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 number811- 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:January 1, 2018 - December 31, 2018
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:
12.31.2018
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 |
Beginning on January 1, 2021, paper copies of the Funds’ annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from a Fund or from your financial intermediary. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change, and you need not take any action. At any time, you may elect to receive reports and other communications from a Fund electronically by calling 800.820.0888, going to GuggenheimInvestments.com/myaccount, or by contacting your financial intermediary.
You may elect to receive all future shareholder reports in paper free of charge. If you hold shares of a Fund directly, you can inform a Fund that you wish to receive paper copies of reports by calling 800.820.0888. If you hold shares of a Fund through a financial intermediary, please contact the financial intermediary to make this election. Your election to receive reports in paper will apply to all Guggenheim Funds in which you are invested and may apply to all funds held with your financial intermediary.
GuggenheimInvestments.com | RVALTS-ANN-2-1218x1219 |
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 | 25 |
MULTI-HEDGE STRATEGIES FUND | 34 |
COMMODITIES STRATEGY FUND | 55 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | 62 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 77 |
OTHER INFORMATION | 78 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS | 79 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE | 83 |
THE RYDEX FUNDS ANNUAL REPORT | 1 |
| December 31, 2018 |
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. This report covers performance of the Funds for the annual period ended December 31, 2018.
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, 2019
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 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 index volatility, changes in interest rates or factors affecting a particular industry or commodity such as droughts, floods, weather, embargos, tariffs and international
2 | THE RYDEX FUNDS ANNUAL REPORT |
| December 31, 2018 |
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 is subject 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, 2018 |
U.S. economic data has been broadly strong, but there is already evidence that certain sectors are losing steam. Consumers are becoming less positive on purchases of homes, autos, and appliances, citing rising rates as a major reason. Growth in nonresidential fixed investment is also slowing, reflecting a combination of higher borrowing costs and tariff uncertainty.
With three major pillars of the economy showing signs of weakness, a broad-based slowdown in real U.S. gross domestic product (“GDP”) growth to below 2% year over year by the fourth quarter of 2019 is possible. Global growth momentum has weakened over the last 12 months, and the souring picture for the global economy collided with rising production from U.S. oil producers to drive a 38% decline in oil prices in the fourth quarter. Subsequently, inflation expectations collapsed, and rate hikes priced for 2019 in the fed funds futures market evaporated.
A key bright spot in late 2018 was the U.S. labor market. The unemployment rate remained below 4.0%, near 50-year lows. Non-farm payrolls increased nearly twice as fast as expected, while average hourly earnings increased at 3.3% year over year, the fastest growth in wages since 2009. With above-potential GDP growth likely to cause job gains to run above labor force growth, unemployment could fall further in 2019, leading to an acceleration of wage growth.
With an eye on the labor market, but cognizant of softening inflation, the U.S. Federal Reserve (the “Fed”) proceeded to raise the fed funds target to 2.25–2.50% in December 2018. The Fed added to its December statement that it would monitor global economic and financial developments, but in the press conference, Fed Chair Powell failed to convey flexibility on both interest rate and balance sheet policy should conditions deteriorate further. Markets sold off further in the days following the Fed decision.
Easing inflationary pressures against a very tight labor market present a conundrum to the Fed as policymakers walk a tightrope managing policy around the Fed’s dual mandate of price stability and full employment. Ultimately, the Fed may be forced to pause in early 2019 to monitor economic data in order to avoid inflicting further pain. With real GDP growth running above potential, unemployment below full employment and falling, and core inflation near the 2% target, the 2019 data should be solid enough for the Fed to deliver another hike in the second half of the year.
For the 12 months ended December 31, 2018, the Standard & Poor’s 500 (“S&P 500®”) Index* generated a total return of -4.38%. After two years of strong appreciation in 2016 and 2017, equities were choppy, including a nearly 20% drawdown from early October to December 24th, as markets contended with the ramifications of trade uncertainty with China, a government shutdown, and the prospects of a new direction in monetary policy.
A pause in monetary policy tightening may grant a short-lived reprieve to debtors at risk of caving under pressure from rising borrowing costs. Credit conditions would appear benign if the Fed seemingly saves the day by staying on hold. We believe any pause would only allow excesses to become more pronounced and afford risk assets one more rally. This rally may be the last opportunity to sell into strength before the Fed resumes raising interest rates, which may push the U.S. into an economic recession in 2020.
For the 12 months ended December 31, 2018, the MSCI Europe-Australasia-Far East (“EAFE”) Index* returned -13.79%. The return of the MSCI Emerging Markets Index* was -14.58%.
In the bond market, the Bloomberg Barclays U.S. Aggregate Bond Index* posted a 0.01% return for the period, while the Bloomberg Barclays U.S. Corporate High Yield Index* returned -2.08%. The return of the ICE Bank of America (“BofA”) Merrill Lynch 3-Month U.S. Treasury Bill Index* was 1.87% 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.
4 | THE RYDEX FUNDS ANNUAL REPORT |
ECONOMIC AND MARKET OVERVIEW (Unaudited)(concluded) | December 31, 2018 |
*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.
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.
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® 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 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.
SG (Societe Generale) CTA Index is designed to track the largest 20 (by AUM) Commodity Trading Advisors, or CTAs, and be representative of the managed futures space. The CTA Index is equally weighted, and reblanced and reconstituted annually.
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, 2018 and ending December 31, 2018.
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 | Fund | Beginning | Ending | Expenses |
Table 1. Based on actual Fund return3 | |||||
Long Short Equity Fund | 1.66% | (5.52%) | $1,000.00 | $944.80 | $8.14 |
Global Managed Futures Strategy Fund | 1.71% | (5.42%) | 1,000.00 | 945.80 | 8.39 |
Multi-Hedge Strategies Fund | 1.94% | (0.13%) | 1,000.00 | 998.70 | 9.77 |
Commodities Strategy Fund | 1.74% | (22.51%) | 1,000.00 | 774.90 | 7.78 |
| |||||
Table 2. Based on hypothetical 5% return (before expenses) | |||||
Long Short Equity Fund | 1.66% | 5.00% | $1,000.00 | $1,016.84 | $8.44 |
Global Managed Futures Strategy Fund | 1.71% | 5.00% | 1,000.00 | 1,016.59 | 8.69 |
Multi-Hedge Strategies Fund | 1.94% | 5.00% | 1,000.00 | 1,015.43 | 9.86 |
Commodities Strategy Fund | 1.74% | 5.00% | 1,000.00 | 1,016.43 | 8.84 |
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 ratio of the Multi-Hedge Strategies Fund would be 1.16%. |
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, 2018 to December 31, 2018. |
THE RYDEX FUNDS ANNUAL REPORT | 7 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
LONG SHORT EQUITY FUND
OBJECTIVE: Seeks long-term capital appreciation.
For the one-year period ended December 31, 2018, the Long Short Equity Fund returned -12.94%. The two benchmarks used by the Fund in the period, the HFRX Equity Hedge Index and the Morningstar Long/Short Equity Category Average, returned -9.42% and -6.19%, respectively, for the same one-year period.
Investment Approach
The Fund is managed as an opportunistic long/short strategy, which employs forward-looking, fundamental analysis to measure the market’s expected return for each stock in the universe. Quantitative techniques are then applied to evaluate market- and company-specific risk factors embedded in each stock and to assess which specific risk factors (such as size, growth, or sectors) are being overvalued or undervalued by the market. Finally, a portfolio is constructed within guidelines that is long the stocks that give the portfolio both the broad risk characteristics and company-specific risks that are perceived to be undervalued and is short stocks for which those characteristics are perceived to be overpriced.
The Fund will ordinarily hold simultaneous long and short positions in equity securities or securities markets that provide exposure up to a level equal to 200% of the Fund’s net assets for the long and 150% of the Fund’s net assets for the short positions. The Fund intends to maintain a hedged overall net exposure (the difference between the notional value of long positions and the notional value of short positions), typically varying between 0% and 80% net long, in order to maintain lower-than-market volatility and beta, and to seek to provide consistent return above an approximately 30% market weighted internal benchmark. The overall net exposure will change as market opportunities change, and may, based on the Fund’s view of current market conditions, be outside this range.
Derivatives in the Fund are used to take short positions as well as long exposure above 100% of NAV (that is, to take leverage).
Performance Review
The start of 2018 was characterized by a low-volatility bull market with strong economic signals and strong corporate earnings. As the year progressed, the global economy began to show weakness with the Fed steadily raising rates, the implementation of new tariffs, uncertainty around Brexit, and even some disappointing fundamentals from high-flying technology leaders. The equity and credit markets significantly dropped in the fourth quarter, as Fed commentary seemed more hawkish than the market thought was warranted. After falling -13.5% in the fourth quarter, the S&P 500 Index returned -4.38% for the year.
On average for 2018, the Fund held about 161% of assets in long securities, and 105% short, for an average net-dollar exposure of 56%. The realized net beta (sensitivity of daily Fund returns to the S&P 500 Index) averaged around 0.57 during the period. The long positions (on a standalone unlevered basis) averaged a return of -8.4%, compared to the Russell 3000 Index return of -5.3%. Short positions returned -1.6% on a stand-alone basis.
The year included poor performance across both longs and shorts—emanating from factor exposures as well as security selection. About -2.5% was the result of the net market exposure beyond a 30% market weighted internal benchmark. Most of the Fund’s volatility emanates from being long and short fundamental style tilts and sector exposures.
Sector positioning was a bright spot. For the year we estimate about +5.8% of attributable return to proper sector positioning, with the largest positive contributors being net longs in Healthcare, IT, and Utilities, and net shorts in Real Estate, Financials, and Chemicals/Materials.
For the full year the fundamental style tilts led to about -3.8% of attributable drag. Most of our style positioning led to small positive contributions—including positioning on higher free cash flow names, larger size names, better profitability names, and avoiding the highest growth names. However, a strong value style bias significantly detracted and led to the total negative contribution across all style factors.
Beyond the factor positioning, the Fund’s security-specific selection impact was a detractor for the year. Within a few industries, the Fund suffered from idiosyncratic trends that caused performance divergence that was less explained by broad fundamental characteristics. For example, within the industrials sector, the Fund held long positions within manufacturing and capital goods companies that had significant global exposure, while the short side held more U.S.-centric and service-oriented businesses. Those two groups diverged strongly in the midst
8 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(continued) | December 31, 2018 |
of the trade war and tariff talk escalation—causing losses from both longs and shorts. Additionally, shorts in a number of expensive IT Software and Consumer Discretionary names hurt the Fund, as those names generally met high sales growth expectations that were rewarded with very high multiples, while a number of long positions in hardware and semiconductor spaces were beaten down to multiples in the single digit range.
The valuation focused approach of this Fund’s strategy has been a detractor for a couple of years now. For context, the Russell 3000 Value benchmark underperformed the Russell 3000 Growth benchmark by more than -6% in 2018 and -23% for a two-year period. Over the last roughly 25 years since these two Russell style indices were launched, they have averaged approximately the same overall return with interim shorter-term deviations. However, a two-year style index deviation where Value underperforms by more than -20% is fairly rare–occurring in only 11% of the rolling two-year periods. It happened briefly after the 2008 Financial Crisis, and for a longer duration during the 1998-2000 Technology Bubble. In all those cases, the forward two years’ performance for the Value index showed a strong bounce back–averaging a +34% outperformance over the Growth index and no occurrences of continuing underperformance for another two years. Of course, this history may not be repeated, as markets and economies evolve and can differ cycle to cycle. But to some extent, investors favoring growth over value during uncertain times can be attributed to behavioral bias. The Fund’s proprietary implied risk premium measure (a forward-looking valuation metric) is showing a gap in valuation between cheaper and expensive names that has not been seen since the Technology Bubble. The situation looks a lot like past behavioral cycles that portend better years ahead for valuation-disciplined investors.
Positioning
At the start of the new fiscal period, the Fund’s estimated net beta remains close to 0.60. The Fund maintains its large factor bias towards cheaper valuation names, and also maintains a high free cash flow bias and profitability bias–both of which are styles that have historically helped protect against macro risk in the event of recession. Guggenheim’s proprietary recession probability indicator has risen this year—leading to somewhat elevated recession expectations for the next year or two—and thus a more cautious positioning with quality style characteristics. The Fund also remains biased against companies that have been experiencing strong asset growth—an area where valuation premiums looks stretched.
The largest sector net overweight exposures (greater than +10% excess) are in Healthcare Pharma/Equipment, Consumer Staples, IT, Transportation, and Energy Mid/Downstream. The largest net underweight exposures (less than -10%) exist in Commercial & Professional Services, Real Estate, Financials, and Chemical/Materials groups.
Our process aims to measure what the market is pricing in based on forward expectations—and the above tilts are dictated primarily by the disparities in those market-implied risk premiums—as well as risk balancing between the market and various sector/style tilts that tend to be correlated. The positions on the long side have a slightly more defensive nature than the short side, which is slightly offset by higher weight to longs versus shorts. Also, given the wide diversity of economically sensitive names on both sides, the Fund is not likely to have strong positive or negative exposure to a recession. The return sensitivity instead will come from any narrowing in the valuation gap between very high growth expensive names versus cheaper, slower growth, and quality names (as measured by cash flow and profitability).
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, 2018 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Cumulative Fund Performance*,†
Inception Date: May 1, 2002 |
Ten Largest Holdings (% of Total Net Assets) | |
Verizon Communications, Inc. | 1.1% |
Exxon Mobil Corp. | 0.9% |
Chevron Corp. | 0.9% |
Archer-Daniels-Midland Co. | 0.9% |
Pfizer, Inc. | 0.8% |
Exelon Corp. | 0.8% |
Medtronic plc | 0.8% |
Alphabet, Inc. — Class C | 0.7% |
Cisco Systems, Inc. | 0.7% |
Genesee & Wyoming, Inc. — Class A | 0.7% |
Top Ten Total | 8.3% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments.
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Long Short Equity Fund | (12.94%) | 0.94% | 5.45% |
HFRX Equity Hedge Index | (9.42%) | (0.25%) | 1.38% |
S&P 500 Index | (4.38%) | 8.49% | 13.12% |
Morningstar Long/Short Equity Category Average | (6.19%) | 1.25% | 5.10% |
* | 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 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. 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. |
10 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2018 |
LONG SHORT EQUITY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 96.2% | ||||||||
Consumer, Non-cyclical - 28.4% | ||||||||
Archer-Daniels-Midland Co. | 6,073 | $ | 248,811 | |||||
Pfizer, Inc. | 5,516 | 240,773 | ||||||
Medtronic plc | 2,510 | 228,310 | ||||||
McKesson Corp. | 1,938 | 214,091 | ||||||
Amgen, Inc. | 1,052 | 204,793 | ||||||
Tyson Foods, Inc. — Class A | 3,628 | 193,735 | ||||||
Molson Coors Brewing Co. — Class B | 3,391 | 190,439 | ||||||
Cardinal Health, Inc. | 4,199 | 187,275 | ||||||
Anthem, Inc. | 679 | 178,326 | ||||||
Procter & Gamble Co. | 1,767 | 162,423 | ||||||
Baxter International, Inc.1 | 2,466 | 162,312 | ||||||
UnitedHealth Group, Inc. | 640 | 159,437 | ||||||
Kimberly-Clark Corp.1 | 1,369 | 155,984 | ||||||
Post Holdings, Inc.* | 1,719 | 153,215 | ||||||
Humana, Inc. | 532 | 152,407 | ||||||
Abbott Laboratories | 2,081 | 150,519 | ||||||
CVS Health Corp. | 2,131 | 139,623 | ||||||
Performance Food Group Co.* | 4,203 | 135,631 | ||||||
Mondelez International, Inc. — Class A | 3,381 | 135,341 | ||||||
Thermo Fisher Scientific, Inc. | 593 | 132,707 | ||||||
Premier, Inc. — Class A* | 3,463 | 129,343 | ||||||
Western Union Co. | 7,572 | 129,178 | ||||||
Central Garden & Pet Co. — Class A* | 3,964 | 123,875 | ||||||
Sysco Corp.1 | 1,915 | 119,994 | ||||||
Merck & Company, Inc. | 1,469 | 112,246 | ||||||
IQVIA Holdings, Inc.*,1 | 959 | 111,407 | ||||||
Hill-Rom Holdings, Inc. | 1,241 | 109,891 | ||||||
IDEXX Laboratories, Inc.* | 577 | 107,333 | ||||||
Bio-Rad Laboratories, Inc. — Class A* | 424 | 98,461 | ||||||
Molina Healthcare, Inc.* | 847 | 98,438 | ||||||
Kellogg Co.1 | 1,723 | 98,228 | ||||||
MEDNAX, Inc.* | 2,889 | 95,337 | ||||||
Quest Diagnostics, Inc.1 | 1,142 | 95,094 | ||||||
PepsiCo, Inc.1 | 857 | 94,681 | ||||||
AbbVie, Inc.1 | 1,020 | 94,034 | ||||||
Flowers Foods, Inc. | 4,917 | 90,817 | ||||||
Danaher Corp.1 | 866 | 89,302 | ||||||
Ingredion, Inc. | 977 | 89,298 | ||||||
Johnson & Johnson1 | 671 | 86,593 | ||||||
Bruker Corp. | 2,595 | 77,253 | ||||||
CoreLogic, Inc.* | 2,290 | 76,532 | ||||||
Laboratory Corporation of America Holdings*,1 | 596 | 75,311 | ||||||
AMERCO | 229 | 75,137 | ||||||
HCA Healthcare, Inc.1 | 593 | 73,799 | ||||||
Innoviva, Inc.* | 4,132 | 72,104 | ||||||
McCormick & Company, Inc.1 | 516 | 71,848 | ||||||
Gilead Sciences, Inc.1 | 1,134 | 70,932 | ||||||
Bristol-Myers Squibb Co.1 | 1,348 | 70,069 | ||||||
Altria Group, Inc.1 | 1,418 | 70,035 | ||||||
Edwards Lifesciences Corp.*,1 | 438 | 67,088 | ||||||
US Foods Holding Corp.* | 2,052 | 64,925 | ||||||
Universal Health Services, Inc. — Class B | 539 | 62,826 | ||||||
Zoetis, Inc.1 | 731 | 62,530 | ||||||
Philip Morris International, Inc.1 | 932 | 62,220 | ||||||
Herbalife Nutrition Ltd.* | 1,048 | 61,780 | ||||||
Kraft Heinz Co.1 | 1,435 | 61,762 | ||||||
Kroger Co.1 | 2,245 | 61,738 | ||||||
ICU Medical, Inc.* | 259 | 59,474 | ||||||
Biogen, Inc.*,1 | 196 | 58,980 | ||||||
Amedisys, Inc.* | 493 | 57,735 | ||||||
Allergan plc1 | 431 | 57,607 | ||||||
Colgate-Palmolive Co.1 | 966 | 57,496 | ||||||
Teleflex, Inc. | 222 | 57,383 | ||||||
Brown-Forman Corp. — Class B | 1,206 | 57,382 | ||||||
Sabre Corp. | 2,614 | 56,567 | ||||||
Hershey Co.1 | 526 | 56,377 | ||||||
Simply Good Foods Co.* | 2,927 | 55,320 | ||||||
CONMED Corp. | 843 | 54,121 | ||||||
Darling Ingredients, Inc.* | 2,810 | 54,064 | ||||||
S&P Global, Inc. | 316 | 53,701 | ||||||
Alexion Pharmaceuticals, Inc.* | 548 | 53,353 | ||||||
Mylan N.V.* | 1,946 | 53,320 | ||||||
Henry Schein, Inc.* | 676 | 53,079 | ||||||
Ligand Pharmaceuticals, Inc. — Class B* | 386 | 52,380 | ||||||
WellCare Health Plans, Inc.*,1 | 221 | 52,176 | ||||||
Estee Lauder Companies, Inc. — Class A | 400 | 52,040 | ||||||
PRA Health Sciences, Inc.* | 563 | 51,774 | ||||||
Quanta Services, Inc. | 1,705 | 51,321 | ||||||
Vector Group Ltd. | 5,228 | 50,868 | ||||||
Cardtronics plc — Class A* | 1,862 | 48,412 | ||||||
Centene Corp.* | 419 | 48,311 | ||||||
Pilgrim’s Pride Corp.* | 3,092 | 47,957 | ||||||
JM Smucker Co. | 505 | 47,213 | ||||||
Jazz Pharmaceuticals plc* | 380 | 47,105 | ||||||
Catalent, Inc.* | 1,502 | 46,832 | ||||||
Constellation Brands, Inc. — Class A1 | 287 | 46,155 | ||||||
Perrigo Company plc | 877 | 33,984 | ||||||
Total Consumer, Non-cyclical | 8,310,078 | |||||||
Industrial - 16.7% | ||||||||
Genesee & Wyoming, Inc. — Class A* | 2,906 | 215,102 | ||||||
Union Pacific Corp. | 1,456 | 201,263 | ||||||
FedEx Corp. | 1,092 | 176,172 | ||||||
Kansas City Southern | 1,828 | 174,483 | ||||||
Regal Beloit Corp. | 2,240 | 156,912 | ||||||
Eaton Corporation plc | 2,274 | 156,133 | ||||||
Cummins, Inc. | 1,040 | 138,985 | ||||||
TE Connectivity Ltd.1 | 1,793 | 135,605 | ||||||
Norfolk Southern Corp. | 884 | 132,193 | ||||||
Caterpillar, Inc.1 | 1,037 | 131,771 | ||||||
Parker-Hannifin Corp. | 829 | 123,637 | ||||||
Arrow Electronics, Inc.* | 1,709 | 117,835 | ||||||
Boise Cascade Co. | 4,589 | 109,448 | ||||||
Avnet, Inc. | 2,928 | 105,701 | ||||||
Landstar System, Inc. | 1,035 | 99,018 | ||||||
CSX Corp.1 | 1,579 | 98,103 | ||||||
EMCOR Group, Inc. | 1,566 | 93,475 | ||||||
AECOM* | 3,500 | 92,750 | ||||||
AGCO Corp. | 1,649 | 91,800 | ||||||
J.B. Hunt Transport Services, Inc.1 | 953 | 88,667 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 11 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
LONG SHORT EQUITY FUND |
| Shares | Value | ||||||
Corning, Inc.1 | 2,886 | $ | 87,186 | |||||
Gibraltar Industries, Inc.* | 2,388 | 84,989 | ||||||
Expeditors International of Washington, Inc.1 | 1,199 | 81,640 | ||||||
Masco Corp.1 | 2,687 | 78,568 | ||||||
Jabil, Inc. | 3,127 | 77,518 | ||||||
Louisiana-Pacific Corp. | 3,265 | 72,548 | ||||||
Ryder System, Inc. | 1,484 | 71,455 | ||||||
Snap-on, Inc.1 | 480 | 69,739 | ||||||
Tech Data Corp.* | 846 | 69,211 | ||||||
United Parcel Service, Inc. — Class B1 | 671 | 65,443 | ||||||
Werner Enterprises, Inc. | 2,213 | 65,372 | ||||||
Waters Corp.*,1 | 344 | 64,896 | ||||||
Greenbrier Companies, Inc. | 1,582 | 62,552 | ||||||
Stericycle, Inc.* | 1,690 | 62,006 | ||||||
Schneider National, Inc. — Class B | 3,260 | 60,864 | ||||||
CH Robinson Worldwide, Inc. | 723 | 60,797 | ||||||
Old Dominion Freight Line, Inc. | 486 | 60,016 | ||||||
Heartland Express, Inc. | 3,256 | 59,585 | ||||||
Trinseo S.A. | 1,276 | 58,415 | ||||||
Textron, Inc.1 | 1,239 | 56,982 | ||||||
Sonoco Products Co. | 1,060 | 56,318 | ||||||
Trinity Industries, Inc. | 2,731 | 56,231 | ||||||
Johnson Controls International plc | 1,892 | 56,098 | ||||||
Vishay Intertechnology, Inc. | 3,108 | 55,975 | ||||||
Oshkosh Corp. | 893 | 54,750 | ||||||
Saia, Inc.* | 952 | 53,141 | ||||||
EnerSys | 678 | 52,629 | ||||||
Gentex Corp. | 2,601 | 52,566 | ||||||
Pentair plc | 1,372 | 51,834 | ||||||
Knight-Swift Transportation Holdings, Inc. | 2,067 | 51,820 | ||||||
Huntington Ingalls Industries, Inc.1 | 268 | 51,003 | ||||||
Spirit AeroSystems Holdings, Inc. — Class A | 696 | 50,175 | ||||||
Packaging Corporation of America1 | 601 | 50,159 | ||||||
Rexnord Corp.* | 2,168 | 49,756 | ||||||
Crane Co. | 633 | 45,690 | ||||||
XPO Logistics, Inc.* | 753 | 42,951 | ||||||
Belden, Inc. | 1,025 | 42,814 | ||||||
Total Industrial | 4,882,745 | |||||||
Financial - 10.0% | ||||||||
Senior Housing Properties Trust REIT | 14,914 | 174,792 | ||||||
JPMorgan Chase & Co. | 1,433 | 139,889 | ||||||
Medical Properties Trust, Inc. REIT | 8,328 | 133,914 | ||||||
Apartment Investment & Management Co. — Class A REIT | 2,972 | 130,411 | ||||||
Ventas, Inc. REIT | 2,178 | 127,609 | ||||||
Visa, Inc. — Class A | 887 | 117,031 | ||||||
Equity Commonwealth REIT | 3,739 | 112,207 | ||||||
Hospitality Properties Trust REIT | 4,648 | 110,994 | ||||||
State Street Corp.1 | 1,616 | 101,921 | ||||||
Park Hotels & Resorts, Inc. REIT | 3,856 | 100,179 | ||||||
Host Hotels & Resorts, Inc. REIT1 | 5,435 | 90,601 | ||||||
Allstate Corp.1 | 1,092 | 90,232 | ||||||
Aflac, Inc.1 | 1,970 | 89,753 | ||||||
Hartford Financial Services Group, Inc.1 | 2,009 | 89,300 | ||||||
Omega Healthcare Investors, Inc. REIT | 2,483 | 87,278 | ||||||
Weingarten Realty Investors REIT | 3,517 | 87,257 | ||||||
Piedmont Office Realty Trust, Inc. — Class A REIT | 4,824 | 82,201 | ||||||
Bank of New York Mellon Corp.1 | 1,746 | 82,184 | ||||||
EPR Properties REIT | 1,232 | 78,885 | ||||||
Brixmor Property Group, Inc. REIT | 5,040 | 74,038 | ||||||
Citigroup, Inc.1 | 1,281 | 66,689 | ||||||
Prudential Financial, Inc.1 | 814 | 66,382 | ||||||
Summit Hotel Properties, Inc. REIT | 6,112 | 59,470 | ||||||
Franklin Resources, Inc. | 1,978 | 58,667 | ||||||
CME Group, Inc. — Class A | 306 | 57,565 | ||||||
Northern Trust Corp.1 | 685 | 57,259 | ||||||
Travelers Companies, Inc.1 | 475 | 56,881 | ||||||
Lazard Ltd. — Class A | 1,520 | 56,103 | ||||||
Mastercard, Inc. — Class A1 | 285 | 53,765 | ||||||
Berkshire Hathaway, Inc. — Class B*,1 | 263 | 53,700 | ||||||
Principal Financial Group, Inc.1 | 1,171 | 51,723 | ||||||
Bank of America Corp.1 | 2,068 | 50,956 | ||||||
PNC Financial Services Group, Inc. | 423 | 49,453 | ||||||
Ameriprise Financial, Inc.1 | 453 | 47,280 | ||||||
Chesapeake Lodging Trust REIT | 1,916 | 46,655 | ||||||
Total Financial | 2,933,224 | |||||||
Technology - 9.6% | ||||||||
Microsoft Corp. | 1,927 | 195,725 | ||||||
Apple, Inc. | 1,163 | 183,452 | ||||||
Intel Corp. | 3,190 | 149,707 | ||||||
Citrix Systems, Inc.1 | 1,403 | 143,751 | ||||||
HP, Inc. | 6,603 | 135,097 | ||||||
Amdocs Ltd. | 2,156 | 126,299 | ||||||
DXC Technology Co.1 | 2,238 | 118,994 | ||||||
Fidelity National Information Services, Inc. | 1,088 | 111,574 | ||||||
Cognizant Technology Solutions Corp. — Class A | 1,620 | 102,838 | ||||||
QUALCOMM, Inc.1 | 1,803 | 102,609 | ||||||
Oracle Corp.1 | 2,209 | 99,736 | ||||||
Cirrus Logic, Inc.* | 3,002 | 99,606 | ||||||
Skyworks Solutions, Inc.1 | 1,279 | 85,719 | ||||||
Leidos Holdings, Inc.1 | 1,531 | 80,714 | ||||||
Accenture plc — Class A1 | 570 | 80,376 | ||||||
Paychex, Inc.1 | 1,157 | 75,379 | ||||||
Texas Instruments, Inc.1 | 794 | 75,033 | ||||||
MAXIMUS, Inc. | 1,104 | 71,859 | ||||||
j2 Global, Inc. | 961 | 66,674 | ||||||
Analog Devices, Inc.1 | 763 | 65,488 | ||||||
Maxim Integrated Products, Inc. | 1,209 | 61,478 | ||||||
Activision Blizzard, Inc. | 1,310 | 61,007 | ||||||
NetApp, Inc.1 | 1,022 | 60,983 | ||||||
Seagate Technology plc1 | 1,552 | 59,892 | ||||||
Hewlett Packard Enterprise Co. | 4,494 | 59,366 | ||||||
ON Semiconductor Corp.*,1 | 3,520 | 58,115 | ||||||
Take-Two Interactive Software, Inc.* | 538 | 55,382 | ||||||
CDK Global, Inc. | 1,136 | 54,392 | ||||||
International Business Machines Corp. | 475 | 53,993 | ||||||
Broadridge Financial Solutions, Inc.1 | 544 | 52,360 |
12| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
LONG SHORT EQUITY FUND |
| Shares | Value | ||||||
Western Digital Corp.1 | 1,284 | $ | 47,469 | |||||
Total Technology | 2,795,067 | |||||||
Consumer, Cyclical - 8.4% | ||||||||
Delta Air Lines, Inc. | 3,495 | 174,400 | ||||||
BorgWarner, Inc. | 3,394 | 117,907 | ||||||
Southwest Airlines Co.1 | 2,399 | 111,506 | ||||||
PACCAR, Inc.1 | 1,849 | 105,652 | ||||||
United Continental Holdings, Inc.*,1 | 1,257 | 105,249 | ||||||
Allison Transmission Holdings, Inc. | 2,247 | 98,666 | ||||||
JetBlue Airways Corp.* | 5,411 | 86,901 | ||||||
Lions Gate Entertainment Corp. — Class A | 4,953 | 79,743 | ||||||
Nu Skin Enterprises, Inc. — Class A | 1,279 | 78,441 | ||||||
Copa Holdings S.A. — Class A | 978 | 76,978 | ||||||
Alaska Air Group, Inc. | 1,252 | 76,184 | ||||||
PulteGroup, Inc. | 2,694 | 70,017 | ||||||
American Airlines Group, Inc.1 | 2,080 | 66,789 | ||||||
Home Depot, Inc.1 | 381 | 65,463 | ||||||
Hyatt Hotels Corp. — Class A | 922 | 62,327 | ||||||
Spirit Airlines, Inc.* | 1,074 | 62,206 | ||||||
Meritor, Inc.* | 3,574 | 60,436 | ||||||
Toll Brothers, Inc. | 1,775 | 58,451 | ||||||
DR Horton, Inc. | 1,654 | 57,327 | ||||||
NIKE, Inc. — Class B | 763 | 56,569 | ||||||
Lowe’s Companies, Inc. | 600 | 55,416 | ||||||
La-Z-Boy, Inc. | 1,985 | 55,004 | ||||||
Lennar Corp. — Class A | 1,391 | 54,458 | ||||||
General Motors Co.1 | 1,597 | 53,420 | ||||||
Walmart, Inc.1 | 571 | 53,189 | ||||||
TJX Companies, Inc. | 1,179 | 52,749 | ||||||
KB Home | 2,738 | 52,296 | ||||||
Lear Corp.1 | 422 | 51,847 | ||||||
TRI Pointe Group, Inc.* | 4,713 | 51,513 | ||||||
Darden Restaurants, Inc. | 512 | 51,128 | ||||||
Cinemark Holdings, Inc. | 1,378 | 49,333 | ||||||
Best Buy Company, Inc. | 930 | 49,253 | ||||||
Walgreens Boots Alliance, Inc. | 700 | 47,831 | ||||||
Delphi Technologies plc | 3,337 | 47,786 | ||||||
PVH Corp. | 477 | 44,337 | ||||||
Total Consumer, Cyclical | 2,440,772 | |||||||
Communications - 7.6% | ||||||||
Verizon Communications, Inc. | 5,885 | 330,855 | ||||||
Alphabet, Inc. — Class C* | 209 | 216,443 | ||||||
Cisco Systems, Inc. | 4,965 | 215,133 | ||||||
Omnicom Group, Inc. | 2,096 | 153,511 | ||||||
Facebook, Inc. — Class A*,1 | 1,005 | 131,745 | ||||||
InterDigital, Inc. | 1,582 | 105,092 | ||||||
AMC Networks, Inc. — Class A* | 1,689 | 92,692 | ||||||
Juniper Networks, Inc.1 | 3,442 | 92,624 | ||||||
Interpublic Group of Companies, Inc. | 4,453 | 91,866 | ||||||
Amazon.com, Inc.*,1 | 57 | 85,612 | ||||||
F5 Networks, Inc.*,1 | 492 | 79,719 | ||||||
Telephone & Data Systems, Inc. | 2,321 | 75,525 | ||||||
Scholastic Corp. | 1,581 | 63,651 | ||||||
Shenandoah Telecommunications Co. | 1,390 | 61,508 | ||||||
AT&T, Inc.1 | 2,085 | 59,506 | ||||||
Zayo Group Holdings, Inc.* | 2,552 | 58,288 | ||||||
VeriSign, Inc.* | 369 | 54,719 | ||||||
TEGNA, Inc. | 4,962 | 53,937 | ||||||
Sirius XM Holdings, Inc.2 | 9,334 | 53,297 | ||||||
Walt Disney Co.1 | 438 | 48,027 | ||||||
News Corp. — Class A | 4,132 | 46,898 | ||||||
Comcast Corp. — Class A1 | 1,376 | 46,853 | ||||||
Total Communications | 2,217,501 | |||||||
Utilities - 7.2% | ||||||||
Exelon Corp. | 5,158 | 232,626 | ||||||
Portland General Electric Co. | 4,349 | 199,402 | ||||||
El Paso Electric Co. | 3,758 | 188,388 | ||||||
National Fuel Gas Co. | 3,578 | 183,122 | ||||||
UGI Corp. | 3,167 | 168,959 | ||||||
OGE Energy Corp. | 3,994 | 156,525 | ||||||
PNM Resources, Inc. | 3,420 | 140,528 | ||||||
FirstEnergy Corp.1 | 3,217 | 120,798 | ||||||
AES Corp.1 | 7,550 | 109,173 | ||||||
Entergy Corp.1 | 1,127 | 97,001 | ||||||
NRG Energy, Inc.1 | 1,938 | 76,745 | ||||||
Ameren Corp.1 | 1,093 | 71,296 | ||||||
Consolidated Edison, Inc.1 | 915 | 69,961 | ||||||
Edison International | 1,198 | 68,010 | ||||||
Black Hills Corp. | 903 | 56,690 | ||||||
American Electric Power Company, Inc.1 | 751 | 56,130 | ||||||
PPL Corp. | 1,960 | 55,527 | ||||||
Pinnacle West Capital Corp. | 643 | 54,784 | ||||||
Total Utilities | 2,105,665 | |||||||
Energy - 5.4% | ||||||||
Exxon Mobil Corp. | 4,016 | 273,851 | ||||||
Chevron Corp. | 2,470 | 268,711 | ||||||
Phillips 66 | 2,327 | 200,471 | ||||||
Occidental Petroleum Corp. | 2,418 | 148,417 | ||||||
Valero Energy Corp. | 1,868 | 140,044 | ||||||
ConocoPhillips1 | 1,529 | 95,333 | ||||||
ONEOK, Inc.1 | 1,390 | 74,990 | ||||||
Kinder Morgan, Inc.1 | 4,094 | 62,966 | ||||||
Williams Companies, Inc.1 | 2,657 | 58,587 | ||||||
Murphy USA, Inc.* | 721 | 55,257 | ||||||
Delek US Holdings, Inc. | 1,655 | 53,804 | ||||||
HollyFrontier Corp.1 | 999 | 51,069 | ||||||
PBF Energy, Inc. — Class A | 1,537 | 50,214 | ||||||
Schlumberger Ltd. | 1,212 | 43,729 | ||||||
Total Energy | 1,577,443 | |||||||
Basic Materials - 2.9% | ||||||||
Westlake Chemical Corp.1 | 2,149 | 142,199 | ||||||
Cabot Corp. | 2,798 | 120,146 | ||||||
Eastman Chemical Co. | 1,488 | 108,788 | ||||||
Olin Corp. | 4,571 | 91,923 | ||||||
LyondellBasell Industries N.V. — Class A1 | 1,014 | 84,324 | ||||||
International Paper Co.1 | 1,871 | 75,514 | ||||||
Domtar Corp. | 1,517 | 53,292 | ||||||
Huntsman Corp. | 2,757 | 53,182 | ||||||
Chemours Co. | 1,845 | 52,066 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 13 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
LONG SHORT EQUITY FUND |
| Shares | Value | ||||||
Celanese Corp. — Class A1 | 573 | $ | 51,553 | |||||
Total Basic Materials | 832,987 | |||||||
Total Common Stocks | ||||||||
(Cost $30,851,984) | 28,095,482 | |||||||
MONEY MARKET FUND† - 1.1% | ||||||||
Invesco Short-Term Investments Trust Treasury Obligations Portfolio — Institutional Class 2.21%3 | 311,244 | 311,244 | ||||||
Total Money Market Fund | ||||||||
(Cost $311,244) | 311,244 | |||||||
SECURITIES LENDING COLLATERAL†,4 - 0.1% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 2.32%3 | 35,921 | 35,921 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $35,921) | 35,921 | |||||||
Total Investments - 97.4% | ||||||||
(Cost $31,199,149) | $ | 28,442,647 | ||||||
Other Assets & Liabilities, net - 2.6% | 767,918 | |||||||
Total Net Assets - 100.0% | $ | 29,210,565 |
Custom Basket Swap Agreements | |||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Notional | Value and | |||||||||
OTC Custom Basket Swap†† | |||||||||||||||
Morgan Stanley | Long Short Equity Portfolio Long Custom Basket Swap5 | 2.80 | % | At Maturity | 05/31/19 | $ | 18,822,614 | $ | (2,190,654 | ) | |||||
OTC Custom Basket Swap Sold Short†† | |||||||||||||||
Morgan Stanley | Long Short Equity Portfolio Short Custom Basket Swap6 | (2.04 | %) | At Maturity | 05/31/19 | 31,924,276 | 3,080,555 |
| Shares | Percentage | Value and | |||||||||
CUSTOM BASKET OF LONG SECURITIES5 | ||||||||||||
Verizon Communications, Inc. | 3,927 | 1.16 | % | $ | 27,963 | |||||||
Pfizer, Inc. | 3,680 | 0.84 | % | 24,186 | ||||||||
Exelon Corp. | 3,178 | 0.75 | % | 22,153 | ||||||||
Procter & Gamble Co. | 1,179 | 0.58 | % | 20,607 | ||||||||
Merck & Company, Inc. | 980 | 0.40 | % | 20,239 | ||||||||
Cisco Systems, Inc. | 3,312 | 0.76 | % | 17,454 | ||||||||
UGI Corp. | 2,226 | 0.63 | % | 17,371 | ||||||||
Microsoft Corp. | 1,286 | 0.69 | % | 15,718 | ||||||||
Portland General Electric Co. | 2,682 | 0.65 | % | 14,939 | ||||||||
Amgen, Inc. | 702 | 0.73 | % | 14,166 | ||||||||
Telephone & Data Systems, Inc. | 1,548 | 0.27 | % | 12,298 | ||||||||
PNM Resources, Inc. | 2,281 | 0.50 | % | 12,066 | ||||||||
Medtronic plc | 1,674 | 0.81 | % | 11,596 | ||||||||
OGE Energy Corp. | 2,665 | 0.55 | % | 10,347 | ||||||||
AES Corp. | 5,037 | 0.39 | % | 9,615 | ||||||||
Shenandoah Telecommunications Co. | 927 | 0.22 | % | 8,765 | ||||||||
Ameren Corp. | 729 | 0.25 | % | 8,364 | ||||||||
Kimberly-Clark Corp. | 913 | 0.55 | % | 7,797 | ||||||||
FirstEnergy Corp. | 2,146 | 0.43 | % | 7,505 | ||||||||
Allison Transmission Holdings, Inc. | 1,499 | 0.35 | % | 6,376 | ||||||||
Ventas, Inc. | 1,453 | 0.45 | % | 6,266 | ||||||||
Innoviva, Inc.* | 2,757 | 0.26 | % | 6,152 | ||||||||
Entergy Corp. | 752 | 0.34 | % | 6,127 | ||||||||
American Electric Power Company, Inc. | 501 | 0.20 | % | 5,618 | ||||||||
Hershey Co. | 350 | 0.20 | % | 5,343 | ||||||||
McCormick & Company, Inc. | 344 | 0.25 | % | 5,230 | ||||||||
Apartment Investment & Management Co. — Class A | 1,983 | 0.46 | % | 4,968 | ||||||||
Pinnacle West Capital Corp. | 429 | 0.19 | % | 4,581 | ||||||||
Spirit Airlines, Inc.* | 717 | 0.22 | % | 3,718 | ||||||||
Black Hills Corp. | 603 | 0.20 | % | 3,096 | ||||||||
WellCare Health Plans, Inc.* | 147 | 0.18 | % | 3,053 | ||||||||
EnerSys | 452 | 0.19 | % | 2,947 | ||||||||
Cardtronics plc — Class A* | 1,242 | 0.17 | % | 2,704 | ||||||||
Herbalife Nutrition Ltd.* | 699 | 0.22 | % | 2,685 | ||||||||
AbbVie, Inc. | 680 | 0.33 | % | 2,212 | ||||||||
Juniper Networks, Inc. | 2,296 | 0.33 | % | 2,016 | ||||||||
PepsiCo, Inc. | 572 | 0.34 | % | 2,013 |
14| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
LONG SHORT EQUITY FUND |
| Shares | Percentage | Value and | |||||||||
Johnson & Johnson | 447 | 0.31 | % | $ | 1,700 | |||||||
Edwards Lifesciences Corp.* | 292 | 0.24 | % | 1,407 | ||||||||
Omega Healthcare Investors, Inc. | 1,656 | 0.31 | % | 1,261 | ||||||||
Mastercard, Inc. — Class A | 190 | 0.19 | % | 1,203 | ||||||||
Simply Good Foods Co.* | 1,953 | 0.20 | % | 1,151 | ||||||||
Walt Disney Co. | 292 | 0.17 | % | 979 | ||||||||
Visa, Inc. — Class A | 592 | 0.41 | % | 960 | ||||||||
Thermo Fisher Scientific, Inc. | 396 | 0.47 | % | 957 | ||||||||
Fidelity National Information Services, Inc. | 726 | 0.40 | % | 957 | ||||||||
F5 Networks, Inc.* | 328 | 0.28 | % | 887 | ||||||||
Central Garden & Pet Co. — Class A* | 2,645 | 0.44 | % | 836 | ||||||||
Omnicom Group, Inc. | 1,398 | 0.54 | % | 807 | ||||||||
TEGNA, Inc. | 3,311 | 0.19 | % | 764 | ||||||||
ConocoPhillips | 1,020 | 0.34 | % | 721 | ||||||||
Danaher Corp. | 578 | 0.32 | % | 706 | ||||||||
Abbott Laboratories | 1,388 | 0.53 | % | 628 | ||||||||
NRG Energy, Inc. | 1,293 | 0.27 | % | 627 | ||||||||
Darling Ingredients, Inc.* | 1,875 | 0.19 | % | 622 | ||||||||
Comcast Corp. — Class A | 918 | 0.17 | % | 586 | ||||||||
Walmart, Inc. | 381 | 0.19 | % | 345 | ||||||||
Lennar Corp. — Class A | 928 | 0.19 | % | 155 | ||||||||
Teleflex, Inc. | 148 | 0.20 | % | 48 | ||||||||
NIKE, Inc. — Class B | 509 | 0.20 | % | 46 | ||||||||
Arcosa, Inc. | 1 | 0.00 | % | (1 | ) | |||||||
Consolidated Edison, Inc. | 610 | 0.25 | % | (35 | ) | |||||||
Corning, Inc. | 1,925 | 0.31 | % | (107 | ) | |||||||
CME Group, Inc. — Class A | 204 | 0.20 | % | (134 | ) | |||||||
Aflac, Inc. | 1,315 | 0.32 | % | (322 | ) | |||||||
Lowe's Companies, Inc. | 400 | 0.20 | % | (443 | ) | |||||||
Kroger Co. | 1,498 | 0.22 | % | (609 | ) | |||||||
US Foods Holding Corp.* | 1,369 | 0.23 | % | (818 | ) | |||||||
Berkshire Hathaway, Inc. — Class B* | 175 | 0.19 | % | (1,055 | ) | |||||||
Medical Properties Trust, Inc. | 5,557 | 0.47 | % | (1,071 | ) | |||||||
Amedisys, Inc.* | 329 | 0.20 | % | (1,092 | ) | |||||||
Zoetis, Inc. | 488 | 0.22 | % | (1,109 | ) | |||||||
United Continental Holdings, Inc.* | 839 | 0.37 | % | (1,140 | ) | |||||||
Anthem, Inc. | 453 | 0.63 | % | (1,320 | ) | |||||||
