | ||||||
Lowe’s Companies, Inc. | 2,615 | 243,038 | ||||||
Costco Wholesale Corp. | 1,276 | 237,489 | ||||||
CVS Health Corp. | 3,127 | 226,708 | ||||||
Walgreens Boots Alliance, Inc. | 3,106 | 225,558 | ||||||
TJX Companies, Inc. | 2,476 | 189,315 | ||||||
Target Corp. | 2,477 | 161,624 | ||||||
Ross Stores, Inc. | 1,876 | 150,549 | ||||||
Dollar Tree, Inc.* | 1,259 | 135,103 | ||||||
Dollar General Corp. | 1,432 | 133,190 | ||||||
Best Buy Company, Inc. | 1,805 | 123,588 | ||||||
AutoZone, Inc.*,1 | 170 | 120,933 | ||||||
O’Reilly Automotive, Inc.* | 499 | 120,029 | ||||||
L Brands, Inc. | 1,842 | 110,925 | ||||||
Ulta Beauty, Inc.* | 455 | 101,765 | ||||||
Genuine Parts Co. | 1,062 | 100,901 | ||||||
Tiffany & Co. | 950 | 98,753 | ||||||
Gap, Inc. | 2,847 | 96,969 | ||||||
CarMax, Inc.* | 1,373 | 88,050 | ||||||
Tractor Supply Co. | 1,154 | 86,262 | ||||||
Kohl’s Corp.1 | 1,518 | 82,321 | ||||||
Burlington Stores, Inc.* | 660 | 81,200 | ||||||
Nordstrom, Inc. | 1,603 | 75,950 | ||||||
Macy’s, Inc. | 2,868 | 72,245 | ||||||
Advance Auto Parts, Inc. | 721 | 71,876 | ||||||
Foot Locker, Inc.1 | 1,391 | 65,210 | ||||||
Michaels Companies, Inc.* | 2,391 | 57,838 | ||||||
Williams-Sonoma, Inc.1 | 1,076 | 55,629 | ||||||
AutoNation, Inc.* | 1,077 | 55,282 | ||||||
Urban Outfitters, Inc.* | 1,554 | 54,483 | ||||||
Penske Automotive Group, Inc. | 1,123 | 53,736 | ||||||
Five Below, Inc.* | 782 | 51,862 | ||||||
Signet Jewelers Ltd. | 905 | 51,178 | ||||||
Ollie’s Bargain Outlet Holdings, Inc.* | 931 | 49,576 | ||||||
American Eagle Outfitters, Inc. | 2,630 | 49,444 | ||||||
Dick’s Sporting Goods, Inc. | 1,619 | 46,530 | ||||||
Bed Bath & Beyond, Inc. | 2,076 | 45,651 | ||||||
Children’s Place, Inc. | 306 | 44,477 | ||||||
Sally Beauty Holdings, Inc.* | 2,346 | 44,011 | ||||||
Lithia Motors, Inc. — Class A | 383 | 43,505 | ||||||
PriceSmart, Inc. | 504 | 43,394 | ||||||
Big Lots, Inc. | 727 | 40,821 | ||||||
HSN, Inc. | 963 | 38,857 | ||||||
Party City Holdco, Inc.* | 2,630 | 36,689 | ||||||
Dillard’s, Inc. — Class A1 | 588 | 35,309 | ||||||
GameStop Corp. — Class A | 1,935 | 34,733 | ||||||
DSW, Inc. — Class A | 1,604 | 34,342 | ||||||
RH* | 391 | 33,708 | ||||||
Guess?, Inc.1 | 1,840 | 31,059 | ||||||
Group 1 Automotive, Inc. | 436 | 30,943 | ||||||
Conn’s, Inc.* | 864 | 30,715 | ||||||
Asbury Automotive Group, Inc.*,1 | 476 | 30,464 | ||||||
Abercrombie & Fitch Co. — Class A | 1,641 | 28,603 | ||||||
Chico’s FAS, Inc. | 3,147 | 27,757 | ||||||
Tailored Brands, Inc. | 1,258 | 27,462 | ||||||
PetMed Express, Inc. | 587 | 26,709 | ||||||
Lumber Liquidators Holdings, Inc.* | 815 | 25,583 | ||||||
Finish Line, Inc. — Class A | 1,601 | 23,263 | ||||||
Express, Inc.* | 2,239 | 22,726 | ||||||
Tile Shop Holdings, Inc. | 2,038 | 19,565 | ||||||
Zumiez, Inc.*,1 | 926 | 19,284 | ||||||
Hibbett Sports, Inc.*,1 | 818 | 16,687 | ||||||
GNC Holdings, Inc. — Class A*,1 | 3,116 | 11,498 | ||||||
Sears Holdings Corp.* | 2,731 | 9,777 | ||||||
Total Retail | 5,443,415 | |||||||
Internet - 24.1% | ||||||||
Amazon.com, Inc.* | 538 | 629,175 | ||||||
Netflix, Inc.* | 1,292 | 248,012 | ||||||
Priceline Group, Inc.* | 142 | 246,759 | ||||||
JD.com, Inc. ADR* | 4,808 | 199,147 | ||||||
Ctrip.com International Ltd. ADR* | 2,919 | 128,728 | ||||||
Expedia, Inc. | 958 | 114,740 | ||||||
Wayfair, Inc. — Class A* | 905 | 72,644 | ||||||
TripAdvisor, Inc.* | 1,648 | 56,790 | ||||||
Liberty Expedia Holdings, Inc. — Class A* | 968 | 42,912 | ||||||
Etsy, Inc.* | 2,071 | 42,352 | ||||||
Groupon, Inc. — Class A* | 8,160 | 41,616 | ||||||
Shutterfly, Inc.* | 703 | 34,974 | ||||||
Overstock.com, Inc.* | 520 | 33,228 | ||||||
Total Internet | 1,891,077 | |||||||
Distribution & Wholesale - 2.4% | ||||||||
LKQ Corp.* | 2,322 | 94,436 | ||||||
Pool Corp. | 472 | 61,195 | ||||||
Core-Mark Holding Company, Inc. | 1,015 | 32,053 | ||||||
Total Distribution & Wholesale | 187,684 | |||||||
Commercial Services - 1.8% | ||||||||
Aaron’s, Inc. | 1,193 | 47,541 | ||||||
Monro, Inc.1 | 662 | 37,701 | ||||||
NutriSystem, Inc. | 648 | 34,085 | ||||||
Rent-A-Center, Inc.1 | 1,833 | 20,346 | ||||||
Total Commercial Services | 139,673 | |||||||
Leisure Time - 1.0% | ||||||||
Camping World Holdings, Inc. — Class A | 1,200 | 53,676 | ||||||
Liberty TripAdvisor Holdings, Inc. — Class A* | 2,312 | 21,791 | ||||||
Total Leisure Time | 75,467 | |||||||
Oil & Gas - 0.6% | ||||||||
Murphy USA, Inc.* | 556 | 44,680 | ||||||
Home Furnishings - 0.4% | ||||||||
Sleep Number Corp.* | 862 | 32,403 | ||||||
Total Common Stocks | ||||||||
(Cost $6,554,305) | 7,814,399 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 105 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
RETAILING FUND |
Face Amount | Value | |||||||
REPURCHASE AGREEMENTS††,2 - 0.6% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | $ | 30,297 | $ | 30,297 | ||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 16,170 | 16,170 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $46,467) | 46,467 |
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 3.2% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%4 | 251,678 | 251,678 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $251,678) | 251,678 | |||||||
Total Investments - 103.4% | ||||||||
(Cost $6,852,450) | $ | 8,112,544 | ||||||
Other Assets & Liabilities, net - (3.4)% | (263,756 | ) | ||||||
Total Net Assets - 100.0% | $ | 7,848,788 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 3. |
†† | Value determined based on Level 2 inputs — See Note 3. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 5. |
2 | Repurchase Agreements — See Note 4. |
3 | Securities lending collateral — See Note 5. |
4 | Rate indicated is the 7 day yield as of December 31, 2017. |
ADR — American Depositary Receipt | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 7,814,399 | $ | — | $ | — | $ | 7,814,399 | ||||||||
Repurchase Agreements | — | 46,467 | — | 46,467 | ||||||||||||
Securities Lending Collateral | 251,678 | — | — | 251,678 | ||||||||||||
Total Assets | $ | 8,066,077 | $ | 46,467 | $ | — | $ | 8,112,544 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
106 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RETAILING FUND |
STATEMENT OF ASSETS AND LIABILITIES | |
December 31, 2017 |
Assets: | ||||
Investments, at value - including $240,621 of securities loaned (cost $6,805,983) | $ | 8,066,077 | ||
Repurchase agreements, at value (cost $46,467) | 46,467 | |||
Receivables: | ||||
Fund shares sold | 445,135 | |||
Securities sold | 149,154 | |||
Dividends | 4,931 | |||
Securities lending income | 249 | |||
Interest | 5 | |||
Total assets | 8,712,018 | |||
Liabilities: | ||||
Payable for: | ||||
Securities purchased | 430,875 | |||
Return of securities loaned | 251,678 | |||
Fund shares redeemed | 163,615 | |||
Management fees | 4,955 | |||
Transfer agent and administrative fees | 1,457 | |||
Investor service fees | 1,457 | |||
Portfolio accounting fees | 583 | |||
Miscellaneous | 8,610 | |||
Total liabilities | 863,230 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 7,848,788 | ||
Net assets consist of: | ||||
Paid in capital | $ | 7,807,359 | ||
Undistributed net investment income | 1,360 | |||
Accumulated net realized loss on investments | (1,220,025 | ) | ||
Net unrealized appreciation on investments | 1,260,094 | |||
Net assets | $ | 7,848,788 | ||
Capital shares outstanding | 105,542 | |||
Net asset value per share | $ | 74.37 |
STATEMENT OF OPERATIONS | |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $165) | $ | 81,387 | ||
Interest | 255 | |||
Income from securities lending, net | 5,231 | |||
Total investment income | 86,873 | |||
Expenses: | ||||
Management fees | 42,664 | |||
Investor service fees | 12,548 | |||
Transfer agent and administrative fees | 12,548 | |||
Professional fees | 7,494 | |||
Portfolio accounting fees | 5,020 | |||
Custodian fees | 921 | |||
Trustees’ fees* | 722 | |||
Line of credit fees | 26 | |||
Miscellaneous | 3,570 | |||
Total expenses | 85,513 | |||
Net investment income | 1,360 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (375,717 | ) | ||
Net realized loss | (375,717 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 884,370 | |||
Net change in unrealized appreciation (depreciation) | 884,370 | |||
Net realized and unrealized gain | 508,653 | |||
Net increase in net assets resulting from operations | $ | 510,013 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 107 |
RETAILING FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | 1,360 | $ | (13,684 | ) | |||
Net realized gain (loss) on investments | (375,717 | ) | 2,536,259 | |||||
Net change in unrealized appreciation (depreciation) on investments | 884,370 | (2,745,127 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 510,013 | (222,552 | ) | |||||
Distributions to shareholders from: | ||||||||
Net realized gains | — | (367,955 | ) | |||||
Total distributions to shareholders | — | (367,955 | ) | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 25,680,045 | 39,987,987 | ||||||
Distributions reinvested | — | 367,955 | ||||||
Cost of shares redeemed | (23,619,210 | ) | (42,815,112 | ) | ||||
Net increase (decrease) from capital share transactions | 2,060,835 | (2,459,170 | ) | |||||
Net increase (decrease) in net assets | 2,570,848 | (3,049,677 | ) | |||||
Net assets: | ||||||||
Beginning of year | 5,277,940 | 8,327,617 | ||||||
End of year | $ | 7,848,788 | $ | 5,277,940 | ||||
Undistributed net investment income at end of year | $ | 1,360 | $ | 13 | ||||
Capital share activity: | ||||||||
Shares sold | 374,888 | 585,034 | * | |||||
Shares issued from reinvestment of distributions | — | 5,538 | * | |||||
Shares redeemed | (349,422 | ) | (629,525 | )* | ||||
Net increase (decrease) in shares | 25,466 | (38,953 | )* |
* | Capital share activity for the year ended December 31, 2016, has been restated to reflect a 1:4 reverse share split effective December 1, 2016 — See Note 9. |
108 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RETAILING FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 65.91 | $ | 69.96 | $ | 77.68 | $ | 81.49 | $ | 66.82 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .02 | (.05 | ) | (.16 | ) | (.40 | ) | (.36 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | 8.44 | (2.93 | ) | (.20 | ) | 6.79 | 24.19 | |||||||||||||
Total from investment operations | 8.46 | (2.98 | ) | (.36 | ) | 6.39 | 23.83 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | — | — | — | — | (— | )c | ||||||||||||||
Net realized gains | — | (1.07 | ) | (7.36 | ) | (10.20 | ) | (9.16 | ) | |||||||||||
Total distributions | — | (1.07 | ) | (7.36 | ) | (10.20 | ) | (9.16 | ) | |||||||||||
Net asset value, end of period | $ | 74.37 | $ | 65.91 | $ | 69.96 | $ | 77.68 | $ | 81.49 | ||||||||||
Total Returnb | 12.82 | % | 0.30 | % | (1.33 | %) | 8.66 | % | 35.80 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 7,849 | $ | 5,278 | $ | 8,328 | $ | 7,304 | $ | 9,470 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.03 | % | (0.25 | %) | (0.19 | %) | (0.51 | %) | (0.46 | %) | ||||||||||
Total expenses | 1.70 | % | 1.66 | % | 1.60 | % | 1.66 | % | 1.64 | % | ||||||||||
Portfolio turnover rate | 447 | % | 668 | % | 225 | % | 452 | % | 1,219 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Distributions from net investment income are less than $0.01 per share. |
d | Reverse share split — Per share amounts for the periods presented through December 31, 2016 have been restated to reflect a 1:4 reverse share split effective December 1, 2016 — See Note 9. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 109 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
TECHNOLOGY FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that are involved in the technology sector, including computer software and service companies, semiconductor manufacturers, networking and telecommunications equipment manufacturers, PC hardware, and peripherals companies (“Technology Companies”).
For the year ended December 31, 2017, Technology Fund returned 32.63%, compared with a return of 21.83% for the S&P 500 Index. The S&P 500 Information Technology Index returned 38.83%.
Within the Fund, the Internet software & services industry contributed the most to the Fund’s performance for the period, followed by the semiconductors & semiconductor equipment industry. No industry detracted from return. The aerospace & defense industry contributed the least.