MAXIMUS, Inc. | 736 | 0.25 | % | (1,328 | ) | |||||||
CDK Global, Inc. | 758 | 0.19 | % | (1,535 | ) | |||||||
Maxim Integrated Products, Inc. | 806 | 0.22 | % | (1,556 | ) | |||||||
UnitedHealth Group, Inc. | 427 | 0.57 | % | (1,572 | ) | |||||||
Scholastic Corp. | 1,054 | 0.23 | % | (1,608 | ) | |||||||
Waters Corp.* | 230 | 0.23 | % | (1,704 | ) | |||||||
|
|
| Value and | |||||||||
S&P Global, Inc. | 211 | 0.19 | % | (1,769 | ) | |||||||
AMERCO | 153 | 0.27 | % | (1,879 | ) | |||||||
AMC Networks, Inc. — Class A* | 1,127 | 0.33 | % | (1,895 | ) | |||||||
j2 Global, Inc. | 641 | 0.24 | % | (1,967 | ) | |||||||
ICU Medical, Inc.* | 173 | 0.21 | % | (1,979 | ) | |||||||
Bristol-Myers Squibb Co. | 900 | 0.25 | % | (2,043 | ) | |||||||
Snap-on, Inc. | 320 | 0.25 | % | (2,101 | ) | |||||||
Brown-Forman Corp. — Class B | 804 | 0.20 | % | (2,173 | ) | |||||||
Sonoco Products Co. | 707 | 0.20 | % | (2,190 | ) | |||||||
International Business Machines Corp. | 316 | 0.19 | % | (2,233 | ) | |||||||
Alphabet, Inc. — Class C* | 139 | 0.76 | % | (2,236 | ) | |||||||
Landstar System, Inc. | 690 | 0.35 | % | (2,275 | ) | |||||||
Brixmor Property Group, Inc. | 3,362 | 0.26 | % | (2,280 | ) | |||||||
Take-Two Interactive Software, Inc.* | 359 | 0.20 | % | (2,316 | ) | |||||||
Performance Food Group Co.* | 2,804 | 0.48 | % | (2,362 | ) | |||||||
Equity Commonwealth | 2,494 | 0.40 | % | (2,367 | ) | |||||||
Genesee & Wyoming, Inc. — Class A* | 1,939 | 0.76 | % | (2,429 | ) | |||||||
Toll Brothers, Inc. | 1,184 | 0.21 | % | (2,446 | ) | |||||||
CONMED Corp. | 563 | 0.19 | % | (2,550 | ) | |||||||
Henry Schein, Inc.* | 451 | 0.19 | % | (2,621 | ) | |||||||
Colgate-Palmolive Co. | 644 | 0.20 | % | (2,633 | ) | |||||||
Northern Trust Corp. | 457 | 0.20 | % | (2,822 | ) | |||||||
Biogen, Inc.* | 130 | 0.21 | % | (2,844 | ) | |||||||
HCA Healthcare, Inc. | 396 | 0.26 | % | (2,880 | ) | |||||||
PPL Corp. | 1,308 | 0.20 | % | (2,895 | ) | |||||||
PulteGroup, Inc. | 1,797 | 0.25 | % | (2,903 | ) | |||||||
VeriSign, Inc.* | 246 | 0.19 | % | (2,969 | ) | |||||||
Analog Devices, Inc. | 509 | 0.23 | % | (2,986 | ) | |||||||
Travelers Companies, Inc. | 316 | 0.20 | % | (3,146 | ) | |||||||
Estee Lauder Companies, Inc. — Class A | 267 | 0.18 | % | (3,288 | ) | |||||||
CH Robinson Worldwide, Inc. | 482 | 0.22 | % | (3,289 | ) | |||||||
Home Depot, Inc. | 254 | 0.23 | % | (3,308 | ) | |||||||
Vishay Intertechnology, Inc. | 2,073 | 0.20 | % | (3,337 | ) | |||||||
PRA Health Sciences, Inc.* | 375 | 0.18 | % | (3,399 | ) | |||||||
Oracle Corp. | 1,474 | 0.35 | % | (3,429 | ) | |||||||
Sirius XM Holdings, Inc. | 6,228 | 0.19 | % | (3,468 | ) | |||||||
Hill-Rom Holdings, Inc. | 828 | 0.39 | % | (3,608 | ) | |||||||
La-Z-Boy, Inc. | 1,324 | 0.19 | % | (3,640 | ) | |||||||
Paychex, Inc. | 772 | 0.27 | % | (3,736 | ) | |||||||
Heartland Express, Inc. | 2,172 | 0.21 | % | (3,793 | ) | |||||||
Alaska Air Group, Inc. | 835 | 0.27 | % | (3,880 | ) | |||||||
Cinemark Holdings, Inc. | 919 | 0.17 | % | (3,941 | ) | |||||||
EPR Properties | 822 | 0.28 | % | (3,951 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 15 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
LONG SHORT EQUITY FUND |
| Shares | Percentage | Value and | |||||||||
Franklin Resources, Inc. | 1,320 | 0.21 | % | $ | (3,971 | ) | ||||||
Old Dominion Freight Line, Inc. | 324 | 0.21 | % | (3,972 | ) | |||||||
Sabre Corp. | 1,744 | 0.20 | % | (4,010 | ) | |||||||
Expeditors International of Washington, Inc. | 800 | 0.29 | % | (4,039 | ) | |||||||
El Paso Electric Co. | 2,507 | 0.67 | % | (4,055 | ) | |||||||
Gibraltar Industries, Inc.* | 1,593 | 0.30 | % | (4,116 | ) | |||||||
Jabil, Inc. | 2,086 | 0.27 | % | (4,176 | ) | |||||||
Universal Health Services, Inc. — Class B | 359 | 0.22 | % | (4,180 | ) | |||||||
Murphy USA, Inc.* | 481 | 0.20 | % | (4,558 | ) | |||||||
Darden Restaurants, Inc. | 341 | 0.18 | % | (4,572 | ) | |||||||
IQVIA Holdings, Inc.* | 640 | 0.39 | % | (4,574 | ) | |||||||
NetApp, Inc. | 682 | 0.22 | % | (4,596 | ) | |||||||
Edison International | 799 | 0.24 | % | (4,647 | ) | |||||||
Gentex Corp. | 1,735 | 0.19 | % | (4,658 | ) | |||||||
CVS Health Corp. | 1,422 | 0.49 | % | (4,709 | ) | |||||||
Mondelez International, Inc. — Class A | 2,256 | 0.48 | % | (5,052 | ) | |||||||
Quanta Services, Inc. | 1,137 | 0.18 | % | (5,081 | ) | |||||||
PNC Financial Services Group, Inc. | 282 | 0.18 | % | (5,089 | ) | |||||||
Bruker Corp. | 1,732 | 0.27 | % | (5,099 | ) | |||||||
Saia, Inc.* | 635 | 0.19 | % | (5,163 | ) | |||||||
Activision Blizzard, Inc. | 874 | 0.22 | % | (5,195 | ) | |||||||
United Parcel Service, Inc. — Class B | 447 | 0.23 | % | (5,219 | ) | |||||||
Centene Corp.* | 279 | 0.17 | % | (5,366 | ) | |||||||
Park Hotels & Resorts, Inc. | 2,572 | 0.36 | % | (5,445 | ) | |||||||
Norfolk Southern Corp. | 589 | 0.47 | % | (5,590 | ) | |||||||
Pentair plc | 915 | 0.18 | % | (5,597 | ) | |||||||
Allergan plc | 288 | 0.20 | % | (5,738 | ) | |||||||
Premier, Inc. — Class A* | 2,311 | 0.46 | % | (5,811 | ) | |||||||
QUALCOMM, Inc. | 1,203 | 0.36 | % | (5,828 | ) | |||||||
Hyatt Hotels Corp. — Class A | 615 | 0.22 | % | (5,876 | ) | |||||||
Flowers Foods, Inc. | 3,281 | 0.32 | % | (6,060 | ) | |||||||
Interpublic Group of Companies, Inc. | 2,971 | 0.33 | % | (6,068 | ) | |||||||
Kinder Morgan, Inc. | 2,732 | 0.22 | % | (6,334 | ) | |||||||
Ingredion, Inc. | 651 | 0.32 | % | (6,375 | ) | |||||||
Walgreens Boots Alliance, Inc. | 467 | 0.17 | % | (6,384 | ) | |||||||
Delek US Holdings, Inc. | 1,104 | 0.19 | % | (6,389 | ) | |||||||
Huntington Ingalls Industries, Inc. | 179 | 0.18 | % | (6,397 | ) | |||||||
Citrix Systems, Inc. | 936 | 0.51 | % | (6,403 | ) | |||||||
JM Smucker Co. | 336 | 0.17 | % | (6,503 | ) | |||||||
Chesapeake Lodging Trust | 1,278 | 0.17 | % | (6,578 | ) | |||||||
Texas Instruments, Inc. | 530 | 0.27 | % | (6,599 | ) | |||||||
Post Holdings, Inc.* | 1,147 | 0.54 | % | (6,634 | ) | |||||||
Bank of New York Mellon Corp. | 1,165 | 0.29 | % | (6,658 | ) | |||||||
Crane Co. | 422 | 0.16 | % | (6,792 | ) | |||||||
Broadridge Financial Solutions, Inc. | 363 | 0.19 | % | (6,994 | ) | |||||||
General Motors Co. | 1,066 | 0.19 | % | (7,073 | ) | |||||||
Pilgrim's Pride Corp.* | 2,063 | 0.17 | % | (7,134 | ) | |||||||
Tech Data Corp.* | 564 | 0.25 | % | (7,139 | ) | |||||||
Oshkosh Corp. | 596 | 0.19 | % | (7,221 | ) | |||||||
TRI Pointe Group, Inc.* | 3,144 | 0.18 | % | (7,268 | ) | |||||||
Bank of America Corp. | 1,379 | 0.18 | % | (7,279 | ) | |||||||
Gilead Sciences, Inc. | 756 | 0.25 | % | (7,370 | ) | |||||||
Johnson Controls International plc | 1,262 | 0.20 | % | (7,381 | ) | |||||||
Trinity Industries, Inc. | 1,822 | 0.20 | % | (7,503 | ) | |||||||
Sysco Corp. | 1,278 | 0.43 | % | (7,526 | ) | |||||||
Piedmont Office Realty Trust, Inc. — Class A | 3,219 | 0.29 | % | (7,674 | ) | |||||||
Catalent, Inc.* | 1,002 | 0.17 | % | (7,718 | ) | |||||||
Eaton Corporation plc | 1,517 | 0.55 | % | (7,769 | ) | |||||||
Altria Group, Inc. | 946 | 0.25 | % | (7,881 | ) | |||||||
Allstate Corp. | 728 | 0.32 | % | (7,983 | ) | |||||||
Humana, Inc. | 355 | 0.54 | % | (7,999 | ) | |||||||
Kansas City Southern | 1,219 | 0.62 | % | (8,067 | ) | |||||||
Amazon.com, Inc.* | 38 | 0.30 | % | (8,101 | ) | |||||||
TJX Companies, Inc. | 786 | 0.19 | % | (8,183 | ) | |||||||
DR Horton, Inc. | 1,104 | 0.20 | % | (8,212 | ) | |||||||
Schneider National, Inc. — Class B | 2,175 | 0.22 | % | (8,287 | ) | |||||||
News Corp. — Class A | 2,757 | 0.17 | % | (8,309 | ) | |||||||
Baxter International, Inc. | 1,645 | 0.58 | % | (8,409 | ) | |||||||
J.B. Hunt Transport Services, Inc. | 636 | 0.31 | % | (8,519 | ) | |||||||
Spirit AeroSystems Holdings, Inc. — Class A | 464 | 0.18 | % | (8,574 | ) | |||||||
Intel Corp. | 2,128 | 0.53 | % | (8,911 | ) | |||||||
Accenture plc — Class A | 380 | 0.28 | % | (9,006 | ) | |||||||
Textron, Inc. | 827 | 0.20 | % | (9,023 | ) | |||||||
Quest Diagnostics, Inc. | 762 | 0.34 | % | (9,058 | ) | |||||||
Union Pacific Corp. | 971 | 0.71 | % | (9,199 | ) | |||||||
AT&T, Inc. | 1,391 | 0.21 | % | (9,230 | ) | |||||||
Rexnord Corp.* | 1,446 | 0.18 | % | (9,234 | ) | |||||||
National Fuel Gas Co. | 2,387 | 0.65 | % | (9,288 | ) | |||||||
InterDigital, Inc. | 1,056 | 0.37 | % | (9,362 | ) | |||||||
KB Home | 1,827 | 0.19 | % | (9,409 | ) | |||||||
Celanese Corp. — Class A | 382 | 0.18 | % | (9,524 | ) | |||||||
Philip Morris International, Inc. | 622 | 0.22 | % | (9,530 | ) | |||||||
Delta Air Lines, Inc. | 2,332 | 0.62 | % | (9,591 | ) | |||||||
Schlumberger Ltd. | 809 | 0.16 | % | (9,608 | ) | |||||||
ONEOK, Inc. | 927 | 0.27 | % | (9,809 | ) | |||||||
Avnet, Inc. | 1,954 | 0.37 | % | (9,811 | ) | |||||||
Hewlett Packard Enterprise Co. | 2,998 | 0.21 | % | (9,811 | ) |
16| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
LONG SHORT EQUITY FUND |
| Shares | Percentage | Value and | |||||||||
Hartford Financial Services Group, Inc. | 1,341 | 0.32 | % | $ | (9,846 | ) | ||||||
Arrow Electronics, Inc.* | 1,140 | 0.42 | % | (9,966 | ) | |||||||
CSX Corp. | 1,053 | 0.35 | % | (10,021 | ) | |||||||
Constellation Brands, Inc. — Class A | 191 | 0.16 | % | (10,089 | ) | |||||||
Stericycle, Inc.* | 1,127 | 0.22 | % | (10,228 | ) | |||||||
Jazz Pharmaceuticals plc* | 254 | 0.17 | % | (10,237 | ) | |||||||
Apple, Inc. | 776 | 0.65 | % | (10,383 | ) | |||||||
Weingarten Realty Investors | 2,346 | 0.31 | % | (10,397 | ) | |||||||
Western Union Co. | 5,052 | 0.46 | % | (10,400 | ) | |||||||
Knight-Swift Transportation Holdings, Inc. | 1,379 | 0.18 | % | (10,494 | ) | |||||||
Prudential Financial, Inc. | 543 | 0.24 | % | (10,505 | ) | |||||||
Molina Healthcare, Inc.* | 565 | 0.35 | % | (10,641 | ) | |||||||
Caterpillar, Inc. | 692 | 0.47 | % | (10,650 | ) | |||||||
XPO Logistics, Inc.* | 502 | 0.15 | % | (10,658 | ) | |||||||
Williams Companies, Inc. | 1,772 | 0.21 | % | (10,858 | ) | |||||||
Domtar Corp. | 1,012 | 0.19 | % | (10,861 | ) | |||||||
Packaging Corporation of America | 401 | 0.18 | % | (11,114 | ) | |||||||
Meritor, Inc.* | 2,385 | 0.21 | % | (11,205 | ) | |||||||
Regal Beloit Corp. | 1,494 | 0.56 | % | (11,224 | ) | |||||||
Alexion Pharmaceuticals, Inc.* | 366 | 0.19 | % | (11,372 | ) | |||||||
American Airlines Group, Inc. | 1,388 | 0.24 | % | (11,418 | ) | |||||||
Werner Enterprises, Inc. | 1,477 | 0.23 | % | (11,437 | ) | |||||||
Parker-Hannifin Corp. | 553 | 0.44 | % | (11,473 | ) | |||||||
Leidos Holdings, Inc. | 1,021 | 0.29 | % | (11,554 | ) | |||||||
JetBlue Airways Corp.* | 3,610 | 0.31 | % | (11,623 | ) | |||||||
Louisiana-Pacific Corp. | 2,178 | 0.26 | % | (11,800 | ) | |||||||
JPMorgan Chase & Co. | 956 | 0.50 | % | (11,846 | ) | |||||||
AGCO Corp. | 1,100 | 0.33 | % | (11,974 | ) | |||||||
Lazard Ltd. — Class A | 1,014 | 0.20 | % | (11,980 | ) | |||||||
Lear Corp. | 281 | 0.18 | % | (11,990 | ) | |||||||
Amdocs Ltd. | 1,439 | 0.45 | % | (12,310 | ) | |||||||
Ameriprise Financial, Inc. | 302 | 0.17 | % | (12,435 | ) | |||||||
Greenbrier Companies, Inc. | 1,056 | 0.22 | % | (12,600 | ) | |||||||
Kraft Heinz Co. | 957 | 0.22 | % | (12,895 | ) | |||||||
Principal Financial Group, Inc. | 781 | 0.18 | % | (12,920 | ) | |||||||
Nu Skin Enterprises, Inc. — Class A | 853 | 0.28 | % | (12,968 | ) | |||||||
Hospitality Properties Trust | 3,101 | 0.39 | % | (13,015 | ) | |||||||
PACCAR, Inc. | 1,233 | 0.37 | % | (13,124 | ) | |||||||
Kellogg Co. | 1,149 | 0.35 | % | (13,130 | ) | |||||||
HollyFrontier Corp. | 666 | 0.18 | % | (13,217 | ) | |||||||
PBF Energy, Inc. — Class A | 1,026 | 0.18 | % | (13,517 | ) | |||||||
ON Semiconductor Corp.* | 2,349 | 0.21 | % | (13,851 | ) | |||||||
PVH Corp. | 318 | 0.16 | % | (14,139 | ) | |||||||
Perrigo Company plc | 585 | 0.12 | % | (14,154 | ) | |||||||
Laboratory Corporation of America Holdings* | 398 | 0.27 | % | (14,437 | ) | |||||||
Summit Hotel Properties, Inc. | 4,078 | 0.21 | % | (14,467 | ) | |||||||
HP, Inc. | 4,406 | 0.48 | % | (14,570 | ) | |||||||
Chevron Corp. | 1,648 | 0.95 | % | (14,599 | ) | |||||||
IDEXX Laboratories, Inc.* | 385 | 0.38 | % | (14,625 | ) | |||||||
Best Buy Company, Inc. | 620 | 0.17 | % | (15,219 | ) | |||||||
Citigroup, Inc. | 855 | 0.24 | % | (15,271 | ) | |||||||
EMCOR Group, Inc. | 1,045 | 0.33 | % | (15,276 | ) | |||||||
Ryder System, Inc. | 990 | 0.25 | % | (15,419 | ) | |||||||
Masco Corp. | 1,792 | 0.28 | % | (15,466 | ) | |||||||
Mylan N.V.* | 1,298 | 0.19 | % | (15,581 | ) | |||||||
International Paper Co. | 1,248 | 0.27 | % | (15,843 | ) | |||||||
Cognizant Technology Solutions Corp. — Class A | 1,081 | 0.36 | % | (15,919 | ) | |||||||
Archer-Daniels-Midland Co. | 4,052 | 0.88 | % | (16,493 | ) | |||||||
Bio-Rad Laboratories, Inc. — Class A* | 283 | 0.35 | % | (16,644 | ) | |||||||
Host Hotels & Resorts, Inc. | 3,626 | 0.32 | % | (16,677 | ) | |||||||
Seagate Technology plc | 1,035 | 0.21 | % | (16,712 | ) | |||||||
Southwest Airlines Co. | 1,601 | 0.40 | % | (17,393 | ) | |||||||
Cirrus Logic, Inc.* | 2,003 | 0.35 | % | (17,782 | ) | |||||||
AECOM* | 2,335 | 0.33 | % | (17,914 | ) | |||||||
BorgWarner, Inc. | 2,264 | 0.42 | % | (18,122 | ) | |||||||
Skyworks Solutions, Inc. | 853 | 0.30 | % | (18,167 | ) | |||||||
Huntsman Corp. | 1,839 | 0.19 | % | (18,573 | ) | |||||||
TE Connectivity Ltd. | 1,196 | 0.48 | % | (19,141 | ) | |||||||
Zayo Group Holdings, Inc.* | 1,703 | 0.21 | % | (19,507 | ) | |||||||
MEDNAX, Inc.* | 1,928 | 0.34 | % | (19,625 | ) | |||||||
LyondellBasell Industries N.V. — Class A | 677 | 0.30 | % | (19,721 | ) | |||||||
CoreLogic, Inc.* | 1,528 | 0.27 | % | (20,184 | ) | |||||||
Cummins, Inc. | 694 | 0.49 | % | (20,317 | ) | |||||||
Belden, Inc. | 684 | 0.15 | % | (20,522 | ) | |||||||
Chemours Co. | 1,231 | 0.18 | % | (21,206 | ) | |||||||
Ligand Pharmaceuticals, Inc. — Class B* | 258 | 0.19 | % | (21,788 | ) | |||||||
Copa Holdings S.A. — Class A | 652 | 0.27 | % | (21,993 | ) | |||||||
Vector Group Ltd. | 3,489 | 0.18 | % | (23,186 | ) | |||||||
Occidental Petroleum Corp. | 1,613 | 0.53 | % | (23,198 | ) | |||||||
Facebook, Inc. — Class A* | 671 | 0.47 | % | (23,737 | ) | |||||||
State Street Corp. | 1,078 | 0.36 | % | (24,156 | ) | |||||||
Lions Gate Entertainment Corp. — Class A | 3,305 | 0.28 | % | (25,639 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 17 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
LONG SHORT EQUITY FUND |
| Shares | Percentage | Value and | |||||||||
Exxon Mobil Corp. | 2,680 | 0.97 | % | $ | (26,067 | ) | ||||||
Molson Coors Brewing Co. — Class B | 2,262 | 0.67 | % | (26,970 | ) | |||||||
Olin Corp. | 3,050 | 0.33 | % | (27,135 | ) | |||||||
Trinseo S.A. | 851 | 0.21 | % | (27,274 | ) | |||||||
Eastman Chemical Co. | 993 | 0.39 | % | (27,312 | ) | |||||||
Valero Energy Corp. | 1,247 | 0.50 | % | (28,091 | ) | |||||||
Westlake Chemical Corp. | 1,434 | 0.50 | % | (28,471 | ) | |||||||
Cabot Corp. | 1,867 | 0.43 | % | (29,894 | ) | |||||||
Western Digital Corp. | 857 | 0.17 | % | (31,016 | ) | |||||||
DXC Technology Co. | 1,493 | 0.42 | % | (35,049 | ) | |||||||
Delphi Technologies plc | 2,227 | 0.17 | % | (35,915 | ) | |||||||
Phillips 66 | 1,553 | 0.71 | % | (35,951 | ) | |||||||
Boise Cascade Co. | 3,062 | 0.39 | % | (36,544 | ) | |||||||
Cardinal Health, Inc. | 3,651 | 0.87 | % | (40,267 | ) | |||||||
McKesson Corp. | 1,820 | 1.07 | % | (43,155 | ) | |||||||
Senior Housing Properties Trust | 9,951 | 0.62 | % | (43,504 | ) | |||||||
Tyson Foods, Inc. — Class A | 2,420 | 0.69 | % | (47,886 | ) | |||||||
FedEx Corp. | 729 | 0.62 | % | (53,204 | ) | |||||||
Total Custom Basket of Long Securities | (2,190,654 | ) | ||||||||||
CUSTOM BASKET OF SHORT SECURITIES6 | ||||||||||||
Southern Copper Corp. | (7,915 | ) | (0.75 | %) | 111,249 | |||||||
Sensient Technologies Corp. | (5,106 | ) | (0.88 | %) | 96,384 | |||||||
Core Laboratories N.V. | (2,089 | ) | (0.38 | %) | 86,337 | |||||||
Equifax, Inc. | (2,112 | ) | (0.61 | %) | 81,064 | |||||||
WPX Energy, Inc.* | (9,881 | ) | (0.35 | %) | 79,258 | |||||||
Compass Minerals International, Inc. | (2,842 | ) | (0.37 | %) | 76,344 | |||||||
Texas Capital Bancshares, Inc.* | (1,576 | ) | (0.25 | %) | 65,833 | |||||||
Mobile Mini, Inc. | (5,414 | ) | (0.54 | %) | 63,474 | |||||||
First Horizon National Corp. | (11,133 | ) | (0.46 | %) | 60,013 | |||||||
Multi-Color Corp. | (1,992 | ) | (0.22 | %) | 57,099 | |||||||
National Oilwell Varco, Inc. | (3,343 | ) | (0.27 | %) | 53,905 | |||||||
ASGN, Inc.* | (3,280 | ) | (0.56 | %) | 51,736 | |||||||
Howard Hughes Corp.* | (1,690 | ) | (0.52 | %) | 49,897 | |||||||
Leggett & Platt, Inc. | (5,713 | ) | (0.64 | %) | 47,252 | |||||||
Sterling Bancorp | (5,925 | ) | (0.31 | %) | 47,030 | |||||||
PolyOne Corp. | (3,879 | ) | (0.35 | %) | 46,173 | |||||||
Healthcare Services Group, Inc. | (4,166 | ) | (0.52 | %) | 44,633 | |||||||
Eaton Vance Corp. | (3,483 | ) | (0.38 | %) | 43,659 | |||||||
Pinnacle Financial Partners, Inc. | (2,387 | ) | (0.34 | %) | 43,551 | |||||||
Corporate Office Properties Trust | (6,081 | ) | (0.40 | %) | 43,064 | |||||||
Allegheny Technologies, Inc.* | (7,692 | ) | (0.52 | %) | 42,531 | |||||||
|
|
| Value and | |||||||||
Goldman Sachs Group, Inc. | (559 | ) | (0.29 | %) | 42,353 | |||||||
Valley National Bancorp | (11,031 | ) | (0.31 | %) | 42,077 | |||||||
Polaris Industries, Inc. | (1,742 | ) | (0.42 | %) | 40,210 | |||||||
Royal Caribbean Cruises Ltd. | (1,981 | ) | (0.61 | %) | 37,580 | |||||||
Scotts Miracle-Gro Co. — Class A | (2,284 | ) | (0.44 | %) | 37,233 | |||||||
Associated Banc-Corp. | (4,544 | ) | (0.28 | %) | 36,472 | |||||||
Tetra Tech, Inc. | (5,033 | ) | (0.82 | %) | 36,122 | |||||||
Douglas Emmett, Inc. | (7,956 | ) | (0.85 | %) | 35,832 | |||||||
Invitation Homes, Inc. | (13,984 | ) | (0.88 | %) | 35,315 | |||||||
General Dynamics Corp. | (898 | ) | (0.44 | %) | 35,302 | |||||||
Guidewire Software, Inc.* | (1,737 | ) | (0.44 | %) | 35,207 | |||||||
KeyCorp | (5,485 | ) | (0.25 | %) | 35,008 | |||||||
Steven Madden Ltd. | (7,600 | ) | (0.72 | %) | 34,981 | |||||||
Paramount Group, Inc. | (13,268 | ) | (0.52 | %) | 34,422 | |||||||
Balchem Corp. | (4,199 | ) | (1.03 | %) | 34,167 | |||||||
Cimpress N.V.* | (853 | ) | (0.28 | %) | 33,265 | |||||||
Marriott International, Inc. — Class A | (1,217 | ) | (0.41 | %) | 31,982 | |||||||
Hanesbrands, Inc. | (6,092 | ) | (0.24 | %) | 31,854 | |||||||
Charles Schwab Corp. | (2,413 | ) | (0.31 | %) | 30,228 | |||||||
WR Grace & Co. | (4,981 | ) | (1.01 | %) | 29,379 | |||||||
Graphic Packaging Holding Co. | (11,262 | ) | (0.38 | %) | 27,989 | |||||||
Robert Half International, Inc. | (1,525 | ) | (0.27 | %) | 27,269 | |||||||
HB Fuller Co. | (3,923 | ) | (0.52 | %) | 26,774 | |||||||
Washington Federal, Inc. | (3,474 | ) | (0.29 | %) | 26,579 | |||||||
Huntington Bancshares, Inc. | (7,184 | ) | (0.27 | %) | 25,906 | |||||||
Vulcan Materials Co. | (917 | ) | (0.28 | %) | 25,555 | |||||||
Martin Marietta Materials, Inc. | (523 | ) | (0.28 | %) | 24,789 | |||||||
Commercial Metals Co. | (5,313 | ) | (0.27 | %) | 24,612 | |||||||
Albemarle Corp. | (969 | ) | (0.23 | %) | 24,554 | |||||||
LKQ Corp.* | (6,039 | ) | (0.45 | %) | 24,321 | |||||||
Pioneer Natural Resources Co. | (1,095 | ) | (0.45 | %) | 24,287 | |||||||
Signature Bank | (1,108 | ) | (0.36 | %) | 24,101 | |||||||
People's United Financial, Inc. | (6,053 | ) | (0.27 | %) | 23,692 | |||||||
Grand Canyon Education, Inc.* | (849 | ) | (0.26 | %) | 23,541 | |||||||
BB&T Corp. | (2,278 | ) | (0.31 | %) | 23,527 | |||||||
BancorpSouth Bank | (3,305 | ) | (0.27 | %) | 23,427 | |||||||
Choice Hotels International, Inc. | (2,745 | ) | (0.62 | %) | 23,235 | |||||||
First Republic Bank | (1,860 | ) | (0.51 | %) | 23,199 | |||||||
Netflix, Inc.* | (327 | ) | (0.27 | %) | 22,841 | |||||||
New York Community Bancorp, Inc. | (10,966 | ) | (0.32 | %) | 22,660 | |||||||
Old National Bancorp | (5,116 | ) | (0.25 | %) | 22,047 |
18| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
LONG SHORT EQUITY FUND |
| Shares | Percentage | Value and | |||||||||
Equinix, Inc. | (369 | ) | (0.41 | %) | $ | 21,837 | ||||||
Jacobs Engineering Group, Inc. | (1,331 | ) | (0.24 | %) | 21,634 | |||||||
Ulta Beauty, Inc.* | (510 | ) | (0.39 | %) | 21,488 | |||||||
Covanta Holding Corp. | (6,388 | ) | (0.27 | %) | 21,063 | |||||||
Whirlpool Corp. | (822 | ) | (0.28 | %) | 20,985 | |||||||
Xylem, Inc. | (3,141 | ) | (0.66 | %) | 20,597 | |||||||
Vornado Realty Trust | (2,038 | ) | (0.40 | %) | 20,300 | |||||||
Boston Properties, Inc. | (1,678 | ) | (0.59 | %) | 20,235 | |||||||
IBERIABANK Corp. | (1,583 | ) | (0.32 | %) | 18,625 | |||||||
Sotheby's* | (2,441 | ) | (0.30 | %) | 18,263 | |||||||
Washington Real Estate Investment Trust | (3,362 | ) | (0.24 | %) | 18,169 | |||||||
Wolverine World Wide, Inc. | (2,872 | ) | (0.29 | %) | 18,056 | |||||||
Ally Financial, Inc. | (4,336 | ) | (0.31 | %) | 17,813 | |||||||
Wabtec Corp. | (1,157 | ) | (0.25 | %) | 17,566 | |||||||
Palo Alto Networks, Inc.* | (544 | ) | (0.32 | %) | 17,543 | |||||||
Silgan Holdings, Inc. | (5,135 | ) | (0.38 | %) | 17,389 | |||||||
CarMax, Inc.* | (1,466 | ) | (0.29 | %) | 17,331 | |||||||
US Ecology, Inc. | (1,377 | ) | (0.27 | %) | 17,323 | |||||||
Roper Technologies, Inc. | (622 | ) | (0.52 | %) | 17,300 | |||||||
AMETEK, Inc. | (2,096 | ) | (0.44 | %) | 17,205 | |||||||
Adtalem Global Education, Inc.* | (1,666 | ) | (0.25 | %) | 16,847 | |||||||
Allegion plc | (1,899 | ) | (0.47 | %) | 16,846 | |||||||
American Homes 4 Rent — Class A | (6,968 | ) | (0.43 | %) | 16,842 | |||||||
Costco Wholesale Corp. | (607 | ) | (0.39 | %) | 16,691 | |||||||
PacWest Bancorp | (2,304 | ) | (0.24 | %) | 16,610 | |||||||
Harley-Davidson, Inc. | (2,311 | ) | (0.25 | %) | 16,407 | |||||||
Alexandria Real Estate Equities, Inc. | (1,568 | ) | (0.57 | %) | 15,860 | |||||||
Ross Stores, Inc. | (1,219 | ) | (0.32 | %) | 15,490 | |||||||
U.S. Bancorp | (1,791 | ) | (0.26 | %) | 15,442 | |||||||
RPM International, Inc. | (4,130 | ) | (0.76 | %) | 15,307 | |||||||
Sealed Air Corp. | (2,748 | ) | (0.30 | %) | 15,240 | |||||||
Markel Corp.* | (196 | ) | (0.64 | %) | 15,228 | |||||||
Empire State Realty Trust, Inc. — Class A | (12,016 | ) | (0.54 | %) | 15,134 | |||||||
Terreno Realty Corp. | (9,031 | ) | (0.99 | %) | 15,065 | |||||||
Crown Holdings, Inc.* | (2,040 | ) | (0.27 | %) | 14,900 | |||||||
Retail Opportunity Investments Corp. | (9,374 | ) | (0.47 | %) | 14,882 | |||||||
Viad Corp. | (1,897 | ) | (0.30 | %) | 14,782 | |||||||
IHS Markit Ltd.* | (5,516 | ) | (0.83 | %) | 14,752 | |||||||
Kilroy Realty Corp. | (3,112 | ) | (0.61 | %) | 14,486 | |||||||
Easterly Government Properties, Inc. | (6,831 | ) | (0.34 | %) | 14,087 | |||||||
Texas Roadhouse, Inc. — Class A | (3,134 | ) | (0.59 | %) | 13,918 | |||||||
Floor & Decor Holdings, Inc. — Class A* | (2,016 | ) | (0.16 | %) | 13,333 | |||||||
General Mills, Inc. | (2,114 | ) | (0.26 | %) | 13,035 | |||||||
Prologis, Inc. | (1,601 | ) | (0.29 | %) | 12,696 | |||||||
Cheesecake Factory, Inc. | (1,880 | ) | (0.26 | %) | 12,109 | |||||||
Omnicell, Inc.* | (1,376 | ) | (0.26 | %) | 11,956 | |||||||
Capitol Federal Financial, Inc. | (21,370 | ) | (0.85 | %) | 11,870 | |||||||
NewMarket Corp. | (1,093 | ) | (1.41 | %) | 11,171 | |||||||
Bio-Techne Corp. | (594 | ) | (0.27 | %) | 11,109 | |||||||
Service Corporation International | (3,056 | ) | (0.39 | %) | 10,821 | |||||||
Haemonetics Corp.* | (905 | ) | (0.28 | %) | 10,715 | |||||||
Dunkin' Brands Group, Inc. | (1,389 | ) | (0.28 | %) | 10,087 | |||||||
Tyler Technologies, Inc.* | (616 | ) | (0.36 | %) | 9,683 | |||||||
South Jersey Industries, Inc. | (4,531 | ) | (0.39 | %) | 9,422 | |||||||
West Pharmaceutical Services, Inc. | (900 | ) | (0.28 | %) | 9,262 | |||||||
PPG Industries, Inc. | (999 | ) | (0.32 | %) | 8,989 | |||||||
Camden Property Trust | (1,792 | ) | (0.49 | %) | 8,986 | |||||||
Atmos Energy Corp. | (2,864 | ) | (0.83 | %) | 8,929 | |||||||
Intuit, Inc. | (571 | ) | (0.35 | %) | 8,783 | |||||||
Northrop Grumman Corp. | (352 | ) | (0.27 | %) | 8,648 | |||||||
Regency Centers Corp. | (1,490 | ) | (0.27 | %) | 8,440 | |||||||
Marsh & McLennan Companies, Inc. | (1,112 | ) | (0.28 | %) | 8,282 | |||||||
Liberty Property Trust | (4,683 | ) | (0.61 | %) | 8,100 | |||||||
Team, Inc.* | (5,590 | ) | (0.26 | %) | 8,058 | |||||||
Chemed Corp. | (313 | ) | (0.28 | %) | 7,942 | |||||||
Tractor Supply Co. | (1,123 | ) | (0.29 | %) | 7,869 | |||||||
Gentherm, Inc.* | (2,174 | ) | (0.27 | %) | 7,510 | |||||||
Fastenal Co. | (1,757 | ) | (0.29 | %) | 7,418 | |||||||
ABM Industries, Inc. | (3,197 | ) | (0.32 | %) | 7,408 | |||||||
Tesla, Inc.* | (473 | ) | (0.49 | %) | 7,248 | |||||||
Columbia Sportswear Co. | (1,056 | ) | (0.28 | %) | 7,211 | |||||||
GCP Applied Technologies, Inc.* | (3,617 | ) | (0.28 | %) | 7,108 | |||||||
Arthur J Gallagher & Co. | (2,059 | ) | (0.48 | %) | 7,084 | |||||||
MGM Resorts International | (3,736 | ) | (0.28 | %) | 6,869 | |||||||
Booking Holdings, Inc.* | (51 | ) | (0.28 | %) | 6,596 | |||||||
iRobot Corp.* | (1,053 | ) | (0.28 | %) | 6,536 | |||||||
Axalta Coating Systems Ltd.* | (3,858 | ) | (0.28 | %) | 5,962 | |||||||
Cannae Holdings, Inc.* | (7,856 | ) | (0.42 | %) | 5,862 | |||||||
Sempra Energy | (1,260 | ) | (0.43 | %) | 5,730 | |||||||
Hawaiian Electric Industries, Inc. | (7,143 | ) | (0.82 | %) | 5,555 | |||||||
Six Flags Entertainment Corp. | (1,693 | ) | (0.30 | %) | 5,532 | |||||||
Sherwin-Williams Co. | (251 | ) | (0.31 | %) | 5,362 | |||||||
AutoNation, Inc.* | (2,448 | ) | (0.27 | %) | 5,067 | |||||||
Becton Dickinson and Co. | (413 | ) | (0.29 | %) | 5,027 | |||||||
Air Products & Chemicals, Inc. | (993 | ) | (0.50 | %) | 4,972 | |||||||
Genuine Parts Co. | (1,763 | ) | (0.53 | %) | 4,860 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 19 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
LONG SHORT EQUITY FUND |
| Shares | Percentage | Value and | |||||||||
Everest Re Group Ltd. | (449 | ) | (0.31 | %) | $ | 4,779 | ||||||
TopBuild Corp.* | (1,919 | ) | (0.27 | %) | 4,565 | |||||||
Asbury Automotive Group, Inc.* | (1,423 | ) | (0.30 | %) | 4,491 | |||||||
Physicians Realty Trust | (10,104 | ) | (0.51 | %) | 4,387 | |||||||
Vail Resorts, Inc. | (370 | ) | (0.24 | %) | 4,339 | |||||||
Linde plc | (613 | ) | (0.30 | %) | 4,128 | |||||||
Domino's Pizza, Inc. | (364 | ) | (0.28 | %) | 4,122 | |||||||
Axis Capital Holdings Ltd. | (2,436 | ) | (0.39 | %) | 4,119 | |||||||
Pool Corp. | (1,275 | ) | (0.59 | %) | 3,760 | |||||||
Meredith Corp. | (3,379 | ) | (0.55 | %) | 3,333 | |||||||
Clorox Co. | (602 | ) | (0.29 | %) | 3,332 | |||||||
Boeing Co. | (184 | ) | (0.19 | %) | 3,137 | |||||||
Rexford Industrial Realty, Inc. | (7,553 | ) | (0.70 | %) | 3,050 | |||||||
Public Storage | (507 | ) | (0.32 | %) | 3,016 | |||||||
STORE Capital Corp. | (5,169 | ) | (0.46 | %) | 2,879 | |||||||
MSA Safety, Inc. | (1,261 | ) | (0.37 | %) | 2,727 | |||||||
Mettler-Toledo International, Inc.* | (164 | ) | (0.29 | %) | 2,669 | |||||||
McDonald's Corp. | (524 | ) | (0.29 | %) | 2,651 | |||||||
Healthcare Trust of America, Inc. — Class A | (8,368 | ) | (0.66 | %) | 2,555 | |||||||
Insulet Corp.* | (1,191 | ) | (0.30 | %) | 2,494 | |||||||
Berry Global Group, Inc.* | (2,022 | ) | (0.30 | %) | 2,398 | |||||||
Pegasystems, Inc. | (2,458 | ) | (0.37 | %) | 2,197 | |||||||
Cable One, Inc. | (111 | ) | (0.29 | %) | 1,542 | |||||||
AptarGroup, Inc. | (1,022 | ) | (0.30 | %) | 1,285 | |||||||
Republic Services, Inc. — Class A | (2,854 | ) | (0.64 | %) | 894 | |||||||
Hilton Worldwide Holdings, Inc. | (1,357 | ) | (0.31 | %) | 609 | |||||||
TransUnion | (1,538 | ) | (0.27 | %) | 488 | |||||||
CoStar Group, Inc.* | (498 | ) | (0.53 | %) | 203 | |||||||
Equity Residential | (2,352 | ) | (0.49 | %) | 157 | |||||||
NiSource, Inc. | (5,873 | ) | (0.47 | %) | (93 | ) | ||||||
Alliant Energy Corp. | (3,584 | ) | (0.47 | %) | (680 | ) | ||||||
AvalonBay Communities, Inc. | (929 | ) | (0.51 | %) | (704 | ) | ||||||
Digital Realty Trust, Inc. | (1,429 | ) | (0.48 | %) | (749 | ) | ||||||
Intercontinental Exchange, Inc. | (1,560 | ) | (0.37 | %) | (909 | ) | ||||||
Crown Castle International Corp. | (1,345 | ) | (0.46 | %) | (945 | ) | ||||||
salesforce.com, Inc.* | (1,652 | ) | (0.71 | %) | (1,065 | ) | ||||||
National Retail Properties, Inc. | (2,957 | ) | (0.45 | %) | (1,132 | ) | ||||||
SBA Communications Corp.* | (812 | ) | (0.41 | %) | (1,187 | ) | ||||||
ServiceNow, Inc.* | (570 | ) | (0.32 | %) | (1,260 | ) | ||||||
Royal Gold, Inc. | (2,582 | ) | (0.69 | %) | (1,575 | ) | ||||||
Incyte Corp.* | (1,509 | ) | (0.30 | %) | (1,685 | ) | ||||||
Federal Realty Investment Trust | (850 | ) | (0.31 | %) | (2,040 | ) | ||||||
Waste Management, Inc. | (1,602 | ) | (0.45 | %) | (2,492 | ) | ||||||
Wayfair, Inc. — Class A* | (1,037 | ) | (0.29 | %) | (2,501 | ) | ||||||
Essex Property Trust, Inc. | (688 | ) | (0.53 | %) | (3,204 | ) | ||||||
Glacier Bancorp, Inc. | (3,088 | ) | (0.38 | %) | (3,718 | ) | ||||||
American Campus Communities, Inc. | (5,744 | ) | (0.74 | %) | (4,104 | ) | ||||||
Deere & Co. | (958 | ) | (0.45 | %) | (4,143 | ) | ||||||
MarketAxess Holdings, Inc. | (463 | ) | (0.31 | %) | (4,327 | ) | ||||||
FireEye, Inc.* | (5,292 | ) | (0.27 | %) | (4,374 | ) | ||||||
Alleghany Corp. | (217 | ) | (0.42 | %) | (5,019 | ) | ||||||
Dominion Energy, Inc. | (1,591 | ) | (0.36 | %) | (5,208 | ) | ||||||
White Mountains Insurance Group Ltd. | (253 | ) | (0.68 | %) | (5,273 | ) | ||||||
TransDigm Group, Inc.* | (581 | ) | (0.62 | %) | (5,876 | ) | ||||||
Ultimate Software Group, Inc.* | (479 | ) | (0.37 | %) | (6,471 | ) | ||||||
Hormel Foods Corp. | (3,538 | ) | (0.47 | %) | (6,805 | ) | ||||||
Monolithic Power Systems, Inc. | (1,279 | ) | (0.47 | %) | (6,887 | ) | ||||||
Cintas Corp. | (837 | ) | (0.44 | %) | (7,417 | ) | ||||||
Copart, Inc.* | (1,979 | ) | (0.30 | %) | (7,549 | ) | ||||||
MSCI, Inc. — Class A | (752 | ) | (0.35 | %) | (8,502 | ) | ||||||
Church & Dwight Company, Inc. | (1,467 | ) | (0.30 | %) | (12,224 | ) | ||||||
Welltower, Inc. | (2,384 | ) | (0.52 | %) | (14,793 | ) | ||||||
SPS Commerce, Inc.* | (1,039 | ) | (0.27 | %) | (15,397 | ) | ||||||
Ecolab, Inc. | (1,387 | ) | (0.64 | %) | (15,423 | ) | ||||||
UDR, Inc. | (3,693 | ) | (0.46 | %) | (18,182 | ) | ||||||
American Tower Corp. — Class A | (1,042 | ) | (0.52 | %) | (20,063 | ) | ||||||
HCP, Inc. | (5,567 | ) | (0.49 | %) | (20,771 | ) | ||||||
Cornerstone OnDemand, Inc.* | (1,956 | ) | (0.31 | %) | (21,416 | ) | ||||||
Workday, Inc. — Class A* | (885 | ) | (0.44 | %) | (22,276 | ) | ||||||
Sun Communities, Inc. | (3,985 | ) | (1.27 | %) | (23,253 | ) | ||||||
Eversource Energy | (3,176 | ) | (0.65 | %) | (23,527 | ) | ||||||
RLI Corp. | (3,104 | ) | (0.67 | %) | (24,076 | ) | ||||||
EastGroup Properties, Inc. | (2,794 | ) | (0.80 | %) | (24,143 | ) | ||||||
American Water Works Company, Inc. | (2,932 | ) | (0.83 | %) | (29,072 | ) | ||||||
Verisk Analytics, Inc. — Class A* | (2,254 | ) | (0.77 | %) | (30,038 | ) | ||||||
Equity LifeStyle Properties, Inc. | (3,678 | ) | (1.12 | %) | (31,058 | ) | ||||||
Realty Income Corp. | (4,418 | ) | (0.87 | %) | (38,196 | ) | ||||||
Rollins, Inc. | (10,839 | ) | (1.23 | %) | (46,960 | ) | ||||||
Exponent, Inc. | (7,525 | ) | (1.20 | %) | (56,119 | ) | ||||||
Total Custom Basket of Short Securities | 3,080,555 |
20| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
LONG SHORT EQUITY 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 a portion of this security is pledged as custom basket swap collateral at December 31, 2018. |
2 | All or a portion of this security is on loan at December 31, 2018 — See Note 7. |
3 | Rate indicated is the 7-day yield as of December 31, 2018. |
4 | Securities lending collateral — See Note 7. |
5 | 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, 2018. |
6 | 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, 2018. |
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, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 28,095,482 | $ | — | $ | — | $ | 28,095,482 | ||||||||
Money Market Fund | 311,244 | — | 311,244 | |||||||||||||
Securities Lending Collateral | 35,921 | — | — | 35,921 | ||||||||||||
Custom Basket Swap Agreements** | — | 3,080,555 | — | 3,080,555 | ||||||||||||
Total Assets | $ | 28,442,647 | $ | 3,080,555 | $ | — | $ | 31,523,202 | ||||||||
| ||||||||||||||||
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Custom Basket Swap Agreements** | $ | — | $ | 2,190,654 | $ | — | $ | 2,190,654 |
** | This derivative is reported as unrealized appreciation/depreciation 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, 2018, there were no transfers between levels.
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 21 |
LONG SHORT EQUITY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments, at value - including $39,970 of securities loaned (cost $31,199,149) | $ | 28,442,647 | ||
Cash | 6,079 | |||
Unrealized appreciation on swap agreements | 3,080,555 | |||
Receivables: | ||||
Dividends | 52,989 | |||
Fund shares sold | 9,109 | |||
Securities lending income | 98 | |||
Total assets | 31,591,477 | |||
Liabilities: | ||||
Unrealized depreciation on swap agreements | 2,190,654 | |||
Payable for: | ||||
Return of securities lending collateral | 42,000 | |||
Fund shares redeemed | 29,999 | |||
Management fees | 21,611 | |||
Swap settlement | 19,534 | |||
Investor service fees | 6,003 | |||
Transfer agent and administrative fees | 2,401 | |||
Portfolio accounting fees | 2,401 | |||
Trustees’ fees* | 558 | |||
Miscellaneous | 65,751 | |||
Total liabilities | 2,380,912 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 29,210,565 | ||
Net assets consist of: | ||||
Paid in capital | $ | 32,884,252 | ||
Total distributable earnings (loss) | (3,673,687 | ) | ||
Net assets | $ | 29,210,565 | ||
Capital shares outstanding | 2,214,298 | |||
Net asset value per share | $ | 13.19 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $250) | $ | 729,607 | ||
Income from securities lending, net | 4,336 | |||
Total investment income | 733,943 | |||
Expenses: | ||||
Management fees | 308,507 | |||
Investor service fees | 85,696 | |||
Professional fees | 47,119 | |||
Transfer agent and administrative fees | 34,278 | |||
Portfolio accounting fees | 34,278 | |||
Trustees’ fees* | 9,515 | |||
Custodian fees | 5,376 | |||
Miscellaneous | 31,260 | |||
Total expenses | 556,029 | |||
Net investment income | 177,914 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 1,668,121 | |||
Swap agreements | (3,568,303 | ) | ||
Net realized loss | (1,900,182 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (5,123,268 | ) | ||
Swap agreements | 1,909,970 | |||
Net change in unrealized appreciation (depreciation) | (3,213,298 | ) | ||
Net realized and unrealized loss | (5,113,480 | ) | ||
Net decrease in net assets resulting from operations | $ | (4,935,566 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
22| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
LONG SHORT EQUITY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | 177,914 | $ | (108,977 | ) | |||
Net realized gain (loss) on investments | (1,900,182 | ) | 5,663,923 | |||||
Net change in unrealized appreciation (depreciation) on investments | (3,213,298 | ) | (663,755 | ) | ||||
Net increase (decrease) in net assets resulting from operations | (4,935,566 | ) | 4,891,191 | |||||
Distributions to shareholders | (4,359,341 | ) | (126,120 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 10,995,300 | 10,449,559 | ||||||
Distributions reinvested | 4,359,341 | 126,120 | ||||||
Cost of shares redeemed | (15,986,990 | ) | (8,089,622 | ) | ||||
Net increase (decrease) from capital share transactions | (632,349 | ) | 2,486,057 | |||||
Net increase (decrease) in net assets | (9,927,256 | ) | 7,251,128 | |||||
Net assets: | ||||||||
Beginning of year | 39,137,821 | 31,886,693 | ||||||
End of year | $ | 29,210,565 | $ | 39,137,821 | ||||
Capital share activity: | ||||||||
Shares sold | 675,872 | 649,140 | ||||||
Shares issued from reinvestment of distributions | 306,996 | 7,922 | ||||||
Shares redeemed | (993,262 | ) | (506,416 | ) | ||||
Net increase (decrease) in shares | (10,394 | ) | 150,646 |
1 | For the year ended December 31, 2017, the total distributions to shareholders were all from net investment income (see Note 11). |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 23 |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 17.59 | $ | 15.37 | $ | 15.27 | $ | 15.08 | $ | 14.67 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .08 | (.05 | ) | .01 | (.11 | ) | (.09 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | (2.19 | ) | 2.33 | .09 | .30 | .50 | ||||||||||||||
Total from investment operations | (2.11 | ) | 2.28 | .10 | .19 | .41 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | — | (.06 | ) | — | — | — | ||||||||||||||
Net realized gains | (2.29 | ) | — | — | — | — | ||||||||||||||
Total distributions | (2.29 | ) | (.06 | ) | — | — | — | |||||||||||||
Net asset value, end of period | $ | 13.19 | $ | 17.59 | $ | 15.37 | $ | 15.27 | $ | 15.08 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (12.94 | %) | 14.85 | % | 0.65 | % | 1.26 | % | 2.79 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 29,211 | $ | 39,138 | $ | 31,887 | $ | 39,120 | $ | 30,041 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.52 | % | (0.32 | %) | 0.04 | % | (0.71 | %) | (0.63 | %) | ||||||||||
Total expensesc,e | 1.62 | % | 1.78 | % | 2.22 | % | 2.28 | % | 2.12 | % | ||||||||||
Net expensesd | 1.62 | % | 1.78 | % | 2.22 | % | 2.28 | % | 2.12 | % | ||||||||||
Portfolio turnover rate | 266 | % | 258 | % | 239 | % | 244 | % | 316 | % |
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, as applicable. |
e | 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: |
2018 | 2017 | 2016 | 2015 | 2014 | |
1.62% | 1.61% | 1.56% | 1.51% | 1.57% |
24| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
GLOBAL MANAGED FUTURES STRATEGY FUND
OBJECTIVE: Seeks to generate positive total returns over time.
For the one-year period ended December 31, 2018, the Global Managed Futures Strategy Fund returned -9.14%. The ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index, the Fund’s benchmark, returned 1.87%.
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 and Guggenheim Ultra Short Duration Fund.
In addition to its benchmark, the Fund underperformed the SG CTA Index for the year, which posted a return of -5.84%. The Fund also underperformed the investment grade bond and U.S. equities markets.
As of period end, energy markets were the sole positive contributor to the Fund’s performance, while positions in currencies, commodities, fixed income, and equities detracted from returns. Positions in the DAX, Gasoline, Australian dollar, Australian 10-year bond and Coffee all contributed positively to the Fund’s return.
Entering the first quarter of 2019, the Fund is net short equities and commodities and long fixed income and the U.S. dollar.
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 the Fund’s performance for the period.
Performance displayed represents past performance which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 25 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Consolidated Holdings Diversification (Market Exposure as % of Net Assets)
“Consolidated Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. 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.
Cumulative Fund Performance*,†
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 | 40.0% |
Guggenheim Strategy Fund II | 18.2% |
Guggenheim Strategy Fund III | 17.0% |
Guggenheim Ultra Short Duration Fund | 5.5% |
Total | 80.7% |
“Largest Holdings” excludes any temporary cash or derivative investments.