Top-contributing holdings were Apple, Inc., Facebook, Inc. Class A, and Microsoft Corp. Momo, Inc., ADR Class A, Pandora Media, Inc., and Synchronoss Technologies, Inc. were the weakest-performing technology holdings for the period.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 2, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Apple, Inc. | 3.5% |
Alphabet, Inc. — Class A | 3.3% |
Microsoft Corp. | 3.1% |
Facebook, Inc. — Class A | 2.7% |
Visa, Inc. — Class A | 1.9% |
Intel Corp. | 1.8% |
Cisco Systems, Inc. | 1.7% |
Oracle Corp. | 1.6% |
Alibaba Group Holding Ltd. ADR | 1.5% |
Mastercard, Inc. — Class A | 1.5% |
Top Ten Total | 22.6% |
“Ten Largest Holdings” excludes any temporary cash investments. |
110 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Technology Fund | 32.63% | 17.33% | 7.96% |
S&P 500 Information Technology Index | 38.83% | 20.90% | 11.90% |
S&P 500 Index | 21.83% | 15.79% | 8.50% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Information Technology Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 111 |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
TECHNOLOGY FUND |
Shares | Value | |||||||
COMMON STOCKS† - 99.6% | ||||||||
Software - 23.7% | ||||||||
Microsoft Corp. | 8,268 | $ | 707,245 | |||||
Oracle Corp. | 7,880 | 372,566 | ||||||
Adobe Systems, Inc.* | 1,470 | 257,603 | ||||||
salesforce.com, Inc.* | 2,301 | 235,231 | ||||||
VMware, Inc. — Class A*,1 | 1,578 | 197,755 | ||||||
Activision Blizzard, Inc. | 3,006 | 190,340 | ||||||
Intuit, Inc. | 1,125 | 177,503 | ||||||
NetEase, Inc. ADR | 501 | 172,880 | ||||||
Electronic Arts, Inc.* | 1,463 | 153,703 | ||||||
Fidelity National Information Services, Inc. | 1,627 | 153,084 | ||||||
Fiserv, Inc.* | 1,102 | 144,505 | ||||||
Paychex, Inc. | 2,005 | 136,500 | ||||||
ServiceNow, Inc.* | 1,040 | 135,606 | ||||||
Momo, Inc. ADR* | 5,430 | 132,926 | ||||||
Autodesk, Inc.* | 1,267 | 132,820 | ||||||
Workday, Inc. — Class A* | 1,250 | 127,175 | ||||||
Red Hat, Inc.* | 1,024 | 122,982 | ||||||
First Data Corp. — Class A* | 6,580 | 109,952 | ||||||
CA, Inc. | 3,121 | 103,867 | ||||||
Citrix Systems, Inc.* | 1,164 | 102,432 | ||||||
Akamai Technologies, Inc.* | 1,517 | 98,666 | ||||||
Synopsys, Inc.* | 1,150 | 98,026 | ||||||
Take-Two Interactive Software, Inc.* | 892 | 97,924 | ||||||
ANSYS, Inc.* | 660 | 97,409 | ||||||
Splunk, Inc.* | 1,150 | 95,266 | ||||||
Cadence Design Systems, Inc.* | 2,241 | 93,719 | ||||||
Broadridge Financial Solutions, Inc. | 990 | 89,674 | ||||||
CDK Global, Inc. | 1,229 | 87,603 | ||||||
Jack Henry & Associates, Inc. | 719 | 84,094 | ||||||
SS&C Technologies Holdings, Inc. | 1,930 | 78,126 | ||||||
PTC, Inc.* | 1,210 | 73,532 | ||||||
Ultimate Software Group, Inc.* | 327 | 71,361 | ||||||
Tableau Software, Inc. — Class A* | 930 | 64,356 | ||||||
Aspen Technology, Inc.* | 910 | 60,242 | ||||||
Nuance Communications, Inc.* | 3,454 | 56,473 | ||||||
Manhattan Associates, Inc.* | 1,085 | 53,751 | ||||||
RealPage, Inc.* | 1,210 | 53,603 | ||||||
j2 Global, Inc. | 705 | 52,896 | ||||||
CommVault Systems, Inc.* | 825 | 43,312 | ||||||
Twilio, Inc. — Class A*,1 | 1,680 | 39,648 | ||||||
Cornerstone OnDemand, Inc.* | 1,120 | 39,570 | ||||||
BroadSoft, Inc.* | 660 | 36,234 | ||||||
Total Software | 5,432,160 | |||||||
Semiconductors - 19.5% | ||||||||
Intel Corp. | 9,023 | 416,502 | ||||||
NVIDIA Corp. | 1,533 | 296,636 | ||||||
Texas Instruments, Inc. | 2,746 | 286,792 | ||||||
Broadcom Ltd. | 1,096 | 281,562 | ||||||
QUALCOMM, Inc. | 4,127 | 264,211 | ||||||
Applied Materials, Inc. | 3,970 | 202,946 | ||||||
Micron Technology, Inc.* | 4,546 | 186,932 | ||||||
Analog Devices, Inc. | 1,805 | 160,699 | ||||||
NXP Semiconductor N.V.* | 1,353 | 158,423 | ||||||
Lam Research Corp. | 830 | 152,778 | ||||||
Taiwan Semiconductor Manufacturing Company Ltd. ADR | 3,594 | 142,502 | ||||||
Marvell Technology Group Ltd. | 6,445 | 138,374 | ||||||
ASML Holding N.V. — Class G | 760 | 132,103 | ||||||
Microchip Technology, Inc. | 1,434 | 126,020 | ||||||
Skyworks Solutions, Inc. | 1,209 | 114,795 | ||||||
Xilinx, Inc. | 1,683 | 113,468 | ||||||
KLA-Tencor Corp. | 1,070 | 112,425 | ||||||
Maxim Integrated Products, Inc. | 2,020 | 105,606 | ||||||
IPG Photonics Corp.* | 455 | 97,429 | ||||||
Advanced Micro Devices, Inc.*,1 | 8,426 | 86,619 | ||||||
ON Semiconductor Corp.* | 4,076 | 85,351 | ||||||
Teradyne, Inc. | 1,921 | 80,432 | ||||||
Qorvo, Inc.* | 1,172 | 78,055 | ||||||
Microsemi Corp.* | 1,319 | 68,126 | ||||||
Cavium, Inc.* | 800 | 67,064 | ||||||
MKS Instruments, Inc. | 681 | 64,355 | ||||||
Cypress Semiconductor Corp. | 4,058 | 61,844 | ||||||
Monolithic Power Systems, Inc. | 532 | 59,776 | ||||||
Entegris, Inc. | 1,900 | 57,855 | ||||||
Integrated Device Technology, Inc.* | 1,832 | 54,465 | ||||||
Silicon Laboratories, Inc.* | 610 | 53,863 | ||||||
Cirrus Logic, Inc.* | 986 | 51,134 | ||||||
MACOM Technology Solutions Holdings, Inc.*,1 | 1,265 | 41,163 | ||||||
Ambarella, Inc.* | 653 | 38,364 | ||||||
Synaptics, Inc.* | 829 | 33,110 | ||||||
Total Semiconductors | 4,471,779 | |||||||
Internet - 18.5% | ||||||||
Alphabet, Inc. — Class A* | 718 | 756,341 | ||||||
Facebook, Inc. — Class A* | 3,526 | 622,198 | ||||||
Alibaba Group Holding Ltd. ADR* | 2,050 | 353,481 | ||||||
Baidu, Inc. ADR* | 998 | 233,742 | ||||||
eBay, Inc.* | 4,622 | 174,434 | ||||||
MercadoLibre, Inc. | 496 | 156,071 | ||||||
Weibo Corp. ADR* | 1,320 | 136,567 | ||||||
YY, Inc. ADR* | 1,200 | 135,672 | ||||||
SINA Corp.* | 1,319 | 132,309 | ||||||
Shopify, Inc. — Class A* | 1,275 | 128,775 | ||||||
Twitter, Inc.* | 4,962 | 119,138 | ||||||
Symantec Corp. | 3,947 | 110,753 | ||||||
Snap, Inc. — Class A*,1 | 7,270 | 106,215 | ||||||
Palo Alto Networks, Inc.* | 693 | 100,443 | ||||||
VeriSign, Inc.* | 802 | 91,781 | ||||||
CDW Corp. | 1,280 | 88,947 | ||||||
IAC/InterActiveCorp* | 720 | 88,042 | ||||||
Match Group, Inc.*,1 | 2,720 | 85,163 | ||||||
GoDaddy, Inc. — Class A* | 1,610 | 80,951 | ||||||
F5 Networks, Inc.* | 591 | 77,551 | ||||||
Zillow Group, Inc. — Class C* | 1,860 | 76,111 | ||||||
GrubHub, Inc.* | 950 | 68,210 | ||||||
Proofpoint, Inc.* | 610 | 54,174 | ||||||
Stamps.com, Inc.* | 283 | 53,204 | ||||||
Yelp, Inc. — Class A* | 1,233 | 51,737 |
112 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2017 |
TECHNOLOGY FUND |
Shares | Value | |||||||
FireEye, Inc.* | 3,161 | $ | 44,886 | |||||
Etsy, Inc.* | 2,140 | 43,763 | ||||||
Trade Desk, Inc. — Class A*,1 | 790 | 36,127 | ||||||
Pandora Media, Inc.*,1 | 6,075 | 29,281 | ||||||
Total Internet | 4,236,067 | |||||||
Computers - 13.5% | ||||||||
Apple, Inc. | 4,716 | 798,089 | ||||||
International Business Machines Corp. | 2,142 | 328,626 | ||||||
Cognizant Technology Solutions Corp. — Class A | 2,513 | 178,473 | ||||||
HP, Inc. | 7,696 | 161,693 | ||||||
Accenture plc — Class A | 992 | 151,865 | ||||||
DXC Technology Co. | 1,514 | 143,679 | ||||||
Western Digital Corp. | 1,665 | 132,418 | ||||||
Infosys Ltd. ADR | 8,083 | 131,106 | ||||||
Hewlett Packard Enterprise Co. | 9,078 | 130,360 | ||||||
Check Point Software Technologies Ltd.* | 1,244 | 128,903 | ||||||
NetApp, Inc. | 1,869 | 103,393 | ||||||
Seagate Technology plc | 2,335 | 97,696 | ||||||
Leidos Holdings, Inc. | 1,349 | 87,105 | ||||||
Amdocs Ltd. | 1,320 | 86,434 | ||||||
Fortinet, Inc.* | 1,760 | 76,894 | ||||||
Nutanix, Inc. — Class A* | 1,830 | 64,562 | ||||||
CSRA, Inc. | 2,070 | 61,935 | ||||||
Teradata Corp.* | 1,552 | 59,690 | ||||||
NCR Corp.* | 1,702 | 57,851 | ||||||
NetScout Systems, Inc.* | 1,512 | 46,040 | ||||||
Lumentum Holdings, Inc.* | 908 | 44,401 | ||||||
Electronics for Imaging, Inc.* | 1,090 | 32,188 | ||||||
Total Computers | 3,103,401 | |||||||
Commercial Services - 6.3% | ||||||||
PayPal Holdings, Inc.* | 3,531 | 259,952 | ||||||
Automatic Data Processing, Inc. | 1,673 | 196,059 | ||||||
FleetCor Technologies, Inc.* | 590 | 113,534 | ||||||
Global Payments, Inc. | 1,093 | 109,562 | ||||||
Total System Services, Inc. | 1,350 | 106,772 | ||||||
Vantiv, Inc. — Class A* | 1,360 | 100,028 | ||||||
Square, Inc. — Class A* | 2,790 | 96,729 | ||||||
Gartner, Inc.* | 769 | 94,702 | ||||||
CoStar Group, Inc.* | 310 | 92,055 | ||||||
Western Union Co. | 4,230 | 80,412 | ||||||
WEX, Inc.* | 510 | 72,027 | ||||||
Sabre Corp. | 3,256 | 66,748 | ||||||
Euronet Worldwide, Inc.* | 670 | 56,461 | ||||||
Total Commercial Services | 1,445,041 | |||||||
Electronics - 5.7% | ||||||||
Corning, Inc. | 4,502 | 144,019 | ||||||
Amphenol Corp. — Class A | 1,632 | 143,290 | ||||||
TE Connectivity Ltd. | 1,370 | 130,205 | ||||||
Trimble, Inc.* | 2,176 | 88,433 | ||||||
Flex Ltd.* | 4,699 | 84,535 | ||||||
Keysight Technologies, Inc.* | 1,860 | 77,376 | ||||||
Arrow Electronics, Inc.* | 931 | 74,862 | ||||||
Coherent, Inc.* | 260 | 73,377 | ||||||
FLIR Systems, Inc. | 1,520 | 70,862 | ||||||
National Instruments Corp. | 1,530 | 63,694 | ||||||
Avnet, Inc. | 1,520 | 60,222 | ||||||
Jabil, Inc. | 2,174 | 57,068 | ||||||
Tech Data Corp.* | 560 | 54,863 | ||||||
Vishay Intertechnology, Inc. | 2,330 | 48,348 | ||||||
II-VI, Inc.* | 995 | 46,715 | ||||||
Sanmina Corp.* | 1,330 | 43,890 | ||||||
KEMET Corp.* | 1,690 | 25,451 | ||||||
Applied Optoelectronics, Inc.*,1 | 598 | 22,616 | ||||||
Total Electronics | 1,309,826 | |||||||
Telecommunications - 5.3% | ||||||||
Cisco Systems, Inc. | 9,931 | 380,357 | ||||||
Arista Networks, Inc.* | 504 | 118,732 | ||||||
Motorola Solutions, Inc. | 1,172 | 105,878 | ||||||
Juniper Networks, Inc. | 3,177 | 90,545 | ||||||
CommScope Holding Company, Inc.* | 1,931 | 73,050 | ||||||
Ubiquiti Networks, Inc.*,1 | 995 | 70,665 | ||||||
LogMeIn, Inc. | 591 | 67,670 | ||||||
ViaSat, Inc.*,1 | 806 | 60,329 | ||||||
ARRIS International plc* | 2,199 | 56,492 | ||||||
Ciena Corp.* | 2,209 | 46,234 | ||||||
Finisar Corp.* | 2,013 | 40,965 | ||||||
NETGEAR, Inc.* | 685 | 40,244 | ||||||
Viavi Solutions, Inc.* | 4,413 | 38,570 | ||||||
Oclaro, Inc.*,1 | 4,164 | 28,065 | ||||||
Total Telecommunications | 1,217,796 | |||||||
Diversified Financial Services - 4.3% | ||||||||
Visa, Inc. — Class A | 3,753 | 427,917 | ||||||
Mastercard, Inc. — Class A | 2,322 | 351,458 | ||||||
Alliance Data Systems Corp. | 433 | 109,757 | ||||||
Ellie Mae, Inc.* | 550 | 49,170 | ||||||
Blackhawk Network Holdings, Inc.* | 1,085 | 38,680 | ||||||
Total Diversified Financial Services | 976,982 | |||||||
Electrical Components & Equipment - 0.8% | ||||||||
Universal Display Corp. | 460 | 79,419 | ||||||
Littelfuse, Inc. | 300 | 59,346 | ||||||
Advanced Energy Industries, Inc.* | 668 | 45,077 | ||||||
Total Electrical Components & Equipment | 183,842 | |||||||
Machinery-Diversified - 0.7% | ||||||||
Cognex Corp. | 1,450 | 88,682 | ||||||
Zebra Technologies Corp. — Class A* | 625 | 64,875 | ||||||
Total Machinery-Diversified | 153,557 | |||||||
Aerospace & Defense - 0.5% | ||||||||
Harris Corp. | 794 | 112,470 | ||||||
Office & Business Equipment - 0.3% | ||||||||
Xerox Corp. | 2,565 | 74,770 | ||||||
Energy-Alternate Sources - 0.3% | ||||||||
First Solar, Inc.* | 1,070 | 72,246 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 113 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
TECHNOLOGY FUND |
Shares | Value | |||||||
Building Materials - 0.2% | ||||||||
Cree, Inc.* | 1,478 | $ | 54,893 | |||||
Total Common Stocks | ||||||||
(Cost $13,778,272) | 22,844,830 | |||||||
Face Amount | ||||||||
REPURCHASE AGREEMENTS††,2 - 1.0% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | $ | 154,908 | 154,908 | |||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 82,675 | 82,675 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $237,583) | 237,583 |
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 2.6% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%4 | 596,241 | 596,241 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $596,241) | 596,241 | |||||||
Total Investments - 103.2% | ||||||||
(Cost $14,612,096) | $ | 23,678,654 | ||||||
Other Assets & Liabilities, net - (3.2)% | (739,116 | ) | ||||||
Total Net Assets - 100.0% | $ | 22,939,538 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 3. |
†† | Value determined based on Level 2 inputs — See Note 3. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 5. |
2 | Repurchase Agreements — See Note 4. |
3 | Securities lending collateral — See Note 5. |
4 | Rate indicated is the 7 day yield as of December 31, 2017. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 22,844,830 | $ | — | $ | — | $ | 22,844,830 | ||||||||
Repurchase Agreements | — | 237,583 | — | 237,583 | ||||||||||||
Securities Lending Collateral | 596,241 | — | — | 596,241 | ||||||||||||
Total Assets | $ | 23,441,071 | $ | 237,583 | $ | — | $ | 23,678,654 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
114 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
TECHNOLOGY FUND |
STATEMENT OF ASSETS AND LIABILITIES | |
December 31, 2017 |
Assets: | ||||
Investments, at value - including $569,002 of securities loaned (cost $14,374,513) | $ | 23,441,071 | ||
Repurchase agreements, at value (cost $237,583) | 237,583 | |||
Cash | 1,936 | |||
Receivables: | ||||
Fund shares sold | 64,751 | |||
Dividends | 9,500 | |||
Securities lending income | 1,156 | |||
Foreign tax reclaims | 590 | |||
Interest | 28 | |||
Total assets | 23,756,615 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities loaned | 596,241 | |||
Fund shares redeemed | 152,529 | |||
Management fees | 17,057 | |||
Transfer agent and administrative fees | 5,017 | |||
Investor service fees | 5,017 | |||
Portfolio accounting fees | 2,007 | |||
Miscellaneous | 39,209 | |||
Total liabilities | 817,077 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 22,939,538 | ||
Net assets consist of: | ||||
Paid in capital | $ | 14,845,216 | ||
Accumulated net investment loss | (17,487 | ) | ||
Accumulated net realized loss on investments | (954,749 | ) | ||
Net unrealized appreciation on investments | 9,066,558 | |||
Net assets | $ | 22,939,538 | ||
Capital shares outstanding | 237,209 | |||
Net asset value per share | $ | 96.71 |
STATEMENT OF OPERATIONS | |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $88) | $ | 228,387 | ||
Interest | 1,269 | |||
Income from securities lending, net | 14,835 | |||
Total investment income | 244,491 | |||
Expenses: | ||||
Management fees | 194,494 | |||
Investor service fees | 57,204 | |||
Transfer agent and administrative fees | 57,204 | |||
Professional fees | 31,955 | |||
Portfolio accounting fees | 22,882 | |||
Custodian fees | 3,771 | |||
Trustees’ fees* | 2,487 | |||
Line of credit fees | 7 | |||
Miscellaneous | 19,900 | |||
Total expenses | 389,904 | |||
Net investment loss | (145,413 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 1,560,782 | |||
Net realized gain | 1,560,782 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 4,572,472 | |||
Net change in unrealized appreciation (depreciation) | 4,572,472 | |||
Net realized and unrealized gain | 6,133,254 | |||
Net increase in net assets resulting from operations | $ | 5,987,841 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 115 |
TECHNOLOGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (145,413 | ) | $ | (44,825 | ) | ||
Net realized gain on investments | 1,560,782 | 3,080,842 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 4,572,472 | (2,095,938 | ) | |||||
Net increase in net assets resulting from operations | 5,987,841 | 940,079 | ||||||
Distributions to shareholders from: | ||||||||
Net realized gains | (599,849 | ) | (727,921 | ) | ||||
Total distributions to shareholders | (599,849 | ) | (727,921 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 48,485,786 | 51,734,032 | ||||||
Distributions reinvested | 599,849 | 727,921 | ||||||
Cost of shares redeemed | (49,690,430 | ) | (53,559,382 | ) | ||||
Net decrease from capital share transactions | (604,795 | ) | (1,097,429 | ) | ||||
Net increase (decrease) in net assets | 4,783,197 | (885,271 | ) | |||||
Net assets: | ||||||||
Beginning of year | 18,156,341 | 19,041,612 | ||||||
End of year | $ | 22,939,538 | $ | 18,156,341 | ||||
Accumulated net investment loss at end of year | $ | (17,487 | ) | $ | (22,015 | ) | ||
Capital share activity: | ||||||||
Shares sold | 551,981 | 724,058 | ||||||
Shares issued from reinvestment of distributions | 6,951 | 10,543 | ||||||
Shares redeemed | (564,197 | ) | (757,688 | ) | ||||
Net decrease in shares | (5,265 | ) | (23,087 | ) |
116 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
TECHNOLOGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended | Year Ended | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 74.88 | $ | 71.70 | $ | 71.28 | $ | 64.65 | $ | 47.78 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.56 | ) | (.21 | ) | (.32 | ) | (.32 | ) | (.15 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 24.71 | 7.78 | 1.13 | 6.95 | 17.02 | |||||||||||||||
Total from investment operations | 24.15 | 7.57 | .81 | 6.63 | 16.87 | |||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (2.32 | ) | (4.39 | ) | (.39 | ) | — | — | ||||||||||||
Total distributions | (2.32 | ) | (4.39 | ) | (.39 | ) | — | — | ||||||||||||
Net asset value, end of period | $ | 96.71 | $ | 74.88 | $ | 71.70 | $ | 71.28 | $ | 64.65 | ||||||||||
Total Returnb | 32.63 | % | 11.07 | % | 1.11 | % | 10.26 | % | 35.39 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 22,940 | $ | 18,156 | $ | 19,042 | $ | 18,218 | $ | 14,649 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.64 | %) | (0.29 | %) | (0.45 | %) | (0.47 | %) | (0.29 | %) | ||||||||||
Total expenses | 1.70 | % | 1.66 | % | 1.60 | % | 1.66 | % | 1.63 | % | ||||||||||
Portfolio turnover rate | 200 | % | 321 | % | 142 | % | 197 | % | 382 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Reverse share split — Per share amounts for the periods presented through December 31, 2014 have been restated to reflect a 1:5 reverse share split effective January 24, 2014. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 117 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
TELECOMMUNICATIONS FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies engaged in the development, manufacture, or sale of communications services or communications equipment (“Telecommunications Companies”).
For the year ended December 31, 2017, Telecommunications Fund returned 5.85%, compared with a return of 21.83% for the S&P 500 Index. The S&P 500 Telecommunications Services Index returned (1.25%).
The industries contributing the most were the communications equipment industry and equity real estate investment trusts. The diversified telecommunications services industry was the only detractor from return.
Cisco Systems, Inc., Arista Networks, Inc., and SBA Communications Corp. Class A were the strongest performers for the year. Sprint Corp., Windstream Holdings, Inc., and CenturyLink, Inc. detracted the most from performance during the year.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: July 27, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
AT&T, Inc. | 10.0% |
Verizon Communications, Inc. | 9.4% |
Cisco Systems, Inc. | 8.7% |
QUALCOMM, Inc. | 6.1% |
T-Mobile US, Inc. | 4.6% |
Crown Castle International Corp. | 4.2% |
Sprint Corp. | 3.2% |
SBA Communications Corp. | 2.7% |
Arista Networks, Inc. | 2.7% |
CenturyLink, Inc. | 2.6% |
Top Ten Total | 54.2% |
“Ten Largest Holdings” excludes any temporary cash investments. |
118 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Telecommunications Fund | 5.85% | 6.92% | 0.10% |
S&P 500 Telecommunication Services Index | (1.25%) | 7.68% | 5.07% |
S&P 500 Index | 21.83% | 15.79% | 8.50% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Telecommunication Services Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 119 |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
TELECOMMUNICATIONS FUND |
Shares | Value | |||||||
COMMON STOCKS† - 99.6% | ||||||||
Telecommunications - 74.9% | ||||||||
AT&T, Inc. | 9,082 | $ | 353,108 | |||||
Verizon Communications, Inc. | 6,215 | 328,960 | ||||||
Cisco Systems, Inc. | 8,017 | 307,051 | ||||||
T-Mobile US, Inc.* | 2,552 | 162,077 | ||||||
Sprint Corp.* | 19,138 | 112,723 | ||||||
Arista Networks, Inc.* | 403 | 94,939 | ||||||
CenturyLink, Inc. | 5,569 | 92,891 | ||||||
Motorola Solutions, Inc. | 936 | 84,558 | ||||||
Juniper Networks, Inc. | 2,564 | 73,074 | ||||||
Zayo Group Holdings, Inc.* | 1,845 | 67,896 | ||||||
Vodafone Group plc ADR | 1,914 | 61,057 | ||||||
CommScope Holding Company, Inc.* | 1,562 | 59,090 | ||||||
Ubiquiti Networks, Inc.*,1 | 811 | 57,597 | ||||||
EchoStar Corp. — Class A* | 894 | 53,551 | ||||||
ViaSat, Inc.*,1 | 643 | 48,129 | ||||||
America Movil SAB de CV — Class L ADR | 2,777 | 47,626 | ||||||
ARRIS International plc* | 1,776 | 45,625 | ||||||
China Mobile Ltd. ADR | 882 | 44,576 | ||||||
BCE, Inc. | 868 | 41,673 | ||||||
Telephone & Data Systems, Inc. | 1,419 | 39,448 | ||||||
Ciena Corp.* | 1,772 | 37,088 | ||||||
InterDigital, Inc. | 481 | 36,628 | ||||||
Vonage Holdings Corp.* | 3,392 | 34,497 | ||||||
Straight Path Communications, Inc. — Class B* | 186 | 33,813 | ||||||
Finisar Corp.* | 1,626 | 33,089 | ||||||
NETGEAR, Inc.* | 545 | 32,019 | ||||||
Viavi Solutions, Inc.* | 3,564 | 31,149 | ||||||
Shenandoah Telecommunications Co. | 829 | 28,020 | ||||||
Extreme Networks, Inc.* | 2,114 | 26,467 | ||||||
Acacia Communications, Inc.*,1 | 674 | 24,419 | ||||||
Iridium Communications, Inc.* | 2,021 | 23,848 | ||||||
Oclaro, Inc.* | 3,360 | 22,646 | ||||||
Infinera Corp.* | 3,226 | 20,421 | ||||||
ADTRAN, Inc. | 1,048 | 20,279 | ||||||
ORBCOMM, Inc.* | 1,922 | 19,566 | ||||||
Consolidated Communications Holdings, Inc. | 1,593 | 19,419 | ||||||
Frontier Communications Corp. | 1,940 | 13,114 | ||||||
Total Telecommunications | 2,632,131 | |||||||
REITs - 7.0% | ||||||||
Crown Castle International Corp. | 1,342 | 148,976 | ||||||
SBA Communications Corp.* | 590 | 96,382 | ||||||
Total REITs | 245,358 | |||||||
Internet - 6.4% | ||||||||
Palo Alto Networks, Inc.* | 563 | 81,601 | ||||||
F5 Networks, Inc.* | 483 | 63,379 | ||||||
Cogent Communications Holdings, Inc. | 699 | 31,665 | ||||||
8x8, Inc.* | 1,821 | 25,676 | ||||||
Boingo Wireless, Inc.* | 946 | 21,285 | ||||||
Total Internet | 223,606 | |||||||
Semiconductors - 6.1% | ||||||||
QUALCOMM, Inc. | 3,347 | 214,275 | ||||||
Aerospace & Defense - 2.6% | ||||||||
Harris Corp. | 646 | 91,506 | ||||||
Computers - 2.1% | ||||||||
NetScout Systems, Inc.* | 1,222 | 37,210 | ||||||
Lumentum Holdings, Inc.* | 731 | 35,745 | ||||||
Total Computers | 72,955 | |||||||
Electronics - 0.5% | ||||||||
Applied Optoelectronics, Inc.*,1 | 477 | 18,040 | ||||||
Total Common Stocks | ||||||||
(Cost $2,719,403) | 3,497,871 |
Face Amount | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.6% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | $ | 15,067 | 15,067 | |||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 8,041 | 8,041 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $23,108) | 23,108 |
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 3.3% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%4 | 114,600 | 114,600 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $114,600) | 114,600 | |||||||
Total Investments - 103.5% | ||||||||
(Cost $2,857,111) | $ | 3,635,579 | ||||||
Other Assets & Liabilities, net - (3.5)% | (121,894 | ) | ||||||
Total Net Assets - 100.0% | $ | 3,513,685 |
120 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
TELECOMMUNICATIONS FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 3. |
†† | Value determined based on Level 2 inputs — See Note 3. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 5. |
2 | Repurchase Agreements — See Note 4. |
3 | Securities lending collateral — See Note 5. |
4 | Rate indicated is the 7 day yield as of December 31, 2017. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 3,497,871 | $ | — | $ | — | $ | 3,497,871 | ||||||||
Repurchase Agreements | — | 23,108 | — | 23,108 | ||||||||||||
Securities Lending Collateral | 114,600 | — | — | 114,600 | ||||||||||||
Total Assets | $ | 3,612,471 | $ | 23,108 | $ | — | $ | 3,635,579 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 121 |
TELECOMMUNICATIONS FUND |
STATEMENT OF ASSETS AND LIABILITIES | |
December 31, 2017 |
Assets: | ||||
Investments, at value - including $110,081 of securities loaned (cost $2,834,003) | $ | 3,612,471 | ||
Repurchase agreements, at value (cost $23,108) | 23,108 | |||
Receivables: | ||||
Securities sold | 47,886 | |||
Dividends | 1,662 | |||
Securities lending income | 738 | |||
Fund shares sold | 691 | |||
Foreign tax reclaims | 133 | |||
Investment adviser | 8 | |||
Interest | 3 | |||
Total assets | 3,686,700 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities loaned | 114,600 | |||
Fund shares redeemed | 49,515 | |||
Management fees | 2,506 | |||
Transfer agent and administrative fees | 737 | |||
Investor service fees | 737 | |||
Portfolio accounting fees | 295 | |||
Miscellaneous | 4,625 | |||
Total liabilities | 173,015 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 3,513,685 | ||
Net assets consist of: | ||||
Paid in capital | $ | 3,105,218 | ||
Undistributed net investment income | 18,812 | |||
Accumulated net realized loss on investments | (388,813 | ) | ||
Net unrealized appreciation on investments | 778,468 | |||
Net assets | $ | 3,513,685 | ||
Capital shares outstanding | 60,081 | |||
Net asset value per share | $ | 58.48 |
STATEMENT OF OPERATIONS | |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $120) | $ | 75,234 | ||
Interest | 154 | |||
Income from securities lending, net | 4,669 | |||
Total investment income | 80,057 | |||
Expenses: | ||||
Management fees | 28,881 | |||
Investor service fees | 8,495 | |||
Transfer agent and administrative fees | 8,495 | |||
Professional fees | 4,433 | |||
Portfolio accounting fees | 3,398 | |||
Custodian fees | 577 | |||
Trustees’ fees* | 408 | |||
Line of credit fees | 30 | |||
Miscellaneous | 3,152 | |||
Total expenses | 57,869 | |||
Net investment income | 22,188 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 174,301 | |||
Net realized gain | 174,301 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (53,631 | ) | ||
Net change in unrealized appreciation (depreciation) | (53,631 | ) | ||
Net realized and unrealized gain | 120,670 | |||
Net increase in net assets resulting from operations | $ | 142,858 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
122 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
TELECOMMUNICATIONS FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 22,188 | $ | 34,494 | ||||
Net realized gain on investments | 174,301 | 470,436 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (53,631 | ) | 187,227 | |||||
Net increase in net assets resulting from operations | 142,858 | 692,157 | ||||||
Distributions to shareholders from: | ||||||||
Net investment income | (36,179 | ) | (18,622 | ) | ||||
Net realized gains | (47,615 | ) | — | |||||
Total distributions to shareholders | (83,794 | ) | (18,622 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 13,601,984 | 20,168,236 | ||||||
Distributions reinvested | 83,794 | 18,622 | ||||||
Cost of shares redeemed | (15,614,915 | ) | (17,805,407 | ) | ||||
Net increase (decrease) from capital share transactions | (1,929,137 | ) | 2,381,451 | |||||
Net increase (decrease) in net assets | (1,870,073 | ) | 3,054,986 | |||||
Net assets: | ||||||||
Beginning of year | 5,383,758 | 2,328,772 | ||||||
End of year | $ | 3,513,685 | $ | 5,383,758 | ||||
Undistributed net investment income at end of year | $ | 18,812 | $ | 34,494 | ||||
Capital share activity: | ||||||||
Shares sold | 236,843 | 384,917 | ||||||
Shares issued from reinvestment of distributions | 1,515 | 346 | ||||||
Shares redeemed | (272,681 | ) | (338,664 | ) | ||||
Net increase (decrease) in shares | (34,323 | ) | 46,599 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 123 |
TELECOMMUNICATIONS FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended | Year Ended | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 57.03 | $ | 48.71 | $ | 53.12 | $ | 52.94 | $ | 46.00 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .37 | .45 | .42 | .61 | .85 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 2.86 | 8.03 | (3.94 | ) | .79 | 7.09 | ||||||||||||||
Total from investment operations | 3.23 | 8.48 | (3.52 | ) | 1.40 | 7.94 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.77 | ) | (.16 | ) | (.89 | ) | (1.22 | ) | (1.00 | ) | ||||||||||
Net realized gains | (1.01 | ) | — | — | — | — | ||||||||||||||
Total distributions | (1.78 | ) | (.16 | ) | (.89 | ) | (1.22 | ) | (1.00 | ) | ||||||||||
Net asset value, end of period | $ | 58.48 | $ | 57.03 | $ | 48.71 | $ | 53.12 | $ | 52.94 | ||||||||||
Total Returnb | 5.85 | % | 17.40 | % | (6.73 | %) | 2.62 | % | 17.46 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 3,514 | $ | 5,384 | $ | 2,329 | $ | 2,382 | $ | 2,194 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.65 | % | 0.86 | % | 0.80 | % | 1.14 | % | 1.73 | % | ||||||||||
Total expenses | 1.70 | % | 1.66 | % | 1.60 | % | 1.66 | % | 1.64 | % | ||||||||||
Portfolio turnover rate | 372 | % | 410 | % | 232 | % | 495 | % | 1,267 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Reverse share split — Per share amounts for the periods presented through December 31, 2014 have been restated to reflect a 1:5 reverse share split effective January 24, 2014. |
124 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
TRANSPORTATION FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies engaged in providing transportation services or companies engaged in the design, manufacture, distribution, or sale of transportation equipment (“Transportation Companies”).
For the year ended December 31, 2017, Transportation Fund returned 22.02%, compared with a return of 21.83% for the S&P 500 Index. The S&P 500 Industrials Index returned 21.03%.
The road & rail industry was the largest contributor to the Fund’s performance for the period, followed by the automobiles industry. The transportation infrastructure industry was the only detractor from return.