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Global Managed Futures Strategy Fund | (9.14%) | (1.44%) | (3.27%) |
ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index | 1.87% | 0.63% | 0.37% |
* | 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. |
26 | THE RYDEX FUNDS ANNUAL REPORT |
CONSOLIDATED SCHEDULE OF INVESTMENTS | December 31, 2018 |
GLOBAL MANAGED FUTURES STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 80.7% | ||||||||
Guggenheim Variable Insurance Strategy Fund III1 | 214,892 | $ | 5,318,567 | |||||
Guggenheim Strategy Fund II1 | 97,136 | 2,410,909 | ||||||
Guggenheim Strategy Fund III1 | 91,124 | 2,258,972 | ||||||
Guggenheim Ultra Short Duration Fund1,2 | 72,944 | 726,522 | ||||||
Total Mutual Funds | ||||||||
(Cost $10,747,657) | 10,714,970 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 11.2% | ||||||||
U.S. Treasury Bills | ||||||||
2.21% due 01/08/193,4 | $ | 1,492,000 | 1,491,441 | |||||
Total U.S. Treasury Bills | ||||||||
(Cost $1,491,337) | 1,491,441 | |||||||
REPURCHASE AGREEMENTS††,5 - 8.3% | ||||||||
JPMorgan Chase & Co. | 648,797 | 648,797 | ||||||
Barclays Capital | 269,816 | 269,816 | ||||||
Bank of America Merrill Lynch | 179,878 | 179,878 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $1,098,491) | 1,098,491 | |||||||
Total Investments - 100.2% | ||||||||
(Cost $13,337,485) | $ | 13,304,902 | ||||||
Other Assets & Liabilities, net - (0.2)% | (23,509 | ) | ||||||
Total Net Assets - 100.0% | $ | 13,281,393 |
Futures Contracts | |||||||||||||
Description | Number of | Expiration | Notional | Value and | |||||||||
Interest Rate Futures Contracts Purchased† | |||||||||||||
Australian Government 10 Year Bond Futures Contracts†† | 23 | Mar 2019 | $ | 2,156,766 | $ | 32,214 | |||||||
Euro - Bund Futures Contracts†† | 24 | Mar 2019 | 4,507,941 | 27,410 | |||||||||
Australian Government 3 Year Bond Futures Contracts†† | 66 | Mar 2019 | 5,219,556 | 23,027 | |||||||||
Euro - OATS Futures Contracts†† | 37 | Mar 2019 | 6,408,331 | 19,306 | |||||||||
Euro - Bobl Futures Contracts†† | 21 | Mar 2019 | 3,196,322 | 15,859 | |||||||||
U.S. Treasury Long Bond Futures Contracts | 4 | Mar 2019 | 584,500 | 10,687 | |||||||||
Euro - Schatz Futures Contracts†† | 71 | Mar 2019 | 9,109,511 | 7,508 | |||||||||
Euro - 30 year Bond Futures Contracts†† | 1 | Mar 2019 | 207,448 | 5,521 | |||||||||
Euro - BTP Italian Government Bond Futures Contracts†† | 1 | Mar 2019 | 146,809 | 530 | |||||||||
U.S. Treasury 2 Year Note Futures Contracts | 2 | Mar 2019 | 424,531 | 37 | |||||||||
$ | 31,961,715 | $ | 142,099 | ||||||||||
Equity Futures Contracts Purchased† | |||||||||||||
CBOE Volatility Index Futures Contracts | 5 | Jan 2019 | $ | 121,000 | $ | 11,096 | |||||||
Euro STOXX 50 Index Futures Contracts†† | 2 | Mar 2019 | 68,753 | 1,757 | |||||||||
CBOE Volatility Index Futures Contracts | 7 | Feb 2019 | 156,323 | (18 | ) | ||||||||
CAC 40 10 Euro Index Futures Contracts†† | 1 | Jan 2019 | 54,274 | (504 | ) | ||||||||
Amsterdam Index Futures Contracts†† | 2 | Jan 2019 | 223,921 | (3,190 | ) | ||||||||
Dow Jones Industrial Average Index Mini Futures Contracts | 2 | Mar 2019 | 233,100 | (7,608 | ) | ||||||||
$ | 857,371 | $ | 1,533 | ||||||||||
Currency Futures Contracts Purchased† | |||||||||||||
Mexican Peso Futures Contracts | 5 | Mar 2019 | $ | 125,775 | $ | 341 | |||||||
New Zealand Dollar Futures Contracts | 4 | Mar 2019 | 268,840 | (2,388 | ) | ||||||||
$ | 394,615 | $ | (2,047 | ) | |||||||||
Commodity Futures Contracts Purchased† | |||||||||||||
Live Cattle Futures Contracts | 4 | Feb 2019 | $ | 198,440 | $ | 1,263 | |||||||
Natural Gas Futures Contracts | 3 | Feb 2019 | 89,430 | (31,748 | ) | ||||||||
$ | 287,870 | $ | (30,485 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 27 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
GLOBAL MANAGED FUTURES STRATEGY FUND |
Futures Contracts | |||||||||||||
Description | Number of | Expiration | Notional | Value and | |||||||||
Commodity Futures Contracts Sold Short† | |||||||||||||
Coffee 'C' Futures Contracts | 7 | Mar 2019 | $ | 266,963 | $ | 46,524 | |||||||
Gasoline RBOB Futures Contracts | 4 | Feb 2019 | 220,886 | 18,100 | |||||||||
Soybean Futures Contracts | 7 | Mar 2019 | 312,900 | 13,717 | |||||||||
LME Primary Aluminum Futures Contracts | 7 | Feb 2019 | 321,344 | 12,042 | |||||||||
Soybean Oil Futures Contracts | 15 | Mar 2019 | 250,560 | 11,904 | |||||||||
NY Harbor ULSD Futures Contracts | 1 | Feb 2019 | 71,089 | 6,348 | |||||||||
Low Sulphur Gas Oil Futures Contracts | 3 | Feb 2019 | 151,500 | 5,437 | |||||||||
Cotton #2 Futures Contracts | 5 | Mar 2019 | 180,575 | 4,927 | |||||||||
LME Zinc Futures Contracts | 2 | Feb 2019 | 123,775 | 4,881 | |||||||||
Copper Futures Contracts | 3 | Mar 2019 | 198,000 | 4,591 | |||||||||
Hard Red Winter Wheat Futures Contracts | 5 | Mar 2019 | 122,250 | 4,152 | |||||||||
Soybean Meal Futures Contracts | 7 | Mar 2019 | 217,000 | 4,119 | |||||||||
LME Nickel Futures Contracts | 3 | Feb 2019 | 191,781 | 2,183 | |||||||||
WTI Crude Futures Contracts | 1 | Feb 2019 | 45,820 | 2,111 | |||||||||
Wheat Futures Contracts | 1 | Mar 2019 | 25,150 | 397 | |||||||||
Sugar #11 Futures Contracts | 2 | Mar 2019 | 26,970 | 270 | |||||||||
Corn Futures Contracts | 2 | Mar 2019 | 37,425 | 19 | |||||||||
Platinum Futures Contracts | 2 | Apr 2019 | 80,040 | (181 | ) | ||||||||
Lean Hogs Futures Contracts | 2 | Feb 2019 | 48,800 | (276 | ) | ||||||||
Cattle Feeder Futures Contracts | 1 | Mar 2019 | 73,287 | (653 | ) | ||||||||
Brent Crude Futures Contracts | 1 | Mar 2019 | 54,150 | (2,062 | ) | ||||||||
LME Lead Futures Contracts | 3 | Feb 2019 | 151,650 | (3,403 | ) | ||||||||
$ | 3,171,915 | $ | 135,147 | ||||||||||
Equity Futures Contracts Sold Short† | |||||||||||||
S&P MidCap 400 Index Mini Futures Contracts | 2 | Mar 2019 | $ | 332,720 | $ | 20,987 | |||||||
Tokyo Stock Price Index Futures Contracts†† | 1 | Mar 2019 | 136,015 | 8,531 | |||||||||
MSCI EAFE Index Mini Futures Contracts | 2 | Mar 2019 | 171,760 | 6,261 | |||||||||
IBEX 35 Index Futures Contracts†† | 2 | Jan 2019 | 194,538 | 5,402 | |||||||||
DAX Index Futures Contracts†† | 1 | Mar 2019 | 305,203 | 4,002 | |||||||||
HSCEI Index Futures Contracts†† | 2 | Jan 2019 | 127,735 | 3,928 | |||||||||
S&P/TSX 60 IX Index Futures Contracts†† | 2 | Mar 2019 | 250,714 | 2,693 | |||||||||
OMX Stockholm 30 Index Futures Contracts†† | 3 | Jan 2019 | 48,094 | 1,701 | |||||||||
MSCI EAFE Index Mini Futures Contracts | 1 | Mar 2019 | 48,345 | 1,116 | |||||||||
MSCI Taiwan Stock Index Futures Contracts†† | 1 | Jan 2019 | 35,193 | 414 | |||||||||
CBOE Volatility Index Futures Contracts | 17 | Jun 2019 | 349,350 | 271 | |||||||||
CBOE Volatility Index Futures Contracts | 11 | May 2019 | 228,250 | 19 | |||||||||
Russell 2000 Index Mini Futures Contracts | 1 | Mar 2019 | 67,480 | (502 | ) | ||||||||
SPI 200 Index Futures Contracts†† | 3 | Mar 2019 | 294,259 | (1,223 | ) | ||||||||
FTSE/JSE TOP 40 Index Futures Contracts†† | 2 | Mar 2019 | 65,704 | (1,929 | ) | ||||||||
$ | 2,655,360 | $ | 51,671 | ||||||||||
Currency Futures Contracts Sold Short† | |||||||||||||
Australian Dollar Futures Contracts | 18 | Mar 2019 | $ | 1,269,540 | $ | 23,695 | |||||||
Canadian Dollar Futures Contracts | 7 | Mar 2019 | 513,800 | 10,224 | |||||||||
Euro FX Futures Contracts | 4 | Mar 2019 | 576,475 | (3,194 | ) | ||||||||
British Pound Futures Contracts | 5 | Mar 2019 | 399,781 | (3,200 | ) | ||||||||
Japanese Yen Futures Contracts | 7 | Mar 2019 | 802,988 | (23,233 | ) | ||||||||
Swiss Franc Futures Contracts | 28 | Mar 2019 | 3,585,400 | (28,059 | ) | ||||||||
$ | 7,147,984 | $ | (23,767 | ) | |||||||||
Interest Rate Futures Contracts Sold Short† | |||||||||||||
Long Gilt Futures Contracts†† | 4 | Mar 2019 | $ | 630,894 | $ | (3,113 | ) | ||||||
Canadian Government 10 Year Bond Futures Contracts†† | 24 | Mar 2019 | 2,407,774 | (7,979 | ) | ||||||||
U.S. Treasury 10 Year Note Futures Contracts | 27 | Mar 2019 | 3,295,266 | (24,020 | ) | ||||||||
U.S. Treasury 5 Year Note Futures Contracts | 17 | Mar 2019 | 1,949,289 | (30,833 | ) | ||||||||
$ | 8,283,223 | $ | (65,945 | ) |
28| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
GLOBAL MANAGED FUTURES STRATEGY FUND |
* | Includes cumulative appreciation (depreciation). Variation margin is reported within the Consolidated Statement of Assets and Liabilities. |
† | 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 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
3 | All or a portion of this security is pledged as futures collateral at December 31, 2018. |
4 | Rate indicated is the effective yield at the time of purchase. |
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, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 10,714,970 | $ | — | $ | — | $ | 10,714,970 | ||||||||
U.S. Treasury Bills | — | 1,491,441 | — | 1,491,441 | ||||||||||||
Repurchase Agreements | — | 1,098,491 | — | 1,098,491 | ||||||||||||
Interest Rate Futures Contracts* | 10,724 | 131,375 | — | 142,099 | ||||||||||||
Equity Futures Contracts* | 39,750 | 28,428 | — | 68,178 | ||||||||||||
Currency Futures Contracts* | 34,260 | — | — | 34,260 | ||||||||||||
Commodity Futures Contracts* | 142,985 | — | — | 142,985 | ||||||||||||
Total Assets | $ | 10,942,689 | $ | 2,749,735 | $ | — | $ | 13,692,424 | ||||||||
| ||||||||||||||||
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Interest Rate Futures Contracts* | $ | 54,853 | $ | 11,092 | $ | — | $ | 65,945 | ||||||||
Equity Futures Contracts* | 8,128 | 6,846 | — | 14,974 | ||||||||||||
Currency Futures Contracts* | 60,074 | — | — | 60,074 | ||||||||||||
Commodity Futures Contracts* | 38,323 | — | — | 38,323 | ||||||||||||
Total Liabilities | $ | 161,378 | $ | 17,938 | $ | — | $ | 179,316 |
* | This derivative is reported as unrealized appreciation/depreciation 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, 2018, there were no transfers between levels.
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 29 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
GLOBAL MANAGED FUTURES STRATEGY FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Cash Management Funds”), each of which are 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, 2018, 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/1601445/000089180418000513/gug75569-ncsr.htm.
Transactions during the year ended December 31, 2018, in which the company is an “affiliated person”, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | Capital | |||||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 3,349,880 | $ | 78,985 | $ | (1,000,000 | ) | $ | 5,436 | $ | (23,392 | ) | $ | 2,410,909 | 97,136 | $ | 77,567 | $ | 1,290 | |||||||||||||||||
Guggenheim Strategy Fund III | 1,627,129 | 651,747 | — | — | (19,904 | ) | 2,258,972 | 91,124 | 51,433 | 85 | ||||||||||||||||||||||||||
Guggenheim Ultra Short Duration Fund* | 1,786,058 | 45,948 | (1,100,000 | ) | 1,626 | (7,110 | ) | 726,522 | 72,944 | 45,428 | 527 | |||||||||||||||||||||||||
Guggenheim Variable Insurance Strategy Fund III | 5,897,587 | 198,889 | (700,000 | ) | 1,309 | (79,218 | ) | 5,318,567 | 214,892 | 196,543 | 2,521 | |||||||||||||||||||||||||
$ | 12,660,654 | $ | 975,569 | $ | (2,800,000 | ) | $ | 8,371 | $ | (129,624 | ) | $ | 10,714,970 | $ | 370,971 | $ | 4,423 |
* | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
30| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
GLOBAL MANAGED FUTURES STRATEGY FUND |
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $1,491,337) | $ | 1,491,441 | ||
Investments in affiliated issuers, at value (cost $10,747,657) | 10,714,970 | |||
Repurchase agreements, at value (cost $1,098,491) | 1,098,491 | |||
Cash | 6,073 | |||
Segregated cash with broker | 4,534 | |||
Receivables: | ||||
Variation margin on futures contracts | 36,391 | |||
Dividends | 19,646 | |||
Fund shares sold | 1,094 | |||
Interest | 90 | |||
Total assets | 13,372,730 | |||
Liabilities: | ||||
Payable for: | ||||
Securities purchased | 20,472 | |||
Professional fees | 17,953 | |||
Fund shares redeemed | 17,023 | |||
Management fees | 8,884 | |||
Investor service fees | 2,648 | |||
Transfer agent and administrative fees | 1,059 | |||
Portfolio accounting fees | 1,059 | |||
Trustees’ fees* | 272 | |||
Miscellaneous | 21,967 | |||
Total liabilities | 91,337 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 13,281,393 | ||
Net assets consist of: | ||||
Paid in capital | $ | 14,511,364 | ||
Total distributable earnings (loss) | (1,229,971 | ) | ||
Net assets | $ | 13,281,393 | ||
Capital shares outstanding | 856,907 | |||
Net asset value per share | $ | 15.50 |
CONSOLIDATED STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 370,971 | ||
Interest | 45,873 | |||
Total investment income | 416,844 | |||
Expenses: | ||||
Management fees | 137,970 | |||
Investor service fees | 36,253 | |||
Professional fees | 17,888 | |||
Transfer agent and administrative fees | 14,501 | |||
Portfolio accounting fees | 14,501 | |||
Trustees’ fees* | 4,075 | |||
Custodian fees | 2,161 | |||
Line of credit fees | 2 | |||
Miscellaneous | 21,382 | |||
Total expenses | 248,733 | |||
Less: | ||||
Expenses waived by Adviser | (7,578 | ) | ||
Net expenses | 241,155 | |||
Net investment income | 175,689 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 7 | |||
Investments in affiliated issuers | 8,371 | |||
Distributions received from affiliated investment company shares | 4,423 | |||
Futures contracts | (1,343,845 | ) | ||
Foreign currency transactions | 81 | |||
Net realized loss | (1,330,963 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 319 | |||
Investments in affiliated issuers | (129,624 | ) | ||
Futures contracts | (80,447 | ) | ||
Foreign currency translations | 281 | |||
Net change in unrealized appreciation (depreciation) | (209,471 | ) | ||
Net realized and unrealized loss | (1,540,434 | ) | ||
Net decrease in net assets resulting from operations | $ | (1,364,745 | ) |
* | 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| 31 |
GLOBAL MANAGED FUTURES STRATEGY FUND |
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 175,689 | $ | 90,084 | ||||
Net realized gain (loss) on investments | (1,330,963 | ) | 1,169,869 | |||||
Net change in unrealized appreciation (depreciation) on investments | (209,471 | ) | (18,544 | ) | ||||
Net increase (decrease) in net assets resulting from operations | (1,364,745 | ) | 1,241,409 | |||||
Distributions to shareholders | — | (224,098 | )1 | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 3,343,451 | 3,928,863 | ||||||
Distributions reinvested | — | 224,098 | ||||||
Cost of shares redeemed | (3,488,782 | ) | (5,160,335 | ) | ||||
Net decrease from capital share transactions | (145,331 | ) | (1,007,374 | ) | ||||
Net increase (decrease) in net assets | (1,510,076 | ) | 9,937 | |||||
Net assets: | ||||||||
Beginning of year | 14,791,469 | 14,781,532 | ||||||
End of year | $ | 13,281,393 | $ | 14,791,469 | ||||
Capital share activity: | ||||||||
Shares sold | 198,960 | 241,110 | ||||||
Shares issued from reinvestment of distributions | — | 14,192 | ||||||
Shares redeemed | (209,139 | ) | (316,195 | ) | ||||
Net decrease in shares | (10,179 | ) | (60,893 | ) |
1 | For the year ended December 31, 2017, the total distributions to shareholders were all from net investment income (see Note 11). |
32| 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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 17.06 | $ | 15.93 | $ | 19.42 | $ | 20.89 | $ | 18.60 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .20 | .10 | .06 | (.07 | ) | (.12 | ) | |||||||||||||
Net gain (loss) on investments (realized and unrealized) | (1.76 | ) | 1.27 | (2.88 | ) | (.25 | ) | 2.41 | ||||||||||||
Total from investment operations | (1.56 | ) | 1.37 | (2.82 | ) | (.32 | ) | 2.29 | ||||||||||||
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 | $ | 15.50 | $ | 17.06 | $ | 15.93 | $ | 19.42 | $ | 20.89 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (9.14 | %) | 8.71 | % | (14.77 | %) | (1.55 | %) | 12.08 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 13,281 | $ | 14,791 | $ | 14,782 | $ | 17,536 | $ | 11,433 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.21 | % | 0.59 | % | 0.32 | % | (0.35 | %) | (0.67 | %) | ||||||||||
Total expensesc | 1.72 | % | 1.69 | % | 1.69 | % | 1.65 | % | 1.67 | % | ||||||||||
Net expensesd | 1.66 | % | 1.64 | % | 1.62 | % | 1.57 | % | 1.60 | % | ||||||||||
Portfolio turnover rate | 8 | % | 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 and reimbursements, as applicable. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 33 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
MULTI-HEDGE STRATEGIES FUND
OBJECTIVE: Seeks to provide long-term capital appreciation with less risk than traditional equity funds.
2018 was the ninth 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.
For the year ended December 31, 2018, the Fund produced a return of -5.16% with annualized daily standard deviation of 5%. 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 44% and -24%, 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 -6.72% 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 74% with the S&P 500 in 2018.
Since the Fund changed its investment objective (starting August 1, 2009), it has outperformed the HFRX Global Hedge Fund Index by more than 13% (roughly 1.3% annualized), net of fees, while doing so with lower correlation to equity markets.
Two of the five hedge fund strategies used within the Fund contributed positively to gross Fund returns in 2018. Specifically, Equity Market Neutral and Merger Arbitrage strategies were positive contributors for the year. Global Macro and Long Short Equity strategies contributed negatively to performance for the period.
During the year, derivatives were used within the Global Macro, Long/Short Equity, and Equity Market Neutral strategies and to a limited extent in the Merger Arbitrage strategy. Overall, the use of derivatives contributed negatively to Fund performance for the year.
Guggenheim’s Ultra Short Duration and 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. |
34 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Consolidated Holdings Diversification (Market Exposure as % of Net Assets)
Cumulative Fund Performance*,†
“Consolidated Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. 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 Strategy Fund II | 14.2% |
Guggenheim Variable Insurance Strategy Fund III | 10.2% |
Guggenheim Strategy Fund III | 10.2% |
Aspen Insurance Holdings Ltd. | 1.3% |
ARRIS International plc | 1.2% |
Imperva, Inc. | 1.2% |
Dun & Bradstreet Corp. | 1.2% |
Navigators Group, Inc. | 1.2% |
USG Corp. | 0.9% |
Investment Technology Group, Inc. | 0.7% |
Top Ten Total | 42.3% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments.
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Multi-Hedge Strategies Fund | (5.16%) | 0.86% | 1.42% |
S&P 500 Index | (4.38%) | 8.49% | 13.12% |
HFRX Global Hedge Fund Index | (6.72%) | (0.59%) | 1.53% |
* | 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 | 35 |
CONSOLIDATED SCHEDULE OF INVESTMENTS | December 31, 2018 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 24.8% | ||||||||
Financial - 5.2% | ||||||||
Aspen Insurance Holdings Ltd.1 | 12,696 | $ | 533,105 | |||||
Navigators Group, Inc. | 6,815 | 473,574 | ||||||
Investment Technology Group, Inc. | 9,714 | 293,751 | ||||||
MB Financial, Inc. | 6,417 | 254,306 | ||||||
Blue Hills Bancorp, Inc.1 | 11,040 | 235,594 | ||||||
Green Bancorp, Inc.1 | 8,402 | 144,010 | ||||||
Beneficial Bancorp, Inc.1 | 8,157 | 116,564 | ||||||
Genworth Financial, Inc. — Class A* | 13,429 | 62,579 | ||||||
Total Financial | 2,113,483 | |||||||
Communications - 4.8% | ||||||||
ARRIS International plc*,1 | 15,763 | 481,875 | ||||||
Imperva, Inc.* | 8,565 | 476,985 | ||||||
Tribune Media Co. — Class A | 6,316 | 286,620 | ||||||
Finisar Corp.* | 12,989 | 280,563 | ||||||
Pandora Media, Inc.* | 33,858 | 273,911 | ||||||
Sprint Corp.*,1 | 22,267 | 129,594 | ||||||
Total Communications | 1,929,548 | |||||||
Technology - 4.4% | ||||||||
Dun & Bradstreet Corp.1 | 3,319 | 473,766 | ||||||
athenahealth, Inc.* | 2,207 | 291,170 | ||||||
Integrated Device Technology, Inc.*,1 | 5,958 | 288,546 | ||||||
Red Hat, Inc.*,1 | 1,621 | 284,712 | ||||||
SendGrid, Inc.*,1 | 3,200 | 138,144 | ||||||
Hortonworks, Inc.* | 7,938 | 114,466 | ||||||
ConvergeOne Holdings, Inc. | 7,631 | 94,472 | ||||||
Engility Holdings, Inc.* | 3,100 | 88,226 | ||||||
Total Technology | 1,773,502 | |||||||
Consumer, Non-cyclical - 2.9% | ||||||||
NutriSystem, Inc. | 6,542 | 287,063 | ||||||
Travelport Worldwide Ltd. | 18,335 | 286,393 | ||||||
NxStage Medical, Inc.*,1 | 7,583 | 217,025 | ||||||
LSC Communications, Inc. | 30,085 | 210,595 | ||||||
Civitas Solutions, Inc.* | 8,629 | 151,094 | ||||||
Cigna Corp. | 1 | 189 | ||||||
CVS Health Corp. | 1 | 52 | ||||||
Conagra Brands, Inc. | 1 | 21 | ||||||
Total Consumer, Non-cyclical | 1,152,432 | |||||||
Consumer, Cyclical - 2.7% | ||||||||
Bojangles’, Inc.* | 18,146 | 291,788 | ||||||
Essendant, Inc. | 23,042 | 289,868 | ||||||
Belmond Ltd. — Class A* | 11,455 | 286,718 | ||||||
Nexeo Solutions, Inc.* | 24,142 | 207,380 | ||||||
Total Consumer, Cyclical | 1,075,754 | |||||||
Industrial - 2.4% | ||||||||
USG Corp.1 | 8,717 | 371,883 | ||||||
Esterline Technologies Corp.*,1 | 1,690 | 205,250 | ||||||
Electro Scientific Industries, Inc.* | 6,650 | 199,234 | ||||||
L3 Technologies, Inc. | 1,136 | 197,278 | ||||||
United Technologies Corp. | 1 | 100 | ||||||
Total Industrial | 973,745 | |||||||
Energy - 1.3% | ||||||||
EQGP Holdings, LP | 9,523 | 189,984 | ||||||
TransMontaigne Partners, LP | 4,640 | 188,291 | ||||||
WildHorse Resource Development Corp.* | 10,900 | 153,799 | ||||||
Transocean Ltd.* | 1 | 6 | ||||||
Total Energy | 532,080 | |||||||
Utilities - 1.1% | ||||||||
Vectren Corp. | 3,764 | 270,933 | ||||||
Connecticut Water Service, Inc. | 2,577 | 172,324 | ||||||
SCANA Corp. | 100 | 4,778 | ||||||
Total Utilities | 448,035 | |||||||
Total Common Stocks | ||||||||
(Cost $10,380,693) | 9,998,579 | |||||||
MUTUAL FUNDS† - 34.7% | ||||||||
Guggenheim Strategy Fund II2 | 230,344 | 5,717,144 | ||||||
Guggenheim Variable Insurance Strategy Fund III2 | 166,329 | 4,116,640 | ||||||
Guggenheim Strategy Fund III2 | 165,940 | 4,113,656 | ||||||
Guggenheim Ultra Short Duration Fund2,10 | 4,239 | 42,224 | ||||||
Total Mutual Funds | ||||||||
(Cost $14,106,533) | 13,989,664 | |||||||
CLOSED-END FUNDS† - 8.5% | ||||||||
RMR Real Estate Income Fund | 10,468 | 157,753 | ||||||
Herzfeld Caribbean Basin Fund, Inc. | 31,804 | 154,567 | ||||||
Dividend and Income Fund | 16,064 | 153,090 | ||||||
Eagle Growth & Income Opportunities Fund3 | 8,695 | 109,818 | ||||||
GDL Fund | 8,256 | 75,707 | ||||||
BrandywineGLOBAL Global Income Opportunities Fund, Inc. | 4,506 | 46,772 | ||||||
Eaton Vance Municipal Income Trust | 3,272 | 37,006 | ||||||
Eaton Vance Municipal Bond Fund | 3,162 | 35,699 | ||||||
Boulder Growth & Income Fund, Inc. | 3,188 | 33,251 | ||||||
Cushing Energy Income Fund | 5,056 | 32,611 | ||||||
Brookfield Global Listed Infrastructure Income Fund, Inc. | 3,187 | 32,284 | ||||||
Adams Natural Resources Fund, Inc. | 2,172 | 31,646 | ||||||
General American Investors Company, Inc. | 1,109 | 31,536 | ||||||
Neuberger Berman California Municipal Fund, Inc. | 2,429 | 29,439 | ||||||
Franklin Universal Trust | 4,474 | 28,410 | ||||||
Eaton Vance California Municipal Income Trust | 2,530 | 28,007 | ||||||
Western Asset Emerging Markets Debt Fund, Inc. | 2,241 | 27,542 | ||||||
Nuveen Connecticut Quality Municipal Income Fund | 2,419 | 27,238 | ||||||
Pioneer Diversified High Income Trust | 1,960 | 25,480 | ||||||
PGIM Global Short Duration High Yield Fund, Inc. | 1,966 | 25,401 |
36| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Value | ||||||
Nuveen New Jersey Quality Municipal Income Fund | 1,986 | $ | 25,302 | |||||
PGIM Short Duration High Yield Fund, Inc. | 1,937 | 25,239 | ||||||
First Trust Aberdeen Global Opportunity Income Fund | 2,649 | 24,848 | ||||||
Neuberger Berman High Yield Strategies Fund, Inc. | 2,500 | 24,175 | ||||||
Eaton Vance New York Municipal Income Trust | 2,026 | 23,279 | ||||||
Morgan Stanley Emerging Markets Domestic Debt Fund, Inc. | 3,803 | 23,046 | ||||||
Nuveen Texas Quality Municipal Income Fund | 1,859 | 23,033 | ||||||
Salient Midstream & MLP Fund | 3,097 | 22,887 | ||||||
Aberdeen Asia-Pacific Income Fund, Inc. | 5,846 | 22,624 | ||||||
Eaton Vance New Jersey Municipal Income Trust | 1,940 | 21,709 | ||||||
Eaton Vance New York Municipal Bond Fund | 1,963 | 21,594 | ||||||
Morgan Stanley Emerging Markets Debt Fund, Inc. | 2,610 | 21,480 | ||||||
Western Asset Global High Income Fund, Inc. | 2,556 | 21,138 | ||||||
AllianceBernstein Global High Income Fund, Inc. | 1,997 | 21,029 | ||||||
First Trust High Income Long/Short Fund | 1,562 | 20,743 | ||||||
Bancroft Fund Ltd. | 1,113 | 20,729 | ||||||
Eaton Vance Massachusetts Municipal Income Trust | 1,661 | 20,497 | ||||||
DTF Tax-Free Income, Inc. | 1,654 | 20,476 | ||||||
Eaton Vance Limited Duration Income Fund | 1,709 | 20,371 | ||||||
Nuveen Global High Income Fund | 1,492 | 20,366 | ||||||
Morgan Stanley Asia-Pacific Fund, Inc. | 1,228 | 20,201 | ||||||
Nuveen Credit Strategies Income Fund | 2,704 | 20,010 | ||||||
First Trust Aberdeen Emerging Opportunity Fund | 1,643 | 19,995 | ||||||
Mexico Fund, Inc. | 1,495 | 19,794 | ||||||
Nuveen Arizona Quality Municipal Income Fund | 1,667 | 19,787 | ||||||
Delaware Investments National Municipal Income Fund | 1,618 | 19,270 | ||||||
Eaton Vance Ohio Municipal Bond Fund | 1,694 | 19,227 | ||||||
Western Asset Inflation-Linked Opportunities & Income Fund12 | 1,879 | 19,072 | ||||||
Japan Smaller Capitalization Fund, Inc. | 2,260 | 18,758 | ||||||
Western Asset High Income Opportunity Fund, Inc. | 4,271 | 18,707 | ||||||
Western Asset High Income Fund II, Inc. | 3,230 | 18,605 | ||||||
Central and Eastern Europe Fund, Inc. | 844 | 18,551 | ||||||
Western Asset Inflation - Linked Securities & Income Fund12 | 1,740 | 18,427 | ||||||
Templeton Emerging Markets Income Fund | 1,905 | 18,326 | ||||||
Pioneer High Income Trust | 2,267 | 18,068 | ||||||
Credit Suisse Asset Management Income Fund, Inc. | 6,505 | 18,019 | ||||||
Morgan Stanley China A Share Fund, Inc. | 985 | 17,986 | ||||||
Aberdeen Total Dynamic Dividend Fund | 2,478 | 17,866 | ||||||
Gabelli Healthcare & WellnessRx Trust | 1,929 | 17,843 | ||||||
BlackRock Credit Allocation Income Trust | 1,594 | 17,821 | ||||||
BlackRock Corporate High Yield Fund, Inc. | 1,918 | 17,799 | ||||||
Aberdeen Japan Equity Fund, Inc. | 2,742 | 17,796 | ||||||
CBRE Clarion Global Real Estate Income Fund | 2,888 | 17,790 | ||||||
Ellsworth Growth and Income Fund Ltd. | 2,067 | 17,757 | ||||||
Nuveen Real Asset Income and Growth Fund | 1,301 | 17,733 | ||||||
Eaton Vance Floating-Rate Income Plus Fund | 1,245 | 17,704 | ||||||
Nuveen AMT-Free Quality Municipal Income Fund | 1,437 | 17,689 | ||||||
BlackRock Debt Strategies Fund, Inc. | 1,792 | 17,508 | ||||||
India Fund, Inc. | 865 | 17,508 | ||||||
Voya Asia Pacific High Dividend Equity Income Fund | 2,051 | 17,495 | ||||||
Nuveen New Jersey Municipal Value Fund | 1,418 | 17,441 | ||||||
Ivy High Income Opportunities Fund | 1,437 | 17,431 | ||||||
Cushing MLP & Infrastructure Total Return Fund | 2,029 | 17,307 | ||||||
Aberdeen Emerging Markets Equity Income Fund, Inc. | 2,721 | 17,278 | ||||||
Macquarie Global Infrastructure Total Return Fund, Inc. | 918 | 17,268 | ||||||
Wells Fargo Income Opportunities Fund | 2,382 | 17,222 | ||||||
Taiwan Fund, Inc. | 1,128 | 17,100 | ||||||
BlackRock Resources & Commodities Strategy Trust | 2,410 | 17,015 | ||||||
BlackRock Limited Duration Income Trust | 1,270 | 16,980 | ||||||
Principal Real Estate Income Fund | 1,017 | 16,821 | ||||||
Cohen & Steers REIT and Preferred Income Fund, Inc. | 940 | 16,732 | ||||||
Adams Diversified Equity Fund, Inc. | 1,318 | 16,633 | ||||||
Morgan Stanley India Investment Fund, Inc. | 829 | 16,621 | ||||||
Ares Dynamic Credit Allocation Fund, Inc. | 1,200 | 16,560 | ||||||
Voya Emerging Markets High Income Dividend Equity Fund | 2,265 | 16,512 | ||||||
Aberdeen Global Dynamic Dividend Fund | 1,936 | 16,475 | ||||||
Nuveen Multi-Market Income Fund | 2,387 | 16,470 | ||||||
Swiss Helvetia Fund, Inc. | 2,383 | 16,443 | ||||||
BlackRock Multi-Sector Income Trust | 1,066 | 16,374 | ||||||
Nuveen Diversified Dividend & Income Fund | 1,772 | 16,355 | ||||||
Duff & Phelps Global Utility Income Fund, Inc. | 1,380 | 16,353 | ||||||
Western Asset Global Corporate Defined Opportunity Fund, Inc. | 1,086 | 16,268 | ||||||
Tortoise Power and Energy Infrastructure Fund, Inc. | 1,019 | 16,243 | ||||||
MFS Charter Income Trust | 2,210 | 16,200 | ||||||
Neuberger Berman MLP Income Fund, Inc. | 2,421 | 16,197 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 37 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Value | ||||||
Nuveen Massachusetts Quality Municipal Income Fund | 1,378 | $ | 16,178 | |||||
Templeton Dragon Fund, Inc. | 943 | 16,031 | ||||||
Invesco High Income Trust II | 1,276 | 15,988 | ||||||
Lazard World Dividend & Income Fund, Inc. | 1,867 | 15,888 | ||||||
Barings Global Short Duration High Yield Fund | 996 | 15,886 | ||||||
Source Capital, Inc. | 488 | 15,884 | ||||||
BlackRock Enhanced Global Dividend Trust | 1,695 | 15,882 | ||||||
Gabelli Global Utility & Income Trust | 986 | 15,875 | ||||||
Brookfield Real Assets Income Fund, Inc. | 829 | 15,809 | ||||||
European Equity Fund, Inc. | 2,040 | 15,769 | ||||||
BlackRock Enhanced International Dividend Trust | 3,148 | 15,677 | ||||||
Templeton Emerging Markets Fund/United States | 1,187 | 15,668 | ||||||
Virtus Total Return Fund, Inc. | 1,804 | 15,623 | ||||||
Nuveen Floating Rate Income Fund | 1,681 | 15,516 | ||||||
Western Asset High Yield Defined Opportunity Fund, Inc. | 1,157 | 15,214 | ||||||
Kayne Anderson Midstream/Energy Fund, Inc. | 1,562 | 15,073 | ||||||
Korea Fund, Inc. | 537 | 15,031 | ||||||
AllianzGI NFJ Dividend Interest & Premium Strategy Fund | 1,407 | 15,027 | ||||||
BlackRock Core Bond Trust | 1,230 | 15,006 | ||||||
BlackRock Taxable Municipal Bond Trust | 712 | 14,966 | ||||||
Putnam Municipal Opportunities Trust | 1,326 | 14,891 | ||||||
Aberdeen Global Premier Properties Fund | 2,966 | 14,771 | ||||||
LMP Capital and Income Fund, Inc. | 1,378 | 14,717 | ||||||
Wells Fargo Multi-Sector Income Fund | 1,312 | 14,550 | ||||||
Delaware Enhanced Global Dividend & Income Fund | 1,667 | 14,503 | ||||||
John Hancock Investors Trust | 1,021 | 14,417 | ||||||
Nuveen Preferred & Income Securities Fund | 1,736 | 14,374 | ||||||
Mexico Equity & Income Fund, Inc. | 1,414 | 14,281 | ||||||
Tri-Continental Corp. | 605 | 14,230 | ||||||
Tortoise Pipeline & Energy Fund, Inc. | 1,143 | 14,185 | ||||||
First Trust Intermediate Duration Preferred & Income Fund | 715 | 14,157 | ||||||
Sprott Focus Trust, Inc. | 2,433 | 14,111 | ||||||
MFS Multimarket Income Trust | 2,736 | 14,008 | ||||||
First Trust Energy Infrastructure Fund | 1,077 | 13,958 | ||||||
Putnam Master Intermediate Income Trust | 3,283 | 13,953 | ||||||
Wells Fargo Global Dividend Opportunity Fund | 3,006 | 13,948 | ||||||
China Fund, Inc. | 824 | 13,917 | ||||||
First Trust New Opportunities MLP & Energy Fund | 1,839 | 13,866 | ||||||
Tekla Healthcare Opportunities Fund | 822 | 13,793 | ||||||
Neuberger Berman Real Estate Securities Income Fund, Inc. | 3,309 | 13,732 | ||||||
AllianzGI Equity & Convertible Income Fund | 739 | 13,701 | ||||||
Nuveen Real Estate Income Fund | 1,608 | 13,604 | ||||||
Cohen & Steers Global Income Builder, Inc. | 1,812 | 13,499 | ||||||
Cohen & Steers Closed-End Opportunity Fund, Inc. | 1,213 | 13,452 | ||||||
Aberdeen Income Credit Strategies Fund | 1,280 | 13,414 | ||||||
BlackRock Enhanced Equity Dividend Trust | 1,715 | 13,326 | ||||||
Cohen & Steers Infrastructure Fund, Inc. | 672 | 13,279 | ||||||
Dreyfus High Yield Strategies Fund | 4,886 | 13,241 | ||||||
Royce Micro-Capital Trust, Inc. | 1,754 | 13,015 | ||||||
Clough Global Dividend and Income Fund | 1,296 | 12,973 | ||||||
Royce Value Trust, Inc. | 1,098 | 12,956 | ||||||
ClearBridge Energy Midstream Opportunity Fund, Inc. | 1,652 | 12,902 | ||||||
Tekla Healthcare Investors | 717 | 12,870 | ||||||
Morgan Stanley Emerging Markets Fund, Inc. | 798 | 12,856 | ||||||
Liberty All-Star Equity Fund | 2,365 | 12,724 | ||||||
ClearBridge MLP & Midstream Total Return Fund, Inc. | 1,630 | 12,714 | ||||||
Clough Global Opportunities Fund | 1,544 | 12,707 | ||||||
Lazard Global Total Return and Income Fund, Inc. | 922 | 12,558 | ||||||
Gabelli Dividend & Income Trust | 683 | 12,499 | ||||||
BlackRock Enhanced Capital and Income Fund, Inc. | 874 | 12,306 | ||||||
Cushing Renaissance Fund | 897 | 12,047 | ||||||
Eaton Vance Tax-Advantaged Global Dividend Income Fund | 883 | 11,956 | ||||||
New Germany Fund, Inc. | 981 | 11,478 | ||||||
Advent Claymore Convertible Securities and Income Fund11,17 | 828 | 10,383 | ||||||
Total Closed-End Funds | ||||||||
(Cost $3,736,507) | 3,442,046 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 22.9% | ||||||||
U.S. Treasury Bills | ||||||||
2.14% due 01/03/194,7 | $ | 7,900,000 | 7,899,506 | |||||
2.21% due 01/08/194,5 | 1,318,000 | 1,317,506 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $9,216,430) | 9,217,012 | |||||||
REPURCHASE AGREEMENTS††,6 - 2.6% | ||||||||
JPMorgan Chase & Co. | 615,743 | 615,743 | ||||||
Barclays Capital | 256,070 | 256,070 | ||||||
Bank of America Merrill Lynch | 170,713 | 170,713 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $1,042,526) | 1,042,526 |
38| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Value | ||||||
SECURITIES LENDING COLLATERAL†,8 - 0.1% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 2.32%9 | 58,327 | $ | 58,327 | |||||
Total Securities Lending Collateral | ||||||||
(Cost $58,327) | 58,327 | |||||||
Total Investments - 93.6% | ||||||||
(Cost $38,541,016) | $ | 37,748,154 | ||||||
COMMON STOCKS SOLD SHORT† - (5.5%) | ||||||||
Utilities - 0.0% | ||||||||
Dominion Energy, Inc. | 100 | (7,146 | ) | |||||
Energy - (0.3)% | ||||||||
Transocean Ltd.* | 1 | (7 | ) | |||||
Chesapeake Energy Corp.* | 57,880 | (121,548 | ) | |||||
Total Energy | (121,555 | ) | ||||||
Basic Materials - (0.3)% | ||||||||
Univar, Inc.* | 7,363 | (130,620 | ) | |||||
Technology - (0.5)% | ||||||||
Lumentum Holdings, Inc.* | 1 | (42 | ) | |||||
Science Applications International Corp. | 1,300 | (82,810 | ) | |||||
Cloudera, Inc.* | 10,359 | (114,571 | ) | |||||
Total Technology | (197,423 | ) | ||||||
Consumer, Non-cyclical - (0.7)% | ||||||||
Conagra Brands, Inc. | 1 | (21 | ) | |||||
CVS Health Corp. | 1 | (66 | ) | |||||
Cigna Corp. | 1 | (190 | ) | |||||
Tivity Health, Inc.* | 1,401 | (34,759 | ) | |||||
Quad/Graphics, Inc. | 18,803 | (231,653 | ) | |||||
Total Consumer, Non-cyclical | (266,689 | ) | ||||||
Industrial - (0.7)% | ||||||||
II-VI, Inc.* | 2,881 | (93,517 | ) | |||||
Harris Corp. | 1,477 | (198,878 | ) | |||||
Total Industrial | (292,395 | ) | ||||||
Communications - (1.4)% | ||||||||
Twilio, Inc. — Class A* | 1,600 | (142,880 | ) | |||||
T-Mobile US, Inc.* | 2,285 | (145,349 | ) | |||||
Sirius XM Holdings, Inc. | 48,756 | (278,397 | ) | |||||
Total Communications | (566,626 | ) | ||||||
Financial - (1.6)% | ||||||||
WSFS Financial Corp. | 2,458 | (93,183 | ) | |||||
Veritex Holdings, Inc.* | 6,638 | (141,920 | ) | |||||
Independent Bank Corp. | 2,548 | (179,150 | ) | |||||
Fifth Third Bancorp | 9,305 | (218,947 | ) | |||||
Total Financial | (633,200 | ) | ||||||
Total Common Stocks Sold Short | ||||||||
(Proceeds $2,697,591) | (2,215,654 | ) | ||||||
EXCHANGE-TRADED FUNDS SOLD SHORT† - (8.5%) | ||||||||
SPDR S&P 500 ETF Trust | 5 | (1,250 | ) | |||||
iShares Core U.S. Aggregate Bond ETF | 35 | (3,727 | ) | |||||
iShares Russell 1000 Growth ETF | 47 | (6,153 | ) | |||||
iShares MSCI South Korea ETF | 172 | (10,124 | ) | |||||
Technology Select Sector SPDR Fund | 340 | (21,073 | ) | |||||
Invesco QQQ Trust Series 1 | 253 | (39,028 | ) | |||||
iShares Russell 1000 Value ETF | 353 | (39,200 | ) | |||||
Industrial Select Sector SPDR Fund | 621 | (39,998 | ) | |||||
iShares MSCI United Kingdom ETF | 1,373 | (40,298 | ) | |||||
iShares MSCI Emerging Markets ETF | 1,105 | (43,161 | ) | |||||
iShares MSCI Australia ETF | 2,397 | (46,142 | ) | |||||
iShares 20+ Year Treasury Bond ETF | 410 | (49,819 | ) | |||||
VanEck Vectors Russia ETF | 2,711 | (50,831 | ) | |||||
iShares China Large-Capital ETF | 1,346 | (52,602 | ) | |||||
iShares MSCI Japan ETF | 1,069 | (54,188 | ) | |||||
Consumer Discretionary Select Sector SPDR Fund | 662 | (65,545 | ) | |||||
iShares MSCI Taiwan ETF | 2,257 | (71,366 | ) | |||||
Materials Select Sector SPDR Fund | 1,669 | (84,318 | ) | |||||
VanEck Vectors Gold Miners ETF | 4,074 | (85,921 | ) | |||||
iShares TIPS Bond ETF | 787 | (86,184 | ) | |||||
iShares MSCI Mexico ETF | 2,159 | (88,908 | ) | |||||
Health Care Select Sector SPDR Fund | 1,153 | (99,746 | ) | |||||
Financial Select Sector SPDR Fund | 4,319 | (102,878 | ) | |||||
Consumer Staples Select Sector SPDR Fund | 2,328 | (118,216 | ) | |||||
iShares MSCI EAFE ETF | 2,419 | (142,189 | ) | |||||
iShares iBoxx $ Investment Grade Corporate Bond ETF | 1,332 | (150,276 | ) | |||||
Utilities Select Sector SPDR Fund | 3,012 | (159,395 | ) | |||||
Energy Select Sector SPDR Fund | 3,377 | (193,671 | ) | |||||
iShares Russell 2000 Index ETF | 1,604 | (214,775 | ) | |||||
iShares U.S. Real Estate ETF | 3,804 | (285,072 | ) | |||||
SPDR Bloomberg Barclays High Yield Bond ETF | 13,864 | (465,692 | ) | |||||
iShares 7-10 Year Treasury Bond ETF | 5,104 | (531,837 | ) | |||||
Total Exchange-Traded Funds Sold Short | ||||||||
(Proceeds $3,816,990) | (3,443,583 | ) | ||||||
Total Securities Sold Short - (14.0)% | ||||||||
(Proceeds $6,514,581) | $ | (5,659,237 | ) | |||||
Other Assets & Liabilities, net - 20.4% | 8,246,265 | |||||||
Total Net Assets - 100.0% | $ | 40,335,182 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 39 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
MULTI-HEDGE STRATEGIES FUND |
Futures Contracts | |||||||||||||
Description | Number of | Expiration | Notional | Value and | |||||||||
Interest Rate Futures Contracts Purchased† | |||||||||||||
Euro - Bund Futures Contracts†† | 40 | Mar 2019 | $ | 7,513,235 | $ | 41,299 | |||||||
Euro - OATS Futures Contracts†† | 77 | Mar 2019 | 13,336,255 | 41,294 | |||||||||
Australian Government 10 Year Bond Futures Contracts†† | 17 | Mar 2019 | 1,594,132 | 23,811 | |||||||||
Euro - 30 year Bond Futures Contracts†† | 4 | Mar 2019 | 829,793 | 10,868 | |||||||||
U.S. Treasury Long Bond Futures Contracts | 3 | Mar 2019 | 438,375 | 4,003 | |||||||||
Euro - BTP Italian Government Bond Futures Contracts†† | 2 | Mar 2019 | 293,617 | 1,059 | |||||||||
$ | 24,005,407 | $ | 122,334 | ||||||||||
Equity Futures Contracts Purchased† | |||||||||||||
CBOE Volatility Index Futures Contracts | 21 | Jan 2019 | $ | 508,200 | $ | 46,605 | |||||||
Euro STOXX 50 Index Futures Contracts†† | 10 | Mar 2019 | 343,767 | 8,786 | |||||||||
DAX Index Futures Contracts†† | 1 | Mar 2019 | 305,203 | 8,278 | |||||||||
FTSE 100 Index Futures Contracts†† | 4 | Mar 2019 | 340,725 | 7,699 | |||||||||
CBOE Volatility Index Futures Contracts | 29 | Feb 2019 | 647,624 | (77 | ) | ||||||||
$ | 2,145,519 | $ | 71,291 | ||||||||||
Commodity Futures Contracts Purchased† | |||||||||||||
Live Cattle Futures Contracts | 7 | Feb 2019 | $ | 347,270 | $ | 6,305 | |||||||
Natural Gas Futures Contracts | 4 | Feb 2019 | 119,240 | (37,043 | ) | ||||||||
$ | 466,510 | $ | (30,738 | ) | |||||||||
Currency Futures Contracts Purchased† | |||||||||||||
British Pound Futures Contracts | 12 | Mar 2019 | $ | 959,475 | $ | 6,996 | |||||||
New Zealand Dollar Futures Contracts | 8 | Mar 2019 | 537,680 | (5,762 | ) | ||||||||
Canadian Dollar Futures Contracts | 33 | Mar 2019 | 2,422,200 | (45,709 | ) | ||||||||
$ | 3,919,355 | $ | (44,475 | ) | |||||||||
Commodity Futures Contracts Sold Short† | |||||||||||||
Coffee 'C' Futures Contracts | 5 | Mar 2019 | $ | 190,688 | $ | 24,933 | |||||||
Low Sulphur Gas Oil Futures Contracts | 4 | Feb 2019 | 202,000 | 21,468 | |||||||||
NY Harbor ULSD Futures Contracts | 3 | Feb 2019 | 213,268 | 19,044 | |||||||||
Brent Crude Futures Contracts | 3 | Mar 2019 | 162,450 | 18,355 | |||||||||
WTI Crude Futures Contracts | 3 | Feb 2019 | 137,460 | 16,612 | |||||||||
Soybean Oil Futures Contracts | 19 | Mar 2019 | 317,376 | 15,042 | |||||||||
Gasoline RBOB Futures Contracts | 3 | Feb 2019 | 165,665 | 13,575 | |||||||||
Hard Red Winter Wheat Futures Contracts | 8 | Mar 2019 | 195,600 | 11,617 | |||||||||
Soybean Futures Contracts | 5 | Mar 2019 | 223,500 | 9,798 | |||||||||
Corn Futures Contracts | 16 | Mar 2019 | 299,400 | 7,326 | |||||||||
LME Primary Aluminum Futures Contracts | 4 | Feb 2019 | 183,625 | 7,200 | |||||||||
Soybean Meal Futures Contracts | 10 | Mar 2019 | 310,000 | 6,090 | |||||||||
Cotton #2 Futures Contracts | 3 | Mar 2019 | 108,345 | 6,028 | |||||||||
Wheat Futures Contracts | 5 | Mar 2019 | 125,750 | 4,041 | |||||||||
Lean Hogs Futures Contracts | 2 | Feb 2019 | 48,800 | 3,296 | |||||||||
Copper Futures Contracts | 1 | Mar 2019 | 66,000 | 3,246 | |||||||||
LME Zinc Futures Contracts | 1 | Feb 2019 | 61,887 | 2,441 | |||||||||
LME Nickel Futures Contracts | 2 | Feb 2019 | 127,854 | 1,173 | |||||||||
Sugar #11 Futures Contracts | 1 | Mar 2019 | 13,485 | 400 | |||||||||
LME Lead Futures Contracts | 2 | Feb 2019 | 101,100 | (619 | ) | ||||||||
Cattle Feeder Futures Contracts | 3 | Mar 2019 | 219,862 | (1,959 | ) | ||||||||
Silver Futures Contracts | 1 | Mar 2019 | 77,700 | (4,234 | ) | ||||||||
Cocoa Futures Contracts | 2 | Mar 2019 | 48,580 | (6,166 | ) | ||||||||
$ | 3,600,395 | $ | 178,707 |
40| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
MULTI-HEDGE STRATEGIES FUND |
Futures Contracts | |||||||||||||
Description | Number of | Expiration | Notional | Value and | |||||||||
Equity Futures Contracts Sold Short† | |||||||||||||
Tokyo Stock Price Index Futures Contracts†† | 1 | Mar 2019 | $ | 136,015 | $ | 8,945 | |||||||
OMX Stockholm 30 Index Futures Contracts†† | 6 | Jan 2019 | 96,188 | 3,402 | |||||||||
IBEX 35 Index Futures Contracts†† | 1 | Jan 2019 | 97,269 | 2,701 | |||||||||
CBOE Volatility Index Futures Contracts | 72 | Jun 2019 | 1,479,600 | 2,680 | |||||||||
FTSE MIB Index Futures Contracts†† | 1 | Mar 2019 | 105,222 | 2,333 | |||||||||
Amsterdam Index Futures Contracts†† | 1 | Jan 2019 | 111,961 | 1,579 | |||||||||
S&P/TSX 60 IX Index Futures Contracts†† | 1 | Mar 2019 | 125,357 | 1,347 | |||||||||
CAC 40 10 Euro Index Futures Contracts†† | 2 | Jan 2019 | 108,547 | 851 | |||||||||
CBOE Volatility Index Futures Contracts | 47 | May 2019 | 975,250 | 43 | |||||||||
Russell 2000 Index Mini Futures Contracts | 1 | Mar 2019 | 67,480 | (502 | ) | ||||||||
NASDAQ-100 Index Mini Futures Contracts | 1 | Mar 2019 | 126,905 | (666 | ) | ||||||||
S&P 500 Index Mini Futures Contracts | 1 | Mar 2019 | 125,475 | (682 | ) | ||||||||