Tesla, Inc., CSX Corp., and Union Pacific Corp. were the biggest contributors to performance for the year. Hawaiian Holdings, Inc., Alaska Air Group, Inc., and Spirit Airlines, Inc. detracted the most from performance during the year.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: June 11, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Union Pacific Corp. | 4.6% |
United Parcel Service, Inc. — Class B | 4.5% |
FedEx Corp. | 3.7% |
General Motors Co. | 3.3% |
Ford Motor Co. | 3.1% |
Tesla, Inc. | 3.0% |
CSX Corp. | 3.0% |
Norfolk Southern Corp. | 2.9% |
Delta Air Lines, Inc. | 2.8% |
Southwest Airlines Co. | 2.8% |
Top Ten Total | 33.7% |
“Ten Largest Holdings” excludes any temporary cash investments. |
THE RYDEX FUNDS ANNUAL REPORT | 125 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Transportation Fund | 22.02% | 17.49% | 9.80% |
S&P 500 Industrials Index | 21.03% | 16.72% | 8.62% |
S&P 500 Index | 21.83% | 15.79% | 8.50% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Industrials Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
126 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
TRANSPORTATION FUND |
Shares | Value | |||||||
COMMON STOCKS† - 99.5% | ||||||||
Transportation - 42.7% | ||||||||
Union Pacific Corp. | 4,038 | $ | 541,496 | |||||
United Parcel Service, Inc. — Class B | 4,447 | 529,860 | ||||||
FedEx Corp. | 1,735 | 432,952 | ||||||
CSX Corp. | 6,440 | 354,265 | ||||||
Norfolk Southern Corp. | 2,316 | 335,588 | ||||||
XPO Logistics, Inc.* | 2,060 | 188,675 | ||||||
J.B. Hunt Transport Services, Inc. | 1,635 | 187,992 | ||||||
CH Robinson Worldwide, Inc. | 2,063 | 183,793 | ||||||
Expeditors International of Washington, Inc. | 2,725 | 176,280 | ||||||
Old Dominion Freight Line, Inc. | 1,317 | 173,251 | ||||||
Kansas City Southern | 1,592 | 167,510 | ||||||
Canadian Pacific Railway Ltd. | 854 | 156,077 | ||||||
Canadian National Railway Co. | 1,884 | 155,430 | ||||||
Knight-Swift Transportation Holdings, Inc. | 3,345 | 146,243 | ||||||
ZTO Express Cayman, Inc. ADR* | 8,550 | 135,518 | ||||||
Schneider National, Inc. — Class B | 4,240 | 121,094 | ||||||
Genesee & Wyoming, Inc. — Class A* | 1,487 | 117,072 | ||||||
Ryder System, Inc. | 1,317 | 110,852 | ||||||
Landstar System, Inc. | 1,042 | 108,472 | ||||||
Kirby Corp.* | 1,588 | 106,078 | ||||||
Werner Enterprises, Inc. | 2,280 | 88,122 | ||||||
Heartland Express, Inc. | 3,182 | 74,268 | ||||||
Saia, Inc.* | 1,010 | 71,458 | ||||||
Forward Air Corp. | 1,170 | 67,205 | ||||||
Hub Group, Inc. — Class A* | 1,398 | 66,964 | ||||||
Atlas Air Worldwide Holdings, Inc.* | 1,098 | 64,398 | ||||||
Air Transport Services Group, Inc.* | 2,630 | 60,858 | ||||||
ArcBest Corp. | 1,372 | 49,049 | ||||||
Echo Global Logistics, Inc.* | 1,620 | 45,360 | ||||||
Total Transportation | 5,016,180 | |||||||
Airlines - 17.4% | ||||||||
Delta Air Lines, Inc. | 5,870 | 328,720 | ||||||
Southwest Airlines Co. | 5,003 | 327,447 | ||||||
American Airlines Group, Inc. | 4,974 | 258,797 | ||||||
United Continental Holdings, Inc.* | 3,533 | 238,124 | ||||||
Alaska Air Group, Inc. | 2,175 | 159,884 | ||||||
JetBlue Airways Corp.* | 6,198 | 138,463 | ||||||
Copa Holdings S.A. — Class A | 970 | 130,038 | ||||||
Ryanair Holdings plc ADR* | 1,164 | 121,277 | ||||||
Spirit Airlines, Inc.* | 2,100 | 94,185 | ||||||
Allegiant Travel Co. — Class A | 549 | 84,958 | ||||||
SkyWest, Inc. | 1,584 | 84,111 | ||||||
Hawaiian Holdings, Inc. | 1,872 | 74,599 | ||||||
Total Airlines | 2,040,603 | |||||||
Auto Parts & Equipment - 16.4% | ||||||||
Aptiv plc | 2,651 | 224,884 | ||||||
Lear Corp. | 1,023 | 180,723 | ||||||
BorgWarner, Inc. | 3,245 | 165,787 | ||||||
Goodyear Tire & Rubber Co. | 4,605 | 148,788 | ||||||
Magna International, Inc. | 2,520 | 142,808 | ||||||
Autoliv, Inc.1 | 1,090 | 138,517 | ||||||
Adient plc | 1,758 | 138,355 | ||||||
Delphi Technologies plc* | 2,547 | 133,641 | ||||||
Dana, Inc. | 3,492 | 111,779 | ||||||
Visteon Corp.* | 812 | 101,614 | ||||||
Tenneco, Inc. | 1,560 | 91,322 | ||||||
Cooper-Standard Holdings, Inc.* | 640 | 78,400 | ||||||
Dorman Products, Inc.* | 1,210 | 73,979 | ||||||
American Axle & Manufacturing Holdings, Inc.* | 4,164 | 70,913 | ||||||
Cooper Tire & Rubber Co. | 2,000 | 70,700 | ||||||
Gentherm, Inc.* | 1,734 | 55,055 | ||||||
Total Auto Parts & Equipment | 1,927,265 | |||||||
Auto Manufacturers - 13.1% | ||||||||
General Motors Co. | 9,580 | 392,684 | ||||||
Ford Motor Co. | 29,069 | 363,072 | ||||||
Tesla, Inc.*,1 | 1,147 | 357,119 | ||||||
Tata Motors Ltd. ADR* | 4,420 | 146,169 | ||||||
Fiat Chrysler Automobiles N.V.* | 7,887 | 140,704 | ||||||
Ferrari N.V. | 1,341 | 140,591 | ||||||
Total Auto Manufacturers | 1,540,339 | |||||||
Commercial Services - 3.7% | ||||||||
AMERCO | 372 | 140,582 | ||||||
Macquarie Infrastructure Corp. | 1,850 | 118,770 | ||||||
Avis Budget Group, Inc.* | 2,285 | 100,266 | ||||||
Hertz Global Holdings, Inc.*,1 | 3,132 | 69,217 | ||||||
Total Commercial Services | 428,835 | |||||||
Leisure Time - 2.6% | ||||||||
Harley-Davidson, Inc.1 | 2,981 | 151,673 | ||||||
LCI Industries | 739 | 96,070 | ||||||
Fox Factory Holding Corp.* | 1,590 | 61,772 | ||||||
Total Leisure Time | 309,515 | |||||||
Home Builders - 1.8% | ||||||||
Thor Industries, Inc. | 971 | 146,349 | ||||||
Winnebago Industries, Inc. | 1,245 | 69,222 | ||||||
Total Home Builders | 215,571 | |||||||
Electronics - 1.1% | ||||||||
Gentex Corp. | 6,101 | 127,816 | ||||||
Internet - 0.7% | ||||||||
Cars.com, Inc.*,1 | 2,667 | 76,916 | ||||||
Total Common Stocks | ||||||||
(Cost $7,224,447) | 11,683,040 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 127 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
TRANSPORTATION FUND |
Face Amount | Value | |||||||
REPURCHASE AGREEMENTS††,2 - 0.7% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | $ | 50,428 | $ | 50,428 | ||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 26,914 | 26,914 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $77,342) | 77,342 |
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 4.8% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%4 | 565,851 | 565,851 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $565,851) | 565,851 | |||||||
Total Investments - 105.0% | ||||||||
(Cost $7,867,640) | $ | 12,326,233 | ||||||
Other Assets & Liabilities, net - (5.0)% | (587,701 | ) | ||||||
Total Net Assets - 100.0% | $ | 11,738,532 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 3. |
†† | Value determined based on Level 2 inputs — See Note 3. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 5. |
2 | Repurchase Agreements — See Note 4. |
3 | Securities lending collateral — See Note 5. |
4 | Rate indicated is the 7 day yield as of December 31, 2017.. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
See Sector Classification in Other Information section |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 11,683,040 | $ | — | $ | — | $ | 11,683,040 | ||||||||
Repurchase Agreements | — | 77,342 | — | 77,342 | ||||||||||||
Securities Lending Collateral | 565,851 | — | — | 565,851 | ||||||||||||
Total Assets | $ | 12,248,891 | $ | 77,342 | $ | — | $ | 12,326,233 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
128 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
TRANSPORTATION FUND |
STATEMENT OF ASSETS AND LIABILITIES | |
December 31, 2017 |
Assets: | ||||
Investments, at value - including $541,287 of securities loaned (cost $7,790,298) | $ | 12,248,891 | ||
Repurchase agreements, at value (cost $77,342) | 77,342 | |||
Cash | 439 | |||
Receivables: | ||||
Fund shares sold | 294,825 | |||
Dividends | 3,258 | |||
Securities lending income | 76 | |||
Foreign tax reclaims | 35 | |||
Interest | 9 | |||
Total assets | 12,624,875 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities loaned | 565,851 | |||
Securities purchased | 290,365 | |||
Management fees | 7,635 | |||
Transfer agent and administrative fees | 2,246 | |||
Investor service fees | 2,246 | |||
Portfolio accounting fees | 898 | |||
Fund shares redeemed | 495 | |||
Miscellaneous | 16,607 | |||
Total liabilities | 886,343 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 11,738,532 | ||
Net assets consist of: | ||||
Paid in capital | $ | 8,480,371 | ||
Undistributed net investment income | — | |||
Accumulated net realized loss on investments | (1,200,432 | ) | ||
Net unrealized appreciation on investments | 4,458,593 | |||
Net assets | $ | 11,738,532 | ||
Capital shares outstanding | 136,260 | |||
Net asset value per share | $ | 86.15 |
STATEMENT OF OPERATIONS | |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $1,907) | $ | 106,977 | ||
Interest | 522 | |||
Income from securities lending, net | 2,433 | |||
Total investment income | 109,932 | |||
Expenses: | ||||
Management fees | 81,590 | |||
Investor service fees | 23,997 | |||
Transfer agent and administrative fees | 23,997 | |||
Professional fees | 15,516 | |||
Portfolio accounting fees | 9,599 | |||
Custodian fees | 1,592 | |||
Trustees’ fees* | 1,058 | |||
Line of credit fees | 15 | |||
Miscellaneous | 6,215 | |||
Total expenses | 163,579 | |||
Net investment loss | (53,647 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 1,233,216 | |||
Net realized gain | 1,233,216 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 546,486 | |||
Net change in unrealized appreciation (depreciation) | 546,486 | |||
Net realized and unrealized gain | 1,779,702 | |||
Net increase in net assets resulting from operations | $ | 1,726,055 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 129 |
TRANSPORTATION FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (53,647 | ) | $ | 51,950 | |||
Net realized gain on investments | 1,233,216 | 740,548 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 546,486 | 339,924 | ||||||
Net increase in net assets resulting from operations | 1,726,055 | 1,132,422 | ||||||
Distributions to shareholders from: | ||||||||
Net investment income | (23,779 | ) | — | |||||
Net realized gains | — | (2,111,952 | ) | |||||
Total distributions to shareholders | (23,779 | ) | (2,111,952 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 31,357,021 | 18,398,288 | ||||||
Distributions reinvested | 23,779 | 2,111,952 | ||||||
Cost of shares redeemed | (34,227,168 | ) | (13,458,085 | ) | ||||
Net increase (decrease) from capital share transactions | (2,846,368 | ) | 7,052,155 | |||||
Net increase (decrease) in net assets | (1,144,092 | ) | 6,072,625 | |||||
Net assets: | ||||||||
Beginning of year | 12,882,624 | 6,809,999 | ||||||
End of year | $ | 11,738,532 | $ | 12,882,624 | ||||
Undistributed net investment income at end of year | $ | — | $ | 54,068 | ||||
Capital share activity: | ||||||||
Shares sold | 406,855 | 246,622 | * | |||||
Shares issued from reinvestment of distributions | 308 | 34,042 | * | |||||
Shares redeemed | (452,837 | ) | (166,243 | )* | ||||
Net increase (decrease) in shares | (45,674 | ) | 114,421 | * |
* | Capital share activity for the year ended December 31, 2016, has been restated to reflect a 1:4 reverse share split effective December 1, 2016 — See Note 9. |
130 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
TRANSPORTATION FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 70.81 | $ | 100.87 | $ | 121.73 | $ | 99.13 | $ | 65.79 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.43 | ) | .16 | (.08 | ) | (.12 | ) | (.32 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | 15.99 | (20.23 | ) | (16.78 | ) | 22.72 | 33.66 | |||||||||||||
Total from investment operations | 15.56 | (20.07 | ) | (16.86 | ) | 22.60 | 33.34 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.22 | ) | — | — | — | — | ||||||||||||||
Net realized gains | — | (9.99 | ) | (4.00 | ) | — | — | |||||||||||||
Total distributions | (.22 | ) | (9.99 | ) | (4.00 | ) | — | — | ||||||||||||
Net asset value, end of period | $ | 86.15 | $ | 70.81 | $ | 100.87 | $ | 121.73 | $ | 99.13 | ||||||||||
Total Returnb | 22.02 | % | 15.43 | % | (14.09 | %) | 22.80 | % | 50.64 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 11,739 | $ | 12,883 | $ | 6,810 | $ | 22,672 | $ | 20,639 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.56 | %) | 0.73 | % | (0.06 | %) | (0.11 | %) | (0.37 | %) | ||||||||||
Total expenses | 1.70 | % | 1.66 | % | 1.60 | % | 1.66 | % | 1.63 | % | ||||||||||
Portfolio turnover rate | 308 | % | 174 | % | 99 | % | 196 | % | 310 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
c | Reverse share split — Per share amounts for the periods presented through December 31, 2016 have been restated to reflect a 1:4 reverse share split effective December 1, 2016 — See Note 9. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 131 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2017 |
UTILITIES FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that operate public utilities (“Utilities Companies”).
For the year ended December 31, 2017, Utilities Fund returned 11.02%, compared with a return of 21.83% for the S&P 500 Index. The S&P 500 Utilities Index returned 12.11%.
The electric utilities industry was the largest contributor to return for the period, followed by the multi-utilities industry. No industry detracted. The water utilities industry contributed least.
NextEra Energy, Inc., NRG Energy, Inc., and Avangrid, Inc. were the best-performing holdings over the one-year period. SCANA Corp., PG&E Corp., and Edison International were the main detractors.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 2, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
NextEra Energy, Inc. | 4.4% |
Duke Energy Corp. | 3.9% |
Dominion Energy, Inc. | 3.7% |
Southern Co. | 3.5% |
Exelon Corp. | 3.1% |
American Electric Power Company, Inc. | 3.1% |
Public Service Enterprise Group, Inc. | 2.6% |
Consolidated Edison, Inc. | 2.6% |
Sempra Energy | 2.6% |
Xcel Energy, Inc. | 2.5% |
Top Ten Total | 32.0% |
“Ten Largest Holdings” excludes any temporary cash investments. |
132 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2017 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2017
1 Year | 5 Year | 10 Year | |
Utilities Fund | 11.02% | 10.81% | 5.34% |
S&P 500 Utilities Index | 12.11% | 12.62% | 6.31% |
S&P 500 Index | 21.83% | 15.79% | 8.50% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Utilities Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 133 |
SCHEDULE OF INVESTMENTS | December 31, 2017 |
UTILITIES FUND |
Shares | Value | |||||||
COMMON STOCKS† - 99.5% | ||||||||
Electric - 80.1% | ||||||||
NextEra Energy, Inc. | 4,178 | $ | 652,562 | |||||
Duke Energy Corp. | 6,847 | 575,901 | ||||||
Dominion Energy, Inc. | 6,726 | 545,210 | ||||||
Southern Co. | 10,649 | 512,110 | ||||||
Exelon Corp. | 11,536 | 454,634 | ||||||
American Electric Power Company, Inc. | 6,144 | 452,014 | ||||||
Public Service Enterprise Group, Inc. | 7,539 | 388,259 | ||||||
Consolidated Edison, Inc. | 4,509 | 383,040 | ||||||
Xcel Energy, Inc. | 7,638 | 367,464 | ||||||
WEC Energy Group, Inc. | 5,194 | 345,037 | ||||||
PG&E Corp. | 7,518 | 337,032 | ||||||
Eversource Energy | 5,328 | 336,623 | ||||||
PPL Corp. | 10,840 | 335,498 | ||||||
DTE Energy Co. | 3,019 | 330,460 | ||||||
Edison International | 5,106 | 322,903 | ||||||
Avangrid, Inc. | 5,890 | 297,916 | ||||||
Entergy Corp. | 3,540 | 288,121 | ||||||
Ameren Corp. | 4,742 | 279,731 | ||||||
CMS Energy Corp. | 5,768 | 272,826 | ||||||
FirstEnergy Corp. | 8,887 | 272,120 | ||||||
CenterPoint Energy, Inc. | 9,426 | 267,321 | ||||||
Alliant Energy Corp. | 5,508 | 234,696 | ||||||
Pinnacle West Capital Corp. | 2,690 | 229,134 | ||||||
NRG Energy, Inc. | 7,907 | 225,191 | ||||||
Vistra Energy Corp.* | 11,800 | 216,176 | ||||||
AES Corp. | 18,908 | 204,774 | ||||||
Westar Energy, Inc. | 3,857 | 203,650 | ||||||
Great Plains Energy, Inc. | 6,058 | 195,310 | ||||||
OGE Energy Corp. | 5,851 | 192,556 | ||||||
SCANA Corp. | 4,646 | 184,818 | ||||||
Calpine Corp.* | 11,909 | 180,183 | ||||||
MDU Resources Group, Inc. | 6,454 | 173,484 | ||||||
IDACORP, Inc. | 1,765 | 161,250 | ||||||
Portland General Electric Co. | 3,289 | 149,913 | ||||||
Hawaiian Electric Industries, Inc. | 4,134 | 149,444 | ||||||
ALLETE, Inc. | 1,959 | 145,671 | ||||||
NRG Yield, Inc. — Class C | 7,572 | 143,111 | ||||||
Avista Corp. | 2,718 | 139,950 | ||||||
Black Hills Corp. | 2,295 | 137,952 | ||||||
PNM Resources, Inc. | 3,232 | 130,734 | ||||||
NorthWestern Corp. | 2,143 | 127,937 | ||||||
El Paso Electric Co. | 2,022 | 111,918 | ||||||
Dynegy, Inc.* | 8,127 | 96,305 | ||||||
Total Electric | 11,750,939 | |||||||
Gas - 14.4% | ||||||||
Sempra Energy | 3,530 | 377,428 | ||||||
Atmos Energy Corp. | 2,671 | 229,412 | ||||||
NiSource, Inc. | 8,568 | 219,940 | ||||||
UGI Corp. | 4,567 | 214,421 | ||||||
Vectren Corp. | 2,659 | 172,888 | ||||||
National Fuel Gas Co. | 2,947 | 161,820 | ||||||
WGL Holdings, Inc. | 1,885 | 161,808 | ||||||
Southwest Gas Holdings, Inc. | 1,845 | 148,486 | ||||||
ONE Gas, Inc. | 2,015 | 147,619 | ||||||
Spire, Inc. | 1,906 | 143,236 | ||||||
New Jersey Resources Corp. | 3,468 | 139,413 | ||||||
Total Gas | 2,116,471 | |||||||
Water - 3.5% | ||||||||
American Water Works Company, Inc. | 3,373 | 308,596 | ||||||
Aqua America, Inc. | 5,266 | 206,585 | ||||||
Total Water | 515,181 | |||||||
Energy-Alternate Sources - 1.5% | ||||||||
Pattern Energy Group, Inc.1 | 5,213 | 112,027 | ||||||
TerraForm Power, Inc. — Class A1 | 8,920 | 106,683 | ||||||
Total Energy-Alternate Sources | 218,710 | |||||||
Pipelines - 0.0% | ||||||||
Kinder Morgan, Inc. | 1 | 18 | ||||||
Total Common Stocks | ||||||||
(Cost $8,346,123) | 14,601,319 |
Face Amount | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.4% | ||||||||
JPMorgan Chase & Co. issued 12/29/17 at 1.41% due 01/02/18 | $ | 33,450 | 33,450 | |||||
Bank of America Merrill Lynch issued 12/29/17 at 1.40% due 01/02/18 | 17,853 | 17,853 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $51,303) | 51,303 |
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 1.1% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.15%4 | 168,417 | 168,417 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $168,417) | 168,417 | |||||||
Total Investments - 101.0% | ||||||||
(Cost $8,565,843) | $ | 14,821,039 | ||||||
Other Assets & Liabilities, net - (1.0)% | (151,165 | ) | ||||||
Total Net Assets - 100.0% | $ | 14,669,874 |
134 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2017 |
UTILITIES FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 3. |
†† | Value determined based on Level 2 inputs — See Note 3. |
1 | All or portion of this security is on loan at December 31, 2017 — See Note 5. |
2 | Repurchase Agreements — See Note 4. |
3 | Securities lending collateral — See Note 5. |
4 | Rate indicated is the 7 day yield as of December 31, 2017. |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2017 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 14,601,319 | $ | — | $ | — | $ | 14,601,319 | ||||||||
Repurchase Agreements | — | 51,303 | — | 51,303 | ||||||||||||
Securities Lending Collateral | 168,417 | — | — | 168,417 | ||||||||||||
Total Assets | $ | 14,769,736 | $ | 51,303 | $ | — | $ | 14,821,039 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.
For the year ended December 31, 2017, there were no transfers between levels.
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 135 |
UTILITIES FUND |
STATEMENT OF ASSETS AND LIABILITIES | |
December 31, 2017 |
Assets: | ||||
Investments, at value - including $161,948 of securities loaned (cost $8,514,540) | $ | 14,769,736 | ||
Repurchase agreements, at value (cost $51,303) | 51,303 | |||
Receivables: | ||||
Dividends | 38,560 | |||
Fund shares sold | 26,918 | |||
Foreign tax reclaims | 123 | |||
Securities lending income | 8 | |||
Interest | 6 | |||
Total assets | 14,886,654 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities loaned | 168,417 | |||
Management fees | 12,685 | |||
Transfer agent and administrative fees | 3,731 | |||
Investor service fees | 3,731 | |||
Fund shares redeemed | 2,474 | |||
Portfolio accounting fees | 1,492 | |||
Miscellaneous | 24,250 | |||
Total liabilities | 216,780 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 14,669,874 | ||
Net assets consist of: | ||||
Paid in capital | $ | 9,514,696 | ||
Undistributed net investment income | 309,195 | |||
Accumulated net realized loss on investments | (1,409,213 | ) | ||
Net unrealized appreciation on investments | 6,255,196 | |||
Net assets | $ | 14,669,874 | ||
Capital shares outstanding | 524,435 | |||
Net asset value per share | $ | 27.97 |
STATEMENT OF OPERATIONS | |
Year Ended December 31, 2017 |
Investment Income: | ||||
Dividends | $ | 618,300 | ||
Interest | 780 | |||
Income from securities lending, net | 61 | |||
Total investment income | 619,141 | |||
Expenses: | ||||
Management fees | 165,276 | |||
Investor service fees | 48,610 | |||
Transfer agent and administrative fees | 48,610 | |||
Professional fees | 24,398 | |||
Portfolio accounting fees | 19,444 | |||
Custodian fees | 3,459 | |||
Trustees’ fees* | 2,706 | |||
Line of credit fees | 22 | |||
Miscellaneous | 18,928 | |||
Total expenses | 331,453 | |||
Net investment income | 287,688 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 350,959 | |||
Net realized gain | 350,959 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 1,123,878 | |||
Net change in unrealized appreciation (depreciation) | 1,123,878 | |||
Net realized and unrealized gain | 1,474,837 | |||
Net increase in net assets resulting from operations | $ | 1,762,525 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
136 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
UTILITIES FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 287,688 | $ | 364,240 | ||||
Net realized gain on investments | 350,959 | 2,740,774 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 1,123,878 | 255,578 | ||||||
Net increase in net assets resulting from operations | 1,762,525 | 3,360,592 | ||||||
Distributions to shareholders from: | ||||||||
Net investment income | (357,236 | ) | (250,168 | ) | ||||
Net realized gains | (364,071 | ) | (267,590 | ) | ||||
Total distributions to shareholders | (721,307 | ) | (517,758 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 40,236,819 | 67,717,626 | ||||||
Distributions reinvested | 721,307 | 517,758 | ||||||
Cost of shares redeemed | (42,571,657 | ) | (72,899,764 | ) | ||||
Net decrease from capital share transactions | (1,613,531 | ) | (4,664,380 | ) | ||||
Net decrease in net assets | (572,313 | ) | (1,821,546 | ) | ||||
Net assets: | ||||||||
Beginning of year | 15,242,187 | 17,063,733 | ||||||
End of year | $ | 14,669,874 | $ | 15,242,187 | ||||
Undistributed net investment income at end of year | $ | 309,195 | $ | 382,625 | ||||
Capital share activity: | ||||||||
Shares sold | 1,434,672 | 2,644,033 | ||||||
Shares issued from reinvestment of distributions | 26,985 | 18,665 | ||||||
Shares redeemed | (1,518,042 | ) | (2,828,447 | ) | ||||
Net decrease in shares | (56,385 | ) | (165,749 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 137 |
UTILITIES FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | ||||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 26.24 | $ | 22.86 | $ | 25.35 | $ | 20.89 | $ | 19.13 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .42 | .36 | .39 | .48 | .43 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 2.42 | 3.38 | (2.24 | ) | 4.30 | 2.18 | ||||||||||||||
Total from investment operations | 2.84 | 3.74 | (1.85 | ) | 4.78 | 2.61 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.55 | ) | (.17 | ) | (.64 | ) | (.32 | ) | (.85 | ) | ||||||||||
Net realized gains | (.56 | ) | (.19 | ) | — | — | — | |||||||||||||
Total distributions | (1.11 | ) | (.36 | ) | (.64 | ) | (.32 | ) | (.85 | ) | ||||||||||
Net asset value, end of period | $ | 27.97 | $ | 26.24 | $ | 22.86 | $ | 25.35 | $ | 20.89 | ||||||||||
Total Returnb | 11.02 | % | 16.34 | % | (7.36 | %) | 22.89 | % | 13.63 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 14,670 | $ | 15,242 | $ | 17,064 | $ | 28,415 | $ | 10,282 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.48 | % | 1.39 | % | 1.66 | % | 2.07 | % | 2.05 | % | ||||||||||
Total expenses | 1.70 | % | 1.65 | % | 1.61 | % | 1.66 | % | 1.64 | % | ||||||||||
Portfolio turnover rate | 183 | % | 234 | % | 312 | % | 247 | % | 464 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any additional fees charged by insurance companies. |
138 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
NOTES TO FINANCIAL STATEMENTS |
Note 1 – Organization and Significant Accounting Policies
Organization
The Rydex Variable Trust (the “Trust”), a Delaware statutory trust, is registered with the SEC under the Investment Company Act of 1940 (“1940 Act”), as an open-ended investment company of the series type. Each series, in effect, is representing a separate Fund. The Trust is authorized to issue an unlimited number of no par value shares. At December 31, 2017, the Trust consisted of forty-nine funds. The Trust offers shares of the Funds to insurance companies for their variable annuity and variable life insurance contracts.
This report covers the Banking Fund, Basic Materials Fund, Biotechnology Fund, Consumer Products Fund, Electronics Fund, Energy Fund, Energy Services Fund, Financial Services Fund, Health Care Fund, Internet Fund, Leisure Fund, Precious Metals Fund, Real Estate Fund, Retailing Fund, Technology Fund, Telecommunications Fund, Transportation Fund and Utilities Fund (the “Funds”), each a non-diversified investment company.
The Funds invest in a specific industry sector. To the extent that investments are concentrated in a single sector, the Funds are subject to legislative or regulatory changes, adverse market conditions and/or increased competition affecting such sector.
The Funds seek capital appreciation and invest substantially all of their assets in equity securities of companies involved in their sector.
The Funds are designed and operated to accommodate frequent trading by shareholders and, unlike most mutual funds, offer unlimited exchange privileges with no minimum holding periods or transactions fees, which may cause the Funds to experience high portfolio turnover.
Security Investors, LLC, which operates under the name Guggenheim Investments (“GI”), provides advisory services. Guggenheim Funds Distributors, LLC (“GFD”) acts as principal underwriter for the Trust. GI and GFD are affiliated entities.
Significant Accounting Policies
The Funds operate as investment companies and, accordingly, follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
The following significant accounting policies are in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and are consistently followed by the Trust. This requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. All time references are based on Eastern Time.
The net asset value per share (“NAV”) of a Fund is calculated by dividing the market value of the fund’s securities and other assets, less all liabilities, by the number of outstanding shares of the fund.
(a) Valuation of Investments
The Board of Trustees of the Funds (the “Board”) has adopted policies and procedures for the valuation of the Funds’ investments (the “Valuation Procedures”). Pursuant to the Valuation Procedures, the Board has delegated to a valuation committee, consisting of representatives from Guggenheim’s investment management, fund administration, legal and compliance departments (the “Valuation Committee”), the day-to-day responsibility for implementing the Valuation Procedures, including, under most circumstances, the responsibility for determining the fair value of the Funds’ securities and/or other assets.
Valuations of the Funds’ securities are supplied primarily by pricing services appointed pursuant to the processes set forth in the Valuation Procedures. The Valuation Committee convenes monthly, or more frequently as needed, to review the valuation of all assets which have been fair valued for reasonableness. The Funds’ officers, through the Valuation Committee and consistent with the monitoring and review responsibilities set forth in the Valuation Procedures, regularly review procedures used and valuations provided by the pricing services.
If the pricing service cannot or does not provide a valuation for a particular investment or such valuation is deemed unreliable, such investment is fair valued by the Valuation Committee.
Equity securities listed on an exchange (New York Stock Exchange (“NYSE”) or American Stock Exchange) are valued at the last quoted sales price as of the close of business on the NYSE, usually 4:00 p.m. on the valuation date. Equity securities listed on the NASDAQ market system are valued at the NASDAQ Official Closing Price on the valuation date, which may not necessarily represent the last sale price. If there has been no sale on such exchange or NASDAQ on a given day, the security is valued at the closing bid price on that day.
Exchange-traded funds (“ETFs”) are valued at the last quoted sales price.
Money market funds are valued at net asset value.
THE RYDEX FUNDS ANNUAL REPORT | 139 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Repurchase agreements are valued at amortized cost, provided such amounts approximate market value.
Investments for which market quotations are not readily available are fair-valued as determined in good faith by GI, under the direction of the Board using methods established or ratified by the Board. Valuations in accordance with these methods are intended to reflect each security’s (or asset’s) “fair value”. Each such determination is based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples of such factors may include, but are not limited to market prices; sale prices; broker quotes; and models which derive prices based on inputs such as prices of securities with comparable maturities and characteristics, or based on inputs such as anticipated cash flows or collateral, spread over Treasuries, and other information analysis.
(b) Currency Translations
The accounting records of the Funds are maintained in U.S. dollars. All assets and liabilities initially expressed in foreign currencies are converted into U.S. dollars at prevailing exchange rates. Purchases and sales of investment securities, dividend and interest income, and certain expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Changes in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Funds. Foreign investments may also subject the Funds to foreign government exchange restrictions, expropriation, taxation, or other political, social or economic developments, all of which could affect the market and/or credit risk of the investments.
The Funds do not isolate that portion of the results of operations resulting from changes in the foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Reported net realized foreign exchange gains and losses arise from sales of foreign currencies and currency gains or losses realized between the trade and settlement dates on investment transactions. Net unrealized exchange gains and losses arise from changes in the fair values of assets and liabilities other than investments in securities at the fiscal period end, resulting from changes in exchange rates.
(c) Foreign Taxes
The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are paid by the Funds and reflected in their statement of operations as follows: foreign taxes withheld at source are presented as a reduction of income and foreign taxes on capital gains from sales of investments are included with the net realized gain (loss) on investments. Foreign taxes payable or deferred as of December 31, 2017, if any, are disclosed in the Funds’ Statements of Assets and Liabilities.
(d) Security Transactions
Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from securities transactions are recorded using the identified cost basis. Proceeds from lawsuits related to investment holdings are recorded as realized gains in the respective Fund. Dividend income is recorded on the ex-dividend date, net applicable taxes withheld by foreign countries. Taxable non-cash dividends are recorded as dividend income. Interest income, including amortization of premiums and accretion of discounts, is accrued on a daily basis. Amendment fees are earned as compensation for evaluating and accepting changes to the original loan agreement and are recognized when received. Dividend income from Real Estate Investment Trusts (“REITs”) is recorded based on the income included in the distributions received from the REIT investments using published REIT classifications, including some management estimates when actual amounts are not available. Distributions received in excess of this estimated amount are recorded as a reduction of the cost of investments or reclassified to capital gains. The actual amounts of income, return of capital, and capital gains are only determined by each REIT after its fiscal year-end, and may differ from the estimated amounts.
(e) Distributions
Distributions of net investment income and net realized gains, if any, are declared and paid at least annually. Normally, all such distributions of a Fund will automatically be reinvested without charge in additional shares of the same Fund. Distributions are recorded on the ex-dividend date and are determined in accordance with income tax regulations which may differ from U.S. GAAP.
(f) Cash
The Funds may leave cash overnight in their cash account with the custodian. Periodically, a Fund may have cash due to the custodian bank as an overdraft balance. A fee is incurred on this overdraft, calculated by multiplying the overdraft by a rate based on the federal funds rate, which was 1.33% at December 31, 2017.
(g) Indemnifications
Under the Funds’ organizational documents, the Trustees and Officers are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, throughout the normal course of business, the Funds enter into contracts
140 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
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.
Note 2 – Investment Advisory Agreement and other Agreements
Under the terms of an investment advisory contract, the Funds pay GI investment advisory fees calculated at the annualized rates below, based on the average daily net assets of the Funds:
Fund | Management Fees |
Banking Fund | 0.85% |
Basic Materials Fund | 0.85% |
Biotechnology Fund | 0.85% |
Consumer Products Fund | 0.85% |
Electronics Fund | 0.85% |
Energy Fund | 0.85% |
Energy Services Fund | 0.85% |
Financial Services Fund | 0.85% |
Health Care Fund | 0.85% |
Internet Fund | 0.85% |
Leisure Fund | 0.85% |
Precious Metals Fund | 0.75% |
Real Estate Fund | 0.85% |
Retailing Fund | 0.85% |
Technology Fund | 0.85% |
Telecommunications Fund | 0.85% |
Transportation Fund | 0.85% |
Utilities Fund | 0.85% |
GI engages external service providers to perform other necessary services for the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, etc., on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.
The Trust has adopted an Investor Services Plan for which GFD and other firms that provide investor services (“Service Providers”) may receive compensation. The Funds will pay investor service fees to GFD at an annual rate not to exceed 0.25% of average daily net assets. GFD, in turn, will compensate Service Providers for providing such services, while retaining a portion of such payments to compensate itself for investor services it performs.
Certain officers of the Trust are also officers of GI and GFD.