SPI 200 Index Futures Contracts†† | 2 | Mar 2019 | 196,173 | (816 | ) | ||||||||
$ | 3,751,442 | $ | 21,215 | ||||||||||
Currency Futures Contracts Sold Short† | |||||||||||||
Australian Dollar Futures Contracts | 8 | Mar 2019 | $ | 564,240 | $ | 13,350 | |||||||
Euro FX Futures Contracts | 1 | Mar 2019 | 144,119 | (40 | ) | ||||||||
Japanese Yen Futures Contracts | 4 | Mar 2019 | 458,850 | (4,178 | ) | ||||||||
Swiss Franc Futures Contracts | 57 | Mar 2019 | 7,298,850 | (55,388 | ) | ||||||||
$ | 8,466,059 | $ | (46,256 | ) | |||||||||
Interest Rate Futures Contracts Sold Short† | |||||||||||||
U.S. Treasury Ultra Long Bond Futures Contracts | 1 | Mar 2019 | $ | 161,094 | $ | (356 | ) | ||||||
Long Gilt Futures Contracts†† | 10 | Mar 2019 | 1,577,236 | (7,782 | ) | ||||||||
U.S. Treasury 10 Year Note Futures Contracts | 62 | Mar 2019 | 7,566,906 | (57,788 | ) | ||||||||
Canadian Government 10 Year Bond Futures Contracts†† | 61 | Mar 2019 | 6,119,759 | (65,531 | ) | ||||||||
$ | 15,424,995 | $ | (131,457 | ) |
Custom Basket Swap Agreements | |||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Notional | Value and | |||||||||
OTC Portfolio Swap†† | |||||||||||||||
Morgan Stanley | Multi-Hedge Portfolio Long Custom Basket Swap13 | 2.80 | % | At Maturity | 08/31/23 | $ | 13,637,756 | $ | (1,108,764 | ) | |||||
Morgan Stanley | Multi-Hedge Portfolio Long Custom Basket Swap14 | 2.80 | % | At Maturity | 08/31/23 | 18,341,086 | (2,746,635 | ) | |||||||
$ | 31,978,842 | $ | (3,855,399 | ) | |||||||||||
OTC Portfolio Swap Sold Short†† | |||||||||||||||
Morgan Stanley | Multi-Hedge Portfolio Short Custom Basket Swap15 | (1.99 | %) | At Maturity | 08/31/23 | $ | 13,201,459 | $ | 1,729,830 | ||||||
Morgan Stanley | Multi-Hedge Portfolio Short Custom Basket Swap16 | (2.04 | %) | At Maturity | 08/31/23 | 15,259,403 | 2,095,690 | ||||||||
$ | 28,460,862 | $ | 3,825,520 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 41 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Percentage | Value and | |||||||||
CUSTOM BASKET OF LONG SECURITIES13 | ||||||||||||
American Tower Corp. — Class A | 3,926 | 4.55 | % | $ | 36,181 | |||||||
HCP, Inc. | 14,416 | 2.95 | % | 14,561 | ||||||||
Equity LifeStyle Properties, Inc. | 5,466 | 3.89 | % | 2,446 | ||||||||
Apartment Investment & Management Co. — Class A | 13,872 | 4.46 | % | 979 | ||||||||
Equity Residential | 9,356 | 4.53 | % | (1,616 | ) | |||||||
CyrusOne, Inc. | 7,362 | 2.85 | % | (4,735 | ) | |||||||
Ventas, Inc. | 6,527 | 2.80 | % | (5,006 | ) | |||||||
STORE Capital Corp. | 14,015 | 2.91 | % | (5,728 | ) | |||||||
Sun Communities, Inc. | 6,557 | 4.89 | % | (7,878 | ) | |||||||
Gaming and Leisure Properties, Inc. | 11,929 | 2.83 | % | (13,023 | ) | |||||||
DR Horton, Inc. | 8,142 | 2.07 | % | (16,891 | ) | |||||||
Liberty Property Trust | 11,187 | 3.44 | % | (19,384 | ) | |||||||
Crown Castle International Corp. | 5,239 | 4.17 | % | (25,962 | ) | |||||||
Hudson Pacific Properties, Inc. | 12,798 | 2.73 | % | (27,095 | ) | |||||||
Boyd Gaming Corp. | 8,352 | 1.27 | % | (27,496 | ) | |||||||
Las Vegas Sands Corp. | 3,147 | 1.20 | % | (28,014 | ) | |||||||
JBG SMITH Properties | 10,539 | 2.69 | % | (31,351 | ) | |||||||
Simon Property Group, Inc. | 2,227 | 2.74 | % | (31,794 | ) | |||||||
Penn National Gaming, Inc.* | 8,902 | 1.23 | % | (34,455 | ) | |||||||
Invitation Homes, Inc. | 22,955 | 3.38 | % | (41,363 | ) | |||||||
Kilroy Realty Corp. | 5,631 | 2.60 | % | (42,613 | ) | |||||||
Healthcare Trust of America, Inc. — Class A | 22,451 | 4.17 | % | (53,906 | ) | |||||||
Rexford Industrial Realty, Inc. | 18,477 | 3.99 | % | (55,370 | ) | |||||||
Sabra Health Care REIT, Inc. | 21,278 | 2.57 | % | (58,437 | ) | |||||||
Regency Centers Corp. | 8,808 | 3.79 | % | (60,704 | ) | |||||||
American Homes 4 Rent — Class A | 28,970 | 4.22 | % | (61,360 | ) | |||||||
Apple Hospitality REIT, Inc. | 21,603 | 2.26 | % | (71,944 | ) | |||||||
Sunstone Hotel Investors, Inc. | 23,150 | 2.21 | % | (85,440 | ) | |||||||
MGM Growth Properties LLC — Class A | 30,187 | 5.85 | % | (111,433 | ) | |||||||
Macerich Co. | 8,560 | 2.72 | % | (113,128 | ) | |||||||
Equinix, Inc. | 1,563 | 4.04 | % | (126,805 | ) | |||||||
Total Custom Basket of Long Securities | (1,108,764 | ) | ||||||||||
CUSTOM BASKET OF LONG SECURITIES14 | ||||||||||||
Procter & Gamble Co. | 830 | 0.42 | % | 7,445 | ||||||||
Shenandoah Telecommunications Co. | 1,064 | 0.26 | % | 6,797 | ||||||||
Innoviva, Inc.* | 3,026 | 0.29 | % | 6,753 | ||||||||
Pfizer, Inc. | 3,116 | 0.74 | % | 6,637 | ||||||||
PNM Resources, Inc. | 2,962 | 0.66 | % | 6,339 | ||||||||
Verizon Communications, Inc. | 3,695 | 1.13 | % | 6,286 | ||||||||
OGE Energy Corp. | 2,595 | 0.55 | % | 6,210 | ||||||||
Edison International | 825 | 0.26 | % | 6,030 | ||||||||
AES Corp. | 6,125 | 0.48 | % | 5,819 | ||||||||
Tech Data Corp.* | 620 | 0.28 | % | 5,671 | ||||||||
Exelon Corp. | 3,469 | 0.85 | % | 5,219 | ||||||||
Omnicom Group, Inc. | 1,542 | 0.62 | % | 4,896 | ||||||||
Merck & Company, Inc. | 584 | 0.24 | % | 4,567 | ||||||||
Telephone & Data Systems, Inc. | 1,796 | 0.32 | % | 4,490 | ||||||||
Spirit Airlines, Inc.* | 811 | 0.26 | % | 4,206 | ||||||||
Icad, Inc.* | 5,848 | 0.12 | % | 4,094 | ||||||||
McCormick & Company, Inc. | 423 | 0.32 | % | 3,861 | ||||||||
Pinnacle West Capital Corp. | 486 | 0.23 | % | 3,262 | ||||||||
Herbalife Nutrition Ltd.* | 799 | 0.26 | % | 3,041 | ||||||||
Entergy Corp. | 875 | 0.41 | % | 2,943 | ||||||||
Hershey Co. | 397 | 0.23 | % | 2,644 | ||||||||
Kimberly-Clark Corp. | 1,060 | 0.66 | % | 2,602 | ||||||||
QUALCOMM, Inc. | 1,092 | 0.34 | % | 2,455 | ||||||||
Edwards Lifesciences Corp.* | 292 | 0.24 | % | 1,871 | ||||||||
Ameren Corp. | 928 | 0.33 | % | 1,858 | ||||||||
AbbVie, Inc. | 491 | 0.25 | % | 1,597 | ||||||||
Simply Good Foods Co.* | 2,211 | 0.23 | % | 1,304 | ||||||||
Omega Healthcare Investors, Inc. | 1,633 | 0.31 | % | 1,243 | ||||||||
Central Garden & Pet Co. — Class A* | 2,994 | 0.51 | % | 1,151 | ||||||||
Abbott Laboratories | 1,248 | 0.49 | % | 1,092 | ||||||||
NRG Energy, Inc. | 1,392 | 0.30 | % | 675 | ||||||||
Apartment Investment & Management Co. — Class A | 2,228 | 0.53 | % | 203 | ||||||||
Lennar Corp. — Class A | 1,050 | 0.22 | % | 176 | ||||||||
Teleflex, Inc. | 167 | 0.24 | % | 56 | ||||||||
NIKE, Inc. — Class B | 576 | 0.23 | % | 52 | ||||||||
Arcosa, Inc. | 1 | 0.00 | % | (2 | ) | |||||||
Waters Corp.* | 221 | 0.23 | % | (183 | ) | |||||||
Danaher Corp. | 544 | 0.31 | % | (228 | ) | |||||||
FirstEnergy Corp. | 2,406 | 0.49 | % | (479 | ) | |||||||
PepsiCo, Inc. | 418 | 0.25 | % | (496 | ) | |||||||
Lowe's Companies, Inc. | 453 | 0.23 | % | (501 | ) | |||||||
Alphabet, Inc. — Class C* | 41 | 0.23 | % | (667 | ) | |||||||
US Foods Holding Corp.* | 1,675 | 0.29 | % | (675 | ) |
42| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Percentage | Value and | |||||||||
Copa Holdings S.A. — Class A | 732 | 0.31 | % | $ | (900 | ) | ||||||
MAXIMUS, Inc. | 787 | 0.28 | % | (944 | ) | |||||||
Aflac, Inc. | 1,479 | 0.37 | % | (1,037 | ) | |||||||
Darling Ingredients, Inc.* | 2,040 | 0.21 | % | (1,105 | ) | |||||||
Ventas, Inc. | 1,830 | 0.58 | % | (1,117 | ) | |||||||
Medical Properties Trust, Inc. | 6,206 | 0.54 | % | (1,196 | ) | |||||||
Amedisys, Inc.* | 372 | 0.24 | % | (1,235 | ) | |||||||
Portland General Electric Co. | 3,231 | 0.81 | % | (1,524 | ) | |||||||
UGI Corp. | 2,380 | 0.69 | % | (1,666 | ) | |||||||
AMERCO | 138 | 0.25 | % | (1,694 | ) | |||||||
CDK Global, Inc. | 858 | 0.22 | % | (1,738 | ) | |||||||
Maxim Integrated Products, Inc. | 900 | 0.25 | % | (1,738 | ) | |||||||
Consolidated Edison, Inc. | 823 | 0.34 | % | (1,821 | ) | |||||||
Intel Corp. | 1,611 | 0.41 | % | (1,892 | ) | |||||||
Bank of New York Mellon Corp. | 419 | 0.11 | % | (2,129 | ) | |||||||
ICU Medical, Inc.* | 196 | 0.25 | % | (2,243 | ) | |||||||
j2 Global, Inc. | 733 | 0.28 | % | (2,249 | ) | |||||||
Brixmor Property Group, Inc. | 3,337 | 0.27 | % | (2,263 | ) | |||||||
Zoetis, Inc. | 460 | 0.21 | % | (2,328 | ) | |||||||
Brown-Forman Corp. — Class B | 910 | 0.24 | % | (2,356 | ) | |||||||
Scholastic Corp. | 1,162 | 0.26 | % | (2,400 | ) | |||||||
Sonoco Products Co. | 789 | 0.23 | % | (2,407 | ) | |||||||
Flowers Foods, Inc. | 3,644 | 0.37 | % | (2,582 | ) | |||||||
Take-Two Interactive Software, Inc.* | 406 | 0.23 | % | (2,619 | ) | |||||||
TEGNA, Inc. | 3,360 | 0.20 | % | (2,622 | ) | |||||||
Performance Food Group Co.* | 3,179 | 0.56 | % | (2,624 | ) | |||||||
EnerSys | 512 | 0.22 | % | (2,755 | ) | |||||||
CONMED Corp. | 637 | 0.22 | % | (2,885 | ) | |||||||
General Motors Co. | 1,206 | 0.22 | % | (2,886 | ) | |||||||
Analog Devices, Inc. | 500 | 0.23 | % | (3,057 | ) | |||||||
Northern Trust Corp. | 490 | 0.22 | % | (3,061 | ) | |||||||
PulteGroup, Inc. | 2,231 | 0.32 | % | (3,190 | ) | |||||||
Franklin Resources, Inc. | 1,720 | 0.28 | % | (3,427 | ) | |||||||
Facebook, Inc. — Class A* | 305 | 0.22 | % | (3,555 | ) | |||||||
Amgen, Inc. | 693 | 0.74 | % | (3,597 | ) | |||||||
CH Robinson Worldwide, Inc. | 528 | 0.24 | % | (3,603 | ) | |||||||
Estee Lauder Companies, Inc. — Class A | 302 | 0.21 | % | (3,711 | ) | |||||||
PRA Health Sciences, Inc.* | 425 | 0.21 | % | (3,851 | ) | |||||||
Ingredion, Inc. | 741 | 0.37 | % | (3,874 | ) | |||||||
Toll Brothers, Inc. | 1,341 | 0.24 | % | (3,889 | ) | |||||||
Sirius XM Holdings, Inc. | 7,050 | 0.22 | % | (3,949 | ) | |||||||
Travelers Companies, Inc. | 353 | 0.23 | % | (4,081 | ) | |||||||
Fidelity National Information Services, Inc. | 730 | 0.41 | % | (4,094 | ) | |||||||
Old Dominion Freight Line, Inc. | 334 | 0.22 | % | (4,096 | ) | |||||||
Landstar System, Inc. | 704 | 0.37 | % | (4,144 | ) | |||||||
Expeditors International of Washington, Inc. | 822 | 0.31 | % | (4,150 | ) | |||||||
Heartland Express, Inc. | 2,397 | 0.24 | % | (4,186 | ) | |||||||
Juniper Networks, Inc. | 2,704 | 0.40 | % | (4,249 | ) | |||||||
Universal Health Services, Inc. — Class B | 371 | 0.24 | % | (4,320 | ) | |||||||
UnitedHealth Group, Inc. | 319 | 0.43 | % | (4,343 | ) | |||||||
United Continental Holdings, Inc.* | 954 | 0.44 | % | (4,354 | ) | |||||||
Oracle Corp. | 1,224 | 0.30 | % | (4,480 | ) | |||||||
HCA Healthcare, Inc. | 430 | 0.29 | % | (4,487 | ) | |||||||
Colgate-Palmolive Co. | 700 | 0.23 | % | (4,620 | ) | |||||||
United Parcel Service, Inc. — Class B | 399 | 0.21 | % | (4,658 | ) | |||||||
Johnson Controls International plc | 1,246 | 0.20 | % | (4,895 | ) | |||||||
Activision Blizzard, Inc. | 825 | 0.21 | % | (4,904 | ) | |||||||
AGCO Corp. | 1,213 | 0.37 | % | (4,975 | ) | |||||||
Visa, Inc. — Class A | 333 | 0.24 | % | (4,978 | ) | |||||||
EPR Properties | 837 | 0.29 | % | (5,014 | ) | |||||||
Murphy USA, Inc.* | 544 | 0.23 | % | (5,052 | ) | |||||||
Hyatt Hotels Corp. — Class A | 632 | 0.23 | % | (5,073 | ) | |||||||
Darden Restaurants, Inc. | 386 | 0.21 | % | (5,246 | ) | |||||||
News Corp. — Class A | 3,174 | 0.20 | % | (5,459 | ) | |||||||
Thermo Fisher Scientific, Inc. | 369 | 0.45 | % | (5,665 | ) | |||||||
Equity Commonwealth | 2,748 | 0.45 | % | (5,676 | ) | |||||||
Texas Instruments, Inc. | 429 | 0.22 | % | (5,709 | ) | |||||||
Premier, Inc. — Class A* | 2,313 | 0.47 | % | (5,817 | ) | |||||||
Gentex Corp. | 1,966 | 0.22 | % | (5,857 | ) | |||||||
Corning, Inc. | 1,896 | 0.31 | % | (5,889 | ) | |||||||
Pentair plc | 1,037 | 0.21 | % | (5,904 | ) | |||||||
Saia, Inc.* | 729 | 0.22 | % | (5,927 | ) | |||||||
Quanta Services, Inc. | 1,371 | 0.22 | % | (5,995 | ) | |||||||
Centene Corp.* | 316 | 0.20 | % | (6,079 | ) | |||||||
Hill-Rom Holdings, Inc. | 815 | 0.39 | % | (6,145 | ) | |||||||
Anthem, Inc. | 475 | 0.68 | % | (6,259 | ) | |||||||
Kinder Morgan, Inc. | 2,705 | 0.23 | % | (6,268 | ) | |||||||
IQVIA Holdings, Inc.* | 724 | 0.46 | % | (6,308 | ) | |||||||
Alaska Air Group, Inc. | 967 | 0.32 | % | (6,350 | ) | |||||||
Oshkosh Corp. | 708 | 0.24 | % | (6,354 | ) | |||||||
ONEOK, Inc. | 933 | 0.27 | % | (6,382 | ) | |||||||
Mondelez International, Inc. — Class A | 2,275 | 0.50 | % | (6,453 | ) | |||||||
Kroger Co. | 1,689 | 0.25 | % | (6,521 | ) | |||||||
Piedmont Office Realty Trust, Inc. — Class A | 3,499 | 0.33 | % | (6,552 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 43 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Percentage | Value and | |||||||||
JPMorgan Chase & Co. | 395 | 0.21 | % | $ | (6,699 | ) | ||||||
Paychex, Inc. | 839 | 0.30 | % | (6,712 | ) | |||||||
Citrix Systems, Inc. | 971 | 0.54 | % | (6,745 | ) | |||||||
Pilgrim's Pride Corp.* | 2,302 | 0.19 | % | (6,765 | ) | |||||||
Delek US Holdings, Inc. | 1,175 | 0.21 | % | (6,799 | ) | |||||||
Cummins, Inc. | 783 | 0.57 | % | (6,827 | ) | |||||||
Biogen, Inc.* | 135 | 0.22 | % | (6,832 | ) | |||||||
Bristol-Myers Squibb Co. | 824 | 0.23 | % | (7,062 | ) | |||||||
Medtronic plc | 1,656 | 0.82 | % | (7,584 | ) | |||||||
Ryder System, Inc. | 944 | 0.25 | % | (7,647 | ) | |||||||
ConocoPhillips | 1,079 | 0.37 | % | (7,648 | ) | |||||||
Altria Group, Inc. | 840 | 0.23 | % | (7,700 | ) | |||||||
Schneider National, Inc. — Class B | 2,022 | 0.21 | % | (7,704 | ) | |||||||
TRI Pointe Group, Inc.* | 3,560 | 0.21 | % | (8,041 | ) | |||||||
DR Horton, Inc. | 1,250 | 0.24 | % | (8,079 | ) | |||||||
Gilead Sciences, Inc. | 618 | 0.21 | % | (8,145 | ) | |||||||
American Airlines Group, Inc. | 1,582 | 0.28 | % | (8,170 | ) | |||||||
Baxter International, Inc. | 1,737 | 0.62 | % | (8,448 | ) | |||||||
WellCare Health Plans, Inc.* | 167 | 0.21 | % | (8,507 | ) | |||||||
Textron, Inc. | 781 | 0.20 | % | (8,520 | ) | |||||||
AMC Networks, Inc. — Class A* | 1,236 | 0.37 | % | (8,568 | ) | |||||||
Accenture plc — Class A | 306 | 0.24 | % | (8,586 | ) | |||||||
Post Holdings, Inc.* | 1,357 | 0.66 | % | (8,626 | ) | |||||||
Spirit AeroSystems Holdings, Inc. — Class A | 583 | 0.23 | % | (8,626 | ) | |||||||
Hartford Financial Services Group, Inc. | 1,532 | 0.37 | % | (8,699 | ) | |||||||
Catalent, Inc.* | 1,134 | 0.19 | % | (8,734 | ) | |||||||
Caterpillar, Inc. | 682 | 0.47 | % | (8,744 | ) | |||||||
Arrow Electronics, Inc.* | 1,077 | 0.40 | % | (8,921 | ) | |||||||
Interpublic Group of Companies, Inc. | 3,277 | 0.37 | % | (8,937 | ) | |||||||
La-Z-Boy, Inc. | 1,980 | 0.30 | % | (8,965 | ) | |||||||
Crane Co. | 478 | 0.19 | % | (9,130 | ) | |||||||
Trinity Industries, Inc. | 2,062 | 0.23 | % | (9,201 | ) | |||||||
J.B. Hunt Transport Services, Inc. | 694 | 0.35 | % | (9,296 | ) | |||||||
Philip Morris International, Inc. | 502 | 0.18 | % | (9,342 | ) | |||||||
Werner Enterprises, Inc. | 1,349 | 0.22 | % | (9,398 | ) | |||||||
Sabre Corp. | 2,187 | 0.26 | % | (9,611 | ) | |||||||
Bruker Corp. | 1,974 | 0.32 | % | (9,674 | ) | |||||||
Principal Financial Group, Inc. | 884 | 0.21 | % | (9,742 | ) | |||||||
Allison Transmission Holdings, Inc. | 1,646 | 0.39 | % | (9,778 | ) | |||||||
Rexnord Corp.* | 1,579 | 0.20 | % | (9,871 | ) | |||||||
Quest Diagnostics, Inc. | 846 | 0.38 | % | (10,056 | ) | |||||||
Constellation Brands, Inc. — Class A | 217 | 0.19 | % | (10,153 | ) | |||||||
Western Union Co. | 5,488 | 0.51 | % | (10,177 | ) | |||||||
KB Home | 2,068 | 0.22 | % | (10,183 | ) | |||||||
Prudential Financial, Inc. | 614 | 0.27 | % | (10,254 | ) | |||||||
F5 Networks, Inc.* | 385 | 0.34 | % | (10,371 | ) | |||||||
Amdocs Ltd. | 1,548 | 0.49 | % | (10,378 | ) | |||||||
Hewlett Packard Enterprise Co. | 3,125 | 0.23 | % | (10,467 | ) | |||||||
Jabil, Inc. | 2,378 | 0.32 | % | (10,505 | ) | |||||||
Weingarten Realty Investors | 2,301 | 0.31 | % | (10,533 | ) | |||||||
Celanese Corp. — Class A | 432 | 0.21 | % | (10,751 | ) | |||||||
CSX Corp. | 1,155 | 0.39 | % | (10,991 | ) | |||||||
Vishay Intertechnology, Inc. | 2,347 | 0.23 | % | (11,045 | ) | |||||||
Snap-on, Inc. | 352 | 0.28 | % | (11,328 | ) | |||||||
Jazz Pharmaceuticals plc* | 287 | 0.19 | % | (11,567 | ) | |||||||
Stericycle, Inc.* | 1,276 | 0.26 | % | (11,580 | ) | |||||||
Union Pacific Corp. | 958 | 0.72 | % | (11,586 | ) | |||||||
Alexion Pharmaceuticals, Inc.* | 365 | 0.19 | % | (11,683 | ) | |||||||
Meritor, Inc.* | 2,652 | 0.24 | % | (11,718 | ) | |||||||
Packaging Corporation of America | 454 | 0.21 | % | (11,814 | ) | |||||||
Lear Corp. | 314 | 0.21 | % | (11,838 | ) | |||||||
Molina Healthcare, Inc.* | 639 | 0.40 | % | (11,843 | ) | |||||||
Cisco Systems, Inc. | 2,949 | 0.70 | % | (11,882 | ) | |||||||
ON Semiconductor Corp.* | 2,750 | 0.25 | % | (11,986 | ) | |||||||
International Paper Co. | 1,351 | 0.30 | % | (12,064 | ) | |||||||
Knight-Swift Transportation Holdings, Inc. | 1,606 | 0.22 | % | (12,221 | ) | |||||||
XPO Logistics, Inc.* | 582 | 0.18 | % | (12,357 | ) | |||||||
JetBlue Airways Corp.* | 4,149 | 0.36 | % | (12,391 | ) | |||||||
Kansas City Southern | 1,468 | 0.76 | % | (12,694 | ) | |||||||
National Fuel Gas Co. | 2,958 | 0.83 | % | (12,867 | ) | |||||||
Williams Companies, Inc. | 1,782 | 0.21 | % | (12,890 | ) | |||||||
Domtar Corp. | 937 | 0.18 | % | (13,574 | ) | |||||||
Humana, Inc. | 393 | 0.61 | % | (13,721 | ) | |||||||
Parker-Hannifin Corp. | 585 | 0.48 | % | (13,733 | ) | |||||||
Eaton Corporation plc | 1,642 | 0.61 | % | (13,785 | ) | |||||||
CVS Health Corp. | 1,431 | 0.51 | % | (13,899 | ) | |||||||
IDEXX Laboratories, Inc.* | 218 | 0.22 | % | (14,084 | ) | |||||||
Chevron Corp. | 1,503 | 0.89 | % | (14,305 | ) | |||||||
InterDigital, Inc. | 1,074 | 0.39 | % | (14,378 | ) | |||||||
Nu Skin Enterprises, Inc. — Class A | 966 | 0.32 | % | (14,460 | ) | |||||||
Cardtronics plc — Class A* | 1,641 | 0.23 | % | (14,463 | ) | |||||||
State Street Corp. | 610 | 0.21 | % | (14,508 | ) | |||||||
Lazard Ltd. — Class A | 1,296 | 0.26 | % | (14,512 | ) | |||||||
PACCAR, Inc. | 1,299 | 0.40 | % | (14,563 | ) | |||||||
Seagate Technology plc | 1,139 | 0.24 | % | (14,681 | ) | |||||||
Kraft Heinz Co. | 1,078 | 0.25 | % | (14,698 | ) |
44| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Percentage | Value and | |||||||||
Louisiana-Pacific Corp. | 2,466 | 0.30 | % | $ | (14,791 | ) | ||||||
Hospitality Properties Trust | 3,002 | 0.39 | % | (14,906 | ) | |||||||
Sysco Corp. | 1,418 | 0.48 | % | (14,909 | ) | |||||||
Best Buy Company, Inc. | 645 | 0.19 | % | (14,992 | ) | |||||||
Broadridge Financial Solutions, Inc. | 403 | 0.21 | % | (15,341 | ) | |||||||
Allergan plc | 266 | 0.19 | % | (15,448 | ) | |||||||
Allstate Corp. | 881 | 0.40 | % | (15,621 | ) | |||||||
Norfolk Southern Corp. | 676 | 0.55 | % | (15,664 | ) | |||||||
PVH Corp. | 360 | 0.18 | % | (15,831 | ) | |||||||
Summit Hotel Properties, Inc. | 4,092 | 0.22 | % | (15,902 | ) | |||||||
HollyFrontier Corp. | 747 | 0.21 | % | (16,083 | ) | |||||||
Laboratory Corporation of America Holdings* | 447 | 0.31 | % | (16,214 | ) | |||||||
NetApp, Inc. | 721 | 0.23 | % | (16,566 | ) | |||||||
Gibraltar Industries, Inc.* | 1,748 | 0.34 | % | (16,653 | ) | |||||||
BorgWarner, Inc. | 2,405 | 0.46 | % | (16,697 | ) | |||||||
Mylan N.V.* | 1,478 | 0.22 | % | (17,092 | ) | |||||||
Vector Group Ltd. | 3,863 | 0.20 | % | (17,144 | ) | |||||||
Cognizant Technology Solutions Corp. — Class A | 1,168 | 0.40 | % | (17,331 | ) | |||||||
Molson Coors Brewing Co. — Class B | 2,605 | 0.80 | % | (17,929 | ) | |||||||
Leidos Holdings, Inc. | 1,100 | 0.32 | % | (18,028 | ) | |||||||
TE Connectivity Ltd. | 1,277 | 0.53 | % | (18,058 | ) | |||||||
Masco Corp. | 2,216 | 0.35 | % | (18,366 | ) | |||||||
Bio-Rad Laboratories, Inc. — Class A* | 322 | 0.41 | % | (18,767 | ) | |||||||
AECOM* | 2,671 | 0.39 | % | (18,860 | ) | |||||||
Host Hotels & Resorts, Inc. | 3,964 | 0.36 | % | (18,900 | ) | |||||||
PBF Energy, Inc. — Class A | 1,134 | 0.20 | % | (19,130 | ) | |||||||
Kellogg Co. | 1,364 | 0.42 | % | (19,761 | ) | |||||||
Avnet, Inc. | 1,964 | 0.39 | % | (19,901 | ) | |||||||
Delta Air Lines, Inc. | 2,702 | 0.74 | % | (19,974 | ) | |||||||
HP, Inc. | 4,793 | 0.53 | % | (20,097 | ) | |||||||
Huntsman Corp. | 2,059 | 0.22 | % | (20,111 | ) | |||||||
Park Hotels & Resorts, Inc. | 2,850 | 0.40 | % | (20,973 | ) | |||||||
Chemours Co. | 1,394 | 0.21 | % | (21,275 | ) | |||||||
LyondellBasell Industries N.V. — Class A | 737 | 0.33 | % | (21,396 | ) | |||||||
Western Digital Corp. | 970 | 0.20 | % | (21,545 | ) | |||||||
MEDNAX, Inc.* | 2,182 | 0.39 | % | (21,958 | ) | |||||||
Greenbrier Companies, Inc. | 1,190 | 0.26 | % | (21,967 | ) | |||||||
Skyworks Solutions, Inc. | 1,029 | 0.38 | % | (22,448 | ) | |||||||
Cirrus Logic, Inc.* | 2,250 | 0.41 | % | (22,588 | ) | |||||||
Regal Beloit Corp. | 1,654 | 0.63 | % | (22,675 | ) | |||||||
Lions Gate Entertainment Corp. — Class A | 3,611 | 0.32 | % | (22,875 | ) | |||||||
|
|
| Value and | |||||||||
Ligand Pharmaceuticals, Inc. — Class B* | 292 | 0.22 | % | (24,019 | ) | |||||||
Tyson Foods, Inc. — Class A | 2,671 | 0.78 | % | (24,050 | ) | |||||||
EMCOR Group, Inc. | 1,211 | 0.39 | % | (24,133 | ) | |||||||
Zayo Group Holdings, Inc.* | 2,171 | 0.27 | % | (24,973 | ) | |||||||
Genesee & Wyoming, Inc. — Class A* | 2,169 | 0.88 | % | (25,986 | ) | |||||||
Southwest Airlines Co. | 1,845 | 0.47 | % | (26,214 | ) | |||||||
Eastman Chemical Co. | 1,104 | 0.44 | % | (26,408 | ) | |||||||
Belden, Inc. | 872 | 0.20 | % | (26,553 | ) | |||||||
Cardinal Health, Inc. | 3,636 | 0.88 | % | (26,618 | ) | |||||||
Exxon Mobil Corp. | 2,223 | 0.83 | % | (26,938 | ) | |||||||
CoreLogic, Inc.* | 1,623 | 0.30 | % | (27,724 | ) | |||||||
McKesson Corp. | 1,673 | 1.01 | % | (27,735 | ) | |||||||
Westlake Chemical Corp. | 1,619 | 0.58 | % | (28,364 | ) | |||||||
Trinseo S.A. | 1,176 | 0.29 | % | (29,933 | ) | |||||||
El Paso Electric Co. | 2,728 | 0.75 | % | (30,012 | ) | |||||||
Delphi Technologies plc | 2,521 | 0.20 | % | (30,054 | ) | |||||||
Occidental Petroleum Corp. | 1,683 | 0.56 | % | (30,988 | ) | |||||||
Cabot Corp. | 2,073 | 0.49 | % | (31,640 | ) | |||||||
Olin Corp. | 3,454 | 0.38 | % | (32,579 | ) | |||||||
Phillips 66 | 1,677 | 0.79 | % | (40,311 | ) | |||||||
Boise Cascade Co. | 3,479 | 0.45 | % | (41,887 | ) | |||||||
Archer-Daniels-Midland Co. | 4,514 | 1.01 | % | (42,023 | ) | |||||||
DXC Technology Co. | 1,642 | 0.48 | % | (49,754 | ) | |||||||
Valero Energy Corp. | 1,467 | 0.60 | % | (54,079 | ) | |||||||
FedEx Corp. | 779 | 0.69 | % | (56,518 | ) | |||||||
Senior Housing Properties Trust | 10,691 | 0.67 | % | (76,382 | ) | |||||||
Total Custom Basket of Long Securities | (2,746,635 | ) | ||||||||||
CUSTOM BASKET OF SHORT SECURITIES15 | ||||||||||||
iShares U.S. Real Estate ETF | (59,293 | ) | (33.66 | %) | 459,321 | |||||||
Senior Housing Properties Trust | (43,206 | ) | (3.84 | %) | 308,291 | |||||||
Chesapeake Lodging Trust | (21,944 | ) | (4.05 | %) | 156,916 | |||||||
Washington Prime Group, Inc. | (47,282 | ) | (1.74 | %) | 135,437 | |||||||
Brandywine Realty Trust | (34,697 | ) | (3.38 | %) | 130,018 | |||||||
Hospitality Properties Trust | (19,625 | ) | (3.55 | %) | 98,483 | |||||||
Piedmont Office Realty Trust, Inc. — Class A | (32,410 | ) | (4.18 | %) | 76,931 | |||||||
Tanger Factory Outlet Centers, Inc. | (25,383 | ) | (3.89 | %) | 74,829 | |||||||
Kimco Realty Corp. | (27,355 | ) | (3.04 | %) | 64,210 | |||||||
Park Hotels & Resorts, Inc. | (12,687 | ) | (2.50 | %) | 50,094 | |||||||
VEREIT, Inc. | (61,013 | ) | (3.30 | %) | 37,834 | |||||||
STAG Industrial, Inc. | (14,847 | ) | (2.80 | %) | 35,596 | |||||||
Camden Property Trust | (5,359 | ) | (3.57 | %) | 26,538 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 45 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Percentage | Value and | |||||||||
Mid-America Apartment Communities, Inc. | (3,920 | ) | (2.84 | %) | $ | 24,692 | ||||||
Omega Healthcare Investors, Inc. | (10,791 | ) | (2.87 | %) | 22,620 | |||||||
WP Carey, Inc. | (5,918 | ) | (2.93 | %) | 13,664 | |||||||
Public Storage | (1,841 | ) | (2.82 | %) | 13,140 | |||||||
Apollo Commercial Real Estate Finance, Inc. | (29,124 | ) | (3.68 | %) | 9,337 | |||||||
Marriott International, Inc. — Class A | (3,650 | ) | (3.00 | %) | 6,928 | |||||||
PS Business Parks, Inc. | (4,604 | ) | (4.57 | %) | (3,952 | ) | ||||||
American Assets Trust, Inc. | (12,463 | ) | (3.79 | %) | (11,097 | ) | ||||||
Total Custom Basket of Short Securities | 1,729,830 | |||||||||||
CUSTOM BASKET OF SHORT SECURITIES16 | ||||||||||||
Balchem Corp. | (1,954 | ) | (1.00 | %) | 62,663 | |||||||
ASGN, Inc.* | (1,690 | ) | (0.60 | %) | 52,713 | |||||||
Tetra Tech, Inc. | (2,539 | ) | (0.86 | %) | 45,191 | |||||||
Southern Copper Corp. | (3,447 | ) | (0.70 | %) | 43,095 | |||||||
Sensient Technologies Corp. | (2,483 | ) | (0.91 | %) | 40,003 | |||||||
Equifax, Inc. | (1,001 | ) | (0.61 | %) | 39,304 | |||||||
Compass Minerals International, Inc. | (1,579 | ) | (0.43 | %) | 32,723 | |||||||
National Oilwell Varco, Inc. | (1,619 | ) | (0.27 | %) | 32,491 | |||||||
Team, Inc.* | (3,635 | ) | (0.35 | %) | 31,328 | |||||||
Leggett & Platt, Inc. | (3,080 | ) | (0.72 | %) | 25,515 | |||||||
Howard Hughes Corp.* | (799 | ) | (0.51 | %) | 25,136 | |||||||
WPX Energy, Inc.* | (3,294 | ) | (0.25 | %) | 25,051 | |||||||
First Horizon National Corp. | (5,102 | ) | (0.44 | %) | 23,569 | |||||||
CoStar Group, Inc.* | (223 | ) | (0.49 | %) | 23,375 | |||||||
Texas Capital Bancshares, Inc.* | (711 | ) | (0.24 | %) | 23,215 | |||||||
HB Fuller Co. | (1,674 | ) | (0.47 | %) | 22,885 | |||||||
Goldman Sachs Group, Inc. | (353 | ) | (0.39 | %) | 22,755 | |||||||
Rollins, Inc. | (5,424 | ) | (1.28 | %) | 21,691 | |||||||
Tyler Technologies, Inc.* | (339 | ) | (0.41 | %) | 20,481 | |||||||
Retail Opportunity Investments Corp. | (5,498 | ) | (0.57 | %) | 20,405 | |||||||
Steven Madden Ltd. | (3,626 | ) | (0.72 | %) | 20,384 | |||||||
Core Laboratories N.V. | (834 | ) | (0.33 | %) | 20,070 | |||||||
PolyOne Corp. | (1,750 | ) | (0.33 | %) | 19,881 | |||||||
Invitation Homes, Inc. | (6,103 | ) | (0.80 | %) | 19,762 | |||||||
Multi-Color Corp. | (728 | ) | (0.17 | %) | 19,736 | |||||||
Scotts Miracle-Gro Co. — Class A | (1,201 | ) | (0.48 | %) | 19,568 | |||||||
Monolithic Power Systems, Inc. | (616 | ) | (0.47 | %) | 18,995 | |||||||
Allegheny Technologies, Inc.* | (3,425 | ) | (0.49 | %) | 18,306 | |||||||
Markel Corp.* | (107 | ) | (0.73 | %) | 18,270 | |||||||
|
|
| Value and | |||||||||
IHS Markit Ltd.* | (2,595 | ) | (0.82 | %) | 18,243 | |||||||
Pegasystems, Inc. | (1,221 | ) | (0.38 | %) | 18,041 | |||||||
Polaris Industries, Inc. | (786 | ) | (0.39 | %) | 18,009 | |||||||
Eaton Vance Corp. | (1,233 | ) | (0.28 | %) | 17,763 | |||||||
Wabtec Corp. | (523 | ) | (0.24 | %) | 17,536 | |||||||
Cintas Corp. | (384 | ) | (0.42 | %) | 17,426 | |||||||
Royal Caribbean Cruises Ltd. | (961 | ) | (0.62 | %) | 17,379 | |||||||
Vornado Realty Trust | (1,147 | ) | (0.47 | %) | 17,171 | |||||||
Pinnacle Financial Partners, Inc. | (928 | ) | (0.28 | %) | 17,122 | |||||||
RPM International, Inc. | (1,986 | ) | (0.77 | %) | 17,118 | |||||||
Sterling Bancorp | (2,722 | ) | (0.29 | %) | 17,024 | |||||||
Corporate Office Properties Trust | (2,135 | ) | (0.29 | %) | 16,736 | |||||||
General Dynamics Corp. | (459 | ) | (0.47 | %) | 15,755 | |||||||
Douglas Emmett, Inc. | (3,415 | ) | (0.76 | %) | 15,607 | |||||||
Equinix, Inc. | (190 | ) | (0.44 | %) | 15,554 | |||||||
First Republic Bank | (1,047 | ) | (0.60 | %) | 15,316 | |||||||
Valley National Bancorp | (4,776 | ) | (0.28 | %) | 15,140 | |||||||
Paramount Group, Inc. | (5,822 | ) | (0.48 | %) | 15,073 | |||||||
Healthcare Trust of America, Inc. — Class A | (4,577 | ) | (0.76 | %) | 14,921 | |||||||
Commercial Metals Co. | (2,654 | ) | (0.28 | %) | 14,809 | |||||||
RLI Corp. | (1,843 | ) | (0.83 | %) | 14,713 | |||||||
Associated Banc-Corp. | (1,964 | ) | (0.25 | %) | 14,510 | |||||||
Guidewire Software, Inc.* | (847 | ) | (0.45 | %) | 14,459 | |||||||
Robert Half International, Inc. | (696 | ) | (0.26 | %) | 14,422 | |||||||
Ultimate Software Group, Inc.* | (226 | ) | (0.36 | %) | 14,403 | |||||||
KeyCorp | (2,355 | ) | (0.23 | %) | 14,217 | |||||||
IBERIABANK Corp. | (657 | ) | (0.28 | %) | 14,184 | |||||||
Hanesbrands, Inc. | (2,749 | ) | (0.23 | %) | 14,127 | |||||||
Amazon.com, Inc.* | (40 | ) | (0.39 | %) | 13,759 | |||||||
Copart, Inc.* | (889 | ) | (0.28 | %) | 13,722 | |||||||
Boston Properties, Inc. | (826 | ) | (0.61 | %) | 13,709 | |||||||
Marriott International, Inc. — Class A | (661 | ) | (0.47 | %) | 13,324 | |||||||
Kilroy Realty Corp. | (1,303 | ) | (0.54 | %) | 13,215 | |||||||
Mobile Mini, Inc. | (1,163 | ) | (0.24 | %) | 13,027 | |||||||
Ulta Beauty, Inc.* | (277 | ) | (0.44 | %) | 12,883 | |||||||
Vail Resorts, Inc. | (167 | ) | (0.23 | %) | 12,849 | |||||||
Digital Realty Trust, Inc. | (737 | ) | (0.51 | %) | 12,744 | |||||||
Netflix, Inc.* | (148 | ) | (0.26 | %) | 12,545 | |||||||
TransUnion | (676 | ) | (0.25 | %) | 12,506 | |||||||
Terreno Realty Corp. | (3,917 | ) | (0.90 | %) | 12,383 | |||||||
Graphic Packaging Holding Co. | (5,081 | ) | (0.35 | %) | 12,264 | |||||||
Charles Schwab Corp. | (1,489 | ) | (0.41 | %) | 12,220 | |||||||
Huntington Bancshares, Inc. | (2,880 | ) | (0.22 | %) | 12,164 | |||||||
Covanta Holding Corp. | (2,800 | ) | (0.25 | %) | 11,844 |
46| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Percentage | Value and | |||||||||
Pioneer Natural Resources Co. | (529 | ) | (0.46 | %) | $ | 11,731 | ||||||
Xylem, Inc. | (1,449 | ) | (0.63 | %) | 11,506 | |||||||
Verisk Analytics, Inc. — Class A* | (1,119 | ) | (0.80 | %) | 11,404 | |||||||
Costco Wholesale Corp. | (400 | ) | (0.53 | %) | 11,347 | |||||||
LKQ Corp.* | (2,794 | ) | (0.43 | %) | 11,252 | |||||||
MSCI, Inc. — Class A | (351 | ) | (0.34 | %) | 11,183 | |||||||
Albemarle Corp. | (438 | ) | (0.22 | %) | 11,099 | |||||||
Northrop Grumman Corp. | (166 | ) | (0.27 | %) | 10,758 | |||||||
South Jersey Industries, Inc. | (1,947 | ) | (0.35 | %) | 10,580 | |||||||
People's United Financial, Inc. | (2,731 | ) | (0.26 | %) | 10,251 | |||||||
Washington Federal, Inc. | (1,568 | ) | (0.27 | %) | 10,160 | |||||||
Old National Bancorp | (2,358 | ) | (0.24 | %) | 10,105 | |||||||
WR Grace & Co. | (2,364 | ) | (1.01 | %) | 10,103 | |||||||
Jacobs Engineering Group, Inc. | (620 | ) | (0.24 | %) | 10,077 | |||||||
Wolverine World Wide, Inc. | (1,377 | ) | (0.29 | %) | 9,925 | |||||||
Texas Roadhouse, Inc. — Class A | (1,402 | ) | (0.55 | %) | 9,851 | |||||||
Grand Canyon Education, Inc.* | (345 | ) | (0.22 | %) | 9,566 | |||||||
Choice Hotels International, Inc. | (1,087 | ) | (0.51 | %) | 9,429 | |||||||
AMETEK, Inc. | (1,072 | ) | (0.48 | %) | 9,423 | |||||||
SPS Commerce, Inc.* | (595 | ) | (0.32 | %) | 9,409 | |||||||
Roper Technologies, Inc. | (302 | ) | (0.53 | %) | 9,355 | |||||||
Alexandria Real Estate Equities, Inc. | (732 | ) | (0.55 | %) | 9,310 | |||||||
BB&T Corp. | (1,102 | ) | (0.31 | %) | 9,191 | |||||||
Fifth Third Bancorp | (1,567 | ) | (0.24 | %) | 9,017 | |||||||
Rexford Industrial Realty, Inc. | (2,988 | ) | (0.58 | %) | 8,984 | |||||||
White Mountains Insurance Group Ltd. | (127 | ) | (0.71 | %) | 8,903 | |||||||
U.S. Bancorp | (1,026 | ) | (0.31 | %) | 8,846 | |||||||
salesforce.com, Inc.* | (930 | ) | (0.83 | %) | 8,598 | |||||||
Axis Capital Holdings Ltd. | (1,445 | ) | (0.49 | %) | 8,540 | |||||||
Ross Stores, Inc. | (670 | ) | (0.37 | %) | 8,513 | |||||||
Sherwin-Williams Co. | (133 | ) | (0.34 | %) | 8,399 | |||||||
Cannae Holdings, Inc.* | (3,399 | ) | (0.38 | %) | 8,224 | |||||||
Sotheby's* | (1,101 | ) | (0.29 | %) | 7,895 | |||||||
Ally Financial, Inc. | (1,882 | ) | (0.28 | %) | 7,864 | |||||||
Palo Alto Networks, Inc.* | (248 | ) | (0.31 | %) | 7,860 | |||||||
Glacier Bancorp, Inc. | (1,316 | ) | (0.34 | %) | 7,800 | |||||||
Crown Holdings, Inc.* | (1,061 | ) | (0.29 | %) | 7,749 | |||||||
US Ecology, Inc. | (622 | ) | (0.26 | %) | 7,691 | |||||||
Silgan Holdings, Inc. | (2,317 | ) | (0.36 | %) | 7,669 | |||||||
CarMax, Inc.* | (662 | ) | (0.27 | %) | 7,609 | |||||||
Adtalem Global Education, Inc.* | (752 | ) | (0.23 | %) | 7,604 | |||||||
Allegion plc | (856 | ) | (0.45 | %) | 7,593 | |||||||
Harley-Davidson, Inc. | (1,043 | ) | (0.23 | %) | 7,404 | |||||||
American Homes 4 Rent — Class A | (3,031 | ) | (0.39 | %) | 7,279 | |||||||
Exponent, Inc. | (3,598 | ) | (1.20 | %) | 7,094 | |||||||
Camden Property Trust | (1,014 | ) | (0.59 | %) | 6,950 | |||||||
Sealed Air Corp. | (1,221 | ) | (0.28 | %) | 6,770 | |||||||
Incyte Corp.* | (681 | ) | (0.28 | %) | 6,684 | |||||||
Prologis, Inc. | (818 | ) | (0.31 | %) | 6,487 | |||||||
Viad Corp. | (856 | ) | (0.28 | %) | 6,471 | |||||||
EastGroup Properties, Inc. | (1,213 | ) | (0.73 | %) | 6,427 | |||||||
Floor & Decor Holdings, Inc. — Class A* | (910 | ) | (0.15 | %) | 6,395 | |||||||
Whirlpool Corp. | (371 | ) | (0.26 | %) | 6,283 | |||||||
Vulcan Materials Co. | (414 | ) | (0.27 | %) | 6,003 | |||||||
General Mills, Inc. | (954 | ) | (0.24 | %) | 5,883 | |||||||
Empire State Realty Trust, Inc. — Class A | (4,596 | ) | (0.43 | %) | 5,788 | |||||||
Martin Marietta Materials, Inc. | (236 | ) | (0.27 | %) | 5,764 | |||||||
Omnicell, Inc.* | (661 | ) | (0.27 | %) | 5,698 | |||||||
New York Community Bancorp, Inc. | (4,522 | ) | (0.28 | %) | 5,629 | |||||||
Cheesecake Factory, Inc. | (848 | ) | (0.24 | %) | 5,463 | |||||||
Haemonetics Corp.* | (408 | ) | (0.27 | %) | 5,415 | |||||||
Cornerstone OnDemand, Inc.* | (906 | ) | (0.30 | %) | 5,392 | |||||||
PPG Industries, Inc. | (585 | ) | (0.39 | %) | 5,356 | |||||||
Intuit, Inc. | (348 | ) | (0.45 | %) | 5,353 | |||||||
Signature Bank | (416 | ) | (0.28 | %) | 5,353 | |||||||
Booking Holdings, Inc.* | (23 | ) | (0.26 | %) | 5,308 | |||||||
Honeywell International, Inc. | (366 | ) | (0.32 | %) | 5,252 | |||||||
Bio-Techne Corp. | (268 | ) | (0.25 | %) | 5,013 | |||||||
Service Corporation International | (1,347 | ) | (0.36 | %) | 4,786 | |||||||
ServiceNow, Inc.* | (296 | ) | (0.35 | %) | 4,676 | |||||||
AptarGroup, Inc. | (424 | ) | (0.26 | %) | 4,646 | |||||||
Federal Realty Investment Trust | (381 | ) | (0.29 | %) | 4,586 | |||||||
MSA Safety, Inc. | (621 | ) | (0.38 | %) | 4,547 | |||||||
Marsh & McLennan Companies, Inc. | (606 | ) | (0.32 | %) | 4,514 | |||||||
Dunkin' Brands Group, Inc. | (600 | ) | (0.25 | %) | 4,358 | |||||||
AvalonBay Communities, Inc. | (468 | ) | (0.53 | %) | 4,324 | |||||||
Regency Centers Corp. | (759 | ) | (0.29 | %) | 4,242 | |||||||
West Pharmaceutical Services, Inc. | (406 | ) | (0.26 | %) | 4,177 | |||||||
Crown Castle International Corp. | (756 | ) | (0.54 | %) | 4,082 | |||||||
Capitol Federal Financial, Inc. | (9,082 | ) | (0.76 | %) | 3,996 | |||||||
Becton Dickinson and Co. | (323 | ) | (0.48 | %) | 3,933 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 47 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Percentage | Value and | |||||||||
Chemed Corp. | (142 | ) | (0.26 | %) | $ | 3,600 | ||||||
Atmos Energy Corp. | (1,163 | ) | (0.71 | %) | 3,456 | |||||||
Tractor Supply Co. | (491 | ) | (0.27 | %) | 3,452 | |||||||
Healthcare Services Group, Inc. | (2,182 | ) | (0.57 | %) | 3,433 | |||||||
Gentherm, Inc.* | (981 | ) | (0.26 | %) | 3,389 | |||||||
Fastenal Co. | (794 | ) | (0.27 | %) | 3,352 | |||||||
Genuine Parts Co. | (977 | ) | (0.61 | %) | 3,257 | |||||||
GCP Applied Technologies, Inc.* | (1,632 | ) | (0.26 | %) | 3,207 | |||||||
Arthur J Gallagher & Co. | (927 | ) | (0.45 | %) | 3,189 | |||||||
MGM Resorts International | (1,686 | ) | (0.27 | %) | 3,100 | |||||||
Liberty Property Trust | (1,842 | ) | (0.51 | %) | 3,068 | |||||||
Boeing Co. | (175 | ) | (0.37 | %) | 2,983 | |||||||
iRobot Corp.* | (475 | ) | (0.26 | %) | 2,947 | |||||||
Sempra Energy | (653 | ) | (0.46 | %) | 2,908 | |||||||
Public Storage | (281 | ) | (0.37 | %) | 2,694 | |||||||
Axalta Coating Systems Ltd.* | (1,741 | ) | (0.27 | %) | 2,690 | |||||||
Six Flags Entertainment Corp. | (764 | ) | (0.28 | %) | 2,497 | |||||||
Hawaiian Electric Industries, Inc. | (3,070 | ) | (0.74 | %) | 2,388 | |||||||
AutoNation, Inc.* | (1,105 | ) | (0.26 | %) | 2,286 | |||||||
Ecolab, Inc. | (630 | ) | (0.61 | %) | 2,219 | |||||||
Air Products & Chemicals, Inc. | (534 | ) | (0.56 | %) | 2,133 | |||||||
Cable One, Inc. | (50 | ) | (0.27 | %) | 2,126 | |||||||
TopBuild Corp.* | (866 | ) | (0.26 | %) | 2,060 | |||||||
McDonald's Corp. | (395 | ) | (0.46 | %) | 1,998 | |||||||
3M Co. | (222 | ) | (0.28 | %) | 1,936 | |||||||
Asbury Automotive Group, Inc.* | (622 | ) | (0.27 | %) | 1,924 | |||||||
Equity Residential | (1,077 | ) | (0.47 | %) | 1,874 | |||||||
Republic Services, Inc. — Class A | (1,361 | ) | (0.64 | %) | 1,861 | |||||||
Domino's Pizza, Inc. | (164 | ) | (0.27 | %) | 1,857 | |||||||
Starbucks Corp. | (757 | ) | (0.32 | %) | 1,785 | |||||||
Linde plc | (277 | ) | (0.28 | %) | 1,778 | |||||||
Pool Corp. | (528 | ) | (0.51 | %) | 1,556 | |||||||
FireEye, Inc.* | (3,011 | ) | (0.32 | %) | 1,528 | |||||||
Physicians Realty Trust | (3,509 | ) | (0.37 | %) | 1,523 | |||||||
Everest Re Group Ltd. | (220 | ) | (0.31 | %) | 1,522 | |||||||
Clorox Co. | (272 | ) | (0.27 | %) | 1,507 | |||||||
Waste Management, Inc. | (758 | ) | (0.44 | %) | 1,448 | |||||||
TransDigm Group, Inc.* | (270 | ) | (0.60 | %) | 1,375 | |||||||
Alliant Energy Corp. | (1,517 | ) | (0.42 | %) | 1,311 | |||||||
|
|
| Value and | |||||||||
Mettler-Toledo International, Inc.* | (74 | ) | (0.27 | %) | 1,207 | |||||||
STORE Capital Corp. | (2,155 | ) | (0.40 | %) | 1,200 | |||||||
Sun Communities, Inc. | (1,743 | ) | (1.16 | %) | 1,189 | |||||||
American Campus Communities, Inc. | (2,325 | ) | (0.63 | %) | 1,142 | |||||||
Insulet Corp.* | (537 | ) | (0.28 | %) | 1,123 | |||||||
Berry Global Group, Inc.* | (935 | ) | (0.29 | %) | 1,107 | |||||||
Intercontinental Exchange, Inc. | (730 | ) | (0.36 | %) | 785 | |||||||
UDR, Inc. | (2,050 | ) | (0.53 | %) | 724 | |||||||
Alleghany Corp. | (78 | ) | (0.32 | %) | 684 | |||||||
Hilton Worldwide Holdings, Inc. | (1,225 | ) | (0.58 | %) | 550 | |||||||
Aon plc | (276 | ) | (0.26 | %) | 513 | |||||||
Essex Property Trust, Inc. | (367 | ) | (0.59 | %) | 393 | |||||||
O'Reilly Automotive, Inc.* | (122 | ) | (0.28 | %) | 217 | |||||||
NiSource, Inc. | (2,735 | ) | (0.45 | %) | (43 | ) | ||||||
Meredith Corp. | (1,536 | ) | (0.52 | %) | (138 | ) | ||||||
National Retail Properties, Inc. | (1,064 | ) | (0.34 | %) | (407 | ) | ||||||
ABM Industries, Inc. | (1,443 | ) | (0.30 | %) | (445 | ) | ||||||
Dominion Energy, Inc. | (880 | ) | (0.41 | %) | (607 | ) | ||||||
Equity LifeStyle Properties, Inc. | (1,634 | ) | (1.04 | %) | (616 | ) | ||||||
Wayfair, Inc. — Class A* | (468 | ) | (0.28 | %) | (1,129 | ) | ||||||
Hormel Foods Corp. | (2,126 | ) | (0.59 | %) | (1,853 | ) | ||||||
Deere & Co. | (490 | ) | (0.48 | %) | (2,119 | ) | ||||||
HCP, Inc. | (2,519 | ) | (0.46 | %) | (2,267 | ) | ||||||
Eversource Energy | (1,437 | ) | (0.61 | %) | (2,341 | ) | ||||||
Coca-Cola Co. | (870 | ) | (0.27 | %) | (2,347 | ) | ||||||
Workday, Inc. — Class A* | (385 | ) | (0.40 | %) | (2,790 | ) | ||||||
SBA Communications Corp.* | (442 | ) | (0.47 | %) | (2,915 | ) | ||||||
Welltower, Inc. | (1,298 | ) | (0.59 | %) | (3,544 | ) | ||||||
American Water Works Company, Inc. | (1,367 | ) | (0.81 | %) | (4,419 | ) | ||||||
Tesla, Inc.* | (214 | ) | (0.47 | %) | (5,057 | ) | ||||||
MarketAxess Holdings, Inc. | (250 | ) | (0.35 | %) | (5,373 | ) | ||||||
NewMarket Corp. | (537 | ) | (1.45 | %) | (5,771 | ) | ||||||
American Tower Corp. — Class A | (590 | ) | (0.61 | %) | (5,780 | ) | ||||||
Church & Dwight Company, Inc. | (662 | ) | (0.30 | %) | (5,970 | ) | ||||||
Realty Income Corp. | (2,020 | ) | (0.84 | %) | (9,217 | ) | ||||||
Royal Gold, Inc. | (1,084 | ) | (0.62 | %) | (9,864 | ) | ||||||
Total Custom Basket of Short Securities | 2,095,690 |
48| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
MULTI-HEDGE STRATEGIES FUND |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Consolidated Statement of Assets and Liabilities. |
† | 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 a portion of this security is pledged as short security collateral at December 31, 2018. |
2 | Affiliated issuer. |
3 | All or a portion of this security is on loan at December 31, 2018 — See Note 7. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | All or a portion of this security is pledged as futures collateral at December 31, 2018. |
6 | Repurchase Agreements — See Note 6. |
7 | All or a portion of this security is pledged as custom basket swap collateral at December 31, 2018. |
8 | Securities lending collateral — See Note 7. |
9 | Rate indicated is the 7-day yield as of December 31, 2018. |
10 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
11 | Effective August 27, 2018, Advent Claymore Convertible Securities and Income Fund II and Advent/Claymore Enhanced Growth & Income Fund reorganized with and into the Advent Claymore Convertible Securities and Income Fund. |
12 | Security is no longer an affiliated entity as of April 27, 2018. |
13 | Total Return based on the return of the custom Equity Market Neutral (“MNRE”) long basket of securities +/- financing at a variable rate. Rate indicated is rate effective at December 31, 2018. |
14 | Total Return based on the return of the custom Long/Short Equity (“SMQLS”) long basket of securities +/- financing at a variable rate. Rate indicated is rate effective at December 31, 2018. |
15 | 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, 2018. |
16 | 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, 2018. |
17 | Security is no longer an affiliated entity as of August 27, 2018. |
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| 49 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
MULTI-HEDGE STRATEGIES FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 9,998,579 | $ | — | $ | — | $ | 9,998,579 | ||||||||
Mutual Funds | 13,989,664 | — | — | 13,989,664 | ||||||||||||
Closed-End Funds | 3,442,046 | — | — | 3,442,046 | ||||||||||||
U.S. Treasury Bills | — | 9,217,012 | — | 9,217,012 | ||||||||||||
Repurchase Agreements | — | 1,042,526 | — | 1,042,526 | ||||||||||||
Securities Lending Collateral | 58,327 | — | — | 58,327 | ||||||||||||
Interest Rate Futures Contracts** | 4,003 | 118,331 | — | 122,334 | ||||||||||||
Equity Futures Contracts** | 49,328 | 45,921 | — | 95,249 | ||||||||||||
Commodity Futures Contracts** | 197,990 | — | — | 197,990 | ||||||||||||
Currency Futures Contracts** | 20,346 | — | — | 20,346 | ||||||||||||
Custom Basket Swap Agreements** | — | 3,825,520 | — | 3,825,520 | ||||||||||||
Total Assets | $ | 27,760,283 | $ | 14,249,310 | $ | — | $ | 42,009,593 | ||||||||
| ||||||||||||||||
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 2,215,654 | $ | — | $ | — | $ | 2,215,654 | ||||||||
Exchange-Traded Funds | 3,443,583 | — | — | 3,443,583 | ||||||||||||
Commodity Futures Contracts** | 50,021 | — | — | 50,021 | ||||||||||||
Equity Futures Contracts** | 1,927 | 816 | — | 2,743 | ||||||||||||
Currency Futures Contracts** | 111,077 | — | — | 111,077 | ||||||||||||
Interest Rate Futures Contracts** | 58,144 | 73,313 | — | 131,457 | ||||||||||||
Custom Basket Swap Agreements** | — | 3,855,399 | — | 3,855,399 | ||||||||||||
Total Liabilities | $ | 5,880,406 | $ | 3,929,528 | $ | — | $ | 9,809,934 |
** | This derivative is reported as unrealized appreciation/depreciation 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, 2018, there were no transfers between levels.
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Cash Management Funds”), each of which are 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, 2018, 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/1601445/000089180418000513/gug75569-ncsr.htm.
50| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
MULTI-HEDGE STRATEGIES FUND |
Transactions during the year ended December 31, 2018, in which the company is an “affiliated person”, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | Capital | |||||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 3,742,223 | $ | 6,602,465 | $ | (4,600,000 | ) | $ | (10,789 | ) | $ | (16,755 | ) | $ | 5,717,144 | 230,344 | $ | 100,227 | $ | 1,722 | ||||||||||||||||
Guggenheim Strategy Fund III | 4,030,761 | 120,876 | — | — | (37,981 | ) | 4,113,656 | 165,940 | 120,357 | 154 | ||||||||||||||||||||||||||
Guggenheim Ultra Short Duration Fund1 | 2,025,802 | 16,503 | (2,000,000 | ) | (2,244 | ) | 2,163 | 42,224 | 4,239 | 16,564 | 30 | |||||||||||||||||||||||||
Guggenheim Variable Insurance Strategy Fund III | 4,032,835 | 143,128 | — | — | (59,323 | ) | 4,116,640 | 166,329 | 141,317 | 1,917 | ||||||||||||||||||||||||||
Closed-End Funds | ||||||||||||||||||||||||||||||||||||
Advent Claymore Convertible Securities and Income Fund2,3 | 66,254 | 13,538 | (43,081 | ) | (3,222 | ) | — | — | — | 1,127 | — | |||||||||||||||||||||||||
Western Asset Inflation - Linked Securities & Income Fund4 | 23,580 | 2,442 | (2,291 | ) | (46 | ) | — | — | — | 221 | — | |||||||||||||||||||||||||
Western Asset Inflation-Linked Opportunities & Income Fund4 | 23,400 | 1,918 | (1,772 | ) | (33 | ) | — | — | — | 233 | — | |||||||||||||||||||||||||
Guggenheim Enhanced Equity Income Fund | 21,387 | — | (20,133 | ) | (469 | ) | (785 | ) | — | — | — | — | ||||||||||||||||||||||||
$ | 13,966,242 | $ | 6,900,870 | $ | (6,667,277 | ) | $ | (16,803 | ) | $ | (112,681 | ) | $ | 13,989,664 | $ | 380,046 | $ | 3,823 |
1 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
2 | Effective August 27, 2018, Advent Claymore Convertible Securities and Income Fund II and Advent/Claymore Enhanced Growth & Income Fund reorganized with and into the Advent Claymore Convertible Securities and Income Fund. |
3 | Security is no longer an affiliated entity as of August 27, 2018. |
4 | Security is no longer an affiliated entity as of April 27, 2018. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 51 |
MULTI-HEDGE STRATEGIES FUND |
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $66,205 of securities loaned (cost $23,391,957) | $ | 22,715,964 | ||
Investments in affiliated issuers, at value (cost $14,106,533) | 13,989,664 | |||
Repurchase agreements, at value (cost $1,042,526) | 1,042,526 | |||
Cash | 8,373,882 | |||
Segregated cash with broker | 6,466 | |||
Unrealized appreciation on swap agreements | 3,825,520 | |||
Receivables: | ||||
Dividends | 50,149 | |||
Fund shares sold | 34,656 | |||
Variation margin on futures contracts | 14,701 | |||
Securities lending income | 1,180 | |||
Interest | 85 | |||
Other assets | 10,326 | |||
Total assets | 50,065,119 | |||
Liabilities: | ||||
Securities sold short, at value (proceeds $6,514,581) | 5,659,237 | |||
Due to custodian | 19,905 | |||
Unrealized depreciation on swap agreements | 3,855,399 | |||
Payable for: | ||||
Return of securities lending collateral | 68,198 | |||
Swap settlement | 48,718 | |||
Management fees | 36,092 | |||
Securities purchased | �� | 24,296 | ||
Fund shares redeemed | 9,081 | |||
Trustees’ fees* | 745 | |||
Miscellaneous | 8,266 | |||
Total liabilities | 9,729,937 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 40,335,182 | ||
Net assets consist of: | ||||
Paid in capital | $ | 42,883,316 | ||
Total distributable earnings (loss) | (2,548,134 | ) | ||
Net assets | $ | 40,335,182 | ||
Capital shares outstanding | 1,712,995 | |||
Net asset value per share | $ | 23.55 |
CONSOLIDATED STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 231,872 | ||
Dividends from securities of affiliated issuers | 380,046 | |||
Interest | 349,630 | |||
Income from securities lending, net | 10,276 | |||
Total investment income | 971,824 | |||
Expenses: | ||||
Management fees | 479,047 | |||
Short sales dividend expense | 148,697 | |||
Line of credit fees | 24 | |||
Miscellaneous | 3,271 | |||
Total expenses | 631,039 | |||
Less: | ||||
Expenses waived by Adviser | (7,408 | ) | ||
Net expenses | 623,631 | |||
Net investment income | 348,193 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 373,361 | |||
Investments in affiliated issuers | (16,803 | ) | ||
Distributions received from affiliated investment company shares | 3,823 | |||
Swap agreements | (1,160,932 | ) | ||
Futures contracts | 872,507 | |||
Foreign currency transactions | (1,610 | ) | ||
Securities sold short | (449,135 | ) | ||
Net realized loss | (378,789 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (1,341,861 | ) | ||
Investments in affiliated issuers | (112,681 | ) | ||
Securities sold short | 1,127,386 | |||
Swap agreements | (613,042 | ) | ||
Futures contracts | (1,318,867 | ) | ||
Foreign currency translations | 123 | |||
Net change in unrealized appreciation (depreciation) | (2,258,942 | ) | ||
Net realized and unrealized loss | (2,637,731 | ) | ||
Net decrease in net assets resulting from operations | $ | (2,289,538 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
52| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
MULTI-HEDGE STRATEGIES FUND |
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | 348,193 | $ | (172,085 | ) | |||
Net realized gain (loss) on investments | (378,789 | ) | 1,212,047 | |||||
Net change in unrealized appreciation (depreciation) on investments | (2,258,942 | ) | 514,183 | |||||
Net increase (decrease) in net assets resulting from operations | (2,289,538 | ) | 1,554,145 | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 7,666,661 | 5,817,462 | ||||||
Cost of shares redeemed | (8,737,138 | ) | (11,629,769 | ) | ||||
Net decrease from capital share transactions | (1,070,477 | ) | (5,812,307 | ) | ||||
Net decrease in net assets | (3,360,015 | ) | (4,258,162 | ) | ||||
Net assets: | ||||||||
Beginning of year | 43,695,197 | 47,953,359 | ||||||
End of year | $ | 40,335,182 | $ | 43,695,197 | ||||
Capital share activity: | ||||||||
Shares sold | 316,923 | 240,735 | ||||||
Shares redeemed | (363,489 | ) | (483,666 | ) | ||||
Net decrease in shares | (46,566 | ) | (242,931 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 53 |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 24.83 | $ | 23.95 | $ | 24.09 | $ | 23.82 | $ | 22.75 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .20 | (.09 | ) | (.16 | ) | (.15 | ) | (.18 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | (1.48 | ) | .97 | .04 | .58 | 1.25 | ||||||||||||||
Total from investment operations | (1.28 | ) | .88 | (.12 | ) | .43 | 1.07 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | — | — | (.02 | ) | (.16 | ) | — | |||||||||||||
Total distributions | — | — | (.02 | ) | (.16 | ) | — | |||||||||||||
Net asset value, end of period | $ | 23.55 | $ | 24.83 | $ | 23.95 | $ | 24.09 | $ | 23.82 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (5.16 | %) | 3.67 | % | (0.48 | %) | 1.85 | % | 4.66 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 40,335 | $ | 43,695 | $ | 47,953 | $ | 52,281 | $ | 42,725 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.85 | % | (0.39 | %) | (0.66 | %) | (0.62 | %) | (0.79 | %) | ||||||||||
Total expensesc | 1.54 | % | 1.88 | % | 2.27 | % | 2.38 | % | 2.50 | % | ||||||||||
Net expensesd | 1.52 | % | 1.85 | % | 2.23 | % | 2.34 | % | 2.45 | % | ||||||||||
Portfolio turnover rate | 162 | % | 158 | % | 119 | % | 160 | % | 245 | % |
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: |
2018 | 2017 | 2016 | 2015 | 2014 | |
1.16% | 1.16% | 1.17% | 1.18% | 1.17% |
54| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, the Fund returned -15.12%, compared with a return of -13.82% for the Index.
For the first three quarters of 2018, the S&P GSCI continued its positive momentum that started in the middle of 2017, as the global economy continued to expand. A sharp reversal in the fourth quarter moved the Fund from a double-digit gain through September 2018 to a double-digit loss by the end of the year. Only five of the 24 components in the Index had positive returns during the period. The best-performing component was Cocoa, with a return above 20%. Natural Gas, Wheat, Feeder Cattle, and Live Cattle were the only other positive components, all with positive returns in the low single digits.
Five components had losses topping -20%. Unleaded Gas was the worst component, dropping 28% during the period. Other components which suffered losses of 20% or more were Coffee, Sugar, Zinc, and Crude Oil.
All of the S&P sectors experienced negative performance during the period. Industrial Metals (down 18%) and Energy (down 17%) were the worst S&P GSCI sectors.
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 is due to derivatives.
Guggenheim’s Ultra Short Duration and 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.
THE RYDEX FUNDS ANNUAL REPORT | 55 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Consolidated Holdings Diversification (Market Exposure as % of Net Assets)
“Consolidated Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. 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.
Cumulative Fund Performance*,†
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 | 34.3% |
Guggenheim Ultra Short Duration Fund | 27.1% |
Total | 61.4% |
“Largest Holdings” excludes any temporary cash or derivative investments.
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Commodities Strategy Fund | (15.12%) | (15.63%) | (7.49%) |
S&P Goldman Sachs Commodity Index | (13.82%) | (14.52%) | (5.78%) |
* | 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. |
56 | THE RYDEX FUNDS ANNUAL REPORT |
CONSOLIDATED SCHEDULE OF INVESTMENTS | December 31, 2018 |
COMMODITIES STRATEGY FUND |
Shares | Value | |||||||
MUTUAL FUNDS† - 61.4% | ||||||||
Guggenheim Strategy Fund II1 | 42,852 | $ | 1,063,576 | |||||
Guggenheim Ultra Short Duration Fund1,2 | 84,187 | 838,500 | ||||||
Total Mutual Funds | ||||||||
(Cost $1,901,740) | 1,902,076 | |||||||
Face | ||||||||
FEDERAL AGENCY NOTES††- 9.7% | ||||||||
Federal Farm Credit Bank3 | ||||||||
2.45% (1 Month USD LIBOR - 0.05%, Rate Floor: 0.00%) due 01/23/194 | $ | 100,000 | 99,998 | |||||
Freddie Mac5 | ||||||||
1.75% due 05/30/19 | 100,000 | 99,683 | ||||||
Farmer Mac3 | ||||||||
1.55% due 07/03/19 | 100,000 | 99,444 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $299,185) | 299,125 | |||||||
U.S. TREASURY BILLS††- 8.3% | ||||||||
U.S. Treasury Bills | ||||||||
2.21% due 01/08/196,7 | 257,000 | 256,904 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $256,886) | 256,904 | |||||||
REPURCHASE AGREEMENTS††,8- 22.7% | ||||||||
JPMorgan Chase & Co. issued 12/31/18 at 2.95% due 01/02/19 | 416,178 | 416,178 | ||||||
Barclays Capital issued 12/31/18 at 2.93% due 01/02/19 | 173,076 | 173,076 | ||||||
Bank of America Merrill Lynch issued 12/31/18 at 2.95% due 01/02/19 | 115,384 | 115,384 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $704,638) | 704,638 | |||||||
Total Investments - 102.1% | ||||||||
(Cost $3,162,449) | $ | 3,162,743 | ||||||
Other Assets & Liabilities, net - (2.1)% | (64,024 | ) | ||||||
Total Net Assets - 100.0% | $ | 3,098,719 |
Futures Contracts | |||||||||||||
Description | Number of | Expiration | Notional | Value and | |||||||||
Commodity Futures Contracts Purchased† | |||||||||||||
Goldman Sachs Commodity Index Futures Contracts | 33 | Jan 2019 | $ | 3,099,525 | $ | (281,375 | ) |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Consolidated Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
3 | The issuer operates under a Congressional charter; its securities are neither issued nor guaranteed by the U.S. Government. |
4 | Variable rate security. Rate indicated is the rate effective at December 31, 2018. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
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 | All or a portion of this security is pledged as futures collateral at December 31, 2018. |
7 | Rate indicated is the effective yield at the time of purchase. |
8 | Repurchase Agreements — See Note 6. |
LIBOR — London Interbank Offered Rate | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 57 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
COMMODITIES STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 1,902,076 | $ | — | $ | — | $ | 1,902,076 | ||||||||
Federal Agency Notes | — | 299,125 | — | 299,125 | ||||||||||||
U.S. Treasury Bills | — | 256,904 | — | 256,904 | ||||||||||||
Repurchase Agreements | — | 704,638 | — | 704,638 | ||||||||||||
Total Assets | $ | 1,902,076 | $ | 1,260,667 | $ | — | $ | 3,162,743 | ||||||||
| ||||||||||||||||
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Commodity Futures Contracts** | $ | 281,375 | $ | — | $ | — | $ | 281,375 |
** | This derivative is reported as unrealized appreciation/depreciation 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, 2018, there were no transfers between levels.
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Cash Management Funds”), each of which are 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, 2018, 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/1601445/000089180418000513/gug75569-ncsr.htm.
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | Capital | |||||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 1,419,739 | $ | 3,410,633 | $ | (3,755,000 | ) | $ | (5,039 | ) | $ | (6,757 | ) | $ | 1,063,576 | 42,852 | $ | 59,914 | $ | 663 | ||||||||||||||||
Guggenheim Ultra Short Duration Fund1 | 1,410,574 | 3,780,989 | (4,345,000 | ) | (4,669 | ) | (3,394 | ) | 838,500 | 84,187 | 55,068 | 899 | ||||||||||||||||||||||||
$ | 2,830,313 | $ | 7,191,622 | $ | (8,100,000 | ) | $ | (9,708 | ) | $ | (10,151 | ) | $ | 1,902,076 | $ | 114,982 | $ | 1,562 |
1 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
58| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
COMMODITIES STRATEGY FUND |
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $556,071) | $ | 556,029 | ||
Investments in affiliated issuers, at value (cost $1,901,740) | 1,902,076 | |||
Repurchase agreements, at value (cost $704,638) | 704,638 | |||
Receivables: | ||||
Dividends | 3,884 | |||
Interest | 1,036 | |||
Variation margin on futures contracts | 847 | |||
Fund shares sold | 41 | |||
Total assets | 3,168,551 | |||
Liabilities: | ||||
Payable for: | ||||
Securities purchased | 29,101 | |||
Fund shares redeemed | 24,010 | |||
Professional fees | 7,786 | |||
Management fees | 1,447 | |||
Transfer agent and administrative fees | 664 | |||
Investor service fees | 664 | |||
Portfolio accounting fees | 266 | |||
Trustees’ fees* | 86 | |||
Miscellaneous | 5,808 | |||
Total liabilities | 69,832 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 3,098,719 | ||
Net assets consist of: | ||||
Paid in capital | $ | 5,322,045 | ||
Total distributable earnings (loss) | (2,223,326 | ) | ||
Net assets | $ | 3,098,719 | ||
Capital shares outstanding | 43,223 | |||
Net asset value per share | $ | 71.69 |
CONSOLIDATED STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 114,982 | ||
Interest | 38,838 | |||
Total investment income | 153,820 | |||
Expenses: | ||||
Management fees | 53,727 | |||
Investor service fees | 15,723 | |||
Transfer agent and administrative fees | 15,723 | |||
Professional fees | 9,187 | |||
Portfolio accounting fees | 6,289 | |||
Trustees’ fees* | 1,721 | |||
Custodian fees | 960 | |||
Miscellaneous | 10,207 | |||
Total expenses | 113,537 | |||
Less: | ||||
Expenses waived by Adviser | (6,983 | ) | ||
Net expenses | 106,554 | |||
Net investment income | 47,266 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in affiliated issuers | (9,708 | ) | ||
Distributions received from affiliated investment company shares | 1,562 | |||
Futures contracts | (281,832 | ) | ||
Net realized loss | (289,978 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (42 | ) | ||
Investments in affiliated issuers | (10,151 | ) | ||
Futures contracts | (522,676 | ) | ||
Net change in unrealized appreciation (depreciation) | (532,869 | ) | ||
Net realized and unrealized loss | (822,847 | ) | ||
Net decrease in net assets resulting from operations | $ | (775,581 | ) |
* | 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 |
COMMODITIES STRATEGY FUND |
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 47,266 | $ | 160 | ||||
Net realized gain (loss) on investments | (289,978 | ) | 74,631 | |||||
Net change in unrealized appreciation (depreciation) on investments | (532,869 | ) | 140,973 | |||||
Net increase (decrease) in net assets resulting from operations | (775,581 | ) | 215,764 | |||||
Distributions to shareholders | (242,391 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 37,091,840 | 22,269,307 | ||||||
Distributions reinvested | 242,391 | — | ||||||
Cost of shares redeemed | (37,948,813 | ) | (22,252,087 | ) | ||||
Net increase (decrease) from capital share transactions | (614,582 | ) | 17,220 | |||||
Net increase (decrease) in net assets | (1,632,554 | ) | 232,984 | |||||
Net assets: | ||||||||
Beginning of year | 4,731,273 | 4,498,289 | ||||||
End of year | $ | 3,098,719 | $ | 4,731,273 | ||||
Capital share activity: | ||||||||
Shares sold | 406,945 | 284,878 | ||||||
Shares issued from reinvestment of distributions | 2,774 | — | ||||||
Shares redeemed | (420,605 | ) | (284,484 | ) | ||||
Net increase (decrease) in shares | (10,886 | ) | 394 |
60| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 87.44 | $ | 83.74 | $ | 75.82 | $ | 114.64 | $ | 173.54 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .67 | — | b | (.03 | ) | (1.12 | ) | (1.76 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | (13.34 | ) | 3.70 | 7.95 | (37.70 | ) | (57.14 | ) | ||||||||||||
Total from investment operations | (12.67 | ) | 3.70 | 7.92 | (38.82 | ) | (58.90 | ) | ||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (3.08 | ) | — | — | — | — | ||||||||||||||
Total distributions | (3.08 | ) | — | — | — | — | ||||||||||||||
Net asset value, end of period | $ | 71.69 | $ | 87.44 | $ | 83.74 | $ | 75.82 | $ | 114.64 | ||||||||||
| ||||||||||||||||||||
Total Returnc | (15.12 | %) | 4.43 | % | 10.40 | % | (33.80 | %) | (34.01 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 3,099 | $ | 4,731 | $ | 4,498 | $ | 2,671 | $ | 4,662 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.75 | % | — | g | (0.48 | %) | (1.16 | %) | (1.04 | %) | ||||||||||
Total expensesd | 1.81 | % | 1.82 | % | 1.80 | % | 1.75 | % | 1.71 | % | ||||||||||
Net expensese | 1.69 | % | 1.72 | % | 1.67 | % | 1.63 | % | 1.62 | % | ||||||||||
Portfolio turnover rate | 187 | % | 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 | Does not include expenses of the underlying funds in which the Fund invests. |
e | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
f | 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. |
g | Less than 0.01%. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 61 |
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, 2018, 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.
The Commodities Strategy Fund is designed and operated to accommodate frequent trading by shareholders and, unlike most mutual funds, offers unlimited exchange privileges with no minimum holding periods or transactions fees, which may cause the Fund 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.
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, 2018 | % of Net Assets of the Fund at December 31, 2018 | |||||||
Global Managed Futures Strategy Fund | 11/07/08 | $ | 675,517 | 5.1 | % | |||||
Multi-Hedge Strategies Fund | 04/15/09 | 1,092,086 | 2.7 | % | ||||||
Commodities Strategy Fund | 07/21/09 | 314,444 | 10.1 | % |
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 a fund’s securities and other assets, less all liabilities, by the number of outstanding shares of that 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.
62 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
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 are valued at their NAV as of the close of business, on the valuation date. Exchange-traded funds and closed-end investment companies 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 their NAV.
Repurchase agreements are valued at amortized cost, provided such amounts approximate market value.
The value of futures contracts is accounted for using the unrealized appreciation or depreciation 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”) index swap agreements entered into by a Fund are accounted for using the unrealized appreciation or depreciation 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 value of equity swaps with custom portfolio baskets are computed using the last exchange sale price for each underlying equity security within the swap agreement.
Investments for which market quotations are not readily available are fair-valued as determined in good faith by GI, subject to review and approval by the Valuation Committee, pursuant to methods established or ratified by the Board. Valuations in accordance with these methods are intended to reflect each security’s (or asset’s or liability’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 U.S. Treasury securities, 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.
THE RYDEX FUNDS ANNUAL REPORT | 63 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
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 appreciation or depreciation. 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 appreciation or depreciation. Payments received or made as a result of an agreement or termination of an agreement are recognized 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, 2018, 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. 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 realized gains. The actual amounts of income, return of capital, and realized 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 2.40% at December 31, 2018.
(j) 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.
64 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
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 appreciation or depreciation 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.
(k) 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 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 may utilize 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.
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.
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
THE RYDEX FUNDS ANNUAL REPORT | 65 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
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 | ||||||
Global Managed Futures Strategy Fund | Hedge, Leverage, Liquidity, Speculation | $ | 37,102,570 | $ | 50,188,587 | ||||
Multi-Hedge Strategies Fund | Duration, Hedge, Index exposure, Leverage, Liquidity, Speculation | 29,561,096 | 33,510,562 | ||||||
Commodities Strategy Fund | Index exposure, Liquidity | 5,809,306 | — |
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 exchange-traded futures contracts. Upon entering into certain centrally-cleared swap transactions, the 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. For a fund utilizing interest rate swaps, the exchange bears the risk of loss. 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.
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 a custom basket of securities) for a fixed or variable interest rate. Total return swaps will usually be computed based on the current value of the reference asset as of the close of regular trading on the NYSE or other exchange. A fund utilizing total return 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 reference asset 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 | ||||||
Long Short Equity Fund | Index exposure, Liquidity | $ | 19,045,295 | $ | 33,796,649 | ||||
Multi-Hedge Strategies Fund | Hedge, Index Exposure, Leverage, Liquidity, Speculation | 31,549,490 | 27,609,259 |
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, 2018:
Derivative Investment Type | Asset Derivatives | Liability Derivatives |
Equity/Currency/Interest Rate/Commodity contracts | Variation margin on futures contracts | Variation margin on futures contracts |
| Unrealized appreciation on swap agreements | Unrealized depreciation on swap agreements |
66 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
The following table sets forth the fair value of the Funds’ derivative investments categorized by primary risk exposure at December 31, 2018:
Asset Derivative Investments Value | ||||||||||||||||||||||||
Fund | Futures | Swaps | Futures | Futures | Futures | Total Value at | ||||||||||||||||||
Long Short Equity Fund | $ | — | $ | 3,080,555 | $ | — | $ | — | $ | — | $ | 3,080,555 | ||||||||||||
Global Managed Futures Strategy Fund | 68,178 | — | 34,260 | 142,099 | 142,985 | 387,522 | ||||||||||||||||||
Multi-Hedge Strategies Fund | 95,249 | 3,825,520 | 20,346 | 122,334 | 197,990 | 4,261,439 |
Liability Derivative Investments Value | ||||||||||||||||||||||||
Fund | Futures | Swaps | Futures | Futures | Futures | Total Value at | ||||||||||||||||||
Long Short Equity Fund | $ | — | $ | 2,190,654 | $ | — | $ | — | $ | — | $ | 2,190,654 | ||||||||||||
Global Managed Futures Strategy Fund | 14,974 | — | 60,074 | 65,945 | 38,323 | 179,316 | ||||||||||||||||||
Multi-Hedge Strategies Fund | 2,743 | 3,855,399 | 111,077 | 131,457 | 50,021 | 4,150,697 | ||||||||||||||||||
Commodities Strategy Fund | — | — | — | — | 281,375 | 281,375 |
* | Includes cumulative appreciation (depreciation) of futures contracts as reported on the Schedules of Investments. 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, 2018:
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 |
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, 2018:
Realized Gain (Loss) on Derivative Investments Recognized on the Statements of Operations | ||||||||||||||||||||||||
Fund | Futures | Swaps | Futures | Futures | Futures | Total | ||||||||||||||||||
Long Short Equity Fund | $ | — | $ | (3,568,303 | ) | $ | — | $ | — | $ | — | $ | (3,568,303 | ) | ||||||||||
Global Managed Futures Strategy Fund | (668,892 | ) | — | 29,888 | (167,343 | ) | (537,498 | ) | (1,343,845 | ) | ||||||||||||||
Multi-Hedge Strategies Fund | (38,932 | ) | (1,160,932 | ) | 467,846 | 353,887 | 89,706 | (288,425 | ) | |||||||||||||||
Commodities Strategy Fund | — | — | — | — | (281,832 | ) | (281,832 | ) |
Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized on the Statements of Operations | ||||||||||||||||||||||||
Fund | Futures | Swaps | Futures | Futures | Futures | Total | ||||||||||||||||||
Long Short Equity Fund | $ | — | $ | 1,909,970 | $ | — | $ | — | $ | — | $ | 1,909,970 | ||||||||||||
Global Managed Futures Strategy Fund | (9,434 | ) | — | (76,945 | ) | 24,695 | (18,763 | ) | (80,447 | ) | ||||||||||||||
Multi-Hedge Strategies Fund | (1,218,301 | ) | (613,042 | ) | (122,818 | ) | 7,857 | 14,395 | (1,931,909 | ) | ||||||||||||||
Commodities Strategy Fund | — | — | — | — | (522,676 | ) | (522,676 | ) |
THE RYDEX FUNDS ANNUAL REPORT | 67 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
In conjunction with short sales and the use of derivative instruments, the Funds are required to maintain collateral in various forms. Depending on the financial instrument utilized and the broker involved, the Funds use margin deposits at the broker, cash and/or securities segregated at the custodian bank, discount notes or 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. Cash and/or securities pledged or received as collateral by the Funds in connection with an OTC derivative subject to an ISDA Master Agreement generally may not be invested, sold or rehypothecated by the counterparty or the Funds, as applicable, absent an event of default under such agreement, in which case such collateral generally may be applied towards obligations due to and payable by such counterparty or the Funds, as applicable. 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 | |||||||||||||||||||||||||
Fund | Instrument | Gross | Gross | Net Amount | Financial | Cash | Net | ||||||||||||||||||
Long Short Equity Fund | Custom basket swap agreements | $ | 3,080,555 | $ | — | $ | 3,080,555 | $ | (2,190,654 | ) | $ | — | $ | 889,901 | |||||||||||
Multi-Hedge Strategies Fund | Custom basket swap agreements | 3,825,520 | — | 3,825,520 | (3,825,520 | ) | — | — |
68 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Gross Amounts Not Offset | |||||||||||||||||||||||||
Fund | Instrument | Gross | Gross | Net Amount | Financial | Cash | Net | ||||||||||||||||||
Long Short Equity Fund | Custom basket swap agreements | $ | 2,190,654 | $ | — | $ | 2,190,654 | $ | (2,190,654 | ) | $ | — | $ | — | |||||||||||
Multi-Hedge Strategies Fund | Custom basket swap agreements | 3,855,399 | — | 3,855,399 | (3,855,399 | ) | — | — |
1 | Exchange-traded or centrally-cleared derivatives are excluded from these reported amounts. |
The Funds have the right to offset deposits against any related liabilities outstanding with each counterparty with the exception of exchange traded or centrally-cleared derivatives. The following table presents deposits held by others in connection with derivative investments as of December 31, 2018.
Fund | Counterparty | Asset Type | Cash Pledged | Cash Received | ||||||
Global Managed Futures Strategy Fund | Goldman Sachs Group | Futures contracts | $ | 4,534 | $ | — | ||||
Multi-Hedge Strategies Fund | Goldman Sachs Group | Futures contracts | 6,466 | — |
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.
THE RYDEX FUNDS ANNUAL REPORT | 69 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
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 |
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, 2018, the Global Managed Futures Strategy Fund, Multi-Hedge Strategies Fund, and Commodities Strategy Fund waived $7,439, $7,375 and $6,758 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.
If a Fund invests in a fund that is advised by the same adviser or an affiliated adviser, the investing Fund’s adviser has agreed to waive fees at the investing fund level to the extent necessary to offset the proportionate share of any management fee paid by each Fund with respect to its investment in such affiliated fund. 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, 2018, the Global Managed Futures Strategy Fund, Multi-Hedge Strategies Fund and the Commodities Strategy Fund waived $139, $33 and $225, respectively, related to investments in affiliated funds.
Certain officers of the Trust are also officers of GI and/or GFD. The Trust does not compensate its officers or trustees who are officers, directors and/or employees of GI or 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. 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 each Fund’s average daily net assets and out of pocket expenses.
70 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO CONSOLIDATED 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, 2018, the repurchase agreements in the joint account were as follows:
Counterparty and | Face Value | Repurchase Price |
| Collateral | Par Value | Fair Value | ||||||||||||
JPMorgan Chase & Co. | U.S. Treasury Note | |||||||||||||||||
2.95% | 1.13% | |||||||||||||||||
Due 01/02/19 | $ | 54,122,377 | $ | 54,131,247 | 06/30/21 | $ | 57,040,000 | $ | 55,203,996 | |||||||||
U.S. Treasury Bill | ||||||||||||||||||
0.00% | ||||||||||||||||||
01/03/19 | 900 | 900 | ||||||||||||||||
57,040,900 | 55,204,896 | |||||||||||||||||
Barclays Capital | U.S. Treasury Note | |||||||||||||||||
2.93% | 2.50% | |||||||||||||||||
Due 01/02/19 | 22,507,947 | 22,511,611 | 05/15/24 | 22,942,600 | 22,958,127 | |||||||||||||
Bank of America Merrill Lynch | U.S. Treasury Strip | |||||||||||||||||
2.95% | 0.00% | |||||||||||||||||
Due 01/02/19 | 15,005,298 | 15,007,757 | 08/15/31 | 22,092,096 | 15,305,404 |
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 | 71 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
At December 31, 2018, the Funds participated in securities lending transactions, which are subject to enforceable netting arrangements, as follows:
Gross Amounts Not Offset in the | Securities Lending Collateral | ||||||||||||||||||||||||
Fund | Value of | Collateral | Net | Cash | Cash | Total | |||||||||||||||||||
Long Short Equity Fund | $ | 39,970 | $ | (39,970 | ) | $ | — | $ | 35,921 | $ | 6,079 | $ | 42,000 | ||||||||||||
Multi-Hedge Strategies Fund | 66,205 | (66,205 | ) | — | 58,327 | 9,871 | 68,198 |
(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, 2018 was as follows:
Fund | Ordinary | Long-Term | Total | |||||||||
Long Short Equity Fund | $ | 3,987,767 | $ | 371,574 | $ | 4,359,341 | ||||||
Commodities Strategy Fund | 242,391 | — | 242,391 |
The tax character of distributions paid during the year ended December 31, 2017 was as follows:
Fund | Ordinary | Long-Term | Total | |||||||||
Long Short Equity Fund | $ | 126,120 | $ | — | $ | 126,120 | ||||||
Global Managed Futures Strategy Fund | 224,098 | — | 224,098 |
72 | THE RYDEX FUNDS ANNUAL REPORT |
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, 2018 were as follows:
Fund | Undistributed | Undistributed | Net Unrealized | Accumulated | Total | |||||||||||||||
Long Short Equity Fund | $ | 199,035 | $ | — | $ | (2,259,975 | ) | $ | (1,612,747 | ) | $ | (3,673,687 | ) | |||||||
Global Managed Futures Strategy Fund | 124,141 | — | (783,170 | ) | (978,251 | ) | (1,637,280 | ) | ||||||||||||
Multi-Hedge Strategies Fund | 913,679 | — | (1,670,814 | ) | (1,891,003 | ) | (2,648,138 | ) | ||||||||||||
Commodities Strategy Fund | 45,134 | — | (2,612,018 | ) | (9,123 | ) | (2,576,007 | ) |
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. 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, 2018, capital loss carryforwards for the Funds were as follows:
Unlimited | ||||||||||||
Fund | Short-Term | Long-Term | Total | |||||||||
Long Short Equity Fund | $ | (1,593,331 | ) | $ | (19,416 | ) | $ | (1,612,747 | ) | |||
Global Managed Futures Strategy Fund | (645,122 | ) | (333,129 | ) | (978,251 | ) | ||||||
Multi-Hedge Strategies Fund | (1,057,916 | ) | (741,399 | ) | (1,799,315 | ) | ||||||
Commodities Strategy Fund | (5,782 | ) | (3,341 | ) | (9,123 | ) |
For the year ended December 31, 2018, the following capital loss carryforward amounts expired or were utilized:
Fund | Expired | Utilized | Total | |||||||||
Multi-Hedge Strategies Fund | $ | 218,949 | $ | — | $ | 218,949 |
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 subsidiaries, the “mark-to-market” of certain derivatives, 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 expiration of capital loss carryforward amounts. To the extent these differences are permanent and would require a reclassification between Paid in Capital and Total Distributable Earnings (loss), such reclassifications are made 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, 2018 for permanent book/tax differences:
Fund | Paid In | Total | ||||||
Long Short Equity Fund | $ | 532 | $ | (532 | ) | |||
Global Managed Futures Strategy Fund | (537,095 | ) | 537,095 | |||||
Multi-Hedge Strategies Fund | (317,295 | ) | 317,295 | |||||
Commodities Strategy Fund | (279,697 | ) | 279,697 |
THE RYDEX FUNDS ANNUAL REPORT | 73 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
At December 31, 2018, the cost of securities for Federal income tax purposes, the aggregate gross unrealized appreciation for all securities for which there was an excess of value over tax cost and the aggregate gross unrealized depreciation for all securities for which there was an excess of tax cost over value, were as follows:
Fund | Tax | Tax | Tax | Net | ||||||||||||
Long Short Equity Fund | $ | 31,572,989 | $ | 3,777,957 | $ | (6,037,932 | ) | $ | (2,259,975 | ) | ||||||
Global Managed Futures Strategy Fund | 14,135,404 | 213,337 | (996,552 | ) | (783,215 | ) | ||||||||||
Multi-Hedge Strategies Fund | 33,653,053 | 4,432,212 | (6,102,916 | ) | (1,670,704 | ) | ||||||||||
Commodities Strategy Fund | 5,771,475 | — | (2,612,018 | ) | (2,612,018 | ) |
Note 9 – Securities Transactions
For the year ended December 31, 2018, 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 | $ | 92,025,389 | $ | 98,692,809 | ||||
Global Managed Futures Strategy Fund | 975,569 | 2,800,000 | ||||||
Multi-Hedge Strategies Fund | 55,184,013 | 53,336,422 | ||||||
Commodities Strategy Fund | 7,191,622 | 8,100,000 |
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, 2018, the Funds did not engage in purchases and sales of securities, pursuant to Rule 17a-7 of the 1940 Act.
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 9, 2019. 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 2.91% for the year ended December 31, 2018. The Funds did not have any borrowings outstanding under this agreement at December 31, 2018.
The average daily balances borrowed for the year ended December 31, 2018, were as follows:
Fund | Average Daily Balance | |||
Global Managed Futures Strategy Fund | $ | 55 | ||
Multi-Hedge Strategies Fund | 4,493 | |||
Commodities Strategy Fund | 3 |
Note 11 – Recent Regulatory Reporting Updates
In August 2018, the U.S. Securities and Exchange Commission adopted amendments to certain disclosure requirements under Regulation S-X to conform to U.S. GAAP, including: (i) an amendment to require presentation of the total, rather than the components, of distributable earnings on the Statements of Assets and Liabilities; and (ii) an amendment to require presentation of the total, rather than the components, of distributions to shareholders, except for tax return of capital distributions, on the Statements of Changes in Net Assets.
As of December 31, 2018, management has implemented the amendments to Regulation S-X, which did not have a material impact on the Funds’ financial statements and related disclosures nor did it impact the Funds’ net assets or results of operations.
74 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Note 12 – Recent Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (the “ASU”) which adds, modifies and removes disclosure requirements related to certain aspects of fair value measurement. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. At this time, management is evaluating the implications of these changes on the financial statements.
Note 13 – 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. On April 3, 2018, Justice Kennedy and Justice Thomas issued a “Statement” related to the petition for certiorari suggesting that the Second Circuit and/or District Court may want to take steps to reexamine the application of the Section 546(e) safe harbor to the previously dismissed state law constructive fraudulent transfer claims based on the Supreme Court’s decision in Merit Management Group LP v. FTI Consulting, Inc. On April 10, 2018, Plaintiffs filed in the Second Circuit a motion for that court to recall its mandate, vacate its prior decision, and remand to the district court for further proceedings consistent with Merit Management. On April 20, 2018, the shareholder defendants filed an opposition to Plaintiffs’ motion to recall the mandate. On May 15, 2018, the Second Circuit issued an order recalling the mandate “in anticipation of further panel review.”
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
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (concluded) |
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. On March 8, 2018, the plaintiff renewed his request for leave to file a motion to amend the complaint to assert a constructive fraudulent transfer claim based on the Supreme Court’s ruling in Merit Management Group LP v. FTI Consulting, Inc. The shareholder defendants opposed that request. On June 18, 2018 the District Court ordered that the request would be stayed pending further action by the Second Circuit in the SLCFC actions.
On December 18, 2018, plaintiff filed a letter with the District Court requesting that the stay be dissolved in order to permit briefing on the motion to amend the complaint and indicating plaintiff’s intention to file another motion to amend the complaint to reinstate claims for intentional fraudulent transfer. The shareholder defendants opposed that request. On January 14, 2019, the court held a case management conference, during which the court stated that it would not lift the stay prior to further action from the Second Circuit in the SLCFC actions. The court further stated that it would allow the plaintiff to file a motion to amend to try to reinstate its intentional fraudulent transfer claim. The plaintiff has not yet filed any such motion. On January 23, 2019, the court ordered the parties still facing pending claims to participate in a mediation, to commence on January 28, 2019.
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.
Note 14 – Subsequent Events
The Funds evaluated subsequent events through the date the financial statements were available for issue and determined there were no additional material events that would require adjustment to or disclosure in the Funds’ financial statements.
76 | THE RYDEX FUNDS ANNUAL REPORT |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Shareholders of Guggenheim Long Short Equity Fund, Global Managed Futures Strategy Fund, Multi-Hedge Strategies Fund and 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, Global Managed Futures Strategy Fund (consolidated), Multi-Hedge Strategies Fund (consolidated) and 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, 2018, 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, 2018, 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, 2018, by correspondence with the custodian, transfer agent, 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 26, 2019
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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 2019, 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 2018.
The Funds’ investment income (dividend income plus short-term gains, if any) qualifies as follows:
Of the taxable ordinary income distributions paid during the fiscal year ending December 31, 2018, the following Fund had the corresponding percentages qualify for the dividends received deduction for corporations.
Fund | Dividend |
Long Short Equity Fund | 10.84% |
With respect to the taxable year ended December 31, 2018, 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 | From long-term capital | ||||||
Long Short Equity Fund | $ | 371,574 | $ | — |
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 | Position(s) Held with the | Principal Occupation(s) | Number of | Other |
INDEPENDENT TRUSTEES | ||||
Angela Brock-Kyle (1959) | Trustee, Member of the Audit Committee and Member of the Governance and Nominating Committee (2017-present). | Current: Founder and Chief Executive Officer, B.O.A.R.D.S (consulting firm)
Former: Senior Leader, TIAA (financial services firm) (1987-2012). | 109 | None. |
Corey A. Colehour (1945) | Trustee (1993-present); Member of the Audit Committee (1994-present); Member of the Governance and Nominating Committee (2017-present). | Retired. | 109 | None. |
J. Kenneth Dalton (1941) | Trustee (1995-present); Chairman and Member of the Audit Committee (1997-present); and Member of the Governance and Nominating Committee (2018-present). | Retired. | 109 | Epiphany Funds (2) (2009-present). |
Thomas F. Lydon, Jr. (1960) | Trustee, Member of the Audit Committee (2005-present); Chairman and Member of the Governance and Nominating Committee (2017-present). | Current: President, Global Trends Investments (registered investment adviser) (1996-present). | 109 | US Global Investors (GROW) (1995-present) and Harvest Volatility Edge Trust (3) (2017-present). |
Sandra G. Sponem (1958) | Trustee, Chairwoman and Member of the Audit Committee (2016-present); and Member of the Governance and Nominating Committee (2017-present). | Retired.
Former: Senior Vice President and Chief Financial Officer, M.A. Mortenson Companies, Inc. (general contracting firm) (2007-2017). | 109 | SSGA Funds (125) (2018-present). |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) Held with the | Principal Occupation(s) |
OFFICERS | ||
Michael P. Byrum (1970) | Vice President (2000-present) | Current: Senior Vice President, Security Investors, LLC (2010-present); Senior Managing Director, Guggenheim Investments (2010-present); President and Chief Investment Officer, Rydex Holdings, LLC (2008-present) and Director and Chairman, Advisory Research Center, Inc. (2006-present).
Former: Manager, Guggenheim Specialized Products, LLC (2005-2018); 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 (2016-present) | 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 (2016-present) | Current: Treasurer and Assistant Treasurer, certain other funds in the Fund Complex (2010-present); Managing Director, Guggenheim Investments (2015-present).
Former: Chief Financial Officer, Guggenheim Specialized Products, LLC (2016-2018); 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 | President (2017-present) | Current: Interested Trustee, certain other funds in the Fund Complex (2018-present); President, certain other funds in the Fund Complex (2017-present); Chief Legal Officer, certain other funds in the Fund Complex (2014-present); Vice President, certain other funds in the Fund Complex (2007-present); Senior Managing Director, Guggenheim Investments (2012-present).
Former: Trustee (2018-February 2019); President and Chief Executive Officer, certain other funds in the Fund Complex (2017-2018); and Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004-2012). |
Mark E. Mathiasen (1978) | Secretary (2017-present) | Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present). |
Glenn McWhinnie (1969) | Assistant Treasurer (2016-present) | Current: Vice President, Guggenheim Investments (2009-present); Assistant Treasurer, certain other funds in the Fund Complex (2016-present). |
Michael P. Megaris (1984) | Assistant Secretary (2018-present) | Current: Assistant Secretary, certain other funds in the Fund Complex (2014-present); Director, Guggenheim Investments (2012-present). |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) Held with the | Principal Occupation(s) |
OFFICERS - continued | ||
Elisabeth Miller (1968) | Chief Compliance Officer (2012-present) | Current: Chief Compliance Officer, certain other funds in the Fund Complex (2012-present); Managing Director, Guggenheim Investments (2012-present); Vice President, Guggenheim Funds Distributors, LLC (2014-present).
Former: Chief Compliance Officer, Security Investors, LLC (2012-2018); Chief Compliance Officer, Guggenheim Funds Investment Advisors, LLC (2012-2018); Chief Compliance Officer, Guggenheim Distributors, LLC (2009-2014); Senior Manager, Security Investors, LLC (2004-2014); Senior Manager, Guggenheim Distributors, LLC (2004-2014). |
Margaux Misantone (1978) | AML Officer (2017-present) | Current: Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investment Advisors, LLC (2018-present); AML Officer, Security Investors, LLC and certain other funds in the Fund Complex (2017-present); Managing Director, Guggenheim Investments (2015-present).
Former: Assistant Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investments Advisors, LLC (2015-2018). |
Adam J. Nelson (1979) | Assistant Treasurer (2016-present) | 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). |
William Rehder (1967) | Assistant Vice President (2018-present) | Current: Managing Director, Guggenheim Investments (2002-present). |
Kimberly J. Scott (1974) | Assistant Treasurer (2016-present) | 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 (2016-present) | Current: Chief Financial Officer, 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 Chief Compliance Officer, 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); Chief Financial Officer and Treasurer, Van Kampen Funds (1996-2004). |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(concluded) |
Name, Address* | Position(s) Held with the | Principal Occupation(s) |
OFFICERS - concluded | ||
Jon Szafran (1989) | Assistant Treasurer (2017-Present) | 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 “Fund Complex” includes all closed-end and open-end funds (including all of their portfolios) advised by the Adviser and any funds that have an investment adviser or servicing agent that is an affiliated person of the Adviser. Information provided is as of the date of this report. |
*** | Certain of the Trustees may serve as directors on the boards of companies not required to be disclosed above, including certain non-profit companies and charitable foundations. |
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GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited) |
Who We Are
This Privacy Notice describes the data protection practices of Guggenheim Investments. Guggenheim Investments as used herein refers to the affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC, Security Investors, LLC, Guggenheim Investment Advisors (Europe) Limited, Guggenheim Real Estate, LLC, GS Gamma Advisors, LLC, Guggenheim Partners India Management, LLC, Guggenheim Partners Europe Limited, as well as the funds in the Guggenheim Funds complex (the “Funds”) (“Guggenheim Investments,” “we,” “us,” or “our”).
Guggenheim Partners Investment Management Holdings, LLC, located at 330 Madison Avenue, New York, New York 10017 is the data controller for your information. The affiliates who are also controllers of certain of your information are: Guggenheim Investment Advisors (Europe) Limited, Guggenheim Partners Europe Limited, 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.
Our Commitment to You
Guggenheim Investments considers your privacy our utmost concern. When you become our client or investor, you entrust us with not only your hard-earned money but also with your personal and financial information. Because we have access to your private information, we hold ourselves to the highest standards in its safekeeping and use. We strictly limit how we share your information with others, whether you are a current or former Guggenheim Investments client or investor.
The Information We Collect About You
We collect certain nonpublic personal information about you from information you provide on applications, other forms, our website, and/or from third parties including investment advisors. This information includes Social Security or other tax identification number, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, bank account information, marital status, family relationships, information that we collect on our website through the use of “cookies,” and other personal information that you or others provide to us. We may also collect such information through your inquiries by mail, e-mail or telephone. We may also collect customer due diligence information, as required by applicable law and regulation, through third party service providers.