MUFG Investor Services (US), LLC (“MUIS”) acts as the Funds’ administrator, transfer agents and accounting agent. As administrator, transfer agents and accounting agent, MUIS is responsible for maintaining the books and records of the Funds’ securities and cash. The U.S Bank, N.A. (“U.S. Bank”) acts as the Funds’ custodian. As custodian, U.S. Bank is responsible for the custody of the Funds’ assets. For providing the aforementioned services, MUIS and U.S. Bank are entitled to receive a monthly fee equal to an annual percentage of the Fund’s average daily managed assets subject to certain minimum monthly fees and out of pocket expenses
THE RYDEX FUNDS ANNUAL REPORT | 141 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 3 – Fair Value Measurement
In accordance with U.S. GAAP, fair value is defined as the price that the Funds 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. U.S. GAAP establishes a three-tier fair value hierarchy based on the types of inputs used to value assets and liabilities and requires corresponding disclosure. The hierarchy and the corresponding inputs are summarized below:
Level 1 — | quoted prices in active markets for identical assets or liabilities. |
Level 2 — | significant other observable inputs (for example quoted prices for securities that are similar based on characteristics such as interest rates, prepayment speeds, credit risk, etc.). |
Level 3 — | significant unobservable inputs based on the best information available under the circumstances, to the extent observable inputs are not available, which may include assumptions. |
The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly, fair value determinations for Level 3 securities require the greatest amount of judgment.
The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The suitability of the techniques and sources employed to determine fair valuation are regularly monitored and subject to change.
Note 4 – Repurchase Agreements
The Funds transfer uninvested cash balances into a single joint account, the daily aggregate balance of which is invested in one or more repurchase agreements collateralized by obligations of the U.S. Treasury and U.S. government agencies. The joint account includes other Funds in the Guggenheim complex not covered in this report. The collateral is in the possession of the Funds’ custodian and is evaluated to ensure that its market value exceeds, at a minimum, 102% of the original face amount of the repurchase agreements. Each Fund holds a pro rata share of the collateral based on the dollar amount of the repurchase agreement entered into by each Fund.
At December 31, 2017, the repurchase agreements in the joint account were as follows:
Counterparty and Terms of Agreement | Face Value | Repurchase Price | Collateral | Par Value | Fair Value | |||||||||||||
JP Morgan Chase & Co. | U.S. Treasury Notes | |||||||||||||||||
1.41% | 1.50% - 2.50% | |||||||||||||||||
Due 01/02/18 | $ | 28,652,652 | $ | 28,656,019 | 05/15/24 - 08/15/26 | $ | 31,210,500 | $ | 29,225,798 | |||||||||
Bank of America Merrill Lynch | U.S. Treasury Bond | |||||||||||||||||
1.40% | 3.88% | |||||||||||||||||
Due 01/02/18 | 15,292,005 | 15,293,789 | 04/15/29 | 7,605,000 | 15,597,858 |
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. The Funds’ investment adviser, acting under the supervision of the Board, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the Funds enter into repurchase agreements to evaluate potential risks.
Note 5 – Portfolio Securities Loaned
The Funds may lend their securities to approved brokers to earn additional income. Security lending income shown on the Statements 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, U.S. Bank acts as the lending agent, and other approved registered broker dealers act as the
142 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
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 U.S. Bank, cash collateral and proceeds are invested in the First American Government Obligations Fund - Class Z. 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. Securities lending transactions are accounted for as secured borrowings. The remaining contractual maturity of the securities lending agreement is overnight and continuous.
At December 31, 2017, the Funds participated in securities lending transactions, which are subject to enforceable netting arrangements, as follows:
Gross Amounts Not Offset in the Statements of Assets and Liabilities | Securities Lending Collateral | |||||||||||||||||||||||
Fund | Value of Securities Loaned | Collateral | Net Amount | Cash Collateral Invested | Cash Collateral Uninvested | Total Collateral | ||||||||||||||||||
Banking Fund | $ | 66,115 | $ | (66,115 | ) | $ | — | $ | 70,052 | $ | — | $ | 70,052 | |||||||||||
Basic Materials Fund | 229,530 | (229,530 | ) | — | 239,835 | — | 239,835 | |||||||||||||||||
Biotechnology Fund | 1,066,545 | (1,066,545 | ) | — | 1,125,384 | — | 1,125,384 | |||||||||||||||||
Consumer Products Fund | 208,651 | (208,651 | ) | — | 219,984 | — | 219,984 | |||||||||||||||||
Electronics Fund | 354,704 | (354,704 | ) | — | 376,680 | — | 376,680 | |||||||||||||||||
Energy Fund | 351,530 | (351,530 | ) | — | 361,857 | — | 361,857 | |||||||||||||||||
Energy Services Fund | 880,166 | (880,166 | ) | — | 907,157 | — | 907,157 | |||||||||||||||||
Financial Services Fund | 140,561 | (140,561 | ) | — | 148,443 | — | 148,443 | |||||||||||||||||
Health Care Fund | 337,396 | (337,396 | ) | — | 355,070 | — | 355,070 | |||||||||||||||||
Internet Fund | 347,531 | (347,531 | ) | — | 363,295 | — | 363,295 | |||||||||||||||||
Leisure Fund | 482,110 | (482,110 | ) | — | 505,256 | — | 505,256 | |||||||||||||||||
Precious Metals Fund | 1,904,191 | (1,904,191 | ) | — | 2,030,580 | — | 2,030,580 | |||||||||||||||||
Real Estate Fund | 273,745 | (273,745 | ) | — | 282,132 | — | 282,132 | |||||||||||||||||
Retailing Fund | 240,621 | (240,621 | ) | — | 251,678 | — | 251,678 | |||||||||||||||||
Technology Fund | 569,002 | (569,002 | ) | — | 596,241 | — | 596,241 | |||||||||||||||||
Telecommunications Fund | 110,081 | (110,081 | ) | — | 114,600 | — | 114,600 | |||||||||||||||||
Transportation Fund | 541,287 | (541,287 | ) | — | 565,851 | — | 565,851 | |||||||||||||||||
Utilities Fund | 161,948 | (161,948 | ) | — | 168,417 | — | 168,417 |
(a) | Actual collateral received by the Fund is greater than the amount shown due to overcollateralization. |
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. GI, acting under the supervision of the Board, reviews the value of the collateral and the creditworthiness of those banks and dealers to evaluate potential risks.
Note 6 – Federal Income Tax Information
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, and has concluded that no provision for income tax is required in the Funds’ financial statements. The Funds’ federal tax returns are subject to examination by the Internal Revenue Service for a period of three years after they are filed.
THE RYDEX FUNDS ANNUAL REPORT | 143 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The tax character of distributions paid during the year ended December 31, 2017 was as follows:
Fund | Ordinary Income | Long-Term Capital Gain | Total Distributions | |||||||||
Banking Fund | $ | 33,765 | $ | — | $ | 33,765 | ||||||
Basic Materials Fund | 105,780 | — | 105,780 | |||||||||
Consumer Products Fund | 647,918 | 65,047 | 712,965 | |||||||||
Energy Fund | 110,100 | — | 110,100 | |||||||||
Financial Services Fund | 71,565 | — | 71,565 | |||||||||
Health Care Fund | — | 1,042,418 | 1,042,418 | |||||||||
Internet Fund | — | 55,537 | 55,537 | |||||||||
Leisure Fund | 20,573 | 16,439 | 37,012 | |||||||||
Precious Metals Fund | 1,123,988 | — | 1,123,988 | |||||||||
Real Estate Fund | 316,400 | — | 316,400 | |||||||||
Technology Fund | — | 599,849 | 599,849 | |||||||||
Telecommunications Fund | 83,794 | — | 83,794 | |||||||||
Transportation Fund | 23,779 | — | 23,779 | |||||||||
Utilities Fund | 721,307 | — | 721,307 |
The tax character of distributions paid during the year ended December 31, 2016 was as follows:
Fund | Ordinary Income | Long-Term Capital Gain | Total Distributions | |||||||||
Banking Fund | $ | 45,284 | $ | — | $ | 45,284 | ||||||
Basic Materials Fund | — | 252,952 | 252,952 | |||||||||
Consumer Products Fund | 1,067,969 | 838,827 | 1,906,796 | |||||||||
Energy Fund | 213,292 | — | 213,292 | |||||||||
Energy Services Fund | 118,384 | — | 118,384 | |||||||||
Financial Services Fund | 122,357 | — | 122,357 | |||||||||
Health Care Fund | — | 911,972 | 911,972 | |||||||||
Internet Fund | 9,729 | 701,230 | 710,959 | |||||||||
Leisure Fund | 33,853 | 101,294 | 135,147 | |||||||||
Real Estate Fund | 184,035 | — | 184,035 | |||||||||
Retailing Fund | 367,955 | — | 367,955 | |||||||||
Technology Fund | 46,923 | 680,998 | 727,921 | |||||||||
Telecommunications Fund | 18,622 | — | 18,622 | |||||||||
Transportation Fund | — | 2,111,952 | 2,111,952 | |||||||||
Utilities Fund | 250,168 | 267,590 | 517,758 |
Note: For federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
144 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
The tax components of accumulated earnings/(deficit) as of December 31, 2017 were as follows:
Fund | Undistributed Ordinary Income | Undistributed Long-Term Capital Gain | Net Unrealized Appreciation (Depreciation) | Accumulated Capital and Other Losses | Other Temporary Differences | Total | ||||||||||||||||||
Banking Fund | $ | 34,621 | $ | 1,768 | $ | 2,059,830 | $ | (1,350,293 | ) | $ | — | $ | 745,926 | |||||||||||
Basic Materials Fund | 209,047 | — | 3,779,463 | — | — | 3,988,510 | ||||||||||||||||||
Biotechnology Fund | — | 71,198 | 12,410,039 | — | — | 12,481,237 | ||||||||||||||||||
Consumer Products Fund | 93,606 | 429,626 | 5,578,967 | — | — | 6,102,199 | ||||||||||||||||||
Electronics Fund | 180,111 | 61,162 | 3,234,505 | (329,594 | ) | — | 3,146,184 | |||||||||||||||||
Energy Fund | 131,623 | — | 3,813,887 | (5,853,721 | ) | — | (1,908,211 | ) | ||||||||||||||||
Energy Services Fund | 203,149 | — | (219,233 | ) | (5,653,497 | ) | — | (5,669,581 | ) | |||||||||||||||
Financial Services Fund | 103,736 | — | 3,250,339 | (273,255 | ) | 6,591 | 3,087,411 | |||||||||||||||||
Health Care Fund | — | 331,012 | 9,234,416 | — | — | 9,565,428 | ||||||||||||||||||
Internet Fund | 210,465 | — | 3,499,291 | — | — | 3,709,756 | ||||||||||||||||||
Leisure Fund | 238,213 | — | 1,848,760 | — | — | 2,086,973 | ||||||||||||||||||
Precious Metals Fund | 859,556 | — | (1,890,946 | ) | (11,435,952 | ) | — | (12,467,342 | ) | |||||||||||||||
Real Estate Fund | 186,707 | — | 2,674,485 | — | 13,865 | 2,875,057 | ||||||||||||||||||
Retailing Fund | 1,360 | — | 193,278 | (153,209 | ) | — | 41,429 | |||||||||||||||||
Technology Fund | 658,231 | — | 7,436,091 | — | — | 8,094,322 | ||||||||||||||||||
Telecommunications Fund | 18,812 | 54,277 | 506,606 | (171,228 | ) | — | 408,467 | |||||||||||||||||
Transportation Fund | 144,137 | 97,457 | 3,735,903 | (719,336 | ) | — | 3,258,161 | |||||||||||||||||
Utilities Fund | 309,195 | 51,435 | 4,794,548 | — | — | 5,155,178 |
For Federal income tax purposes, capital loss carryforwards represent realized losses of the Funds that may be carried forward and applied against future capital gains. For taxable years beginning on or before December 22, 2010, such capital losses may be carried forward for a maximum of eight years. Under the RIC Modernization Act of 2010, the 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 taxable years must be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to 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. As of December 31, 2017, capital loss carryforwards for the Funds were as follows:
Unlimited | |||||||||||||||||
Fund | Expires in 2018 | Short-Term | Long-Term | Total Capital Loss Carryforward | |||||||||||||
Banking Fund | $ | — | $ | (1,350,293 | ) | $ | — | $ | (1,350,293 | )* | |||||||
Electronics Fund | (329,594 | ) | — | — | (329,594 | )* | |||||||||||
Energy Fund | — | (361,872 | ) | (5,491,849 | ) | (5,853,721 | ) | ||||||||||
Energy Services Fund | — | (776,319 | ) | (4,877,178 | ) | (5,653,497 | ) | ||||||||||
Financial Services Fund | (273,255 | ) | — | — | (273,255 | ) | |||||||||||
Precious Metals Fund | — | (2,037,518 | ) | (9,398,434 | ) | (11,435,952 | ) | ||||||||||
Retailing Fund | — | — | (153,209 | ) | (153,209 | ) | |||||||||||
Telecommunications Fund | — | (32,864 | ) | (138,364 | ) | (171,228 | )* | ||||||||||
Transportation Fund | (719,336 | ) | — | — | (719,336 | )* |
* | In accordance with Section 382 of the Internal Revenue Code, a portion of certain Fund losses are subject to an annual limitation. This annual limitation is generally applicable to all of the capital loss carryforwards shown with respect to each Fund. |
THE RYDEX FUNDS ANNUAL REPORT | 145 |
NOTES TO FINANCIAL STATEMENTS (continued) |
For the year ended December 31, 2017, the following capital loss carryforward amounts expired or were utilized:
Fund | Expired | Utilized | Total | ||||||||||
Banking Fund | $ | — | $ | 345,928 | $ | 345,928 | |||||||
Biotechnology Fund | — | 1,541,149 | 1,541,149 | ||||||||||
Electronics Fund | — | 329,594 | 329,594 | ||||||||||
Financial Services Fund | 2,061,910 | 805,538 | 2,867,448 | ||||||||||
Health Care Fund | — | 563,540 | 563,540 | ||||||||||
Real Estate Fund | 5,054,333 | 144,282 | 5,198,615 | ||||||||||
Telecommunications Fund | — | 60,983 | 60,983 | ||||||||||
Transportation Fund | — | 719,740 | 719,740 |
Net investment income and net realized gains (losses) may differ for financial statement and tax purposes because of temporary or permanent book/tax differences. These differences are primarily due to investments in real estate investment trusts, foreign currency gains and losses, losses deferred due to wash sales, distributions in connection with redemption of fund shares, return of capital distributions received, and the “mark-to-market,” recharacterization, or disposition of certain Passive Foreign Investment Companies (PFICs). Additional differences may result from the tax treatment of net operating losses, foreign capital gains taxes, and the expiration of capital loss carryforward amounts. To the extent these differences are permanent, reclassifications are made to the appropriate capital accounts in the period that the differences arise. These reclassifications have no effect on net assets or NAV per share.