How We Handle Your Personal Information
The legal basis for using your information as set out in this Privacy Notice is as follows: (a) use of your personal data is necessary to perform our obligations under any contract with you (such as a contract for us to provide financial services to you); or (b) where use of your personal data is not necessary for performance of a contract, use of your personal data is necessary for our legitimate interests or the legitimate interests of others (for example, to enforce the legal terms governing our services, operate and market our website and other services we offer, ensure safe environments for our personnel and others, make and receive payments, prevent fraud and to know the customer to whom we are providing the services). Some processing is done to comply with applicable law.
In addition to the specific uses described above, we also use your information in the following manner:
● | We use your information in connection with servicing your accounts. |
● | We use information to respond to your requests or questions. For example, we might use your information to respond to your customer feedback. |
● | We use information to improve our products and services. We may use your information to make our website and products better. We may use your information to customize your experience with us. |
● | We use information for security purposes. We may use your information to protect our company and our customers. |
● | We use information to communicate with you. For example, we will communicate with you about your account or our relationship. We may contact you about your feedback. We might also contact you about this Privacy Notice. We may also enroll you in our email newsletter. |
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GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited)(continued) |
● | We use information as otherwise permitted by law, as we may notify you. |
● | Aggregate/Anonymous Data. We may aggregate and/or anonymize any information collected through the website so that such information can no longer be linked to you or your device (“Aggregate/Anonymous Information”). We may use Aggregate/Anonymous Information for any purpose, including without limitation for research and marketing purposes, and may also share such data with any third parties, including advertisers, promotional partners, and sponsors. |
We do not sell information about current or former clients or their accounts to third parties. Nor do we share this information, except when necessary to complete transactions at your request, to make you aware of investment products and services that we or our affiliates offer, or as permitted or required by law.
We provide information about you to companies and individuals not affiliated with Guggenheim Investments to complete certain transactions or account changes, or to perform services for us related to your account. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we must provide certain information about you to that company to complete the transaction. We provide the third party with only the information necessary to carry out its responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. To alert you to other Guggenheim Investments products and services, we share your information within our family of affiliated companies. You may limit our sharing with affiliated companies as set out below. We may also share information with any successor to all or part of our business, or in connection with steps leading up to a merger or acquisition. For example, if part of our business was sold we may give customer information as part of that transaction. We may also share information about you with your consent.
We will release information about you if you direct us to do so, if we are compelled by law to do so, or in other circumstances as permitted by law (for example, to protect your account from fraud).
If you close your account(s) or become an inactive client or investor, we will continue to adhere to the privacy policies and practices described in this notice.
Opt-Out Provisions and Your Data Choices
The law allows you to “opt out” of certain kinds of information sharing with third parties. We do not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.
When you are no longer our client or investor, we continue to share your information as described in this notice, and you may contact us at any time to limit our sharing by sending an email to CorporateDataPrivacy@GuggenheimPartners.com.
European Union Data Subjects and certain others: In addition to the choices set forth above, residents of the European Union and certain other jurisdictions have certain rights to (1) request access to or rectification or deletion of information we collect about them, (2) request a restriction on the processing of their information, (3) object to the processing of their information, or (4) request the portability of certain information. To exercise these or other rights, please contact us using the contact information below. We will consider all requests and provide our response within the time period stated by applicable law. Please note, however, that certain information may be exempt from such requests in some circumstances, which may include if we need to keep processing your information for our legitimate interests or to comply with a legal obligation. We may request you provide us with information necessary to confirm your identity before responding to your request.
Residents of France and certain other jurisdictions may also provide us with instructions regarding the manner in which we may continue to store, erase and share your information after your death, and where applicable, the person you have designated to exercise these rights after your death.
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GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited)(concluded) |
How We Protect Privacy Online
We take steps to protect your privacy when you use our web site – www.guggenheiminvestments.com – by using secure forms of online communication, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These safeguards vary based on the sensitivity of the information that we collect and store. However, we cannot and do not guarantee that these measures will prevent every unauthorized attempt to access, use, or disclose your information since despite our efforts, no Internet and/or other electronic transmissions can be completely secure. Our web site uses “http cookies”—tiny pieces of information that we ask your browser to store. We use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your e-mail address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.
How We Safeguard Your Personal Information and Data Retention
We restrict access to nonpublic personal information about you to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
We keep your information for no longer than necessary for the purposes for which it is processed. The length of time for which we retain information depends on the purposes for which we collected and use it and/or as required to comply with applicable laws. Information may persist in copies made for backup and business continuity purposes for additional time.
International Visitors
If you are not a resident of the United States, please be aware that your information may be transferred to, stored and processed in the United States where our servers are located and our databases are operated. The data protection and other laws of the United States and other countries might not be as comprehensive as those in your country.
In such cases, we ensure that a legal basis for such a transfer exists and that adequate protection is provided as required by applicable law, for example, by using standard contractual clauses or by transferring your data to a jurisdiction that has obtained an adequacy finding. Individuals whose data may be transferred on the basis of standard contractual clauses may contact us as described below.
We’ll Keep You Informed
If you have any questions or concerns about how we treat your personal data, we encourage you to consult with us first. You may also contact the relevant supervisory authority.
We reserve the right to modify this policy at any time and will inform you promptly of material changes. You may access our privacy policy from our web site at www.guggenheiminvestments.com. Should you have any questions regarding our privacy policy, contact us by email at CorporateDataPrivacy@GuggenheimPartners.com.
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12.31.2018
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 |
Beginning on January 1, 2021, paper copies of the Funds’ annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from a Fund or from your financial intermediary. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change, and you need not take any action. At any time, you may elect to receive reports and other communications from a Fund electronically by calling 800.820.0888, going to GuggenheimInvestments.com/myaccount, or by contacting your financial intermediary.
You may elect to receive all future shareholder reports in paper free of charge. If you hold shares of a Fund directly, you can inform a Fund that you wish to receive paper copies of reports by calling 800.820.0888. If you hold shares of a Fund through a financial intermediary, please contact the financial intermediary to make this election. Your election to receive reports in paper will apply to all Guggenheim Funds in which you are invested and may apply to all funds held with your financial intermediary.
GuggenheimInvestments.com | RVASECF-ANN-2-1218x1219 |
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 | 71 |
LEISURE FUND | 78 |
PRECIOUS METALS FUND | 86 |
REAL ESTATE FUND | 93 |
RETAILING FUND | 101 |
TECHNOLOGY FUND | 108 |
TELECOMMUNICATIONS FUND | 116 |
TRANSPORTATION FUND | 123 |
UTILITIES FUND | 130 |
NOTES TO FINANCIAL STATEMENTS | 137 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 149 |
OTHER INFORMATION | 150 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS | 152 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE | 156 |
THE RYDEX FUNDS ANNUAL REPORT | 1 |
| December 31, 2018 |
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, 2018.
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, 2019
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, 2018 |
U.S. economic data has been broadly strong, but there is already evidence that certain sectors are losing steam. Consumers are becoming less positive on purchases of homes, autos, and appliances, citing rising rates as a major reason. Growth in nonresidential fixed investment is also slowing, reflecting a combination of higher borrowing costs and tariff uncertainty.
With three major pillars of the economy showing signs of weakness, a broad-based slowdown in real U.S. gross domestic product (“GDP”) growth to below 2% year over year by the fourth quarter of 2019 is possible. Global growth momentum has weakened over the last 12 months, and the souring picture for the global economy collided with rising production from U.S. oil producers to drive a 38% decline in oil prices in the fourth quarter. Subsequently, inflation expectations collapsed, and rate hikes priced for 2019 in the fed funds futures market evaporated.
A key bright spot in late 2018 was the U.S. labor market. The unemployment rate remained below 4.0%, near 50-year lows. Non-farm payrolls increased nearly twice as fast as expected, while average hourly earnings increased at 3.3% year over year, the fastest growth in wages since 2009. With above-potential GDP growth likely to cause job gains to run above labor force growth, unemployment could fall further in 2019, leading to an acceleration of wage growth.
With an eye on the labor market, but cognizant of softening inflation, the U.S. Federal Reserve (the “Fed”) proceeded to raise the fed funds target to 2.25–2.50% in December 2018. The Fed added to its December statement that it would monitor global economic and financial developments, but in the press conference, Fed Chair Powell failed to convey flexibility on both interest rate and balance sheet policy should conditions deteriorate further. Markets sold off further in the days following the Fed decision.
Easing inflationary pressures against a very tight labor market present a conundrum to the Fed as policymakers walk a tightrope managing policy around the Fed’s dual mandate of price stability and full employment. Ultimately, the Fed may be forced to pause in early 2019 to monitor economic data in order to avoid inflicting further pain. With real GDP growth running above potential, unemployment below full employment and falling, and core inflation near the 2% target, the 2019 data should be solid enough for the Fed to deliver another hike in the second half of the year.
For the 12 months ended December 31, 2018, the Standard & Poor’s 500® (“S&P 500®”) Index* generated a total return of -4.38%. After two years of strong appreciation in 2016 and 2017, equities were choppy, including a nearly 20% drawdown from early October to December 24th, as markets contended with the ramifications of a trade uncertainty with China, a government shutdown, and the prospects of a new direction in monetary policy.
A pause in monetary policy tightening may grant a short-lived reprieve to debtors at risk of caving under pressure from rising borrowing costs. Credit conditions would appear benign if the Fed seemingly saves the day by staying on hold. We believe any pause would only allow excesses to become more pronounced and afford risk assets one more rally. This rally may be the last opportunity to sell into strength before the Fed resumes raising interest rates, which may push the U.S. into an economic recession in 2020.
For the 12 months ended December 31, 2018, the MSCI Europe-Australasia-Far East (“EAFE”) Index* returned -13.79%. The return of the MSCI Emerging Markets Index* was -14.58%.
In the bond market, the Bloomberg Barclays U.S. Aggregate Bond Index* posted a 0.01% return for the period, while the Bloomberg Barclays U.S. Corporate High Yield Index* returned -2.08%. The return of the ICE Bank of America (“BofA”) Merrill Lynch 3-Month U.S. Treasury Bill Index* was 1.87% 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).
THE RYDEX FUNDS ANNUAL REPORT | 3 |
ECONOMIC AND MARKET OVERVIEW (Unaudited)(concluded) | December 31, 2018 |
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.
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® 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® 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® 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® 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, 2018 and ending December 31, 2018.
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 | Ending | Expenses |
Table 1. Based on actual Fund return3 | |||||
Banking Fund | 1.76% | (17.51%) | $1,000.00 | $824.90 | $8.10 |
Basic Materials Fund | 1.80% | (15.08%) | 1,000.00 | 849.20 | 8.39 |
Biotechnology Fund | 1.75% | (12.63%) | 1,000.00 | 873.70 | 8.26 |
Consumer Products Fund | 1.76% | (6.33%) | 1,000.00 | 936.70 | 8.59 |
Electronics Fund | 1.76% | (15.23%) | 1,000.00 | 847.70 | 8.20 |
Energy Fund | 1.75% | (30.99%) | 1,000.00 | 690.10 | 7.45 |
Energy Services Fund | 1.76% | (44.14%) | 1,000.00 | 558.60 | 6.91 |
Financial Services Fund | 1.76% | (10.56%) | 1,000.00 | 894.40 | 8.40 |
Health Care Fund | 1.76% | (4.81%) | 1,000.00 | 951.90 | 8.66 |
Internet Fund | 1.75% | (17.14%) | 1,000.00 | 828.60 | 8.07 |
Leisure Fund | 1.75% | (13.34%) | 1,000.00 | 866.60 | 8.23 |
Precious Metals Fund | 1.80% | (11.28%) | 1,000.00 | 887.20 | 8.56 |
Real Estate Fund | 1.76% | (8.06%) | 1,000.00 | 919.40 | 8.51 |
Retailing Fund | 1.75% | (12.70%) | 1,000.00 | 873.00 | 8.26 |
Technology Fund | 1.75% | (10.78%) | 1,000.00 | 892.20 | 8.35 |
Telecommunications Fund | 1.78% | (6.08%) | 1,000.00 | 939.20 | 8.70 |
Transportation Fund | 1.76% | (15.86%) | 1,000.00 | 841.40 | 8.17 |
Utilities Fund | 1.76% | 2.25% | 1,000.00 | 1,022.50 | 8.97 |
| |||||
Table 2. Based on hypothetical 5% return (before expenses) | |||||
Banking Fund | 1.76% | 5.00% | $1,000.00 | $1,016.33 | $8.94 |
Basic Materials Fund | 1.80% | 5.00% | 1,000.00 | 1,016.13 | 9.15 |
Biotechnology Fund | 1.75% | 5.00% | 1,000.00 | 1,016.38 | 8.89 |
Consumer Products Fund | 1.76% | 5.00% | 1,000.00 | 1,016.33 | 8.94 |
Electronics Fund | 1.76% | 5.00% | 1,000.00 | 1,016.33 | 8.94 |
Energy Fund | 1.75% | 5.00% | 1,000.00 | 1,016.38 | 8.89 |
Energy Services Fund | 1.76% | 5.00% | 1,000.00 | 1,016.33 | 8.94 |
Financial Services Fund | 1.76% | 5.00% | 1,000.00 | 1,016.33 | 8.94 |
Health Care Fund | 1.76% | 5.00% | 1,000.00 | 1,016.33 | 8.94 |
Internet Fund | 1.75% | 5.00% | 1,000.00 | 1,016.38 | 8.89 |
Leisure Fund | 1.75% | 5.00% | 1,000.00 | 1,016.38 | 8.89 |
Precious Metals Fund | 1.80% | 5.00% | 1,000.00 | 1,016.13 | 9.15 |
Real Estate Fund | 1.76% | 5.00% | 1,000.00 | 1,016.33 | 8.94 |
Retailing Fund | 1.75% | 5.00% | 1,000.00 | 1,016.38 | 8.89 |
Technology Fund | 1.75% | 5.00% | 1,000.00 | 1,016.38 | 8.89 |
Telecommunications Fund | 1.78% | 5.00% | 1,000.00 | 1,016.23 | 9.05 |
Transportation Fund | 1.76% | 5.00% | 1,000.00 | 1,016.33 | 8.94 |
Utilities Fund | 1.76% | 5.00% | 1,000.00 | 1,016.33 | 8.94 |
1 | Annualized and excludes expenses of the underlying funds in which the Funds invest, if any. |
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, 2018 to December 31, 2018. |
6 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, Banking Fund returned -19.19%, compared with the S&P 500 Index, which returned -4.38%. The S&P 500 Financials Index returned -13.03%.
The banking industry is the largest in the Fund, accounting for most of the Fund by weight, and as a whole it detracted from return. The capital markets industry and consumer finance industry also detracted from return. The commercial banking industry was the only industry that contributed to Fund performance.
Popular, Inc., Itau Unibanco Holding SA ADR, and First Financial Bankshares, Inc. were the holdings that contributed the most to the Fund’s return for the period. Citigroup, Inc., Wells Fargo & Co., and Bank of America 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 2, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Bank of America Corp. | 4.3% |
Wells Fargo & Co. | 4.2% |
JPMorgan Chase & Co. | 4.2% |
Citigroup, Inc. | 4.1% |
U.S. Bancorp | 3.4% |
PNC Financial Services Group, Inc. | 3.0% |
Bank of New York Mellon Corp. | 2.8% |
Capital One Financial Corp. | 2.4% |
BB&T Corp. | 2.3% |
SunTrust Banks, Inc. | 1.9% |
Top Ten Total | 32.6% |
“Ten Largest Holdings” excludes any temporary cash investments.
THE RYDEX FUNDS ANNUAL REPORT | 7 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Banking Fund | (19.19%) | 2.62% | 4.48% |
S&P 500 Financials Index | (13.03%) | 8.16% | 10.92% |
S&P 500 Index | (4.38%) | 8.49% | 13.12% |
* | 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. 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, 2018 |
BANKING FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.5% | ||||||||
Banks - 92.0% | ||||||||
Bank of America Corp. | 9,591 | $ | 236,322 | |||||
Wells Fargo & Co. | 5,047 | 232,566 | ||||||
JPMorgan Chase & Co. | 2,382 | 232,531 | ||||||
Citigroup, Inc. | 4,350 | 226,461 | ||||||
U.S. Bancorp | 4,124 | 188,467 | ||||||
PNC Financial Services Group, Inc. | 1,408 | 164,609 | ||||||
Bank of New York Mellon Corp. | 3,304 | 155,519 | ||||||
BB&T Corp. | 2,960 | 128,227 | ||||||
SunTrust Banks, Inc. | 2,099 | 105,874 | ||||||
M&T Bank Corp. | 700 | 100,191 | ||||||
Northern Trust Corp. | 1,165 | 97,382 | ||||||
Fifth Third Bancorp | 3,732 | 87,814 | ||||||
KeyCorp | 5,898 | 87,172 | ||||||
First Republic Bank | 988 | 85,857 | ||||||
Regions Financial Corp. | 6,235 | 83,424 | ||||||
Citizens Financial Group, Inc. | 2,792 | 83,006 | ||||||
Huntington Bancshares, Inc. | 6,695 | 79,804 | ||||||
Comerica, Inc. | 1,102 | 75,696 | ||||||
SVB Financial Group* | 368 | 69,891 | ||||||
Zions Bancorp North America | 1,534 | 62,495 | ||||||
ICICI Bank Ltd. ADR | 5,673 | 58,375 | ||||||
HDFC Bank Ltd. ADR | 563 | 58,321 | ||||||
Toronto-Dominion Bank | 1,135 | 56,432 | ||||||
Commerce Bancshares, Inc. | 991 | 55,863 | ||||||
Royal Bank of Canada | 815 | 55,844 | ||||||
Popular, Inc. | 1,180 | 55,720 | ||||||
East West Bancorp, Inc. | 1,280 | 55,718 | ||||||
HSBC Holdings plc ADR | 1,352 | 55,581 | ||||||
Bank of Montreal | 826 | 53,979 | ||||||
UBS Group AG* | 4,358 | 53,952 | ||||||
Credit Suisse Group AG ADR* | 4,937 | 53,616 | ||||||
Cullen/Frost Bankers, Inc. | 604 | 53,116 | ||||||
Bank of Nova Scotia | 1,035 | 51,615 | ||||||
Signature Bank | 501 | 51,508 | ||||||
BOK Financial Corp. | 702 | 51,478 | ||||||
Canadian Imperial Bank of Commerce | 683 | 50,911 | ||||||
Webster Financial Corp. | 974 | 48,008 | ||||||
First Citizens BancShares, Inc. — Class A | 127 | 47,885 | ||||||
Prosperity Bancshares, Inc. | 764 | 47,597 | ||||||
First Horizon National Corp. | 3,484 | 45,849 | ||||||
Western Alliance Bancorporation* | 1,152 | 45,492 | ||||||
PacWest Bancorp | 1,360 | 45,261 | ||||||
First Financial Bankshares, Inc. | 782 | 45,114 | ||||||
CIT Group, Inc. | 1,137 | 43,513 | ||||||
Synovus Financial Corp. | 1,359 | 43,474 | ||||||
Wintrust Financial Corp. | 653 | 43,418 | ||||||
Pinnacle Financial Partners, Inc. | 920 | 42,412 | ||||||
IBERIABANK Corp. | 655 | 42,103 | ||||||
MB Financial, Inc. | 1,043 | 41,334 | ||||||
Umpqua Holdings Corp. | 2,552 | 40,577 | ||||||
Associated Banc-Corp. | 2,049 | 40,550 | ||||||
Bank OZK | 1,766 | 40,318 | ||||||
United Bankshares, Inc. | 1,294 | 40,256 | ||||||
BankUnited, Inc. | 1,342 | 40,179 | ||||||
Glacier Bancorp, Inc. | 1,009 | 39,977 | ||||||
Hancock Whitney Corp. | 1,149 | 39,813 | ||||||
TCF Financial Corp. | 2,040 | 39,760 | ||||||
FNB Corp. | 3,983 | 39,193 | ||||||
UMB Financial Corp. | 639 | 38,960 | ||||||
First Hawaiian, Inc. | 1,707 | 38,425 | ||||||
CVB Financial Corp. | 1,861 | 37,648 | ||||||
Cathay General Bancorp | 1,103 | 36,984 | ||||||
Home BancShares, Inc. | 2,262 | 36,961 | ||||||
Columbia Banking System, Inc. | 1,014 | 36,798 | ||||||
Fulton Financial Corp. | 2,359 | 36,517 | ||||||
BancorpSouth Bank | 1,386 | 36,230 | ||||||
Texas Capital Bancshares, Inc.* | 706 | 36,070 | ||||||
Chemical Financial Corp. | 972 | 35,585 | ||||||
First Financial Bancorp | 1,440 | 34,157 | ||||||
Old National Bancorp | 2,199 | 33,865 | ||||||
Simmons First National Corp. — Class A | 1,358 | 32,769 | ||||||
First Midwest Bancorp, Inc. | 1,630 | 32,290 | ||||||
CenterState Bank Corp. | 1,505 | 31,665 | ||||||
Trustmark Corp. | 1,072 | 30,477 | ||||||
Union Bankshares Corp. | 1,073 | 30,291 | ||||||
United Community Banks, Inc. | 1,359 | 29,164 | ||||||
LegacyTexas Financial Group, Inc. | 880 | 28,239 | ||||||
Hope Bancorp, Inc. | 2,289 | 27,148 | ||||||
Cadence BanCorp | 1,518 | 25,472 | ||||||
Total Banks | 5,103,135 | |||||||
Savings & Loans - 2.9% | ||||||||
People’s United Financial, Inc. | 3,565 | 51,443 | ||||||
Sterling Bancorp | 2,613 | 43,141 | ||||||
Investors Bancorp, Inc. | 3,710 | 38,584 | ||||||
Pacific Premier Bancorp, Inc.* | 1,104 | 28,174 | ||||||
Total Savings & Loans | 161,342 | |||||||
Diversified Financial Services - 2.4% | ||||||||
Capital One Financial Corp. | 1,759 | 132,963 | ||||||
Insurance - 2.2% | ||||||||
AXA Equitable Holdings, Inc. | 4,067 | 67,634 | ||||||
Voya Financial, Inc. | 1,395 | 55,995 | ||||||
Total Insurance | 123,629 | |||||||
Total Common Stocks | ||||||||
(Cost $4,288,005) | 5,521,069 | |||||||
Total Investments - 99.5% | ||||||||
(Cost $4,288,005) | $ | 5,521,069 | ||||||
Other Assets & Liabilities, net - 0.5% | 27,135 | |||||||
Total Net Assets - 100.0% | $ | 5,548,204 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 9 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
BANKING FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 3. |
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, 2018 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 5,521,069 | $ | — | $ | — | $ | 5,521,069 |
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, 2018, 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, 2018 |
Assets: | ||||
Investments, at value (cost $4,288,005) | $ | 5,521,069 | ||
Cash | 285 | |||
Receivables: | ||||
Securities sold | 49,486 | |||
Dividends | 9,352 | |||
Foreign tax reclaims | 618 | |||
Securities lending income | 3 | |||
Total assets | 5,580,813 | |||
Liabilities: | ||||
Payable for: | ||||
Professional fees | 7,662 | |||
Line of credit | 7,000 | |||
Management fees | 2,977 | |||
Fund shares redeemed | 1,135 | |||
Transfer agent and administrative fees | 876 | |||
Investor service fees | 876 | |||
Portfolio accounting fees | 350 | |||
Trustees’ fees* | 183 | |||
Miscellaneous | 11,550 | |||
Total liabilities | 32,609 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 5,548,204 | ||
Net assets consist of: | ||||
Paid in capital | $ | 5,841,095 | ||
Total distributable earnings (loss) | (292,891 | ) | ||
Net assets | $ | 5,548,204 | ||
Capital shares outstanding | 72,568 | |||
Net asset value per share | $ | 76.46 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $2,500) | $ | 157,015 | ||
Interest | 853 | |||
Income from securities lending, net | 141 | |||
Total investment income | 158,009 | |||
Expenses: | ||||
Management fees | 58,454 | |||
Investor service fees | 17,192 | |||
Transfer agent and administrative fees | 17,192 | |||
Professional fees | 8,119 | |||
Portfolio accounting fees | 6,877 | |||
Trustees’ fees* | 2,834 | |||
Custodian fees | 1,031 | |||
Line of credit fees | 18 | |||
Miscellaneous | 5,976 | |||
Total expenses | 117,693 | |||
Net investment income | 40,316 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 696,638 | |||
Net realized gain | 696,638 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (1,739,382 | ) | ||
Net change in unrealized appreciation (depreciation) | (1,739,382 | ) | ||
Net realized and unrealized loss | (1,042,744 | ) | ||
Net decrease in net assets resulting from operations | $ | (1,002,428 | ) |
* | 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 | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 40,316 | $ | 34,419 | ||||
Net realized gain on investments | 696,638 | 300,585 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (1,739,382 | ) | 492,571 | |||||
Net increase (decrease) in net assets resulting from operations | (1,002,428 | ) | 827,575 | |||||
Distributions to shareholders | (36,389 | ) | (33,765 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 24,259,647 | 30,366,745 | ||||||
Distributions reinvested | 36,389 | 33,765 | ||||||
Cost of shares redeemed | (27,401,238 | ) | (37,578,472 | ) | ||||
Net decrease from capital share transactions | (3,105,202 | ) | (7,177,962 | ) | ||||
Net decrease in net assets | (4,144,019 | ) | (6,384,152 | ) | ||||
Net assets: | ||||||||
Beginning of year | 9,692,223 | 16,076,375 | ||||||
End of year | $ | 5,548,204 | $ | 9,692,223 | ||||
Capital share activity: | ||||||||
Shares sold | 259,935 | 347,123 | ||||||
Shares issued from reinvestment of distributions | 384 | 386 | ||||||
Shares redeemed | (289,569 | ) | (435,048 | ) | ||||
Net decrease in shares | (29,250 | ) | (87,539 | ) |
1 | For the year ended December 31, 2017, the total distributions to shareholders were all from net investment income (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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 95.19 | $ | 84.90 | $ | 67.87 | $ | 71.43 | $ | 86.82 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .56 | .28 | .10 | .42 | .48 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | (18.70 | ) | 10.28 | 17.11 | (3.86 | ) | 2.55 | |||||||||||||
Total from investment operations | (18.14 | ) | 10.56 | 17.21 | (3.44 | ) | 3.03 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.56 | ) | (.27 | ) | (.18 | ) | (.12 | ) | (1.44 | ) | ||||||||||
Net realized gains | (.03 | ) | — | — | — | (16.98 | ) | |||||||||||||
Total distributions | (.59 | ) | (.27 | ) | (.18 | ) | (.12 | ) | (18.42 | ) | ||||||||||
Net asset value, end of period | $ | 76.46 | $ | 95.19 | $ | 84.90 | $ | 67.87 | $ | 71.43 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (19.19 | %) | 12.48 | % | 27.25 | % | (4.86 | %) | 3.42 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 5,548 | $ | 9,692 | $ | 16,076 | $ | 5,611 | $ | 3,938 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.59 | % | 0.33 | % | 0.69 | % | 0.62 | % | 0.56 | % | ||||||||||
Total expenses | 1.71 | % | 1.70 | % | 1.67 | % | 1.59 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 320 | % | 273 | % | 417 | % | 388 | % | 285 | % |
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 NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 13 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, Basic Materials Fund returned -17.44%, compared with a return of -4.38% for the S&P 500 Index. The S&P 500 Materials Index returned -14.70%.
The chemicals industry was the largest detractor from the Fund’s return for the period, followed by the metals & mining industry. No industry contributed to return. The real estate investment trust (REIT) industry detracted the least from the Fund’s return for the period.
The top-performing holdings were AngloGold Ashanti Ltd. ADR, Ball Corp., and KapStone Paper and Packaging Corp. The worst-performing holdings included DowDuPont, Inc., Freeport-McMoRan, Inc., and Alcoa 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 2, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Linde plc | 4.9% |
DowDuPont, Inc. | 4.8% |
Ecolab, Inc. | 2.9% |
Sherwin-Williams Co. | 2.7% |
Air Products & Chemicals, Inc. | 2.7% |
LyondellBasell Industries N.V. — Class A | 2.6% |
Vale S.A. ADR | 2.4% |
PPG Industries, Inc. | 2.3% |
Newmont Mining Corp. | 1.9% |
International Paper Co. | 1.8% |
Top Ten Total | 29.0% |
“Ten Largest Holdings” excludes any temporary cash investments.
14 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Basic Materials Fund | (17.44%) | 1.27% | 6.99% |
S&P 500 Materials Index | (14.70%) | 3.84% | 11.07% |
S&P 500 Index | (4.38%) | 8.49% | 13.12% |
* | 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. 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, 2018 |
BASIC MATERIALS FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.6% | ||||||||
Chemicals - 46.6% | ||||||||
Linde plc | 1,929 | $ | 301,001 | |||||
DowDuPont, Inc. | 5,547 | 296,654 | ||||||
Sherwin-Williams Co. | 426 | 167,614 | ||||||
Air Products & Chemicals, Inc. | 1,029 | 164,691 | ||||||
LyondellBasell Industries N.V. — Class A | 1,892 | 157,339 | ||||||
PPG Industries, Inc. | 1,363 | 139,339 | ||||||
International Flavors & Fragrances, Inc. | 787 | 105,670 | ||||||
Celanese Corp. — Class A | 1,088 | 97,887 | ||||||
Mosaic Co. | 3,136 | 91,603 | ||||||
Eastman Chemical Co. | 1,223 | 89,414 | ||||||
CF Industries Holdings, Inc. | 2,005 | 87,238 | ||||||
FMC Corp. | 1,162 | 85,942 | ||||||
Westlake Chemical Corp. | 1,270 | 84,036 | ||||||
Albemarle Corp. | 1,006 | 77,532 | ||||||
RPM International, Inc. | 1,293 | 76,003 | ||||||
Nutrien Ltd. | 1,371 | 64,437 | ||||||
Axalta Coating Systems Ltd.* | 2,722 | 63,749 | ||||||
Chemours Co. | 2,175 | 61,378 | ||||||
Huntsman Corp. | 3,105 | 59,895 | ||||||
Ashland Global Holdings, Inc. | 824 | 58,471 | ||||||
WR Grace & Co. | 894 | 58,030 | ||||||
Valvoline, Inc. | 2,744 | 53,096 | ||||||
Ingevity Corp.* | 630 | 52,725 | ||||||
Olin Corp. | 2,547 | 51,220 | ||||||
Platform Specialty Products Corp.* | 4,643 | 47,962 | ||||||
Cabot Corp. | 1,031 | 44,271 | ||||||
Balchem Corp. | 553 | 43,328 | ||||||
Sensient Technologies Corp. | 764 | 42,669 | ||||||
HB Fuller Co. | 953 | 40,665 | ||||||
Methanex Corp. | 806 | 38,825 | ||||||
Sociedad Quimica y Minera de Chile S.A. ADR1 | 986 | 37,764 | ||||||
GCP Applied Technologies, Inc.* | 1,485 | 36,457 | ||||||
Total Chemicals | 2,876,905 | |||||||
Mining - 16.6% | ||||||||
Newmont Mining Corp. | 3,404 | 117,949 | ||||||
Freeport-McMoRan, Inc. | 10,484 | 108,090 | ||||||
Barrick Gold Corp. | 7,364 | 99,708 | ||||||
Rio Tinto plc ADR | 1,650 | 79,992 | ||||||
Royal Gold, Inc. | 811 | 69,462 | ||||||
BHP Group Ltd. ADR1 | 1,365 | 65,916 | ||||||
Alcoa Corp.* | 2,257 | 59,991 | ||||||
Teck Resources Ltd. — Class B | 2,704 | 58,244 | ||||||
Agnico Eagle Mines Ltd. | 1,359 | 54,904 | ||||||
Randgold Resources Ltd. ADR1 | 658 | 54,596 | ||||||
Wheaton Precious Metals Corp. | 2,784 | 54,371 | ||||||
Franco-Nevada Corp. | 651 | 45,681 | ||||||
AngloGold Ashanti Ltd. ADR | 3,465 | 43,486 | ||||||
Pan American Silver Corp. | 2,865 | 41,829 | ||||||
Kaiser Aluminum Corp. | 383 | 34,198 | ||||||
Compass Minerals International, Inc. | 820 | 34,186 | ||||||
Total Mining | 1,022,603 | |||||||
Packaging & Containers - 11.7% | ||||||||
Ball Corp. | 2,363 | 108,651 | ||||||
WestRock Co. | 2,227 | 84,091 | ||||||
Packaging Corporation of America | 913 | 76,199 | ||||||
Berry Global Group, Inc.* | 1,439 | 68,396 | ||||||
Sealed Air Corp. | 1,810 | 63,060 | ||||||
Sonoco Products Co. | 1,177 | 62,534 | ||||||
Crown Holdings, Inc.* | 1,489 | 61,898 | ||||||
Bemis Company, Inc. | 1,232 | 56,549 | ||||||
Graphic Packaging Holding Co. | 4,740 | 50,433 | ||||||
Owens-Illinois, Inc. | 2,686 | 46,307 | ||||||
Silgan Holdings, Inc. | 1,877 | 44,335 | ||||||
Total Packaging & Containers | 722,453 | |||||||
Iron & Steel - 9.1% | ||||||||
Vale S.A. ADR | 11,216 | 147,939 | ||||||
Nucor Corp. | 2,110 | 109,319 | ||||||
Steel Dynamics, Inc. | 2,365 | 71,045 | ||||||
Reliance Steel & Aluminum Co. | 867 | 61,704 | ||||||
ArcelorMittal | 2,398 | 49,567 | ||||||
Allegheny Technologies, Inc.* | 2,063 | 44,911 | ||||||
Commercial Metals Co. | 2,309 | 36,990 | ||||||
Carpenter Technology Corp. | 1,029 | 36,643 | ||||||
Total Iron & Steel | 558,118 | |||||||
Building Materials - 6.0% | ||||||||
Vulcan Materials Co. | 1,019 | 100,677 | ||||||
Martin Marietta Materials, Inc. | 527 | 90,576 | ||||||
Louisiana-Pacific Corp. | 2,233 | 49,617 | ||||||
Eagle Materials, Inc. | 770 | 46,993 | ||||||
Summit Materials, Inc. — Class A* | 2,630 | 32,612 | ||||||
Boise Cascade Co. | 1,094 | 26,092 | ||||||
US Concrete, Inc.* | 600 | 21,168 | ||||||
Total Building Materials | 367,735 | |||||||
Commercial Services - 2.9% | ||||||||
Ecolab, Inc. | 1,218 | 179,472 | ||||||
Forest Products & Paper - 2.4% | ||||||||
International Paper Co. | 2,741 | 110,627 | ||||||
Domtar Corp. | 1,143 | 40,154 | ||||||
Total Forest Products & Paper | 150,781 | |||||||
Miscellaneous Manufacturing - 1.7% | ||||||||
AptarGroup, Inc. | 714 | 67,166 | ||||||
Trinseo S.A. | 848 | 38,821 | ||||||
Total Miscellaneous Manufacturing | 105,987 | |||||||
Household Products & Housewares - 1.3% | ||||||||
Avery Dennison Corp. | 867 | 77,883 | ||||||
Housewares - 0.8% | ||||||||
Scotts Miracle-Gro Co. — Class A | 830 | 51,012 | ||||||
Coal - 0.5% | ||||||||
Warrior Met Coal, Inc. | 1,315 | 31,705 | ||||||
Total Common Stocks | ||||||||
(Cost $3,819,582) | 6,144,654 |
16| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
BASIC MATERIALS FUND |
| Face | Value | ||||||
REPURCHASE AGREEMENTS††,2 - 1.2% | ||||||||
JPMorgan Chase & Co. | $ | 42,499 | $ | 42,499 | ||||
Barclays | 17,674 | 17,674 | ||||||
Bank of America Merrill Lynch | 11,783 | 11,783 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $71,956) | 71,956 | |||||||
| Shares | |||||||
SECURITIES LENDING COLLATERAL†,3 - 1.3% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 2.32%4 | 79,384 | 79,384 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $79,384) | 79,384 | |||||||
Total Investments - 102.1% | ||||||||
(Cost $3,970,922) | $ | 6,295,994 | ||||||
Other Assets & Liabilities, net - (2.1)% | (127,917 | ) | ||||||
Total Net Assets - 100.0% | $ | 6,168,077 |
* | 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 a portion of this security is on loan at December 31, 2018 — 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, 2018. |
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, 2018 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 6,144,654 | $ | — | $ | — | $ | 6,144,654 | ||||||||
Repurchase Agreements | — | 71,956 | — | 71,956 | ||||||||||||
Securities Lending Collateral | 79,384 | — | — | 79,384 | ||||||||||||
Total Assets | $ | 6,224,038 | $ | 71,956 | $ | — | $ | 6,295,994 |
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, 2018, 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, 2018 |
Assets: | ||||
Investments, at value - including $91,008 of securities loaned (cost $3,898,966) | $ | 6,224,038 | ||
Repurchase agreements, at value (cost $71,956) | 71,956 | |||
Cash | 13,929 | |||
Receivables: | ||||
Securities sold | 56,982 | |||
Dividends | 8,326 | |||
Securities lending income | 89 | |||
Foreign tax reclaims | 22 | |||
Interest | 6 | |||
Fund shares sold | 5 | |||
Total assets | 6,375,353 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 92,818 | |||
Fund shares redeemed | 67,902 | |||
Deferred foreign capital gain taxes | 19,017 | |||
Management fees | 4,367 | |||
Transfer agent and administrative fees | 1,285 | |||
Investor service fees | 1,285 | |||
Portfolio accounting fees | 514 | |||
Trustees’ fees* | 181 | |||
Miscellaneous | 19,907 | |||
Total liabilities | 207,276 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 6,168,077 | ||
Net assets consist of: | ||||
Paid in capital | $ | 4,498,025 | ||
Total distributable earnings (loss) | 1,670,052 | |||
Net assets | $ | 6,168,077 | ||
Capital shares outstanding | 94,286 | |||
Net asset value per share | $ | 65.42 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $1,733) | $ | 173,104 | ||
Interest | 1,459 | |||
Income from securities lending, net | 1,056 | |||
Total investment income | 175,619 | |||
Expenses: | ||||
Management fees | 83,601 | |||
Investor service fees | 24,589 | |||
Transfer agent and administrative fees | 24,589 | |||
Professional fees | 14,474 | |||
Portfolio accounting fees | 9,835 | |||
Trustees’ fees* | 3,124 | |||
Custodian fees | 2,739 | |||
Line of credit fees | 4 | |||
Miscellaneous | 6,787 | |||
Total expenses | 169,742 | |||
Net investment income | 5,877 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 1,250,785 | |||
Foreign currency transactions | (16 | ) | ||
Net realized gain | 1,250,769 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (3,002,408 | ) | ||
Net change in unrealized appreciation (depreciation) | (3,002,408 | ) | ||
Net realized and unrealized loss | (1,751,639 | ) | ||
Net decrease in net assets resulting from operations | $ | (1,745,762 | ) |
* | 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. |
BASIC MATERIALS FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | 5,877 | $ | (13,939 | ) | |||
Net realized gain on investments | 1,250,769 | 732,957 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (3,002,408 | ) | 1,828,447 | |||||
Net increase (decrease) in net assets resulting from operations | (1,745,762 | ) | 2,547,465 | |||||
Distributions to shareholders | (209,047 | ) | (105,780 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 9,436,602 | 29,274,757 | ||||||
Distributions reinvested | 209,047 | 105,780 | ||||||
Cost of shares redeemed | (18,590,190 | ) | (29,983,875 | ) | ||||
Net decrease from capital share transactions | (8,944,541 | ) | (603,338 | ) | ||||
Net increase (decrease) in net assets | (10,899,350 | ) | 1,838,347 | |||||
Net assets: | ||||||||
Beginning of year | 17,067,427 | 15,229,080 | ||||||
End of year | $ | 6,168,077 | $ | 17,067,427 | ||||
Capital share activity: | ||||||||
Shares sold | 119,254 | 391,107 | ||||||
Shares issued from reinvestment of distributions | 2,686 | 1,441 | ||||||
Shares redeemed | (237,662 | ) | (407,804 | ) | ||||
Net decrease in shares | (115,722 | ) | (15,256 | ) |
1 | For the year ended December 31, 2017, the distributions from net investment income and net realized gains were as follows (See Note 9): |
Net investment income | $ | (71,217 | ) | |||||
Net realized gains | (34,563 | ) |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 81.27 | $ | 67.61 | $ | 52.52 | $ | 63.47 | $ | 74.45 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .05 | (.07 | ) | .02 | .18 | .15 | ||||||||||||||
Net gain (loss) on investments (realized and unrealized) | (13.91 | ) | 14.47 | 15.43 | (11.13 | ) | (1.32 | ) | ||||||||||||
Total from investment operations | (13.86 | ) | 14.40 | 15.45 | (10.95 | ) | (1.17 | ) | ||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.42 | ) | (.50 | ) | — | — | (3.39 | ) | ||||||||||||
Net realized gains | (1.57 | ) | (.24 | ) | (.36 | ) | — | (6.42 | ) | |||||||||||
Total distributions | (1.99 | ) | (.74 | ) | (.36 | ) | — | (9.81 | ) | |||||||||||
Net asset value, end of period | $ | 65.42 | $ | 81.27 | $ | 67.61 | $ | 52.52 | $ | 63.47 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (17.44 | %) | 21.43 | % | 30.86 | % | (17.30 | %) | (1.81 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 6,168 | $ | 17,067 | $ | 15,229 | $ | 5,084 | $ | 9,062 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.06 | % | (0.10 | %) | 0.08 | % | 0.27 | % | 0.18 | % | ||||||||||
Total expenses | 1.73 | % | 1.70 | % | 1.66 | % | 1.59 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 83 | % | 181 | % | 266 | % | 228 | % | 218 | % |
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. |
20| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, Biotechnology Fund returned -9.44%, compared with the S&P 500 Index, which returned -4.38%. The S&P 500 Health Care Index returned 6.47%.
Companies in the biotechnology industry compose most of the weight of the Fund. For the year, that group detracted the most from return, followed by the pharmaceuticals segment. The life sciences tools & services industry contributed to return.
The best-performing holdings in the Fund were AveXis, Inc., Bioverativ, Inc., and Illumina, Inc. The worst-performing holdings in the Fund included Celgene Corp., Clovis Oncology, Inc., and Puma Biotechnology, 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. | 7.6% |
Amgen, Inc. | 7.2% |
Gilead Sciences, Inc. | 5.6% |
Biogen, Inc. | 5.1% |
Shire plc ADR | 4.6% |
Vertex Pharmaceuticals, Inc. | 4.2% |
Celgene Corp. | 4.2% |
Illumina, Inc. | 4.2% |
Regeneron Pharmaceuticals, Inc. | 4.1% |
Alexion Pharmaceuticals, Inc. | 2.9% |
Top Ten Total | 49.7% |
“Ten Largest Holdings” excludes any temporary cash investments.
THE RYDEX FUNDS ANNUAL REPORT | 21 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Biotechnology Fund | (9.44%) | 6.27% | 15.20% |
S&P 500 Health Care Index | 6.47% | 11.12% | 14.65% |
S&P 500 Index | (4.38%) | 8.49% | 13.12% |
* | 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. 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, 2018 |
BIOTECHNOLOGY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.7% | ||||||||
Biotechnology - 72.1% | ||||||||
Amgen, Inc. | 7,736 | $ | 1,505,967 | |||||
Gilead Sciences, Inc. | 18,635 | 1,165,619 | ||||||
Biogen, Inc.* | 3,539 | 1,064,956 | ||||||
Shire plc ADR | 5,572 | 969,751 | ||||||
Vertex Pharmaceuticals, Inc.* | 5,347 | 886,051 | ||||||
Celgene Corp.* | 13,715 | 878,994 | ||||||
Illumina, Inc.* | 2,917 | 874,896 | ||||||
Regeneron Pharmaceuticals, Inc.* | 2,300 | 859,050 | ||||||
Alexion Pharmaceuticals, Inc.* | 6,269 | 610,350 | ||||||
BioMarin Pharmaceutical, Inc.* | 6,157 | 524,269 | ||||||
Incyte Corp.* | 7,718 | 490,788 | ||||||
Seattle Genetics, Inc.* | 7,252 | 410,898 | ||||||
Alnylam Pharmaceuticals, Inc.* | 5,220 | 380,590 | ||||||
Ionis Pharmaceuticals, Inc.* | 6,843 | 369,933 | ||||||
Exact Sciences Corp.* | 5,811 | 366,674 | ||||||
Exelixis, Inc.* | 16,965 | 333,702 | ||||||
Bluebird Bio, Inc.* | 3,076 | 305,139 | ||||||
United Therapeutics Corp.* | 2,697 | 293,703 | ||||||
Sage Therapeutics, Inc.* | 3,055 | 292,638 | ||||||
Loxo Oncology, Inc.* | 1,938 | 271,456 | ||||||
FibroGen, Inc.* | 5,821 | 269,396 | ||||||
Intercept Pharmaceuticals, Inc.* | 2,240 | 225,770 | ||||||
Ligand Pharmaceuticals, Inc. — Class B* | 1,645 | 223,227 | ||||||
ACADIA Pharmaceuticals, Inc.* | 13,115 | 212,070 | ||||||
Myriad Genetics, Inc.* | 6,828 | 198,490 | ||||||
Ultragenyx Pharmaceutical, Inc.* | 4,530 | 196,964 | ||||||
Immunomedics, Inc.* | 13,614 | 194,272 | ||||||
PTC Therapeutics, Inc.* | 5,190 | 178,121 | ||||||
Spark Therapeutics, Inc.* | 4,044 | 158,282 | ||||||
REGENXBIO, Inc.* | 3,670 | 153,956 | ||||||
Medicines Co.* | 8,032 | 153,732 | ||||||
Spectrum Pharmaceuticals, Inc.* | 13,600 | 119,000 | ||||||
Total Biotechnology | 15,138,704 | |||||||
Pharmaceuticals - 25.0% | ||||||||
AbbVie, Inc. | 17,359 | 1,600,326 | ||||||
Sarepta Therapeutics, Inc.* | 3,626 | 395,705 | ||||||
Neurocrine Biosciences, Inc.* | 4,622 | 330,057 | ||||||
PRA Health Sciences, Inc.* | 3,390 | 311,744 | ||||||
Nektar Therapeutics* | 9,250 | 304,047 | ||||||
Jazz Pharmaceuticals plc* | 2,386 | 295,769 | ||||||
TESARO, Inc.* | 3,599 | 267,226 | ||||||
Alkermes plc* | 8,021 | 236,700 | ||||||
Array BioPharma, Inc.* | 16,151 | 230,152 | ||||||
Global Blood Therapeutics, Inc.* | 5,122 | 210,258 | ||||||
Agios Pharmaceuticals, Inc.* | 4,530 | 208,878 | ||||||
Heron Therapeutics, Inc.* | 7,600 | 197,144 | ||||||
Madrigal Pharmaceuticals, Inc.* | 1,640 | 184,861 | ||||||
Supernus Pharmaceuticals, Inc.* | 5,350 | 177,727 | ||||||
Portola Pharmaceuticals, Inc.* | 8,530 | 166,506 | ||||||
Clovis Oncology, Inc.* | 7,340 | 131,826 | ||||||
Total Pharmaceuticals | 5,248,926 | |||||||
Healthcare-Products - 1.4% | ||||||||
Bio-Techne Corp. | 2,103 | 304,346 | ||||||
Healthcare-Services - 1.2% | ||||||||
Syneos Health, Inc.* | 6,494 | 255,539 | ||||||
Total Common Stocks | ||||||||
(Cost $10,416,309) | 20,947,515 | |||||||
RIGHTS††† - 0.0% | ||||||||
Clinical Data, Inc.*,1 | 4,730 | — | ||||||
Total Rights | ||||||||
(Cost $—) | — | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 1.4% | ||||||||
JPMorgan Chase & Co. | $ | 168,868 | 168,868 | |||||
Barclays Capital | 70,227 | 70,227 | ||||||
Bank of America Merrill Lynch | 46,818 | 46,818 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $285,913) | 285,913 | |||||||
Total Investments - 101.1% | ||||||||
(Cost $10,702,222) | $ | 21,233,428 | ||||||
Other Assets & Liabilities, net - (1.1)% | (233,712 | ) | ||||||
Total Net Assets - 100.0% | $ | 20,999,716 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 23 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
BIOTECHNOLOGY 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 | Security was fair valued by the Valuation Committee at December 31, 2018. The total market value of fair valued securities amounts to $0, (cost $0) or 0.0% of total net assets. |
2 | Repurchase Agreements — See Note 4 |
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, 2018 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 20,947,515 | $ | — | $ | — | $ | 20,947,515 | ||||||||
Rights | — | — | — | * | — | |||||||||||
Repurchase Agreements | — | 285,913 | — | 285,913 | ||||||||||||
Total Assets | $ | 20,947,515 | $ | 285,913 | $ | — | $ | 21,233,428 |
* | Includes securities with 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, 2018, 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, 2018 |
Assets: | ||||
Investments, at value (cost $10,416,309) | $ | 20,947,515 | ||
Repurchase agreements, at value (cost $285,913) | 285,913 | |||
Receivables: | ||||
Fund shares sold | 204,955 | |||
Interest | 23 | |||
Securities lending income | 22 | |||
Total assets | 21,438,428 | |||
Liabilities: | ||||
Payable for: | ||||
Securities purchased | 195,474 | |||
Fund shares redeemed | 165,389 | |||
Management fees | 14,785 | |||
Transfer agent and administrative fees | 4,348 | |||
Investor service fees | 4,348 | |||
Portfolio accounting fees | 1,739 | |||
Trustees’ fees* | 455 | |||
Miscellaneous | 52,174 | |||
Total liabilities | 438,712 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 20,999,716 | ||
Net assets consist of: | ||||
Paid in capital | $ | 11,689,815 | ||
Total distributable earnings (loss) | 9,309,901 | |||
Net assets | $ | 20,999,716 | ||
Capital shares outstanding | 268,663 | |||
Net asset value per share | $ | 78.16 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends | $ | 155,838 | ||
Interest | 2,979 | |||
Income from securities lending, net | 8,385 | |||
Total investment income | 167,202 | |||
Expenses: | ||||
Management fees | 222,661 | |||
Investor service fees | 65,489 | |||
Transfer agent and administrative fees | 65,489 | |||
Professional fees | 34,655 | |||
Portfolio accounting fees | 26,195 | |||
Trustees’ fees* | 7,180 | |||
Custodian fees | 3,759 | |||
Line of credit fees | 333 | |||
Miscellaneous | 24,264 | |||
Total expenses | 450,025 | |||
Net investment loss | (282,823 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 1,936,319 | |||
Net realized gain | 1,936,319 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (4,235,879 | ) | ||
Net change in unrealized appreciation (depreciation) | (4,235,879 | ) | ||
Net realized and unrealized loss | (2,299,560 | ) | ||
Net decrease in net assets resulting from operations | $ | (2,582,383 | ) |
* | 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 | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (282,823 | ) | $ | (260,497 | ) | ||
Net realized gain on investments | 1,936,319 | 1,484,880 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (4,235,879 | ) | 4,982,566 | |||||
Net increase (decrease) in net assets resulting from operations | (2,582,383 | ) | 6,206,949 | |||||
Distributions to shareholders | (71,198 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 26,330,050 | 41,892,541 | ||||||
Distributions reinvested | 71,198 | — | ||||||
Cost of shares redeemed | (32,020,031 | ) | (41,058,300 | ) | ||||
Net increase (decrease) from capital share transactions | (5,618,783 | ) | 834,241 | |||||
Net increase (decrease) in net assets | (8,272,364 | ) | 7,041,190 | |||||
Net assets: | ||||||||
Beginning of year | 29,272,080 | 22,230,890 | ||||||
End of year | $ | 20,999,716 | $ | 29,272,080 | ||||
Capital share activity: | ||||||||
Shares sold | 290,934 | 533,295 | ||||||
Shares issued from reinvestment of distributions | 751 | — | ||||||
Shares redeemed | (361,313 | ) | (527,513 | ) | ||||
Net increase (decrease) in shares | (69,628 | ) | 5,782 |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 86.53 | $ | 66.86 | $ | 83.22 | $ | 76.71 | $ | 57.81 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.96 | ) | (.79 | ) | (.80 | ) | (1.02 | ) | (.62 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | (7.17 | ) | 20.46 | (15.56 | ) | 7.53 | 19.52 | |||||||||||||
Total from investment operations | (8.13 | ) | 19.67 | (16.36 | ) | 6.51 | 18.90 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (.24 | ) | — | — | — | — | ||||||||||||||
Total distributions | (.24 | ) | — | — | — | — | ||||||||||||||
Net asset value, end of period | $ | 78.16 | $ | 86.53 | $ | 66.86 | $ | 83.22 | $ | 76.71 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (9.44 | %) | 29.44 | % | (19.66 | %) | 8.47 | % | 32.69 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 21,000 | $ | 29,272 | $ | 22,231 | $ | 42,005 | $ | 38,094 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (1.08 | %) | (0.99 | %) | (1.16 | %) | (1.17 | %) | (0.92 | %) | ||||||||||
Total expenses | 1.72 | % | 1.70 | % | 1.66 | % | 1.60 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 109 | % | 137 | % | 127 | % | 161 | % | 165 | % |
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, 2018 |
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, 2018, Consumer Products Fund returned -12.12%, compared with a return of -4.38% for the S&P 500 Index. The S&P 500 Consumer Staples Index returned -8.38%.
The food products industry was the largest detractor from the Fund’s return for the period, followed by the tobacco industry. The food & staples retailing industry contributed the most to return.
Fund performance for the year got the biggest boost from Keurig Dr. Pepper, Inc., Herbalife Nutrition Ltd., and McCormick & Co., Inc. The Fund’s weakest performers during the year were Philip Morris International, Inc., Kraft Heinz Co., and Altria Group, 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 29, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Procter & Gamble Co. | 6.4% |
Coca-Cola Co. | 6.1% |
PepsiCo, Inc. | 5.4% |
Philip Morris International, Inc. | 4.5% |
Altria Group, Inc. | 4.1% |
Mondelez International, Inc. — Class A | 3.3% |
Kraft Heinz Co. | 3.1% |
Colgate-Palmolive Co. | 3.0% |
Estee Lauder Companies, Inc. — Class A | 3.0% |
Kimberly-Clark Corp. | 2.7% |
Top Ten Total | 41.6% |
“Ten Largest Holdings” excludes any temporary cash investments.
28 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Consumer Products Fund | (12.12%) | 4.33% | 10.63% |
S&P 500 Consumer Staples Index | (8.38%) | 6.26% | 10.96% |
S&P 500 Index | (4.38%) | 8.49% | 13.12% |
* | 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. 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, 2018 |
CONSUMER PRODUCTS FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.5% | ||||||||
Food - 37.2% | ||||||||
Mondelez International, Inc. — Class A | 10,709 | $ | 428,681 | |||||
Kraft Heinz Co. | 9,413 | 405,136 | ||||||
Sysco Corp. | 5,112 | 320,318 | ||||||
Hormel Foods Corp. | 6,273 | 267,732 | ||||||
General Mills, Inc. | 6,822 | 265,649 | ||||||
Hershey Co. | 2,454 | 263,020 | ||||||
Kroger Co. | 9,556 | 262,790 | ||||||
Tyson Foods, Inc. — Class A | 4,912 | 262,301 | ||||||
Kellogg Co. | 4,336 | 247,195 | ||||||
McCormick & Company, Inc. | 1,741 | 242,417 | ||||||
Lamb Weston Holdings, Inc. | 2,492 | 183,312 | ||||||
JM Smucker Co. | 1,941 | 181,464 | ||||||
Campbell Soup Co. | 4,970 | 163,960 | ||||||
Conagra Brands, Inc. | 7,252 | 154,903 | ||||||
US Foods Holding Corp.* | 4,659 | 147,411 | ||||||
Ingredion, Inc. | 1,598 | 146,057 | ||||||
Post Holdings, Inc.* | 1,527 | 136,101 | ||||||
Lancaster Colony Corp. | 683 | 120,795 | ||||||
Flowers Foods, Inc. | 5,994 | 110,709 | ||||||
Pilgrim’s Pride Corp.* | 7,120 | 110,431 | ||||||
Performance Food Group Co.* | 3,229 | 104,200 | ||||||
Sprouts Farmers Market, Inc.* | 4,181 | 98,295 | ||||||
TreeHouse Foods, Inc.* | 1,849 | 93,763 | ||||||
Sanderson Farms, Inc. | 870 | 86,382 | ||||||
Cal-Maine Foods, Inc. | 1,895 | 80,158 | ||||||
Total Food | 4,883,180 | |||||||
Beverages - 25.3% | ||||||||
Coca-Cola Co. | 16,822 | 796,522 | ||||||
PepsiCo, Inc. | 6,441 | 711,602 | ||||||
Keurig Dr Pepper, Inc. | 13,258 | 339,935 | ||||||
Constellation Brands, Inc. — Class A | 1,893 | 304,432 | ||||||
Monster Beverage Corp.* | 6,054 | 297,978 | ||||||
Brown-Forman Corp. — Class B | 5,765 | 274,299 | ||||||
Molson Coors Brewing Co. — Class B | 3,533 | 198,413 | ||||||
Anheuser-Busch InBev S.A. ADR | 2,316 | 152,416 | ||||||
Coca-Cola European Partners plc | 2,926 | 134,157 | ||||||
Fomento Economico Mexicano SAB de CV ADR | 1,211 | 104,206 | ||||||
Total Beverages | 3,313,960 | |||||||
Cosmetics & Personal Care - 13.9% | ||||||||
Procter & Gamble Co. | 9,194 | 845,112 | ||||||
Colgate-Palmolive Co. | 6,705 | 399,082 | ||||||
Estee Lauder Companies, Inc. — Class A | 3,004 | 390,820 | ||||||
Unilever N.V. — Class Y | 1,956 | 105,233 | ||||||
Edgewell Personal Care Co.* | 2,150 | 80,303 | ||||||
Total Cosmetics & Personal Care | 1,820,550 | |||||||
Agriculture - 12.7% | ||||||||
Philip Morris International, Inc. | 8,778 | 586,019 | ||||||
Altria Group, Inc. | 10,839 | 535,338 | ||||||
Archer-Daniels-Midland Co. | 6,539 | 267,903 | ||||||
Bunge Ltd. | 2,838 | 151,663 | ||||||
British American Tobacco plc ADR | 3,880 | 123,617 | ||||||
Total Agriculture | 1,664,540 | |||||||
Household Products & Housewares - 7.0% | ||||||||
Kimberly-Clark Corp. | 3,102 | 353,442 | ||||||
Clorox Co. | 1,625 | 250,478 | ||||||
Church & Dwight Company, Inc. | 3,479 | 228,779 | ||||||
Spectrum Brands Holdings, Inc. | 1,990 | 84,077 | ||||||
Total Household Products & Housewares | 916,776 | |||||||
Pharmaceuticals - 1.3% | ||||||||
Herbalife Nutrition Ltd.*,1 | 2,932 | 172,842 | ||||||
Retail - 0.9% | ||||||||
Casey’s General Stores, Inc. | 967 | 123,911 | ||||||
Electrical Components & Equipment - 0.7% | ||||||||
Energizer Holdings, Inc. | 2,070 | 93,461 | ||||||
Commercial Services - 0.5% | ||||||||
Medifast, Inc. | 550 | 68,761 | ||||||
Total Common Stocks | ||||||||
(Cost $8,946,148) | 13,057,981 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.0% | ||||||||
JPMorgan Chase & Co. | $ | 1,914 | 1,914 | |||||
Barclays Capital | 796 | 796 | ||||||
Bank of America Merrill Lynch | 531 | 531 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $3,241) | 3,241 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 0.3% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 2.32%4 | 37,403 | 37,403 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $37,403) | 37,403 | |||||||
Total Investments - 99.8% | ||||||||
(Cost $8,986,792) | $ | 13,098,625 | ||||||
Other Assets & Liabilities, net - 0.2% | 22,464 | |||||||
Total Net Assets - 100.0% | $ | 13,121,089 |
30| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
CONSUMER PRODUCTS 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 a portion of this security is on loan at December 31, 2018 — 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, 2018. |
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, 2018 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 13,057,981 | $ | — | $ | — | $ | 13,057,981 | ||||||||
Repurchase Agreements | — | 3,241 | — | 3,241 | ||||||||||||
Securities Lending Collateral | 37,403 | — | — | 37,403 | ||||||||||||
Total Assets | $ | 13,095,384 | $ | 3,241 | $ | — | $ | 13,098,625 |
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, 2018, 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, 2018 |
Assets: | ||||
Investments, at value - including $43,328 of securities loaned (cost $8,983,551) | $ | 13,095,384 | ||
Repurchase agreements, at value (cost $3,241) | 3,241 | |||
Cash | 6,330 | |||
Receivables: | ||||
Securities sold | 70,041 | |||
Dividends | 40,440 | |||
Foreign tax reclaims | 1,759 | |||
Securities lending income | 228 | |||
Total assets | 13,217,423 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 43,733 | |||
Management fees | 9,781 | |||
Fund shares redeemed | 7,653 | |||
Transfer agent and administrative fees | 2,877 | |||
Investor service fees | 2,877 | |||
Portfolio accounting fees | 1,150 | |||
Trustees’ fees* | 235 | |||
Miscellaneous | 28,028 | |||
Total liabilities | 96,334 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 13,121,089 | ||
Net assets consist of: | ||||
Paid in capital | $ | 9,941,142 | ||
Total distributable earnings (loss) | 3,179,947 | |||
Net assets | $ | 13,121,089 | ||
Capital shares outstanding | 235,242 | |||
Net asset value per share | $ | 55.78 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $10) | $ | 382,318 | ||
Interest | 1,653 | |||
Income from securities lending, net | 2,549 | |||
Total investment income | 386,520 | |||
Expenses: | ||||
Management fees | 114,590 | |||
Investor service fees | 33,703 | |||
Transfer agent and administrative fees | 33,703 | |||
Portfolio accounting fees | 13,481 | |||
Professional fees | 15,128 | |||
Trustees’ fees* | 3,408 | |||
Custodian fees | 1,919 | |||
Line of credit fees | 57 | |||
Miscellaneous | 16,234 | |||
Total expenses | 232,223 | |||
Net investment income | 154,297 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 227,545 | |||
Net realized gain | 227,545 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (2,430,390 | ) | ||
Net change in unrealized appreciation (depreciation) | (2,430,390 | ) | ||
Net realized and unrealized loss | (2,202,845 | ) | ||
Net decrease in net assets resulting from operations | $ | (2,048,548 | ) |
* | 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 | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 154,297 | $ | 46,367 | ||||
Net realized gain on investments | 227,545 | 1,413,048 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (2,430,390 | ) | 291,702 | |||||
Net increase (decrease) in net assets resulting from operations | (2,048,548 | ) | 1,751,117 | |||||
Distributions to shareholders | (517,916 | ) | (712,965 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 24,322,968 | 25,652,415 | ||||||
Distributions reinvested | 517,916 | 712,965 | ||||||
Cost of shares redeemed | (25,177,014 | ) | (29,789,629 | ) | ||||
Net decrease from capital share transactions | (336,130 | ) | (3,424,249 | ) | ||||
Net decrease in net assets | (2,902,594 | ) | (2,386,097 | ) | ||||
Net assets: | ||||||||
Beginning of year | 16,023,683 | 18,409,780 | ||||||
End of year | $ | 13,121,089 | $ | 16,023,683 | ||||
Capital share activity: | ||||||||
Shares sold | 397,494 | 393,943 | ||||||
Shares issued from reinvestment of distributions | 8,554 | 11,492 | ||||||
Shares redeemed | (412,473 | ) | (461,696 | ) | ||||
Net decrease in shares | (6,425 | ) | (56,261 | ) |
1 | For the year ended December 31, 2017, the distributions from net investment income and net realized gains were as follows (See Note 9): |
Net investment income | $ | (186,845 | ) | |||||
Net realized gains | (526,120 | ) |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 66.30 | $ | 61.79 | $ | 61.56 | $ | 60.19 | $ | 56.94 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .70 | .17 | .44 | .58 | .42 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | (8.51 | ) | 6.79 | 3.10 | 3.14 | 6.72 | ||||||||||||||
Total from investment operations | (7.81 | ) | 6.96 | 3.54 | 3.72 | 7.14 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.45 | ) | (.64 | ) | (.42 | ) | (.34 | ) | (.30 | ) | ||||||||||
Net realized gains | (2.26 | ) | (1.81 | ) | (2.89 | ) | (2.01 | ) | (3.59 | ) | ||||||||||
Total distributions | (2.71 | ) | (2.45 | ) | (3.31 | ) | (2.35 | ) | (3.89 | ) | ||||||||||
Net asset value, end of period | $ | 55.78 | $ | 66.30 | $ | 61.79 | $ | 61.56 | $ | 60.19 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (12.12 | %) | 11.53 | % | 5.42 | % | 6.22 | % | 12.63 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 13,121 | $ | 16,024 | $ | 18,410 | $ | 32,481 | $ | 26,090 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.14 | % | 0.27 | % | 0.68 | % | 0.95 | % | 0.70 | % | ||||||||||
Total expenses | 1.72 | % | 1.70 | % | 1.65 | % | 1.61 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 176 | % | 133 | % | 161 | % | 225 | % | 194 | % |
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, 2018 |
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, 2018, Electronics Fund returned -12.71%, compared with a return of -4.38% for the S&P 500 Index. The S&P 500 Information Technology Index returned -0.29%.
The semiconductors group accounted for almost all of the Fund by weight, and was the largest detractor from return. The semiconductor equipment industry also detracted from return. No segment contributed to return.
For the year, Fund performance got the biggest boost from Advanced Micro Devices, Inc., Xilinx, Inc., and Integrated Device Technology, Inc. Holdings detracting the most from the Fund’s performance for the period were NVIDIA Corp., Applied Materials, Inc., and NXP Semiconductors NV.
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. | 8.7% |
Broadcom, Inc. | 6.4% |
Texas Instruments, Inc. | 5.9% |
NVIDIA Corp. | 5.4% |
QUALCOMM, Inc. | 5.0% |
Micron Technology, Inc. | 3.7% |
Analog Devices, Inc. | 3.5% |
Applied Materials, Inc. | 3.5% |
Lam Research Corp. | 2.8% |
Xilinx, Inc. | 2.8% |
Top Ten Total | 47.7% |
“Ten Largest Holdings” excludes any temporary cash investments.
THE RYDEX FUNDS ANNUAL REPORT | 35 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Electronics Fund | (12.71%) | 12.44% | 14.45% |
S&P 500 Information Technology Index | (0.29%) | 14.93% | 18.36% |
S&P 500 Index | (4.38%) | 8.49% | 13.12% |
* | 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. 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, 2018 |
ELECTRONICS FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.5% | ||||||||
Semiconductors - 94.0% | ||||||||
Intel Corp. | 9,042 | $ | 424,341 | |||||
Broadcom, Inc. | 1,220 | 310,222 | ||||||
Texas Instruments, Inc. | 3,013 | 284,728 | ||||||
NVIDIA Corp. | 1,961 | 261,794 | ||||||
QUALCOMM, Inc. | 4,256 | 242,209 | ||||||
Micron Technology, Inc.* | 5,693 | 180,639 | ||||||
Analog Devices, Inc. | 1,971 | 169,171 | ||||||
Applied Materials, Inc. | 5,152 | 168,676 | ||||||
Lam Research Corp. | 1,016 | 138,349 | ||||||
Xilinx, Inc. | 1,600 | 136,272 | ||||||
NXP Semiconductor N.V. | 1,834 | 134,396 | ||||||
Advanced Micro Devices, Inc.* | 6,933 | 127,983 | ||||||
Microchip Technology, Inc. | 1,736 | 124,853 | ||||||
Maxim Integrated Products, Inc. | 2,236 | 113,701 | ||||||
KLA-Tencor Corp. | 1,232 | 110,252 | ||||||
Skyworks Solutions, Inc. | 1,525 | 102,205 | ||||||
Marvell Technology Group Ltd. | 6,227 | 100,815 | ||||||
Taiwan Semiconductor Manufacturing Company Ltd. ADR | 2,523 | 93,124 | ||||||
Qorvo, Inc.* | 1,336 | 81,135 | ||||||
ON Semiconductor Corp.* | 4,770 | 78,753 | ||||||
Integrated Device Technology, Inc.* | 1,505 | 72,887 | ||||||
ASML Holding N.V. — Class G | 462 | 71,896 | ||||||
Teradyne, Inc. | 2,265 | 71,076 | ||||||
Monolithic Power Systems, Inc. | 565 | 65,681 | ||||||
Cypress Semiconductor Corp. | 4,955 | 63,028 | ||||||
Entegris, Inc. | 2,207 | 61,564 | ||||||
Cree, Inc.* | 1,426 | 60,997 | ||||||
Mellanox Technologies Ltd.* | 618 | 57,091 | ||||||
STMicroelectronics N.V. — Class Y | 4,084 | 56,686 | ||||||
Kulicke & Soffa Industries, Inc. | 2,757 | 55,884 | ||||||
MKS Instruments, Inc. | 861 | 55,629 | ||||||
Silicon Laboratories, Inc.* | 700 | 55,167 | ||||||
Silicon Motion Technology Corp. ADR | 1,549 | 53,440 | ||||||
Semtech Corp.* | 1,143 | 52,429 | ||||||
Cabot Microelectronics Corp. | 531 | 50,631 | ||||||
Brooks Automation, Inc. | 1,587 | 41,548 | ||||||
Cirrus Logic, Inc.* | 1,228 | 40,745 | ||||||
Power Integrations, Inc. | 655 | 39,942 | ||||||
Diodes, Inc.* | 1,179 | 38,035 | ||||||
Inphi Corp.* | 1,080 | 34,722 | ||||||
Synaptics, Inc.* | 904 | 33,638 | ||||||
MACOM Technology Solutions Holdings, Inc.* | 1,979 | 28,715 | ||||||
Nanometrics, Inc.* | 894 | 24,433 | ||||||
Total Semiconductors | 4,569,482 | |||||||
Energy-Alternate Sources - 2.4% | ||||||||
First Solar, Inc.* | 1,442 | 61,220 | ||||||
SolarEdge Technologies, Inc.*,1 | 1,595 | 55,984 | ||||||
Total Energy-Alternate Sources | 117,204 | |||||||
Electrical Components & Equipment - 1.3% | ||||||||
Universal Display Corp. | 661 | 61,850 | ||||||
Electronics - 0.8% | ||||||||
Advanced Energy Industries, Inc.* | 902 | 38,723 | ||||||
Miscellaneous Manufacturing - 0.6% | ||||||||
Ambarella, Inc.* | 867 | 30,327 | ||||||
Machinery-Diversified - 0.4% | ||||||||
Ichor Holdings Ltd.* | 1,136 | 18,517 | ||||||
Total Common Stocks | ||||||||
(Cost $2,386,508) | 4,836,103 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.8% | ||||||||
JPMorgan Chase & Co. | $ | 21,899 | 21,899 | |||||
Barclays Capital | 9,107 | 9,107 | ||||||
Bank of America Merrill Lynch | 6,071 | 6,071 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $37,077) | 37,077 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 0.7% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 2.32%4 | 36,202 | 36,202 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $36,202) | 36,202 | |||||||
Total Investments - 101.0% | ||||||||
(Cost $2,459,787) | $ | 4,909,382 | ||||||
Other Assets & Liabilities, net - (1.0)% | (49,723 | ) | ||||||
Total Net Assets - 100.0% | $ | 4,859,659 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 37 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
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 a portion of this security is on loan at December 31, 2018 — 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, 2018. |
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, 2018 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 4,836,103 | $ | — | $ | — | $ | 4,836,103 | ||||||||
Repurchase Agreements | — | 37,077 | — | 37,077 | ||||||||||||
Securities Lending Collateral | 36,202 | — | — | 36,202 | ||||||||||||
Total Assets | $ | 4,872,305 | $ | 37,077 | $ | — | $ | 4,909,382 |
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, 2018, 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, 2018 |
Assets: | ||||
Investments, at value - including $41,558 of securities loaned (cost $2,422,710) | $ | 4,872,305 | ||
Repurchase agreements, at value (cost $37,077) | 37,077 | |||
Cash | 6,126 | |||
Receivables: | ||||
Fund shares sold | 54,398 | |||
Dividends | 1,989 | |||
Securities lending income | 137 | |||
Interest | 4 | |||
Total assets | 4,972,036 | |||
Liabilities: | ||||
Payable for: | ||||
Securities purchased | 46,578 | |||
Return of securities lending collateral | 42,328 | |||
Management fees | 3,423 | |||
Transfer agent and administrative fees | 1,007 | |||
Investor service fees | 1,007 | |||
Fund shares redeemed | 784 | |||
Portfolio accounting fees | 403 | |||
Trustees’ fees* | 153 | |||
Miscellaneous | 16,694 | |||
Total liabilities | 112,377 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 4,859,659 | ||
Net assets consist of: | ||||
Paid in capital | $ | 3,135,869 | ||
Total distributable earnings (loss) | 1,723,790 | |||
Net assets | $ | 4,859,659 | ||
Capital shares outstanding | 72,212 | |||
Net asset value per share | $ | 67.30 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: |
| |||
Dividends (net of foreign withholding tax of $145) | $ | 123,350 | ||
Interest | 981 | |||
Income from securities lending, net | 11,992 | |||
Total investment income | 136,323 | |||
Expenses: | ||||
Management fees | 71,324 | |||
Investor service fees | 20,977 | |||
Transfer agent and administrative fees | 20,977 | |||
Professional fees | 11,608 | |||
Portfolio accounting fees | 8,391 | |||
Trustees’ fees* | 2,997 | |||
Custodian fees | 1,232 | |||
Line of credit fees | 20 | |||
Miscellaneous | 5,946 | |||
Total expenses | 143,472 | |||
Net investment loss | (7,149 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 1,317,537 | |||
Net realized gain | 1,317,537 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (2,100,923 | ) | ||
Net change in unrealized appreciation (depreciation) | (2,100,923 | ) | ||
Net realized and unrealized loss | (783,386 | ) | ||
Net decrease in net assets resulting from operations | $ | (790,535 | ) |
* | 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 | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (7,149 | ) | $ | (48,506 | ) | ||
Net realized gain on investments | 1,317,537 | 641,050 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (2,100,923 | ) | 1,682,021 | |||||
Net increase (decrease) in net assets resulting from operations | (790,535 | ) | 2,274,565 | |||||
Distributions to shareholders | (242,664 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 21,819,055 | 35,241,512 | ||||||
Distributions reinvested | 242,664 | — | ||||||
Cost of shares redeemed | (27,404,421 | ) | (34,989,891 | ) | ||||
Net increase (decrease) from capital share transactions | (5,342,702 | ) | 251,621 | |||||
Net increase (decrease) in net assets | (6,375,901 | ) | 2,526,186 | |||||
Net assets: | ||||||||
Beginning of year | 11,235,560 | 8,709,374 | ||||||
End of year | $ | 4,859,659 | $ | 11,235,560 | ||||
Capital share activity: | ||||||||
Shares sold | 262,533 | 485,493 | ||||||
Shares issued from reinvestment of distributions | 2,952 | — | ||||||
Shares redeemed | (333,916 | ) | (487,740 | ) | ||||
Net decrease in shares | (68,431 | ) | (2,247 | ) |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 79.89 | $ | 60.95 | $ | 49.03 | $ | 48.01 | $ | 38.81 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.07 | ) | (.34 | ) | (.07 | ) | (.15 | ) | (.01 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | (9.54 | ) | 19.28 | 11.99 | 1.17 | 9.21 | ||||||||||||||
Total from investment operations | (9.61 | ) | 18.94 | 11.92 | 1.02 | 9.20 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (2.98 | ) | — | — | — | — | ||||||||||||||
Total distributions | (2.98 | ) | — | — | — | — | ||||||||||||||
Net asset value, end of period | $ | 67.30 | $ | 79.89 | $ | 60.95 | $ | 49.03 | $ | 48.01 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (12.71 | %) | 31.06 | % | 24.34 | % | 2.10 | % | 23.74 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 4,860 | $ | 11,236 | $ | 8,709 | $ | 5,374 | $ | 7,410 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.09 | %) | (0.48 | %) | (0.14 | %) | (0.31 | %) | (0.01 | %) | ||||||||||
Total expenses | 1.71 | % | 1.70 | % | 1.66 | % | 1.59 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 248 | % | 327 | % | 362 | % | 351 | % | 381 | % |
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| 41 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, Energy Fund returned -25.49%, compared with the -4.38% return of the S&P 500 Index. The S&P 500 Energy Index returned -18.10%.
The oil, gas & consumable fuels industry was the largest detractor from return, followed by the energy equipment & services industry. No segment contributed to return, but the industrial conglomerates industry detracted least.
Andeavor, Petroleo Brasilileiro SA ADR, and ConocoPhillips contributed the most to the Fund’s return for the year. Holdings detracting the most from performance were Schlumberger NV, ExxonMobil Corp. and Halliburton 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) | |
Exxon Mobil Corp. | 6.9% |
Chevron Corp. | 6.3% |
ConocoPhillips | 3.7% |
Schlumberger Ltd. | 3.0% |
EOG Resources, Inc. | 3.0% |
Occidental Petroleum Corp. | 2.9% |
Phillips 66 | 2.7% |
Marathon Petroleum Corp. | 2.7% |
Valero Energy Corp. | 2.5% |
Kinder Morgan, Inc. | 2.4% |
Top Ten Total | 36.1% |
“Ten Largest Holdings” excludes any temporary cash investments.
42 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Energy Fund | (25.49%) | (12.22%) | 0.22% |
S&P 500 Energy Index | (18.10%) | (5.56%) | 3.50% |
S&P 500 Index | (4.38%) | 8.49% | 13.12% |
* | 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. 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, 2018 |
ENERGY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.6% | ||||||||
Oil & Gas - 71.7% | ||||||||
Exxon Mobil Corp. | 9,834 | $ | 670,580 | |||||
Chevron Corp. | 5,640 | 613,576 | ||||||
ConocoPhillips | 5,798 | 361,505 | ||||||
EOG Resources, Inc. | 3,302 | 287,967 | ||||||
Occidental Petroleum Corp. | 4,641 | 284,865 | ||||||
Phillips 66 | 3,061 | 263,705 | ||||||
Marathon Petroleum Corp. | 4,454 | 262,831 | ||||||
Valero Energy Corp. | 3,200 | 239,904 | ||||||
Pioneer Natural Resources Co. | 1,495 | 196,622 | ||||||
Anadarko Petroleum Corp. | 4,454 | 195,263 | ||||||
Concho Resources, Inc.* | 1,873 | 192,526 | ||||||
Continental Resources, Inc.* | 4,152 | 166,869 | ||||||
Diamondback Energy, Inc. | 1,734 | 160,742 | ||||||
Marathon Oil Corp. | 10,267 | 147,229 | ||||||
BP plc ADR | 3,865 | 146,561 | ||||||
Petroleo Brasileiro S.A. ADR | 10,863 | 141,328 | ||||||
Hess Corp. | 3,388 | 137,214 | ||||||
Devon Energy Corp. | 5,939 | 133,865 | ||||||
Cabot Oil & Gas Corp. — Class A | 5,709 | 127,596 | ||||||
Apache Corp. | 4,816 | 126,420 | ||||||
Noble Energy, Inc. | 6,572 | 123,291 | ||||||
HollyFrontier Corp. | 2,386 | 121,972 | ||||||
Royal Dutch Shell plc — Class A ADR | 1,839 | 107,158 | ||||||
Suncor Energy, Inc. | 3,664 | 102,482 | ||||||
Cimarex Energy Co. | 1,648 | 101,599 | ||||||
Parsley Energy, Inc. — Class A* | 5,918 | 94,570 | ||||||
WPX Energy, Inc.* | 8,319 | 94,421 | ||||||
Helmerich & Payne, Inc. | 1,956 | 93,771 | ||||||
Equities Corp. | 4,783 | 90,351 | ||||||
Canadian Natural Resources Ltd. | 3,661 | 88,340 | ||||||
PBF Energy, Inc. — Class A | 2,526 | 82,524 | ||||||
Murphy Oil Corp. | 3,488 | 81,584 | ||||||
CVR Energy, Inc. | 2,350 | 81,028 | ||||||
Centennial Resource Development, Inc. — Class A* | 6,747 | 74,352 | ||||||
Newfield Exploration Co.* | 4,970 | 72,860 | ||||||
Antero Resources Corp.* | 7,484 | 70,275 | ||||||
Delek US Holdings, Inc. | 1,945 | 63,232 | ||||||
CNX Resources Corp.* | 5,454 | 62,285 | ||||||
Whiting Petroleum Corp.* | 2,706 | 61,399 | ||||||
Range Resources Corp. | 6,353 | 60,798 | ||||||
PDC Energy, Inc.* | 1,981 | 58,955 | ||||||
SM Energy Co. | 3,630 | 56,192 | ||||||
Patterson-UTI Energy, Inc. | 5,397 | 55,859 | ||||||
WildHorse Resource Development Corp.* | 3,630 | 51,219 | ||||||
Ecopetrol S.A. ADR | 2,990 | 47,481 | ||||||
Carrizo Oil & Gas, Inc.* | 3,662 | 41,344 | ||||||
California Resources Corp.* | 2,242 | 38,204 | ||||||
Total Oil & Gas | 6,934,714 | |||||||
Pipelines - 13.3% | ||||||||
Kinder Morgan, Inc. | 14,913 | 229,362 | ||||||
Williams Companies, Inc. | 9,761 | 215,230 | ||||||
ONEOK, Inc. | 3,597 | 194,058 | ||||||
Cheniere Energy, Inc.* | 2,708 | 160,287 | ||||||
Targa Resources Corp. | 3,234 | 116,489 | ||||||
Enbridge, Inc. | 3,123 | 97,063 | ||||||
Equitrans Midstream Corp.* | 4,712 | 94,334 | ||||||
Plains GP Holdings, LP — Class A* | 3,624 | 72,842 | ||||||
TransCanada Corp. | 1,725 | 61,582 | ||||||
SemGroup Corp. — Class A | 3,246 | 44,730 | ||||||
Total Pipelines | 1,285,977 | |||||||
Oil & Gas Services - 11.8% | ||||||||
Schlumberger Ltd. | 8,156 | 294,268 | ||||||
Baker Hughes a GE Co. | 9,205 | 197,908 | ||||||
Halliburton Co. | 6,962 | 185,050 | ||||||
National Oilwell Varco, Inc. | 5,044 | 129,631 | ||||||
TechnipFMC plc | 4,704 | 92,104 | ||||||
RPC, Inc. | 5,950 | 58,726 | ||||||
Core Laboratories N.V. | 980 | 58,467 | ||||||
ProPetro Holding Corp.* | 3,464 | 42,676 | ||||||
Oceaneering International, Inc.* | 3,496 | 42,302 | ||||||
US Silica Holdings, Inc. | 3,460 | 35,223 | ||||||
Total Oil & Gas Services | 1,136,355 | |||||||
Coal - 0.8% | ||||||||
Peabody Energy Corp. | 2,536 | 77,297 | ||||||
Energy-Alternate Sources - 0.7% | ||||||||
Renewable Energy Group, Inc.* | 1,600 | 41,120 | ||||||
Green Plains, Inc. | 2,263 | 29,668 | ||||||
Total Energy-Alternate Sources | 70,788 | |||||||
Metal Fabricate & Hardware - 0.7% | ||||||||
Tenaris S.A. ADR | 2,951 | 62,915 | ||||||
Transportation - 0.6% | ||||||||
Golar LNG Ltd. | 2,840 | 61,799 | ||||||
Total Common Stocks | ||||||||
(Cost $5,776,457) | 9,629,845 |
44| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
ENERGY FUND |
| Face | Value | ||||||
REPURCHASE AGREEMENTS††,1 - 0.5% | ||||||||
JPMorgan Chase & Co. | $ | 29,021 | $ | 29,021 | ||||
Barclays Capital | 12,069 | 12,069 | ||||||
Bank of America Merrill Lynch | 8,046 | 8,046 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $49,136) | 49,136 | |||||||
Total Investments - 100.1% | ||||||||
(Cost $5,825,593) | $ | 9,678,981 | ||||||
Other Assets & Liabilities, net - (0.1)% | (6,858 | ) | ||||||
Total Net Assets - 100.0% | $ | 9,672,123 |
* | 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 | Repurchase Agreements — See Note 4. |
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, 2018 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 9,629,845 | $ | — | $ | — | $ | 9,629,845 | ||||||||
Repurchase Agreements | — | 49,136 | — | 49,136 | ||||||||||||
Total Assets | $ | 9,629,845 | $ | 49,136 | $ | — | $ | 9,678,981 |
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, 2018, 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, 2018 |
Assets: | ||||
Investments, at value (cost $5,776,457) | $ | 9,629,845 | ||
Repurchase agreements, at value (cost $49,136) | 49,136 | |||
Cash | 135 | |||
Receivables: | ||||
Fund shares sold | 35,049 | |||
Dividends | 9,739 | |||
Securities lending income | 10 | |||
Interest | 4 | |||
Total assets | 9,723,918 | |||
Liabilities: | ||||
Payable for: | ||||
Professional fees | 18,666 | |||
Management fees | 7,155 | |||
Fund shares redeemed | 5,428 | |||
Transfer agent and administrative fees | 2,104 | |||
Investor service fees | 2,104 | |||
Portfolio accounting fees | 842 | |||
Trustees’ fees* | 308 | |||
Miscellaneous | 15,188 | |||
Total liabilities | 51,795 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 9,672,123 | ||
Net assets consist of: | ||||
Paid in capital | $ | 15,842,893 | ||
Total distributable earnings (loss) | (6,170,770 | ) | ||
Net assets | $ | 9,672,123 | ||
Capital shares outstanding | 174,835 | |||
Net asset value per share | $ | 55.32 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $4,290) | $ | 292,278 | ||
Interest | 1,870 | |||
Income from securities lending, net | 3,198 | |||
Total investment income | 297,346 | |||
Expenses: | ||||
Management fees | 142,398 | |||
Investor service fees | 41,882 | |||
Transfer agent and administrative fees | 41,882 | |||
Professional fees | 18,944 | |||
Portfolio accounting fees | 16,752 | |||
Trustees’ fees* | 4,521 | |||
Custodian fees | 2,425 | |||
Line of credit fees | 26 | |||
Miscellaneous | 18,560 | |||
Total expenses | 287,390 | |||
Net investment income | 9,956 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 342,155 | |||
Net realized gain | 342,155 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (4,513,930 | ) | ||
Net change in unrealized appreciation (depreciation) | (4,513,930 | ) | ||
Net realized and unrealized loss | (4,171,775 | ) | ||
Net decrease in net assets resulting from operations | $ | (4,161,819 | ) |
* | 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 | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 9,956 | $ | 149,779 | ||||
Net realized gain on investments | 342,155 | 862,529 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (4,513,930 | ) | (3,472,763 | ) | ||||
Net decrease in net assets resulting from operations | (4,161,819 | ) | (2,460,455 | ) | ||||
Distributions to shareholders | (100,740 | ) | (110,100 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 79,229,795 | 117,598,047 | ||||||
Distributions reinvested | 100,740 | 110,100 | ||||||
Cost of shares redeemed | (82,713,811 | ) | (125,936,864 | ) | ||||
Net decrease from capital share transactions | (3,383,276 | ) | (8,228,717 | ) | ||||
Net decrease in net assets | (7,645,835 | ) | (10,799,272 | ) | ||||
Net assets: | ||||||||
Beginning of year | 17,317,958 | 28,117,230 | ||||||
End of year | $ | 9,672,123 | $ | 17,317,958 | ||||
Capital share activity: | ||||||||
Shares sold | 1,057,017 | 1,574,560 | ||||||
Shares issued from reinvestment of distributions | 1,272 | 1,707 | ||||||
Shares redeemed | (1,115,672 | ) | (1,695,100 | ) | ||||
Net decrease in shares | (57,383 | ) | (118,833 | ) |
1 | For the year ended December 31, 2017, the total distributions to shareholders were all from net investment income (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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 74.58 | $ | 80.09 | $ | 61.43 | $ | 90.41 | $ | 123.98 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .04 | .53 | .08 | .76 | .48 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | (18.95 | ) | (5.61 | ) | 18.72 | (27.58 | ) | (21.93 | ) | |||||||||||
Total from investment operations | (18.91 | ) | (5.08 | ) | 18.80 | (26.82 | ) | (21.45 | ) | |||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.35 | ) | (.43 | ) | (.14 | ) | (.36 | ) | (.12 | ) | ||||||||||
Net realized gains | — | — | — | (1.80 | ) | (12.00 | ) | |||||||||||||
Total distributions | (.35 | ) | (.43 | ) | (.14 | ) | (2.16 | ) | (12.12 | ) | ||||||||||
Net asset value, end of period | $ | 55.32 | $ | 74.58 | $ | 80.09 | $ | 61.43 | $ | 90.41 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (25.49 | %) | (6.26 | %) | 31.37 | % | (30.22 | %) | (18.62 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 9,672 | $ | 17,318 | $ | 28,117 | $ | 19,682 | $ | 26,560 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.06 | % | 0.75 | % | 0.42 | % | 0.91 | % | 0.38 | % | ||||||||||
Total expenses | 1.72 | % | 1.70 | % | 1.66 | % | 1.60 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 490 | % | 573 | % | 293 | % | 121 | % | 214 | % |
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 years presented through December 31, 2016 have been restated to reflect a 1:4 reverse share split effective December 1, 2016. |
48| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, Energy Services Fund returned -45.65%, compared with the S&P 500 Index, which returned -4.38%. The S&P 500 Energy Index returned -18.10%.
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.
Covia Holdings Corp., Helix Energy Solutions Group, Inc., and Basic Energy Services, Inc. were the Fund’s best-performing holdings for the year. The Fund’s worst-performing holdings included Schlumberger NV, Halliburton Co., and Baker Hughes.
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) | |
Schlumberger Ltd. | 14.2% |
Halliburton Co. | 10.0% |
Baker Hughes a GE Co. | 9.9% |
National Oilwell Varco, Inc. | 6.4% |
Helmerich & Payne, Inc. | 4.6% |
TechnipFMC plc | 4.2% |
Transocean Ltd. | 4.1% |
Patterson-UTI Energy, Inc. | 3.3% |
Tenaris S.A. ADR | 3.3% |
Cactus, Inc. — Class A | 3.3% |
Top Ten Total | 63.3% |
“Ten Largest Holdings” excludes any temporary cash investments.
THE RYDEX FUNDS ANNUAL REPORT | 49 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Energy Services Fund | (45.65%) | (23.45%) | (4.87%) |
S&P 500 Energy Index | (18.10%) | (5.56%) | 3.50% |
S&P 500 Index | (4.38%) | 8.49% | 13.12% |
* | 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. 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, 2018 |
ENERGY SERVICES FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.3% | ||||||||
Oil & Gas Services - 76.2% | ||||||||
Schlumberger Ltd. | 13,787 | $ | 497,435 | |||||
Halliburton Co. | 13,154 | 349,634 | ||||||
Baker Hughes a GE Co. | 16,015 | 344,323 | ||||||
National Oilwell Varco, Inc. | 8,694 | 223,436 | ||||||
TechnipFMC plc | 7,559 | 148,005 | ||||||
RPC, Inc. | 11,145 | 110,001 | ||||||
Core Laboratories N.V. | 1,826 | 108,939 | ||||||
Apergy Corp.* | 3,977 | 107,697 | ||||||
Liberty Oilfield Services, Inc. — Class A | 6,975 | 90,326 | ||||||
McDermott International, Inc.* | 13,043 | 85,301 | ||||||
Dril-Quip, Inc.* | 2,710 | 81,381 | ||||||
ProPetro Holding Corp.* | 6,482 | 79,858 | ||||||
Oceaneering International, Inc.* | 6,550 | 79,255 | ||||||
Archrock, Inc. | 9,875 | 73,964 | ||||||
C&J Energy Services, Inc.* | 5,447 | 73,535 | ||||||
Oil States International, Inc.* | 5,015 | 71,614 | ||||||
Keane Group, Inc.* | 8,733 | 71,436 | ||||||
US Silica Holdings, Inc.1 | 6,470 | 65,865 | ||||||
Total Oil & Gas Services | 2,662,005 | |||||||
Oil & Gas - 16.5% | ||||||||
Helmerich & Payne, Inc. | 3,344 | 160,311 | ||||||
Transocean Ltd.* | 20,560 | 142,686 | ||||||
Patterson-UTI Energy, Inc. | 11,160 | 115,506 | ||||||
Diamond Offshore Drilling, Inc.* | 9,408 | 88,812 | ||||||
Mammoth Energy Services, Inc. | 3,813 | 68,558 | ||||||
Total Oil & Gas | 575,873 | |||||||
Metal Fabricate & Hardware - 3.3% | ||||||||
Tenaris S.A. ADR | 5,405 | 115,234 | ||||||
Machinery-Diversified - 3.3% | ||||||||
Cactus, Inc. — Class A* | 4,143 | 113,560 | ||||||
Total Common Stocks | ||||||||
(Cost $3,115,310) | 3,466,672 | |||||||
| Face |
| ||||||
REPURCHASE AGREEMENTS††,2 - 0.8% | ||||||||
JPMorgan Chase & Co. | $ | 16,629 | 16,629 | |||||
Barclays Capital | 6,916 | 6,916 | ||||||
Bank of America Merrill Lynch | 4,610 | 4,610 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $28,155) | 28,155 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 1.2% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 2.32%4 | 40,896 | 40,896 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $40,896) | 40,896 | |||||||
Total Investments - 101.3% | ||||||||
(Cost $3,184,361) | $ | 3,535,723 | ||||||
Other Assets & Liabilities, net - (1.3)% | (43,719 | ) | ||||||
Total Net Assets - 100.0% | $ | 3,492,004 |
* | 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 a portion of this security is on loan at December 31, 2018 — 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, 2018. |
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, 2018 |
ENERGY SERVICES FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2018 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 3,466,672 | $ | — | $ | — | $ | 3,466,672 | ||||||||
Repurchase Agreements | — | 28,155 | — | 28,155 | ||||||||||||
Securities Lending Collateral | 40,896 | — | — | 40,896 | ||||||||||||
Total Assets | $ | 3,507,568 | $ | 28,155 | $ | — | $ | 3,535,723 |
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, 2018, 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, 2018 |
Assets: | ||||
Investments, at value - including $44,252 of securities loaned (cost $3,156,206) | $ | 3,507,568 | ||
Repurchase agreements, at value (cost $28,155) | 28,155 | |||
Cash | 6,921 | |||
Receivables: | ||||
Securities sold | 72,298 | |||
Fund shares sold | 9,917 | |||
Dividends | 8,320 | |||
Securities lending income | 58 | |||
Interest | 2 | |||
Total assets | 3,633,239 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 73,726 | |||
Return of securities lending collateral | 47,817 | |||
Management fees | 2,599 | |||
Transfer agent and administrative fees | 764 | |||
Investor service fees | 764 | |||
Portfolio accounting fees | 306 | |||
Trustees’ fees* | 142 | |||
Miscellaneous | 15,117 | |||
Total liabilities | 141,235 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 3,492,004 | ||
Net assets consist of: | ||||
Paid in capital | $ | 12,581,121 | ||
Total distributable earnings (loss) | (9,089,117 | ) | ||
Net assets | $ | 3,492,004 | ||
Capital shares outstanding | 115,207 | |||
Net asset value per share | $ | 30.31 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $580) | $ | 100,149 | ||
Interest | 826 | |||
Income from securities lending, net | 7,493 | |||
Total investment income | 108,468 | |||
Expenses: | ||||
Management fees | 58,270 | |||
Investor service fees | 17,138 | |||
Transfer agent and administrative fees | 17,138 | |||
Professional fees | 7,393 | |||
Portfolio accounting fees | 6,855 | |||
Trustees’ fees* | 2,303 | |||
Custodian fees | 1,030 | |||
Line of credit fees | 42 | |||
Miscellaneous | 7,335 | |||
Total expenses | 117,504 | |||
Net investment loss | (9,036 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (139,979 | ) | ||
Net realized loss | (139,979 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (3,076,408 | ) | ||
Net change in unrealized appreciation (depreciation) | (3,076,408 | ) | ||
Net realized and unrealized loss | (3,216,387 | ) | ||
Net decrease in net assets resulting from operations | $ | (3,225,423 | ) |
* | 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 | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (9,036 | ) | $ | 200,476 | |||
Net realized loss on investments | (139,979 | ) | (606,661 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | (3,076,408 | ) | (2,250,644 | ) | ||||
Net decrease in net assets resulting from operations | (3,225,423 | ) | (2,656,829 | ) | ||||
Distributions to shareholders | (203,149 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 23,622,688 | 38,145,435 | ||||||
Distributions reinvested | 203,149 | — | ||||||
Cost of shares redeemed | (25,952,063 | ) | (40,212,231 | ) | ||||
Net decrease from capital share transactions | (2,126,226 | ) | (2,066,796 | ) | ||||
Net decrease in net assets | (5,554,798 | ) | (4,723,625 | ) | ||||
Net assets: | ||||||||
Beginning of year | 9,046,802 | 13,770,427 | ||||||
End of year | $ | 3,492,004 | $ | 9,046,802 | ||||
Capital share activity: | ||||||||
Shares sold | 441,752 | 668,004 | ||||||
Shares issued from reinvestment of distributions | 3,791 | — | ||||||
Shares redeemed | (487,404 | ) | (705,427 | ) | ||||
Net decrease in shares | (41,861 | ) | (37,423 | ) |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 57.60 | $ | 70.80 | $ | 58.00 | $ | 85.24 | $ | 132.25 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.07 | ) | 1.11 | (.03 | ) | .66 | .36 | |||||||||||||
Net gain (loss) on investments (realized and unrealized) | (25.46 | ) | (14.31 | ) | 12.92 | (27.60 | ) | (37.41 | ) | |||||||||||
Total from investment operations | (25.53 | ) | (13.20 | ) | 12.89 | (26.94 | ) | (37.05 | ) | |||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (1.76 | ) | — | (.09 | ) | (.30 | ) | — | ||||||||||||
Net realized gains | — | — | — | — | (9.96 | ) | ||||||||||||||
Total distributions | (1.76 | ) | — | (.09 | ) | (.30 | ) | (9.96 | ) | |||||||||||
Net asset value, end of period | $ | 30.31 | $ | 57.60 | $ | 70.80 | $ | 58.00 | $ | 85.24 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (45.65 | %) | (18.64 | %) | 23.15 | % | (31.70 | %) | (29.34 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 3,492 | $ | 9,047 | $ | 13,770 | $ | 11,475 | $ | 15,843 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.13 | %) | 1.92 | % | (0.26 | %) | 0.85 | % | 0.29 | % | ||||||||||
Total expenses | 1.71 | % | 1.70 | % | 1.66 | % | 1.60 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 331 | % | 338 | % | 291 | % | 175 | % | 220 | % |
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 share split effective December 1, 2016. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 55 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, Financial Services Fund returned -12.28%, while the S&P 500 Index returned -4.38% over the same period. The S&P 500 Financials Index returned -13.03%.
The banks industry was the largest detractor from return, followed by capital markets. The commercial banks industry was the largest contributor to return, followed by the real estate investment trusts segment.
XL Group Ltd., CME Group, Inc. Class A, and Popular, Inc. were the best-performing holdings in the Fund for the year. The worst-performing holdings for the period were Citigroup, Inc., Wells Fargo & Co., and Goldman Sachs Group, 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: July 20, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Berkshire Hathaway, Inc. — Class B | 3.4% |
JPMorgan Chase & Co. | 2.7% |
Bank of America Corp. | 2.4% |
Wells Fargo & Co. | 2.2% |
Citigroup, Inc. | 1.7% |
American Express Co. | 1.3% |
U.S. Bancorp | 1.3% |
CME Group, Inc. — Class A | 1.3% |
Morgan Stanley | 1.2% |
American Tower Corp. — Class A | 1.2% |
Top Ten Total | 18.7% |
“Ten Largest Holdings” excludes any temporary cash investments.