The following adjustments were made on the Statements of Assets and Liabilities as of December 31, 2017 for permanent book/tax differences:
Fund | Paid In Capital | Undistributed Net Investment Income (Loss) | Accumulated Net Realized Gain (Loss) | ||||||||||
Banking Fund | $ | — | $ | 1 | $ | (1 | ) | ||||||
Basic Materials Fund | 310,108 | 23,479 | (333,587 | ) | |||||||||
Biotechnology Fund | (260,497 | ) | 260,497 | — | |||||||||
Consumer Products Fund | 602,454 | — | (602,454 | ) | |||||||||
Electronics Fund | 205,930 | 48,506 | (254,436 | ) | |||||||||
Energy Fund | 1 | (18,156 | ) | 18,155 | |||||||||
Energy Services Fund | (2,673 | ) | 2,673 | — | |||||||||
Financial Services Fund | (2,063,689 | ) | 684 | 2,063,005 | |||||||||
Health Care Fund | (25,009 | ) | 176,476 | (151,467 | ) | ||||||||
Internet Fund | 523,221 | 101,187 | (624,408 | ) | |||||||||
Leisure Fund | 468,558 | (289 | ) | (468,269 | ) | ||||||||
Precious Metals Fund | — | 569,095 | (569,095 | ) | |||||||||
Real Estate Fund | (5,066,556 | ) | (805 | ) | 5,067,361 | ||||||||
Retailing Fund | (1 | ) | (13 | ) | 14 | ||||||||
Technology Fund | 823,469 | 149,941 | (973,410 | ) | |||||||||
Telecommunications Fund | (982 | ) | (1,691 | ) | 2,673 | ||||||||
Transportation Fund | 268,462 | 23,358 | (291,820 | ) | |||||||||
Utilities Fund | (14,064 | ) | (3,882 | ) | 17,946 |
146 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
At December 31, 2017, the cost of securities for Federal income tax purposes, the aggregate gross unrealized gain for all securities for which there was an excess of value over tax cost and the aggregate gross unrealized loss for all securities for which there was an excess of tax cost over value, were as follows:
Fund | Tax Cost | Tax Unrealized Gain | Tax Unrealized Loss | Net Unrealized Gain (Loss) | |||||||||||||
Banking Fund | $ | 7,854,432 | $ | 2,063,924 | $ | (4,094 | ) | $ | 2,059,830 | ||||||||
Basic Materials Fund | 13,676,274 | 3,788,472 | (9,009 | ) | 3,779,463 | ||||||||||||
Biotechnology Fund | 18,137,274 | 12,678,586 | (268,547 | ) | 12,410,039 | ||||||||||||
Consumer Products Fund | 10,636,128 | 5,635,341 | (56,374 | ) | 5,578,967 | ||||||||||||
Electronics Fund | 8,367,394 | 3,259,033 | (24,528 | ) | 3,234,505 | ||||||||||||
Energy Fund | 13,934,622 | 3,847,709 | (33,822 | ) | 3,813,887 | ||||||||||||
Energy Services Fund | 10,235,793 | — | (219,233 | ) | (219,233 | ) | |||||||||||
Financial Services Fund | 13,208,917 | 3,266,419 | (16,080 | ) | 3,250,339 | ||||||||||||
Health Care Fund | 13,734,918 | 9,461,375 | (226,959 | ) | 9,234,416 | ||||||||||||
Internet Fund | 5,809,118 | 3,522,836 | (23,545 | ) | 3,499,291 | ||||||||||||
Leisure Fund | 8,156,241 | 1,860,421 | (11,661 | ) | 1,848,760 | ||||||||||||
Precious Metals Fund | 34,131,478 | — | (1,890,946 | ) | (1,890,946 | ) | |||||||||||
Real Estate Fund | 7,857,073 | 2,706,260 | (31,775 | ) | 2,674,485 | ||||||||||||
Retailing Fund | 7,919,266 | 236,458 | (43,180 | ) | 193,278 | ||||||||||||
Technology Fund | 16,242,563 | 7,532,224 | (96,133 | ) | 7,436,091 | ||||||||||||
Telecommunications Fund | 3,128,973 | 529,866 | (23,260 | ) | 506,606 | ||||||||||||
Transportation Fund | 8,590,330 | 3,737,266 | (1,363 | ) | 3,735,903 | ||||||||||||
Utilities Fund | 10,026,491 | 4,794,548 | — | 4,794,548 |
Note 7 – Securities Transactions
For the year ended December 31, 2017, the cost of purchases and proceeds from sales of investment securities, excluding government securities, short-term investments and derivatives, were as follows:
Fund | Purchases | Sales | |||||||
Banking Fund | $ | 29,024,744 | $ | 36,037,874 | |||||
Basic Materials Fund | 26,108,266 | 26,697,057 | |||||||
Biotechnology Fund | 36,317,610 | 35,811,990 | |||||||
Consumer Products Fund | 23,523,696 | 27,618,896 | |||||||
Electronics Fund | 32,565,625 | 32,401,174 | |||||||
Energy Fund | 113,448,222 | 121,533,728 | |||||||
Energy Services Fund | 35,898,144 | 37,645,568 | |||||||
Financial Services Fund | 52,458,771 | 54,043,264 | |||||||
Health Care Fund | 36,986,654 | 37,753,023 | |||||||
Internet Fund | 35,796,826 | 38,109,776 | |||||||
Leisure Fund | 24,564,690 | 25,284,181 | |||||||
Precious Metals Fund | 179,537,686 | 173,505,386 | |||||||
Real Estate Fund | 40,108,448 | 41,610,329 | |||||||
Retailing Fund | 25,057,922 | 22,992,367 | |||||||
Technology Fund | 45,318,945 | 46,613,042 | |||||||
Telecommunications Fund | 12,804,925 | 14,772,157 | |||||||
Transportation Fund | 29,449,706 | 32,337,330 | |||||||
Utilities Fund | 35,259,435 | 37,268,402 |
THE RYDEX FUNDS ANNUAL REPORT | 147 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The Funds are permitted to purchase or sell securities from or to certain affiliated funds under specified conditions outlined in procedures adopted by the Board of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by a Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under these procedures, each transaction is effected at the current market price to save costs, where permissible. For the year ended December 31, 2017, the Funds engaged in purchases and sales of securities, pursuant to Rule 17a-7 of the 1940 Act, as follows:
Fund | Purchases | Sales | Realized Gain (Loss) | ||||||||||
Banking Fund | $ | 4,915,861 | $ | 6,931,431 | $ | 80,501 | |||||||
Basic Materials Fund | 4,135,981 | 4,906,232 | (54,448 | ) | |||||||||
Biotechnology Fund | 6,908,573 | 5,570,322 | 58,492 | ||||||||||
Consumer Products Fund | 2,241,983 | 4,293,757 | (23,627 | ) | |||||||||
Electronics Fund | 8,210,678 | 12,425,748 | 107,565 | ||||||||||
Energy Fund | 13,237,168 | 10,405,026 | (963 | ) | |||||||||
Energy Services Fund | 9,666,032 | 8,401,740 | (192,182 | ) | |||||||||
Financial Services Fund | 12,597,739 | 11,353,161 | 102,051 | ||||||||||
Health Care Fund | 7,573,362 | 5,806,845 | (42,586 | ) | |||||||||
Internet Fund | 9,391,067 | 9,549,128 | 180,391 | ||||||||||
Leisure Fund | 3,440,132 | 2,756,773 | 115,615 | ||||||||||
Precious Metals Fund | 11,580,286 | 14,290,682 | 71,223 | ||||||||||
Real Estate Fund | 7,092,087 | 7,879,685 | 93,743 | ||||||||||
Retailing Fund | 3,518,683 | 3,107,206 | (16,012 | ) | |||||||||
Technology Fund | 11,080,114 | 11,434,424 | 275,120 | ||||||||||
Telecommunications Fund | 1,942,651 | 2,193,313 | 3,514 | ||||||||||
Transportation Fund | 4,004,623 | 4,608,084 | 75,964 | ||||||||||
Utilities Fund | 6,232,655 | 5,473,007 | 134,747 |
Note 8 – Line of Credit
The Trust, along with other affiliated trusts, secured an uncommitted $75,000,000 line of credit from U.S. Bank, N.A., which expires June 11, 2018. This line of credit is reserved for emergency or temporary purposes. Borrowings, if any, under this arrangement bear interest equal to the Prime Rate, minus 2%, which shall be paid monthly, averaging 2.09% for the year ended December 31, 2017. The Funds did not have any borrowings outstanding under this agreement at December 31, 2017.
The average daily balances borrowed for the year ended December 31, 2017, were as follows:
Fund | Average Daily Balance | ||||
Banking Fund | $ | 995 | |||
Basic Materials Fund | 515 | ||||
Biotechnology Fund | 5,805 | ||||
Consumer Products Fund | 95 | ||||
Electronics Fund | 1,091 | ||||
Energy Fund | 4,865 | ||||
Energy Services Fund | 385 | ||||
Financial Services Fund | 4,822 | ||||
Health Care Fund | 1,238 | ||||
Internet Fund | 3,919 | ||||
Leisure Fund | 41 | ||||
Precious Metals Fund | 11,985 | ||||
Real Estate Fund | 1,471 | ||||
Retailing Fund | 1,275 | ||||
Technology Fund | 299 | ||||
Telecommunications Fund | 1,441 | ||||
Transportation Fund | 774 | ||||
Utilities Fund | 1,047 |
148 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 9 – Reverse Share Splits
Effective December 1, 2016, a reverse share split occurred for the following funds:
Fund | Split Type |
Banking Fund | One-for-Six Reverse Split |
Basic Materials Fund | One-for-Three Reverse Split |
Energy Fund | One-for-Four Reverse Split |
Energy Services Fund | One-for-Six Reverse Split |
Financial Services Fund | One-for-Three Reverse Split |
Internet Fund | One-for-Four Reverse Split |
Retailing Fund | One-for-Four Reverse Split |
Transportation Fund | One-for-Four Reverse Split |
The effect of these transactions was to divide the number of outstanding shares of the Funds by the respective split ratio, resulting in a corresponding increase in the net asset value per share. The share transactions presented in the Statements of Changes in Net Assets and the Per Share Data in the Financial Highlights for each of the periods presented prior to the effective date have been restated to reflect these reverse share splits. There were no changes in net assets, results of operations or total return as a result of these transactions.
Note 10 – Legal Proceedings
Tribune Company
Rydex Variable Trust has been named as a defendant and a putative member of the proposed defendant class of shareholders in the case entitled Kirschner v. FitzSimons, No. 12-2652 (S.D.N.Y.) (formerly Official Committee of Unsecured Creditors of Tribune Co. v. FitzSimons, Adv. Pro. No. 10-54010 (Bankr. D. Del.)) (the “FitzSimons action”), as a result of ownership by certain series of the Rydex Variable Trust of shares in the Tribune Company (“Tribune”) in 2007, when Tribune effected a leveraged buyout transaction (“LBO”) by which Tribune converted to a privately-held company. In his complaint, the plaintiff has alleged that, in connection with the LBO, Tribune insiders and shareholders were overpaid for their Tribune stock using financing that the insiders knew would, and ultimately did, leave Tribune insolvent. The plaintiff has asserted claims against certain insiders, major shareholders, professional advisers, and others involved in the LBO. The plaintiff is also attempting to obtain from former Tribune shareholders, including the Rydex Variable Trust, the proceeds they received in connection with the LBO.
In June 2011, a group of Tribune creditors filed multiple actions against former Tribune shareholders involving state law constructive fraudulent conveyance claims arising out of the 2007 LBO (the “SLCFC actions”). Rydex Variable Trust has been named as a defendant in one or more of these suits. In those actions, the creditors seek to recover from Tribune’s former shareholders the proceeds received in connection with the 2007 LBO.
The FitzSimons action and the SLCFC actions have been consolidated with the majority of the other Tribune LBO-related lawsuits in a multidistrict litigation proceeding captioned In re Tribune Company Fraudulent Conveyance Litig., No. 11-md-2696 (S.D.N.Y.) (the “MDL Proceeding”).
On September 23, 2013, the District Court granted the defendants’ omnibus motion to dismiss the SLCFC actions, on the basis that the creditors lacked standing. On September 30, 2013, the creditors filed a notice of appeal of the September 23 order. On October 28, 2013, the defendants filed a joint notice of cross-appeal of that same order. On March 29, 2016, the U.S. Court of Appeals for the Second Circuit issued its opinion on the appeal of the SLCFC actions. The appeals court affirmed the district court’s dismissal of those lawsuits, but on different grounds than the district court. The appeals court held that while the plaintiffs have standing under the U.S. Bankruptcy Code, their claims were preempted by Section 546(e) of the Bankruptcy Code—the statutory safe harbor for settlement payments. On April 12, 2016, the Plaintiffs in the SLCFC actions filed a petition seeking rehearing en banc before the appeals court. On July 22, 2016, the appeals court denied the petition. On September 9, 2016, the plaintiffs filed a petition for writ of certiorari in the U.S. Supreme Court challenging the Second Circuit’s decision that the safe harbor of Section 546(e) applied to their claims. The shareholder defendants, including the Funds, filed a joint brief in opposition to the petition for certiorari on October 24, 2016. The Supreme Court has not yet granted or denied the petition for certiorari.
THE RYDEX FUNDS ANNUAL REPORT | 149 |
NOTES TO FINANCIAL STATEMENTS (continued) |
On May 23, 2014, the defendants filed motions to dismiss the FitzSimons action, including a global motion to dismiss Count I, which is the claim brought against former Tribune shareholders for intentional fraudulent conveyance under U.S. federal law. On January 6, 2017, the United States District Court for the Southern District of New York granted the shareholder defendants’ motion to dismiss the intentional fraudulent conveyance claim in the FitzSimons action. The Court concluded that the plaintiff had failed to allege that Tribune entered the LBO with actual intent to hinder, delay, or defraud its creditors, and therefore the complaint failed to state a claim. In dismissing the intentional fraudulent conveyance claim, the Court denied the plaintiff’s request to amend the complaint. On February 23, 2017, the Court issued an order stating that it intends to permit an interlocutory appeal of the dismissal order, but will wait to do so until it has resolved outstanding motions to dismiss filed by other defendants. Accordingly, the timing of the appeal is uncertain.
On July 18, 2017, the plaintiff submitted a letter to the District Court seeking leave to amend its complaint to add a constructive fraudulent transfer claim. The shareholder defendants opposed that request. On August 24, 2017, the Court denied the plaintiff’s request without prejudice to renewal of the request in the event of an intervening change in the law.
None of these lawsuits alleges any wrongdoing on the part of Rydex Variable Trust. The following series of Rydex Variable Trust held shares of Tribune and tendered these shares as part of Tribune’s LBO: Nova Fund, S&P 500 2x Strategy Fund, Multi-Cap Core Equity Fund, S&P 500 Pure Value Fund, Hedged Equity Fund and Multi-Hedge Strategies Fund (the “Funds”). The value of the proceeds received by the foregoing Funds was $12,580, $2,380, $1,360, $148,376, $2,720, and $119,034, respectively. At this stage of the proceedings, Rydex Variable Trust is not able to make a reliable predication as to the outcome of these lawsuits or the effect, if any, on a Fund’s net asset value.
Lyondell Chemical Company
In December 2011, Rydex Variable Trust was named as a defendant in Weisfelner, as Trustee of the LB Creditor Trust, v. Fund 1 (In re Lyondell Chemical Co.), Adv. Pro. No. 10-4609 (Bankr. S.D.N.Y.) (the “Creditor Trust Action”). Its funds may also be putative members of the proposed defendant classes in Weisfelner, as Trustee of the LB Litigation Trust v. A. Holmes & H. Holmes TTEE (In re Lyondell Co.), Adv. Pro. No. 10-5525 (Bankr. S.D.N.Y.) (the “Litigation Trust Action”) and Weisfelner, as Trustee of the LB Creditor Trust, v. Reichman (In re Lyondell Chemical Co.), Adv. Pro. No. 12-1570 (Bankr. S.D.N.Y.).
Similar to the claims made in the Tribune matter, the Weisfelner complaints seek to have set aside and recovered as fraudulent transfers from former Lyondell Chemical Company (“Lyondell”) shareholders the consideration paid to them pursuant to the cash out merger of Lyondell shareholders in connection with the combination of Lyondell and Basell AF in 2007. Lyondell filed for bankruptcy in 2008. The Creditor Trust Action and Reichman allege claims against the former Lyondell shareholders under state law for both constructive fraudulent transfer and intentional fraudulent transfer. The Litigation Trust Action alleges a claim against the former Lyondell shareholders under federal law for intentional fraudulent transfer.
On April 7, 2014, the plaintiff filed a Third Amended Complaint in the Creditor Trust Action, a Second Amended Complaint in the Litigation Trust Action, and an Amended Complaint in Reichman.
On May 8, 2014, the plaintiff in the Litigation Trust Action filed a motion to certify a defendant class generally comprised of all former Lyondell shareholders that received proceeds in exchange for their shares in the 2007 merger transaction.
On July 30, 2014, the defendants filed a motion to dismiss these lawsuits. The Bankruptcy Court held oral argument on the motion to dismiss and on the motion for class certification on January 14 and January 15, 2015. On September 15, 2015, the Bankruptcy Court denied the motion for class certification without prejudice to the plaintiff’s right to file a renewed motion. On November 18, 2015, the Bankruptcy Court granted the defendants’ motion to dismiss the intentional fraudulent transfer claims in the Creditor Trust Action, the Litigation Trust Action, and in Reichman, but denied the motion to dismiss the constructive fraudulent transfer claims in the Creditor Trust Action and in Reichman. The Bankruptcy Court entered final judgment dismissing the Litigation Trust Action, but the plaintiff appealed the dismissal to the U.S. District Court for the Southern District of New York.
On May 4, 2016, the defendants filed a motion to dismiss, or in the alternative, for a stay of, the Creditor Trust Action and Reichman in light of the U.S. Court of Appeals for the Second Circuit’s opinion in the appeal of the Tribune SLCFC actions. On July 20, 2016, the Bankruptcy Court issued a report and recommendation granting the defendants’ motion to dismiss. On May 30, 2017, the shareholder defendants filed a motion to remand the proceedings in the Creditor Trust and Reichman Actions to the Bankruptcy Court, for consideration of the collateral estoppel ground for dismissal raised by the Bankruptcy Court’s ruling in the Blavatnik Action. On August 18, 2017, the plaintiff in the Creditor Trust
150 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (concluded) |
action filed a notice of dismissal of claims brought against defendants who had not answered the Third Amended Complaint. The same day, the plaintiff in the Reichman action filed a notice of dismissal of all claims against named defendants who had not filed an answer and withdrew his request for class certification of a defendant class. On September 5, 2017, the Court entered an order dismissing the Creditor Trust and Reichman actions with prejudice. The Court’s order dismissed the actions as to all defendants as well as to unnamed members of the putative defendant class in the Reichman action.
On July 27, 2016, the District Court reversed the Bankruptcy Court and reinstated the federal law intentional fraudulent transfer claim in the Litigation Trust Action and remanded to the Bankruptcy Court for further proceedings. The District Court found that the fraudulent intent that mattered was that of Lyondell’s CEO, not its board, because the CEO’s intent could be imputed to Lyondell under Delaware law agency principles. The District Court did note, however, that plaintiff faces a high standard for proving “actual intent” to harm creditors, and that it remains to be seen whether plaintiff will be able to make this showing. On August 11, 2016, the shareholder defendants filed a motion for reconsideration and/or to certify an interlocutory appeal of the District Court’s opinion. On October 5, 2016, the District Court denied the motion for reconsideration and/or to certify an interlocutory appeal. On April 21, 2017, the Bankruptcy Court issued an Opinion and Order After Trial in a related Lyondell litigation (the “Blavatnik Action”) rejecting claims for intentional fraudulent transfer and constructive fraudulent transfer in connection with the 2007 LBO. Based on this related ruling in the Blavatnik Action, the shareholder defendants filed a motion to dismiss the Litigation Trust Action on the grounds of collateral estoppel on May 30, 2017. Although the Bankruptcy Court had not yet ruled on the motion to dismiss, on August 15, 2017, the plaintiff in the Litigation Trust action filed a notice of dismissal of all claims against the defendants who joined the motion to dismiss. On August 18, 2017, the Litigation Trust plaintiff also withdrew his request for class certification of a defendant class in the Litigation Trust action. On September 5, 2017, the Court entered an order dismissing the Litigation Trust action with prejudice. The Court’s order dismissed the action as to all defendants as well as to unnamed members of the putative defendant class.
As a result of the dismissals above, there are no longer claims pending against the Rydex Variable Trust related to the Lyondell merger.
These lawsuits do not allege any wrongdoing on the part of Rydex Variable Trust. The following series of Rydex Variable Trust received cash proceeds from the cash out merger in the following amounts: Basic Materials Fund - $1,235,952; Long Short Equity Fund f/k/a U.S. Long Short Momentum Fund - $523,200; Multi-Cap Core Equity Fund - $5,760; Hedged Equity Fund - $480; and Multi-Hedge Strategies Fund - $112,848.
THE RYDEX FUNDS ANNUAL REPORT | 151 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Shareholders of Banking Fund, Basic Materials Fund, Biotechnology Fund, Consumer Products Fund, Electronics Fund, Energy Fund, Energy Services Fund, Financial Services Fund, Health Care Fund, Internet Fund, Leisure Fund, Precious Metals Fund, Real Estate Fund, Retailing Fund, Technology Fund, Telecommunications Fund, Transportation Fund, and Utilities Fund and the Board of Trustees of Rydex Variable Trust
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Banking Fund, Basic Materials Fund, Biotechnology Fund, Consumer Products Fund, Electronics Fund, Energy Fund, Energy Services Fund, Financial Services Fund, Health Care Fund, Internet Fund, Leisure Fund, Precious Metals Fund, Real Estate Fund, Retailing Fund, Technology Fund, Telecommunications Fund, Transportation Fund, and Utilities Fund (collectively referred to as the “Funds”), (eighteen of the funds constituting Rydex Variable Trust (the “Trust”)), including the schedules of investments, as of December 31, 2017, 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, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds (eighteen of the funds constituting Rydex Variable Trust) at December 31, 2017, 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.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Guggenheim investment companies since 1979.
Tysons, Virginia
February 27, 2018
152 | THE RYDEX FUNDS ANNUAL REPORT |
OTHER INFORMATION (Unaudited) |
Federal Income Tax Information
This information is being provided as required by the Internal Revenue Code. Amounts shown may differ from those elsewhere in the report because of differences in tax and financial reporting practice.
In January 2018, shareholders will be advised on IRS Form 1099 DIV or substitute 1099 DIV as to the federal tax status of the distributions received by shareholders in the calendar year 2017.
Of the taxable ordinary income distributions paid during the fiscal year ending December 31, 2017, the following funds had the corresponding percentages qualify for the dividends received deduction for corporations:
Fund | Dividend |
Banking Fund | 100.00% |
Basic Materials Fund | 100.00% |
Consumer Products Fund | 94.03% |
Energy Fund | 100.00% |
Financial Services Fund | 100.00% |
Leisure Fund | 100.00% |
Precious Metals Fund | 5.06% |
Real Estate Fund | 13.45% |
Telecommunications Fund | 56.43% |
Transportation Fund | 100.00% |
Utilities Fund | 100.00% |
With respect to the taxable year ended December 31, 2017, the Funds hereby designate as capital gain dividends the amounts listed below, or, if subsequently determined to be different, the net capital gain of such year:
Fund | From long-term capital gain: | From long-term capital gain, using proceeds from shareholder redemptions: | |||||||
Basic Materials Fund | $ | — | $ | 211,157 | |||||
Consumer Products Fund | 65,047 | 550,276 | |||||||
Electronics Fund | — | 205,931 | |||||||
Health Care Fund | 1,042,418 | 71,200 | |||||||
Internet Fund | 55,537 | 291,218 | |||||||
Leisure Fund | 16,439 | 285,103 | |||||||
Technology Fund | 599,849 | 681,446 | |||||||
Transportation Fund | — | 268,458 |
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 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
THE RYDEX FUNDS ANNUAL REPORT | 153 |
OTHER INFORMATION (Unaudited)(concluded) |
Sector Classification
Information in the Schedule of Investments is categorized by sectors using sector-level Classifications defined by the Bloomberg Industry Classification System, a widely recognized industry classification system provider. Each Fund’s registration statement has investment policies relating to concentration in specific sectors/industries. For purposes of these investment policies, the Funds usually classify sectors/industries based on industry-level Classifications used by widely recognized industry classification system providers such as Bloomberg Industry Classification System, Global Industry Classification Standards and Barclays Global Classification Scheme.
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 https://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 800-SEC-0330. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 800.820.0888.
154 | THE RYDEX FUNDS ANNUAL REPORT |
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 visiting guggenheiminvestments.com or by calling 800.820.0888.
Name, Address* and Year of Birth of Trustees | Position(s) Held with the Trust | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen | Other |
INDEPENDENT TRUSTEES | ||||
Angela Brock-Kyle | Trustee, Member of the Audit Committee, Chairwoman and Member of the Compliance and Risk Oversight Committee, and Member of the Nominating and Governance Committee. | Current: Founder and Chief Executive Officer, B.O.A.R.D.S (consulting firm).
Former: Senior Leader, TIAA (financial services firm) (1987-2012). | 133 | Current: Infinity Property & Casualty Corporation (2014-present). |
Corey A. Colehour (1945) | Trustee, Member of the Audit Committee, Member of the Nominating and Governance Committee, and Member of the Investment and Performance Committee. | Current: Retired. | 133 | None |
J. Kenneth Dalton (1941) | Trustee, Member and Chairman of the Audit Committee, and Member of the Compliance and Risk Oversight Committee. | Current: Retired. | 133 | Epiphany Funds (3) (2009-present). |
John O. Demaret (1940) | Trustee, Member of the Audit Committee, and Member of the Compliance and Risk Oversight Committee. | Current: Retired. | 133 | None |
Werner E. Keller (1940) | Chairman and Trustee of the Board, and Member of the Audit Committee. | Current: Founder and President, Keller Partners, LLC (investment research firm) (2005-present). | 133 | None |
Thomas F. Lydon, Jr. (1960) | Trustee, Member of the Audit Committee, Chairman and Member of the Nominating and Governance Committee, and Member of the Investment and Performance Committee. | Current: President, Global Trends Investments (registered investment adviser) (1996-present). | 133 | US Global Investors (GROW) (1995-present). |
Patrick T. McCarville (1942) | Trustee, Member of the Audit Committee, and Member of the Nominating and Governance Committee. | Current: Retired.
Former: Chief Executive Officer, Par Industries, Inc., d/b/a Par Leasing (1977-2010). | 133 | None. |
Sandra G. Sponem (1958) | Trustee, Member of the Audit Committee, Member of the Nominating and Governance Committee, and Chairwoman and Member of the Investment and Performance Committee, | Current: Retired
Former: Senior Vice President and Chief Financial Officer, M.A. Mortenson Companies, Inc. (general contracting firm) (2007-2017). | 133 | None. |
THE RYDEX FUNDS ANNUAL REPORT | 155 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* and Year of Birth of Trustees | Position(s) Held with the Trust | Principal Occupation(s) |
OFFICERS | ||
Michael P. Byrum (1970) | Vice President | Current: Senior Vice President, Security Investors, LLC (2010-present); President and Chief Investment Officer, Rydex Holdings, LLC (2008-present); Director and Chairman, Advisory Research Center, Inc. (2006-present); Manager, Guggenheim Specialized Products, LLC (2005-present).
Former: Vice President, Guggenheim Distributors, LLC (2009); Director (2009-2010) and Secretary (2002-2010), Rydex Fund Services, LLC; Director (2008-2010), Chief Investment Officer (2006-2010), President (2004-2010) and Secretary (2002-2010), Rydex Advisors, LLC; Director (2008-2010), Chief Investment Officer (2006-2010), President (2004-2010) and Secretary (2002-2010), Rydex Advisors II, LLC. |
James M. Howley (1972) | Assistant Treasurer | Current: Managing Director, Guggenheim Investments (2004-present); Assistant Treasurer, certain other funds in the Fund Complex (2006-present).
Former: Manager, Mutual Fund Administration of Van Kampen Investments, Inc. (1996-2004). |
Keith D. Kemp (1960) | Assistant Treasurer | Current: Treasurer and Assistant Treasurer, certain other funds in the Fund Complex (2010-present); Managing Director, Guggenheim Investments (2015-present); Chief Financial Officer, Guggenheim Specialized Products, LLC (2016-present).
Former: Managing Director and Director, Transparent Value, LLC (2010-2016); Director, Guggenheim Partners Investment Management, LLC (2010-2015); Chief Operating Officer, Macquarie Capital Investment Management (2007-2009). |
Amy J. Lee (1961) | President | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2017-present); Chief Legal Officer, certain other funds in the Fund Complex (2014-present); Senior Managing Director, Guggenheim Investments (2012-present).
Former: Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004-2012). |
Mark E. Mathiasen (1978) | Secretary | Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present). |
Glenn McWhinnie (1969) | Assistant Treasurer | Current: Vice President, Guggenheim Investments (2009-present). |
Elisabeth Miller (1968) | Chief Compliance Officer | Current: CCO, certain other funds in the Fund Complex (2012-present); CCO, Security Investors, LLC (2012-present); CCO, Guggenheim Funds Investment Advisors, LLC (2012-present); Managing Director, Guggenheim Investments (2012-present). Vice President, Guggenheim Funds Distributors, LLC (2014-present).
Former: CCO, Guggenheim Distributors, LLC (2009-2014); Senior Manager, Security Investors, LLC (2004-2009); Senior Manager, Guggenheim Distributors, LLC (2004-2009). |
156 | THE RYDEX FUNDS ANNUAL REPORT |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(concluded) |
Name, Address* and Year of Birth of Trustees | Position(s) Held with the Trust | Principal Occupation(s) |
OFFICERS - concluded | ||
Adam J. Nelson (1979) | Assistant Treasurer | Current: Vice President, Guggenheim Investments (2015-present); Assistant Treasurer, certain other funds in the Fund Complex (2015-present).
Former: Assistant Vice President and Fund Administration Director, State Street Corporation (2013-2015); Fund Administration Assistant Director, State Street (2011-2013); Fund Administration Manager, State Street (2009-2011). |
Kimberly J. Scott (1974) | Assistant Treasurer | Current: Director, Guggenheim Investments (2012-present); Assistant Treasurer, certain other funds in the Fund Complex (2012-present).
Former: Financial Reporting Manager, Invesco, Ltd. (2010-2011); Vice President/Assistant Treasurer, Mutual Fund Administration for Van Kampen Investments, Inc./Morgan Stanley Investment Management (2009-2010); Manager of Mutual Fund Administration, Van Kampen Investments, Inc./Morgan Stanley Investment Management (2005-2009). |
John L. Sullivan (1955) | Chief Financial Officer and Treasurer | Current: CFO, Chief Accounting Officer and Treasurer, certain other funds in the Fund Complex (2010-present); Senior Managing Director, Guggenheim Investments (2010-present).
Former: Managing Director and CCO, each of the funds in the Van Kampen Investments fund complex (2004-2010); Managing Director and Head of Fund Accounting and Administration, Morgan Stanley Investment Management (2002-2004); CFO and Treasurer, Van Kampen Funds (1996-2004). |
Jon Szafran (1989) | Assistant Treasurer | Current: Vice President, Guggenheim Investments (2017-present); Assistant Treasurer, certain other funds in the Fund Complex (2017-present).
Former: Assistant Treasurer of Henderson Global Funds and Manager of US Fund Administration, Henderson Global Investors (North America) Inc. ("HGINA"), (2017); Senior Analyst of US Fund Administration, HGINA (2014-2017); Senior Associate of Fund Administration, Cortland Capital Market Services, LLC (2013-2014); Experienced Associate, PricewaterhouseCoopers LLP (2012-2013). |
* | All Trustees and Officers may be reached c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
THE RYDEX FUNDS ANNUAL REPORT | 157 |
GUGGENHEIM INVESTMENTS PRIVACY POLICIES (Unaudited) |
Guggenheim Investments as used herein refers to Guggenheim Partners, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC and Security Investors, LLC as well as the funds in the Guggenheim Funds complex (the “funds”).
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 personal information about you, we hold ourselves to high standards in its safekeeping and use. This means, most importantly, that we do not sell client or account information to anyone—whether you are a current or former Guggenheim Investments client.
The Information We Collect About You and How We Collect It
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 Funds or one of the Guggenheim affiliated companies. “Nonpublic personal information” is personally identifiable information about you. For example it includes 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 Share Your Personal Information
As a matter of policy, we do not disclose your nonpublic personal information to nonaffiliated third parties except as required or permitted by law. 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 your personal 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. In connection with servicing your accounts or 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 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 personal 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 share personal information about you if we are compelled by law to do so, if you direct us to do so with your consent, or in other circumstances as permitted by law.
How We Safeguard Your Personal Information
We maintain physical, electronic and procedural safeguards to protect your personal information. Within Guggenheim Investments, access to such information is limited to those who need it to perform their jobs such as servicing your account, resolving problems or informing you of new products and services.
158 | THE RYDEX FUNDS ANNUAL REPORT |
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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 it has at least one audit committee financial expert serving on its audit committee (the “Audit Committee”), Werner Keller. Mr. Keller is “independent,” meaning that he is not an “interested person” of the Registrant (as that term is defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended) and he does not accept any consulting, advisory, or other compensatory fee from the Registrant (except in his capacity as a Board or committee member).
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) Audit Fees. The aggregate Audit Fees billed by the registrant’s principal accountant for professional services rendered for the audit of the annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal years ended December 31, 2017 and December 31, 2016 were $867,833 and $861,472, respectively.
(b) Audit Related Fees. The aggregate Audit-Related Fees billed by the registrant’s principal accountant for assurance and related services that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item for the fiscal years ended December 31, 2017 and December 31, 2016 were $0 and $0, respectively.
The aggregate fees billed in the Reporting Periods for assurance and related services by the Auditor to the registrant’s investment adviser (not including any sub-investment adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant (“Service Affiliates”) which required pre-approval by the Audit Committee which related to the review of the transfer agent function for the fiscal years ended December 31, 2017 and December 31, 2016 were $0 and $0, respectively.
(c) Tax Fees. The aggregate Tax Fees billed by the registrant’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 December 31, 2017 and December 31, 2016 were $277,916 and $264,208, respectively.
(d) All Other Fees. The aggregate All Other Fees billed by the registrant’s principal accountant for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item, for the fiscal years ended December 31, 2017 and December 31, 2016 were $0 and $0, respectively.
(e) Audit Committee Pre-Approval Policies and Procedures. The audit committee has adopted a policy whereby audit and non-audit services performed by the registrant’s principal accountant for the registrant, its investment advisor, and any entity controlling, controlled by, or under common control with the investment advisor that provides ongoing services to the registrant require pre-approval in advance at regularly scheduled audit committee meetings. If such service is required between regularly scheduled audit committee meetings, the chairman of the audit committee, J. Kenneth Dalton, is authorized to pre-approve the service with full committee approval at the next scheduled meeting. There shall be no waivers of the pre-approval process. No services described in (b)-(d) above were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) Non-Audit Fees. The aggregate non-audit fees billed by the registrant’s accountant for the most recent fiscal year and the preceding fiscal year for services rendered to the registrant, the investment advisor, and any entity controlling, controlled by, or under common control with the advisor that provides ongoing services to the registrant were $277,916 and $331,781, respectively. These aggregate fees were less than the aggregate fees billed for the same periods by the registrant’s principal accountant for audit services rendered to the registrant, the investment advisor, and any entity controlling, controlled by, or under common control with the advisor that provides ongoing services to the registrant.
(h) Auditor Independence. The registrant’s Audit Committee was provided with information relating to the provision of non-audit services by Ernst & Young, LLP to the registrant’s investment adviser (not including any sub adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved by the Audit Committee so that a determination could be made whether the provision of such services is compatible with maintaining Ernst & Young, LLP’s independence.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures.
(a) 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. Disclosure of Securities Lending Activities for Closed End Fund Management Investment Companies.
Not Applicable
Item 13. Exhibits.
(a)(1) The registrant’s code of ethics pursuant to Item 2 of Form N-CSR is attached.
(a)(2) Separate certifications by the President (principal executive officer) and Treasurer (principal financial officer) of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2(a)) are attached.
(b) A certification by the registrant’s President (principal executive officer) and Treasurer (principal financial officer) as required by Rule 30a-2(b) under the Act (17 CFR 270.30a-2(b)) is attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) | Rydex Variable Trust | |
By (Signature and Title)* | /s/ Amy J. Lee | |
Amy J. Lee, President |
Date | March 9, 2018 |
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/ Amy J. Lee | |
Amy J. Lee, President |
Date | March 9, 2018 | |
By (Signature and Title)* | /s/ John L. Sullivan | |
John L. Sullivan, Chief Financial Officer and Treasurer |
Date | March 9, 2018 |
* | Print the name and title of each signing officer under his or her signature. |