56 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Financial Services Fund | (12.28%) | 4.88% | 8.75% |
S&P 500 Financials Index | (13.03%) | 8.16% | 10.92% |
S&P 500 Index | (4.38%) | 8.49% | 13.12% |
* | 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. 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, 2018 |
FINANCIAL SERVICES FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.7% | ||||||||
Banks - 30.9% | ||||||||
JPMorgan Chase & Co. | 1,981 | $ | 193,385 | |||||
Bank of America Corp. | 6,833 | 168,365 | ||||||
Wells Fargo & Co. | 3,431 | 158,101 | ||||||
Citigroup, Inc. | 2,306 | 120,050 | ||||||
U.S. Bancorp | 2,007 | 91,720 | ||||||
Morgan Stanley | 2,235 | 88,618 | ||||||
Goldman Sachs Group, Inc. | 506 | 84,527 | ||||||
PNC Financial Services Group, Inc. | 684 | 79,967 | ||||||
Bank of New York Mellon Corp. | 1,609 | 75,736 | ||||||
BB&T Corp. | 1,438 | 62,294 | ||||||
State Street Corp. | 855 | 53,925 | ||||||
SunTrust Banks, Inc. | 1,028 | 51,852 | ||||||
M&T Bank Corp. | 341 | 48,807 | ||||||
Northern Trust Corp. | 560 | 46,811 | ||||||
Fifth Third Bancorp | 1,813 | 42,660 | ||||||
KeyCorp | 2,873 | 42,463 | ||||||
First Republic Bank | 477 | 41,451 | ||||||
Regions Financial Corp. | 3,037 | 40,635 | ||||||
Citizens Financial Group, Inc. | 1,362 | 40,492 | ||||||
Huntington Bancshares, Inc. | 3,263 | 38,895 | ||||||
ICICI Bank Ltd. ADR | 3,646 | 37,517 | ||||||
HDFC Bank Ltd. ADR | 360 | 37,293 | ||||||
Comerica, Inc. | 528 | 36,268 | ||||||
Toronto-Dominion Bank | 720 | 35,799 | ||||||
Popular, Inc. | 747 | 35,273 | ||||||
Royal Bank of Canada | 510 | 34,945 | ||||||
SVB Financial Group* | 174 | 33,046 | ||||||
Zions Bancorp North America | 746 | 30,392 | ||||||
East West Bancorp, Inc. | 627 | 27,293 | ||||||
Commerce Bancshares, Inc. | 478 | 26,965 | ||||||
Signature Bank | 231 | 23,749 | ||||||
First Horizon National Corp. | 1,703 | 22,412 | ||||||
PacWest Bancorp | 658 | 21,898 | ||||||
Synovus Financial Corp. | 666 | 21,305 | ||||||
Wintrust Financial Corp. | 317 | 21,077 | ||||||
Pinnacle Financial Partners, Inc. | 448 | 20,653 | ||||||
IBERIABANK Corp. | 315 | 20,248 | ||||||
MB Financial, Inc. | 500 | 19,815 | ||||||
Umpqua Holdings Corp. | 1,240 | 19,716 | ||||||
Associated Banc-Corp. | 996 | 19,711 | ||||||
Bank OZK | 856 | 19,543 | ||||||
Hancock Whitney Corp. | 561 | 19,439 | ||||||
First Hawaiian, Inc. | 830 | 18,683 | ||||||
Texas Capital Bancshares, Inc.* | 347 | 17,728 | ||||||
Total Banks | 2,191,522 | |||||||
REITs - 28.1% | ||||||||
American Tower Corp. — Class A | 553 | 87,479 | ||||||
Simon Property Group, Inc. | 459 | 77,107 | ||||||
Crown Castle International Corp. | 662 | 71,913 | ||||||
Prologis, Inc. | 1,092 | 64,122 | ||||||
Public Storage | 311 | 62,949 | ||||||
Equinix, Inc. | 159 | 56,057 | ||||||
Welltower, Inc. | 781 | 54,209 | ||||||
AvalonBay Communities, Inc. | 302 | 52,563 | ||||||
Equity Residential | 786 | 51,884 | ||||||
Digital Realty Trust, Inc. | 476 | 50,718 | ||||||
Ventas, Inc. | 817 | 47,868 | ||||||
Realty Income Corp. | 723 | 45,578 | ||||||
SBA Communications Corp.* | 281 | 45,491 | ||||||
Boston Properties, Inc. | 392 | 44,120 | ||||||
Weyerhaeuser Co. | 1,957 | 42,780 | ||||||
Essex Property Trust, Inc. | 173 | 42,421 | ||||||
HCP, Inc. | 1,392 | 38,879 | ||||||
Annaly Capital Management, Inc. | 3,879 | 38,092 | ||||||
Alexandria Real Estate Equities, Inc. | 325 | 37,453 | ||||||
Host Hotels & Resorts, Inc. | 2,245 | 37,424 | ||||||
Vornado Realty Trust | 587 | 36,412 | ||||||
Extra Space Storage, Inc. | 396 | 35,830 | ||||||
Mid-America Apartment Communities, Inc. | 364 | 34,835 | ||||||
UDR, Inc. | 877 | 34,747 | ||||||
Regency Centers Corp. | 590 | 34,621 | ||||||
Invitation Homes, Inc. | 1,717 | 34,477 | ||||||
AGNC Investment Corp. | 1,851 | 32,467 | ||||||
Iron Mountain, Inc. | 999 | 32,378 | ||||||
Duke Realty Corp. | 1,234 | 31,961 | ||||||
Federal Realty Investment Trust | 268 | 31,635 | ||||||
Camden Property Trust | 348 | 30,641 | ||||||
National Retail Properties, Inc. | 611 | 29,640 | ||||||
VICI Properties, Inc. | 1,560 | 29,297 | ||||||
Lamar Advertising Co. — Class A | 418 | 28,917 | ||||||
Omega Healthcare Investors, Inc. | 807 | 28,366 | ||||||
Gaming and Leisure Properties, Inc. | 865 | 27,948 | ||||||
SL Green Realty Corp. | 351 | 27,757 | ||||||
Apartment Investment & Management Co. — Class A | 632 | 27,732 | ||||||
Macerich Co. | 633 | 27,396 | ||||||
Kilroy Realty Corp. | 428 | 26,913 | ||||||
Kimco Realty Corp. | 1,836 | 26,897 | ||||||
Liberty Property Trust | 631 | 26,426 | ||||||
American Homes 4 Rent — Class A | 1,310 | 26,003 | ||||||
Douglas Emmett, Inc. | 760 | 25,939 | ||||||
STORE Capital Corp. | 913 | 25,847 | ||||||
CyrusOne, Inc. | 465 | 24,589 | ||||||
CubeSmart | 852 | 24,444 | ||||||
Park Hotels & Resorts, Inc. | 924 | 24,005 | ||||||
New Residential Investment Corp. | 1,660 | 23,589 | ||||||
Brixmor Property Group, Inc. | 1,531 | 22,490 | ||||||
Sabra Health Care REIT, Inc. | 1,099 | 18,112 | ||||||
Uniti Group, Inc. | 1,163 | 18,108 | ||||||
Senior Housing Properties Trust | 1,530 | 17,932 | ||||||
PotlatchDeltic Corp. | 479 | 15,156 | ||||||
Total REITs | 1,992,614 | |||||||
Insurance - 19.9% | ||||||||
Berkshire Hathaway, Inc. — Class B* | 1,192 | 243,382 | ||||||
MetLife, Inc. | 1,686 | 69,227 | ||||||
Marsh & McLennan Companies, Inc. | 854 | 68,106 | ||||||
American International Group, Inc. | 1,655 | 65,223 | ||||||
Aflac, Inc. | 1,410 | 64,240 | ||||||
Progressive Corp. | 1,055 | 63,648 |
58| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
FINANCIAL SERVICES FUND |
| Shares | Value | ||||||
Chubb Ltd. | 492 | $ | 63,557 | |||||
Prudential Financial, Inc. | 763 | 62,223 | ||||||
Travelers Companies, Inc. | 511 | 61,192 | ||||||
Allstate Corp. | 698 | 57,676 | ||||||
Willis Towers Watson plc | 319 | 48,443 | ||||||
Hartford Financial Services Group, Inc. | 984 | 43,739 | ||||||
Loews Corp. | 902 | 41,059 | ||||||
Arthur J Gallagher & Co. | 541 | 39,872 | ||||||
Aon plc | 272 | 39,538 | ||||||
Arch Capital Group Ltd.* | 1,464 | 39,118 | ||||||
Cincinnati Financial Corp. | 499 | 38,633 | ||||||
Principal Financial Group, Inc. | 872 | 38,516 | ||||||
Lincoln National Corp. | 688 | 35,301 | ||||||
Everest Re Group Ltd. | 157 | 34,188 | ||||||
AXA Equitable Holdings, Inc. | 1,986 | 33,027 | ||||||
Fidelity National Financial, Inc. | 1,030 | 32,383 | ||||||
Athene Holding Ltd. — Class A* | 731 | 29,116 | ||||||
Unum Group | 939 | 27,588 | ||||||
Voya Financial, Inc. | 670 | 26,894 | ||||||
Assurant, Inc. | 290 | 25,938 | ||||||
Brighthouse Financial, Inc.* | 644 | 19,629 | ||||||
Total Insurance | 1,411,456 | |||||||
Diversified Financial Services - 16.1% | ||||||||
American Express Co. | 989 | 94,272 | ||||||
CME Group, Inc. — Class A | 480 | 90,298 | ||||||
BlackRock, Inc. — Class A | 211 | 82,885 | ||||||
Charles Schwab Corp. | 1,978 | 82,146 | ||||||
Intercontinental Exchange, Inc. | 953 | 71,790 | ||||||
Capital One Financial Corp. | 852 | 64,403 | ||||||
TD Ameritrade Holding Corp. | 1,175 | 57,528 | ||||||
T. Rowe Price Group, Inc. | 560 | 51,699 | ||||||
Interactive Brokers Group, Inc. — Class A | 928 | 50,715 | ||||||
Discover Financial Services | 809 | 47,715 | ||||||
Synchrony Financial | 1,881 | 44,128 | ||||||
Franklin Resources, Inc. | 1,417 | 42,028 | ||||||
Ameriprise Financial, Inc. | 387 | 40,391 | ||||||
Nasdaq, Inc. | 480 | 39,154 | ||||||
E*TRADE Financial Corp. | 818 | 35,894 | ||||||
Raymond James Financial, Inc. | 479 | 35,642 | ||||||
Cboe Global Markets, Inc. | 363 | 35,512 | ||||||
Ally Financial, Inc. | 1,445 | 32,744 | ||||||
SEI Investments Co. | 617 | 28,505 | ||||||
Invesco Ltd. | 1,683 | 28,173 | ||||||
Jefferies Financial Group, Inc. | 1,474 | 25,589 | ||||||
LPL Financial Holdings, Inc. | 403 | 24,615 | ||||||
Affiliated Managers Group, Inc. | 244 | 23,775 | ||||||
LendingTree, Inc.* | 75 | 16,468 | ||||||
Total Diversified Financial Services | 1,146,069 | |||||||
Commercial Services - 2.2% | ||||||||
S&P Global, Inc. | 411 | 69,845 | ||||||
Moody’s Corp. | 392 | 54,896 | ||||||
MarketAxess Holdings, Inc. | 139 | 29,372 | ||||||
Total Commercial Services | 154,113 | |||||||
Savings & Loans - 0.9% | ||||||||
People’s United Financial, Inc. | 1,733 | 25,007 | ||||||
Sterling Bancorp | 1,272 | 21,001 | ||||||
Investors Bancorp, Inc. | 1,804 | 18,761 | ||||||
Total Savings & Loans | 64,769 | |||||||
Private Equity - 0.6% | ||||||||
KKR & Company, Inc. — Class A | 2,272 | 44,599 | ||||||
Software - 0.6% | ||||||||
MSCI, Inc. — Class A | 271 | 39,954 | ||||||
Media - 0.4% | ||||||||
FactSet Research Systems, Inc. | 139 | 27,818 | ||||||
Real Estate - 0.0% | ||||||||
Newmark Group, Inc. — Class A | 1 | 7 | ||||||
Total Common Stocks | ||||||||
(Cost $3,987,532) | 7,072,921 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,1 - 1.0% | ||||||||
JPMorgan Chase & Co. | $ | 43,743 | 43,743 | |||||
Barclays Capital | 18,191 | 18,191 | ||||||
Bank of America Merrill Lynch | 12,128 | 12,128 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $74,062) | 74,062 | |||||||
Total Investments - 100.7% | ||||||||
(Cost $4,061,594) | $ | 7,146,983 | ||||||
Other Assets & Liabilities, net - (0.7)% | (48,575 | ) | ||||||
Total Net Assets - 100.0% | $ | 7,098,408 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 59 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
FINANCIAL SERVICES 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 | Repurchase Agreements — See Note 4. |
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, 2018 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 7,072,921 | $ | — | $ | — | $ | 7,072,921 | ||||||||
Repurchase Agreements | — | 74,062 | — | 74,062 | ||||||||||||
Total Assets | $ | 7,072,921 | $ | 74,062 | $ | — | $ | 7,146,983 | ||||||||
|
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, 2018, 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, 2018 |
Assets: | ||||
Investments, at value (cost $3,987,532) | $ | 7,072,921 | ||
Repurchase agreements, at value (cost $74,062) | 74,062 | |||
Receivables: | ||||
Dividends | 18,827 | |||
Fund shares sold | 882 | |||
Foreign tax reclaims | 59 | |||
Interest | 6 | |||
Securities lending income | 5 | |||
Total assets | 7,166,762 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 28,811 | |||
Management fees | 5,231 | |||
Transfer agent and administrative fees | 1,538 | |||
Investor service fees | 1,538 | |||
Portfolio accounting fees | 616 | |||
Trustees’ fees* | 285 | |||
Miscellaneous | 30,335 | |||
Total liabilities | 68,354 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 7,098,408 | ||
Net assets consist of: | ||||
Paid in capital | $ | 5,142,184 | ||
Total distributable earnings (loss) | 1,956,224 | |||
Net assets | $ | 7,098,408 | ||
Capital shares outstanding | 96,630 | |||
Net asset value per share | $ | 73.46 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $672) | $ | 255,511 | ||
Interest | 1,369 | |||
Income from securities lending, net | 494 | |||
Total investment income | 257,374 | |||
Expenses: | ||||
Management fees | 97,035 | |||
Investor service fees | 28,539 | |||
Transfer agent and administrative fees | 28,539 | |||
Portfolio accounting fees | 11,416 | |||
Professional fees | 13,215 | |||
Trustees’ fees* | 3,987 | |||
Custodian fees | 1,720 | |||
Line of credit fees | 65 | |||
Miscellaneous | 11,318 | |||
Total expenses | 195,834 | |||
Net investment income | 61,540 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 914,802 | |||
Net realized gain | 914,802 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (2,021,689 | ) | ||
Net change in unrealized appreciation (depreciation) | (2,021,689 | ) | ||
Net realized and unrealized loss | (1,106,887 | ) | ||
Net decrease in net assets resulting from operations | $ | (1,045,347 | ) |
* | 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 | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 61,540 | $ | 149,881 | ||||
Net realized gain on investments | 914,802 | 925,229 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (2,021,689 | ) | 765,877 | |||||
Net increase (decrease) in net assets resulting from operations | (1,045,347 | ) | 1,840,987 | |||||
Distributions to shareholders | (80,650 | ) | (71,565 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 48,162,381 | 57,801,599 | ||||||
Distributions reinvested | 80,650 | 71,565 | ||||||
Cost of shares redeemed | (56,375,926 | ) | (59,515,447 | ) | ||||
Net decrease from capital share transactions | (8,132,895 | ) | (1,642,283 | ) | ||||
Net increase (decrease) in net assets | (9,258,892 | ) | 127,139 | |||||
Net assets: | ||||||||
Beginning of year | 16,357,300 | 16,230,161 | ||||||
End of year | $ | 7,098,408 | $ | 16,357,300 | ||||
Capital share activity: | ||||||||
Shares sold | 576,992 | 733,065 | ||||||
Shares issued from reinvestment of distributions | 963 | 927 | ||||||
Shares redeemed | (674,978 | ) | (761,395 | ) | ||||
Net decrease in shares | (97,023 | ) | (27,403 | ) |
1 | For the year ended December 31, 2017, the total distributions to shareholders were all from net investment income (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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 84.47 | $ | 73.42 | $ | 64.46 | $ | 67.34 | $ | 60.15 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .45 | .77 | — | b | .72 | .27 | ||||||||||||||
Net gain (loss) on investments (realized and unrealized) | (10.74 | ) | 10.63 | 9.32 | (3.36 | ) | 7.28 | |||||||||||||
Total from investment operations | (10.29 | ) | 11.40 | 9.32 | (2.64 | ) | 7.55 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.72 | ) | (.35 | ) | (.36 | ) | (.24 | ) | (.36 | ) | ||||||||||
Total distributions | (.72 | ) | (.35 | ) | (.36 | ) | (.24 | ) | (.36 | ) | ||||||||||
Net asset value, end of period | $ | 73.46 | $ | 84.47 | $ | 73.42 | $ | 64.46 | $ | 67.34 | ||||||||||
| ||||||||||||||||||||
Total Returnc | (12.28 | %) | 15.57 | % | 15.83 | % | (3.99 | %) | 12.58 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 7,098 | $ | 16,357 | $ | 16,230 | $ | 13,963 | $ | 13,743 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.54 | % | 1.00 | % | — | e | 1.09 | % | 0.41 | % | ||||||||||
Total expenses | 1.72 | % | 1.70 | % | 1.66 | % | 1.60 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 403 | % | 364 | % | 329 | % | 213 | % | 215 | % |
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. |
e | Less than 0.01%. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 63 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, Health Care Fund returned 1.25%, compared with a -4.38% return for the S&P 500 Index. The S&P 500 Health Care Index returned 6.47%.
The Fund is mostly composed of four large industries: pharmaceuticals, biotechnology, health care providers, and health care equipment. Only the biotechnology industry detracted from return. All other industries contributed to return, led by health care equipment.
The best-performing holdings in the Fund were Merck & Co., Inc., Eli Lilly and Co., and Pfizer, Inc. The worst-performing holdings in the Fund included Perrigo Co. Plc, Celgene Corp., and Alkermes 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 | 3.5% |
Pfizer, Inc. | 3.1% |
UnitedHealth Group, Inc. | 3.0% |
Merck & Company, Inc. | 2.7% |
AbbVie, Inc. | 2.3% |
Abbott Laboratories | 2.2% |
Amgen, Inc. | 2.2% |
Eli Lilly & Co. | 2.2% |
Thermo Fisher Scientific, Inc. | 1.8% |
Bristol-Myers Squibb Co. | 1.8% |
Top Ten Total | 24.8% |
“Ten Largest Holdings” excludes any temporary cash investments.
64 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Health Care Fund | 1.25% | 7.91% | 12.98% |
S&P 500 Health Care Index | 6.47% | 11.12% | 14.65% |
S&P 500 Index | (4.38%) | 8.49% | 13.12% |
* | 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. 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, 2018 |
HEALTH CARE FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.5% | ||||||||
Pharmaceuticals - 33.2% | ||||||||
Johnson & Johnson | 5,540 | $ | 714,937 | |||||
Pfizer, Inc. | 14,606 | 637,552 | ||||||
Merck & Company, Inc. | 7,363 | 562,607 | ||||||
AbbVie, Inc. | 5,170 | 476,622 | ||||||
Eli Lilly & Co. | 3,814 | 441,356 | ||||||
Bristol-Myers Squibb Co. | 7,026 | 365,212 | ||||||
CVS Health Corp. | 5,418 | 355,006 | ||||||
Allergan plc | 2,015 | 269,325 | ||||||
Cigna Corp. | 1,399 | 265,687 | ||||||
Zoetis, Inc. | 2,980 | 254,909 | ||||||
McKesson Corp. | 1,640 | 181,171 | ||||||
Teva Pharmaceutical Industries Ltd. ADR* | 10,371 | 159,921 | ||||||
AmerisourceBergen Corp. — Class A | 2,053 | 152,743 | ||||||
Mylan N.V.* | 5,400 | 147,960 | ||||||
Cardinal Health, Inc. | 3,186 | 142,096 | ||||||
Canopy Growth Corp.* | 5,090 | 136,768 | ||||||
DexCom, Inc.* | 1,093 | 130,941 | ||||||
Novartis AG ADR | 1,480 | 126,999 | ||||||
Jazz Pharmaceuticals plc* | 1,012 | 125,448 | ||||||
AstraZeneca plc ADR | 3,188 | 121,080 | ||||||
Sarepta Therapeutics, Inc.* | 1,076 | 117,424 | ||||||
Alkermes plc* | 3,672 | 108,361 | ||||||
Bausch Health Companies, Inc.* | 5,415 | 100,015 | ||||||
Neurocrine Biosciences, Inc.* | 1,372 | 97,975 | ||||||
PRA Health Sciences, Inc.* | 1,013 | 93,155 | ||||||
Perrigo Company plc | 2,365 | 91,644 | ||||||
Nektar Therapeutics* | 2,752 | 90,458 | ||||||
TESARO, Inc.* | 1,071 | 79,522 | ||||||
Array BioPharma, Inc.* | 4,817 | 68,642 | ||||||
Global Blood Therapeutics, Inc.* | 1,527 | 62,683 | ||||||
Heron Therapeutics, Inc.* | 2,266 | 58,780 | ||||||
Mallinckrodt plc* | 2,719 | 42,960 | ||||||
Total Pharmaceuticals | 6,779,959 | |||||||
Healthcare-Products - 27.0% | ||||||||
Abbott Laboratories | 6,235 | 450,978 | ||||||
Thermo Fisher Scientific, Inc. | 1,632 | 365,225 | ||||||
Danaher Corp. | 3,239 | 334,006 | ||||||
Medtronic plc | 3,632 | 330,367 | ||||||
Becton Dickinson and Co. | 1,369 | 308,463 | ||||||
Stryker Corp. | 1,901 | 297,982 | ||||||
Intuitive Surgical, Inc.* | 620 | 296,930 | ||||||
Boston Scientific Corp.* | 7,845 | 277,242 | ||||||
Baxter International, Inc. | 3,548 | 233,529 | ||||||
Edwards Lifesciences Corp.* | 1,441 | 220,718 | ||||||
Zimmer Biomet Holdings, Inc. | 1,736 | 180,058 | ||||||
Align Technology, Inc.* | 789 | 165,240 | ||||||
ResMed, Inc. | 1,412 | 160,784 | ||||||
ABIOMED, Inc.* | 482 | 156,669 | ||||||
IDEXX Laboratories, Inc.* | 842 | 156,629 | ||||||
Cooper Companies, Inc. | 555 | 141,248 | ||||||
Teleflex, Inc. | 537 | 138,804 | ||||||
Hologic, Inc.* | 3,340 | 137,274 | ||||||
Henry Schein, Inc.* | 1,731 | 135,918 | ||||||
Varian Medical Systems, Inc.* | 1,108 | 125,547 | ||||||
LivaNova plc* | 1,310 | 119,826 | ||||||
Dentsply Sirona, Inc. | 3,104 | 115,500 | ||||||
Masimo Corp.* | 879 | 94,378 | ||||||
Bio-Techne Corp. | 633 | 91,608 | ||||||
ICU Medical, Inc.* | 380 | 87,259 | ||||||
Insulet Corp.* | 1,097 | 87,014 | ||||||
Integra LifeSciences Holdings Corp.* | 1,668 | 75,227 | ||||||
Inogen, Inc.* | 540 | 67,052 | ||||||
Tandem Diabetes Care, Inc.* | 1,640 | 62,271 | ||||||
NuVasive, Inc.* | 1,243 | 61,603 | ||||||
Patterson Companies, Inc. | 2,686 | 52,807 | ||||||
Total Healthcare-Products | 5,528,156 | |||||||
Biotechnology - 20.6% | ||||||||
Amgen, Inc. | 2,306 | 448,909 | ||||||
Gilead Sciences, Inc. | 5,555 | 347,465 | ||||||
Biogen, Inc.* | 1,058 | 318,373 | ||||||
Shire plc ADR | 1,656 | 288,210 | ||||||
Vertex Pharmaceuticals, Inc.* | 1,590 | 263,479 | ||||||
Celgene Corp.* | 4,085 | 261,808 | ||||||
Illumina, Inc.* | 872 | 261,539 | ||||||
Regeneron Pharmaceuticals, Inc.* | 692 | 258,462 | ||||||
Alexion Pharmaceuticals, Inc.* | 1,866 | 181,674 | ||||||
BioMarin Pharmaceutical, Inc.* | 1,833 | 156,080 | ||||||
Incyte Corp.* | 2,302 | 146,384 | ||||||
Seattle Genetics, Inc.* | 2,165 | 122,669 | ||||||
Alnylam Pharmaceuticals, Inc.* | 1,559 | 113,667 | ||||||
Ionis Pharmaceuticals, Inc.* | 2,037 | 110,120 | ||||||
Exact Sciences Corp.* | 1,737 | 109,605 | ||||||
Exelixis, Inc.* | 5,055 | 99,432 | ||||||
Bluebird Bio, Inc.* | 922 | 91,462 | ||||||
Sage Therapeutics, Inc.* | 912 | 87,361 | ||||||
United Therapeutics Corp.* | 800 | 87,120 | ||||||
Loxo Oncology, Inc.* | 584 | 81,801 | ||||||
Intercept Pharmaceuticals, Inc.* | 673 | 67,832 | ||||||
Ligand Pharmaceuticals, Inc. — Class B* | 492 | 66,764 | ||||||
ACADIA Pharmaceuticals, Inc.* | 3,907 | 63,176 | ||||||
Myriad Genetics, Inc.* | 2,040 | 59,303 | ||||||
Immunomedics, Inc.* | 4,057 | 57,893 | ||||||
PTC Therapeutics, Inc.* | 1,548 | 53,127 | ||||||
Total Biotechnology | 4,203,715 | |||||||
Healthcare-Services - 13.7% | ||||||||
UnitedHealth Group, Inc. | 2,449 | 610,095 | ||||||
Anthem, Inc. | 1,250 | 328,288 | ||||||
HCA Healthcare, Inc. | 2,069 | 257,487 | ||||||
Humana, Inc. | 880 | 252,102 | ||||||
IQVIA Holdings, Inc.* | 1,629 | 189,241 | ||||||
Centene Corp.* | 1,629 | 187,824 | ||||||
Laboratory Corporation of America Holdings* | 1,114 | 140,765 | ||||||
WellCare Health Plans, Inc.* | 590 | 139,293 | ||||||
Quest Diagnostics, Inc. | 1,572 | 130,900 | ||||||
Universal Health Services, Inc. — Class B | 1,112 | 129,615 | ||||||
DaVita, Inc.* | 2,238 | 115,168 | ||||||
Molina Healthcare, Inc.* | 906 | 105,295 |
66| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
HEALTH CARE FUND |
| Shares | Value | ||||||
Amedisys, Inc.* | 660 | $ | 77,293 | |||||
Teladoc Health, Inc.* | 1,470 | 72,868 | ||||||
Acadia Healthcare Company, Inc.* | 2,230 | 57,333 | ||||||
Total Healthcare-Services | 2,793,567 | |||||||
Electronics - 2.4% | ||||||||
Agilent Technologies, Inc. | 2,701 | 182,210 | ||||||
Waters Corp.* | 800 | 150,920 | ||||||
Mettler-Toledo International, Inc.* | 264 | 149,313 | ||||||
Total Electronics | 482,443 | |||||||
Software - 2.3% | ||||||||
Cerner Corp.* | 3,157 | 165,553 | ||||||
Veeva Systems, Inc. — Class A* | 1,576 | 140,768 | ||||||
athenahealth, Inc.* | 690 | 91,032 | ||||||
Medidata Solutions, Inc.* | 1,184 | 79,825 | ||||||
Total Software | 477,178 | |||||||
Commercial Services - 0.3% | ||||||||
HealthEquity, Inc.* | 1,225 | 73,071 | ||||||
Total Common Stocks | ||||||||
(Cost $10,208,383) | 20,338,089 | |||||||
| Face |
| ||||||
REPURCHASE AGREEMENTS††,1 - 0.7% | ||||||||
JPMorgan Chase & Co. | $ | 84,912 | 84,912 | |||||
Barclays Capital | 35,313 | 35,313 | ||||||
Bank of America Merrill Lynch | 23,542 | 23,542 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $143,767) | 143,767 | |||||||
Total Investments - 100.2% | ||||||||
(Cost $10,352,150) | $ | 20,481,856 | ||||||
Other Assets & Liabilities, net - (0.2)% | (44,637 | ) | ||||||
Total Net Assets - 100.0% | $ | 20,437,219 |
* | 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 | Repurchase Agreements — See Note 4. |
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, 2018 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 20,338,089 | $ | — | $ | — | $ | 20,338,089 | ||||||||
Repurchase Agreements | — | 143,767 | — | 143,767 | ||||||||||||
Total Assets | $ | 20,338,089 | $ | 143,767 | $ | — | $ | 20,481,856 |
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, 2018, there were no transfers between levels.
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 67 |
HEALTH CARE FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments, at value (cost $10,208,383) | $ | 20,338,089 | ||
Repurchase agreements, at value (cost $143,767) | 143,767 | |||
Receivables: | ||||
Securities sold | 367,479 | |||
Dividends | 14,506 | |||
Foreign tax reclaims | 1,306 | |||
Fund shares sold | 1,192 | |||
Interest | 12 | |||
Total assets | 20,866,351 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 349,264 | |||
Management fees | 15,601 | |||
Transfer agent and administrative fees | 4,589 | |||
Investor service fees | 4,589 | |||
Portfolio accounting fees | 1,835 | |||
Trustees’ fees* | 455 | |||
Miscellaneous | 52,799 | |||
Total liabilities | 429,132 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 20,437,219 | ||
Net assets consist of: | ||||
Paid in capital | $ | 12,604,236 | ||
Total distributable earnings (loss) | 7,832,983 | |||
Net assets | $ | 20,437,219 | ||
Capital shares outstanding | 327,610 | |||
Net asset value per share | $ | 62.38 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $304) | $ | 237,712 | ||
Interest | 3,018 | |||
Income from securities lending, net | 3,130 | |||
Total investment income | 243,860 | |||
Expenses: | ||||
Management fees | 205,933 | |||
Investor service fees | 60,568 | |||
Transfer agent and administrative fees | 60,568 | |||
Professional Fees | 29,374 | |||
Portfolio accounting fees | 24,227 | |||
Trustees’ fees* | 5,963 | |||
Custodian fees | 3,444 | |||
Line of credit fees | 189 | |||
Miscellaneous | 27,529 | |||
Total expenses | 417,795 | |||
Net investment loss | (173,935 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 1,244,879 | |||
Net realized gain | 1,244,879 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (1,637,146 | ) | ||
Net change in unrealized appreciation (depreciation) | (1,637,146 | ) | ||
Net realized and unrealized loss | (392,267 | ) | ||
Net decrease in net assets resulting from operations | $ | (566,202 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
68| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
HEALTH CARE FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (173,935 | ) | $ | (176,476 | ) | ||
Net realized gain on investments | 1,244,879 | 1,060,371 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (1,637,146 | ) | 3,512,248 | |||||
Net increase (decrease) in net assets resulting from operations | (566,202 | ) | 4,396,143 | |||||
Distributions to shareholders | (331,012 | ) | (1,042,418 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 48,533,376 | 40,295,378 | ||||||
Distributions reinvested | 331,012 | 1,042,418 | ||||||
Cost of shares redeemed | (50,187,301 | ) | (40,812,108 | ) | ||||
Net increase (decrease) from capital share transactions | (1,322,913 | ) | 525,688 | |||||
Net increase (decrease) in net assets | (2,220,127 | ) | 3,879,413 | |||||
Net assets: | ||||||||
Beginning of year | 22,657,346 | 18,777,933 | ||||||
End of year | $ | 20,437,219 | $ | 22,657,346 | ||||
Capital share activity: | ||||||||
Shares sold | 720,012 | 675,760 | ||||||
Shares issued from reinvestment of distributions | 4,840 | 17,299 | ||||||
Shares redeemed | (760,178 | ) | (687,013 | ) | ||||
Net increase (decrease) in shares | (35,326 | ) | 6,046 |
1 | For the year ended December 31, 2017, the total distributions to shareholders were all from net realized gains (See Note 9). |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 69 |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 62.43 | $ | 52.62 | $ | 60.47 | $ | 58.82 | $ | 48.91 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.48 | ) | (.44 | ) | (.37 | ) | (.30 | ) | (.31 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 1.33 | c | 12.39 | (5.36 | ) | 3.11 | 12.29 | |||||||||||||
Total from investment operations | .85 | 11.95 | (5.73 | ) | 2.81 | 11.98 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (.90 | ) | (2.14 | ) | (2.12 | ) | (1.16 | ) | (2.07 | ) | ||||||||||
Total distributions | (.90 | ) | (2.14 | ) | (2.12 | ) | (1.16 | ) | (2.07 | ) | ||||||||||
Net asset value, end of period | $ | 62.38 | $ | 62.43 | $ | 52.62 | $ | 60.47 | $ | 58.82 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 1.25 | % | 22.86 | % | (9.70 | %) | 4.53 | % | 24.62 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 20,437 | $ | 22,657 | $ | 18,778 | $ | 36,849 | $ | 43,294 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.72 | %) | (0.73 | %) | (0.67 | %) | (0.47 | %) | (0.57 | %) | ||||||||||
Total expenses | 1.72 | % | 1.70 | % | 1.66 | % | 1.59 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 194 | % | 156 | % | 146 | % | 154 | % | 176 | % |
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 | The amount shown for a share outstanding throughout the period does not accord with the aggregate net losses on investments for the year because of the sales and purchases of fund shares in relation to fluctuating market value of the investments of the Fund. |
70| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, Internet Fund returned -3.20%, compared with a return of -4.38% for the S&P 500 Index. The S&P 500 Information Technology Index returned -0.29%.
The interactive media & services industry detracted the most from return, followed by the internet & direct marketing retail industry. The leading contributors were the IT services industry and the software industry.
Amazon.com, Inc., Netflix, Inc., and Twilio, Inc. Class A added the most to Fund performance for the year. Facebook, Inc. Class A, Activision Blizzard, Inc., and Vipshop Holdings Ltd. ADR 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 | 7.9% |
Amazon.com, Inc. | 7.5% |
Facebook, Inc. — Class A | 5.8% |
Cisco Systems, Inc. | 4.1% |
Netflix, Inc. | 3.1% |
salesforce.com, Inc. | 3.0% |
PayPal Holdings, Inc. | 2.9% |
Alibaba Group Holding Ltd. ADR | 2.8% |
Booking Holdings, Inc. | 2.5% |
Activision Blizzard, Inc. | 1.8% |
Top Ten Total | 41.4% |
“Ten Largest Holdings” excludes any temporary cash investments.
THE RYDEX FUNDS ANNUAL REPORT | 71 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Internet Fund | (3.20%) | 8.39% | 16.89% |
S&P 500 Information Technology Index | (0.29%) | 14.93% | 18.36% |
S&P 500 Index | (4.38%) | 8.49% | 13.12% |
* | 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. 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. |
72 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2018 |
INTERNET FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 101.6% | ||||||||
Internet - 59.9% | ||||||||
Alphabet, Inc. — Class A* | 610 | $ | 637,426 | |||||
Amazon.com, Inc.* | 403 | 605,294 | ||||||
Facebook, Inc. — Class A* | 3,572 | 468,253 | ||||||
Netflix, Inc.* | 944 | 252,671 | ||||||
Alibaba Group Holding Ltd. ADR* | 1,647 | 225,754 | ||||||
Booking Holdings, Inc.* | 118 | 203,246 | ||||||
Baidu, Inc. ADR* | 863 | 136,872 | ||||||
eBay, Inc.* | 4,377 | 122,862 | ||||||
JD.com, Inc. ADR* | 5,560 | 116,371 | ||||||
Twitter, Inc.* | 3,623 | 104,125 | ||||||
Palo Alto Networks, Inc.* | 538 | 101,332 | ||||||
VeriSign, Inc.* | 671 | 99,503 | ||||||
Ctrip.com International Ltd. ADR* | 3,581 | 96,902 | ||||||
Expedia Group, Inc. | 854 | 96,203 | ||||||
IAC/InterActiveCorp* | 512 | 93,716 | ||||||
Match Group, Inc. | 1,953 | 83,530 | ||||||
GoDaddy, Inc. — Class A* | 1,242 | 81,500 | ||||||
F5 Networks, Inc.* | 457 | 74,048 | ||||||
Weibo Corp. ADR* | 1,255 | 73,330 | ||||||
Twilio, Inc. — Class A* | 815 | 72,779 | ||||||
Shopify, Inc. — Class A* | 519 | 71,856 | ||||||
MercadoLibre, Inc.* | 243 | 71,163 | ||||||
Wayfair, Inc. — Class A* | 759 | 68,371 | ||||||
GrubHub, Inc.* | 849 | 65,212 | ||||||
YY, Inc. ADR* | 1,078 | 64,529 | ||||||
Wix.com Ltd.* | 710 | 64,141 | ||||||
TripAdvisor, Inc.* | 1,182 | 63,757 | ||||||
Zillow Group, Inc. — Class A* | 1,991 | 62,577 | ||||||
Okta, Inc.* | 970 | 61,886 | ||||||
Zillow Group, Inc. — Class C* | 1,958 | 61,834 | ||||||
Autohome, Inc. ADR* | 780 | 61,019 | ||||||
58.com, Inc. ADR* | 1,111 | 60,227 | ||||||
Baozun, Inc. ADR*,1 | 2,039 | 59,559 | ||||||
SINA Corp.* | 1,090 | 58,468 | ||||||
Etsy, Inc.* | 1,172 | 55,752 | ||||||
Cargurus, Inc.* | 1,360 | 45,873 | ||||||
Yelp, Inc. — Class A* | 1,172 | 41,008 | ||||||
Stamps.com, Inc.* | 257 | 39,999 | ||||||
Shutterfly, Inc.* | 726 | 29,229 | ||||||
Total Internet | 4,852,177 | |||||||
Software - 18.4% | ||||||||
salesforce.com, Inc.* | 1,803 | 246,957 | ||||||
Activision Blizzard, Inc. | 3,069 | 142,923 | ||||||
Electronic Arts, Inc.* | 1,475 | 116,392 | ||||||
Citrix Systems, Inc. | 845 | 86,579 | ||||||
Veeva Systems, Inc. — Class A* | 962 | 85,926 | ||||||
Take-Two Interactive Software, Inc.* | 780 | 80,293 | ||||||
NetEase, Inc. ADR | 341 | 80,261 | ||||||
Momo, Inc. ADR* | 3,121 | 74,124 | ||||||
Akamai Technologies, Inc.* | 1,211 | 73,968 | ||||||
Dropbox, Inc. — Class A* | 3,270 | 66,806 | ||||||
Bilibili, Inc. ADR* | 4,020 | 58,652 | ||||||
HUYA, Inc. ADR* | 3,710 | 57,431 | ||||||
HubSpot, Inc.* | 410 | 51,549 | ||||||
New Relic, Inc.* | 627 | 50,768 | ||||||
MongoDB, Inc.* | 580 | 48,569 | ||||||
Coupa Software, Inc.* | 710 | 44,631 | ||||||
j2 Global, Inc. | 626 | 43,432 | ||||||
Cornerstone OnDemand, Inc.* | 790 | 39,840 | ||||||
Box, Inc. — Class A* | 2,148 | 36,258 | ||||||
Total Software | 1,485,359 | |||||||
Telecommunications - 11.7% | ||||||||
Cisco Systems, Inc. | 7,730 | 334,941 | ||||||
Motorola Solutions, Inc. | 889 | 102,271 | ||||||
Arista Networks, Inc.* | 469 | 98,818 | ||||||
Juniper Networks, Inc. | 2,697 | 72,576 | ||||||
GDS Holdings Ltd. ADR* | 2,470 | 57,032 | ||||||
ARRIS International plc* | 1,807 | 55,240 | ||||||
Ciena Corp.* | 1,616 | 54,799 | ||||||
LogMeIn, Inc. | 598 | 48,779 | ||||||
ViaSat, Inc.* | 739 | 43,564 | ||||||
CommScope Holding Company, Inc.* | 2,560 | 41,958 | ||||||
Finisar Corp.* | 1,761 | 38,038 | ||||||
Total Telecommunications | 948,016 | |||||||
Commercial Services - 4.4% | ||||||||
PayPal Holdings, Inc.* | 2,803 | 235,704 | ||||||
CoStar Group, Inc.* | 245 | 82,648 | ||||||
2U, Inc.* | 802 | 39,876 | ||||||
Total Commercial Services | 358,228 | |||||||
Diversified Financial Services - 2.5% | ||||||||
TD Ameritrade Holding Corp. | 2,580 | 126,317 | ||||||
E*TRADE Financial Corp. | 1,800 | 78,984 | ||||||
Total Diversified Financial Services | 205,301 | |||||||
Computers - 1.7% | ||||||||
Nutanix, Inc. — Class A* | 1,563 | 65,005 | ||||||
Lumentum Holdings, Inc.* | 1,011 | 42,479 | ||||||
NetScout Systems, Inc.* | 1,351 | 31,924 | ||||||
Total Computers | �� | 139,408 | ||||||
REITs - 1.5% | ||||||||
Equinix, Inc. | 347 | 122,338 | ||||||
Retail - 0.9% | ||||||||
Qurate Retail, Inc. — Class A* | 3,603 | 70,330 | ||||||
Advertising - 0.6% | ||||||||
Trade Desk, Inc. — Class A* | 443 | 51,414 | ||||||
Total Common Stocks | ||||||||
(Cost $4,692,168) | 8,232,571 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 73 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
INTERNET FUND |
| Face | Value | ||||||
REPURCHASE AGREEMENTS††,2 - 3.2% | ||||||||
JPMorgan Chase & Co. | $ | 150,847 | $ | 150,847 | ||||
Barclays Capital | 62,733 | 62,733 | ||||||
Bank of America Merrill Lynch | 41,822 | 41,822 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $255,402) | 255,402 | |||||||
| Shares |
| ||||||
SECURITIES LENDING COLLATERAL†,3 - 0.2% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 2.32%4 | 14,860 | 14,860 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $14,860) | 14,860 | |||||||
Total Investments - 105.0% | ||||||||
(Cost $4,962,430) | $ | 8,502,833 | ||||||
Other Assets & Liabilities, net - (5.0)% | (403,465 | ) | ||||||
Total Net Assets - 100.0% | $ | 8,099,368 |
* | 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 a portion of this security is on loan at December 31, 2018 — 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, 2018. |
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, 2018 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 8,232,571 | $ | — | $ | — | $ | 8,232,571 | ||||||||
Repurchase Agreements | — | 255,402 | — | 255,402 | ||||||||||||
Securities Lending Collateral | 14,860 | — | — | 14,860 | ||||||||||||
Total Assets | $ | 8,247,431 | $ | 255,402 | $ | — | $ | 8,502,833 |
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, 2018, there were no transfers between levels.
74| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INTERNET FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments, at value - including $16,241 of securities loaned (cost $4,707,028) | $ | 8,247,431 | ||
Repurchase agreements, at value (cost $255,402) | 255,402 | |||
Cash | 2,515 | |||
Receivables: | ||||
Fund shares sold | 82,847 | |||
Dividends | 512 | |||
Securities lending income | 113 | |||
Interest | 21 | |||
Total assets | 8,588,841 | |||
Liabilities: | ||||
Payable for: | ||||
Securities purchased | 252,314 | |||
Fund shares redeemed | 187,344 | |||
Return of securities lending collateral | 17,375 | |||
Management fees | 5,777 | |||
Transfer agent and administrative fees | 1,699 | |||
Investor service fees | 1,699 | |||
Portfolio accounting fees | 680 | |||
Trustees’ fees* | 198 | |||
Miscellaneous | 22,387 | |||
Total liabilities | 489,473 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 8,099,368 | ||
Net assets consist of: | ||||
Paid in capital | $ | 5,628,378 | ||
Total distributable earnings (loss) | 2,470,990 | |||
Net assets | $ | 8,099,368 | ||
Capital shares outstanding | 97,696 | |||
Net asset value per share | $ | 82.90 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $539) | $ | 36,768 | ||
Interest | 1,520 | |||
Income from securities lending, net | 11,028 | |||
Total investment income | 49,316 | |||
Expenses: | ||||
Management fees | 98,315 | |||
Investor service fees | 28,916 | |||
Transfer agent and administrative fees | 28,916 | |||
Professional fees | 13,546 | |||
Portfolio accounting fees | 11,567 | |||
Trustees’ fees* | 3,143 | |||
Custodian fees | 1,671 | |||
Line of credit fees | 62 | |||
Miscellaneous | 12,572 | |||
Total expenses | 198,708 | |||
Net investment loss | (149,392 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 304,663 | |||
Net realized gain | 304,663 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (880,860 | ) | ||
Net change in unrealized appreciation (depreciation) | (880,860 | ) | ||
Net realized and unrealized loss | (576,197 | ) | ||
Net decrease in net assets resulting from operations | $ | (725,589 | ) |
* | 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| 75 |
INTERNET FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (149,392 | ) | $ | (100,029 | ) | ||
Net realized gain on investments | 304,663 | 1,056,051 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (880,860 | ) | 1,693,938 | |||||
Net increase (decrease) in net assets resulting from operations | (725,589 | ) | 2,649,960 | |||||
Distributions to shareholders | (206,047 | ) | (55,537 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 53,056,598 | 40,413,575 | ||||||
Distributions reinvested | 206,047 | 55,537 | ||||||
Cost of shares redeemed | (53,174,599 | ) | (42,605,993 | ) | ||||
Net increase (decrease) from capital share transactions | 88,046 | (2,136,881 | ) | |||||
Net increase (decrease) in net assets | (843,590 | ) | 457,542 | |||||
Net assets: | ||||||||
Beginning of year | 8,942,958 | 8,485,416 | ||||||
End of year | $ | 8,099,368 | $ | 8,942,958 | ||||
Capital share activity: | ||||||||
Shares sold | 541,673 | 514,563 | ||||||
Shares issued from reinvestment of distributions | 1,959 | 706 | ||||||
Shares redeemed | (548,920 | ) | (542,567 | ) | ||||
Net decrease in shares | (5,288 | ) | (27,298 | ) |
1 | For the year ended December 31, 2017, the total distributions to shareholders were all from net realized gains (see Note 9). |
76| 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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 86.84 | $ | 65.13 | $ | 70.60 | $ | 79.11 | $ | 85.98 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (1.25 | ) | (.79 | ) | (.14 | ) | (.76 | ) | (.92 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | (1.23 | ) | 22.88 | (3.30 | ) | 7.29 | 2.61 | |||||||||||||
Total from investment operations | (2.48 | ) | 22.09 | (3.44 | ) | 6.53 | 1.69 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (1.46 | ) | (.38 | ) | (2.03 | ) | (15.04 | ) | (8.56 | ) | ||||||||||
Total distributions | (1.46 | ) | (.38 | ) | (2.03 | ) | (15.04 | ) | (8.56 | ) | ||||||||||
Net asset value, end of period | $ | 82.90 | $ | 86.84 | $ | 65.13 | $ | 70.60 | $ | 79.11 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (3.20 | %) | 33.96 | % | 4.44 | % | 8.36 | % | 1.96 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 8,099 | $ | 8,943 | $ | 8,485 | $ | 13,036 | $ | 6,624 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (1.29 | %) | (1.01 | %) | (0.78 | %) | (1.03 | %) | (1.06 | %) | ||||||||||
Total expenses | 1.72 | % | 1.71 | % | 1.66 | % | 1.61 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 485 | % | 365 | % | 384 | % | 363 | % | 283 | % |
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 NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 77 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, Leisure Fund returned -13.44%, compared with a return of -4.38% for the S&P 500 Index. The S&P 500 Consumer Discretionary Index returned 0.83%.
Only the interactive media & services industry contributed to return. The hotels, restaurants & leisure industry and the media industry detracted the most from the Fund’s return for the period.
Holdings that contributed the most to the Fund’s return were Twenty-First Century Fox, Inc. Class A, World Wrestling Entertainment, Inc. Class A, and Chipotle Mexican Grill, Inc. Class A. Philip Morris International, Inc., Altria Group, Inc., and DISH Network Corp. Class A 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) | |
Walt Disney Co. | 3.8% |
Comcast Corp. — Class A | 3.5% |
McDonald’s Corp. | 3.4% |
Netflix, Inc. | 3.2% |
Philip Morris International, Inc. | 3.1% |
Altria Group, Inc. | 2.8% |
Twenty-First Century Fox, Inc. — Class A | 2.8% |
Starbucks Corp. | 2.6% |
Charter Communications, Inc. — Class A | 2.5% |
Las Vegas Sands Corp. | 1.9% |
Top Ten Total | 29.6% |
“Ten Largest Holdings” excludes any temporary cash investments.
78 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Leisure Fund | (13.44%) | 4.20% | 14.50% |
S&P 500 Consumer Discretionary Index | 0.83% | 9.69% | 18.35% |
S&P 500 Index | (4.38%) | 8.49% | 13.12% |
* | 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. The S&P 500 Index and 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 | 79 |
SCHEDULE OF INVESTMENTS | December 31, 2018 |
LEISURE FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.9% | ||||||||
Media - 25.2% | ||||||||
Walt Disney Co. | 1,228 | $ | 134,650 | |||||
Comcast Corp. — Class A | 3,699 | 125,951 | ||||||
Twenty-First Century Fox, Inc. — Class A | 2,051 | 98,694 | ||||||
Charter Communications, Inc. — Class A* | 311 | 88,626 | ||||||
Discovery, Inc. — Class A*,1 | 1,989 | 49,208 | ||||||
CBS Corp. — Class B | 964 | 42,146 | ||||||
Liberty Broadband Corp. — Class C* | 526 | 37,888 | ||||||
Altice USA, Inc. — Class A | 2,195 | 36,261 | ||||||
DISH Network Corp. — Class A* | 1,399 | 34,933 | ||||||
Viacom, Inc. — Class B | 1,321 | 33,950 | ||||||
Grupo Televisa SAB ADR | 2,261 | 28,443 | ||||||
News Corp. — Class A | 2,353 | 26,706 | ||||||
World Wrestling Entertainment, Inc. — Class A | 333 | 24,882 | ||||||
Cable One, Inc. | 28 | 22,963 | ||||||
Tribune Media Co. — Class A | 460 | 20,875 | ||||||
New York Times Co. — Class A | 885 | 19,727 | ||||||
Nexstar Media Group, Inc. — Class A | 245 | 19,267 | ||||||
AMC Networks, Inc. — Class A* | 343 | 18,824 | ||||||
Sinclair Broadcast Group, Inc. — Class A | 630 | 16,594 | ||||||
TEGNA, Inc. | 1,439 | 15,642 | ||||||
Total Media | 896,230 | |||||||
Retail - 18.2% | ||||||||
McDonald’s Corp. | 688 | 122,168 | ||||||
Starbucks Corp. | 1,459 | 93,960 | ||||||
Yum! Brands, Inc. | 614 | 56,439 | ||||||
Chipotle Mexican Grill, Inc. — Class A* | 85 | 36,702 | ||||||
Darden Restaurants, Inc. | 364 | 36,349 | ||||||
Domino’s Pizza, Inc. | 138 | 34,223 | ||||||
Restaurant Brands International, Inc. | 629 | 32,897 | ||||||
Yum China Holdings, Inc. | 943 | 31,619 | ||||||
Dunkin’ Brands Group, Inc. | 370 | 23,724 | ||||||
Texas Roadhouse, Inc. — Class A | 361 | 21,552 | ||||||
Cracker Barrel Old Country Store, Inc.1 | 127 | 20,302 | ||||||
Wendy’s Co. | 1,258 | 19,637 | ||||||
Cheesecake Factory, Inc. | 342 | 14,880 | ||||||
Jack in the Box, Inc. | 189 | 14,672 | ||||||
Wingstop, Inc. | 225 | 14,443 | ||||||
Dave & Buster’s Entertainment, Inc. | 309 | 13,769 | ||||||
Shake Shack, Inc. — Class A* | 298 | 13,535 | ||||||
Brinker International, Inc. | 297 | 13,062 | ||||||
Bloomin’ Brands, Inc. | 728 | 13,024 | ||||||
Papa John���s International, Inc. | 285 | 11,346 | ||||||
BJ’s Restaurants, Inc. | 208 | 10,518 | ||||||
Total Retail | 648,821 | |||||||
Lodging - 12.5% | ||||||||
Las Vegas Sands Corp. | 1,311 | 68,238 | ||||||
Marriott International, Inc. — Class A | 595 | 64,593 | ||||||
Hilton Worldwide Holdings, Inc. | 684 | 49,111 | ||||||
MGM Resorts International | 1,567 | 38,015 | ||||||
Wynn Resorts Ltd. | 358 | 35,410 | ||||||
Melco Resorts & Entertainment Ltd. ADR | 1,951 | 34,377 | ||||||
Huazhu Group Ltd. ADR | 1,076 | 30,806 | ||||||
Hyatt Hotels Corp. — Class A | 427 | 28,865 | ||||||
Wyndham Hotels & Resorts, Inc. | 500 | 22,685 | ||||||
Choice Hotels International, Inc. | 299 | 21,402 | ||||||
Wyndham Destinations, Inc. | 549 | 19,676 | ||||||
Hilton Grand Vacations, Inc.* | 651 | 17,180 | ||||||
Boyd Gaming Corp. | 804 | 16,707 | ||||||
Total Lodging | 447,065 | |||||||
Entertainment - 8.8% | ||||||||
Live Nation Entertainment, Inc.* | 676 | 33,293 | ||||||
Stars Group, Inc.* | 1,887 | 31,173 | ||||||
Vail Resorts, Inc. | 143 | 30,147 | ||||||
Madison Square Garden Co. — Class A* | 101 | 27,038 | ||||||
Six Flags Entertainment Corp. | 418 | 23,254 | ||||||
Cinemark Holdings, Inc. | 601 | 21,516 | ||||||
Marriott Vacations Worldwide Corp. | 286 | 20,166 | ||||||
Churchill Downs, Inc. | 79 | 19,271 | ||||||
Eldorado Resorts, Inc.* | 504 | 18,250 | ||||||
International Game Technology plc | 1,202 | 17,585 | ||||||
Red Rock Resorts, Inc. — Class A | 791 | 16,065 | ||||||
Penn National Gaming, Inc.* | 851 | 16,024 | ||||||
SeaWorld Entertainment, Inc.* | 672 | 14,845 | ||||||
Scientific Games Corp. — Class A* | 783 | 14,000 | ||||||
AMC Entertainment Holdings, Inc. — Class A | 943 | 11,580 | ||||||
Total Entertainment | 314,207 | |||||||
Leisure Time - 7.1% | ||||||||
Carnival Corp. | 1,186 | 58,470 | ||||||
Royal Caribbean Cruises Ltd. | 484 | 47,330 | ||||||
Norwegian Cruise Line Holdings Ltd.* | 745 | 31,581 | ||||||
Harley-Davidson, Inc. | 739 | 25,215 | ||||||
Planet Fitness, Inc. — Class A* | 446 | 23,914 | ||||||
Polaris Industries, Inc. | 302 | 23,157 | ||||||
Brunswick Corp. | 461 | 21,413 | ||||||
Callaway Golf Co. | 827 | 12,653 | ||||||
Vista Outdoor, Inc.* | 936 | 10,624 | ||||||
Total Leisure Time | 254,357 | |||||||
Software - 7.1% | ||||||||
Activision Blizzard, Inc. | 1,352 | 62,963 | ||||||
Electronic Arts, Inc.* | 653 | 51,528 | ||||||
NetEase, Inc. ADR | 182 | 42,837 | ||||||
Take-Two Interactive Software, Inc.* | 346 | 35,617 | ||||||
Bilibili, Inc. ADR* | 2,035 | 29,691 | ||||||
HUYA, Inc. ADR* | 1,866 | 28,886 | ||||||
Total Software | 251,522 | |||||||
Agriculture - 6.7% | ||||||||
Philip Morris International, Inc. | 1,632 | 108,952 | ||||||
Altria Group, Inc. | 2,017 | 99,620 | ||||||
British American Tobacco plc ADR | 960 | 30,585 | ||||||
Total Agriculture | 239,157 |
80| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
LEISURE FUND |
| Shares | Value | ||||||
Beverages - 6.3% | ||||||||
Constellation Brands, Inc. — Class A | 350 | $ | 56,287 | |||||
Brown-Forman Corp. — Class B | 1,073 | 51,054 | ||||||
Molson Coors Brewing Co. — Class B | 657 | 36,897 | ||||||
Anheuser-Busch InBev S.A. ADR | 489 | 32,181 | ||||||
Diageo plc ADR | 201 | 28,502 | ||||||
Boston Beer Company, Inc. — Class A* | 73 | 17,581 | ||||||
Total Beverages | 222,502 | |||||||
Internet - 5.4% | ||||||||
Netflix, Inc.* | 420 | 112,417 | ||||||
iQIYI, Inc. ADR*,1 | 2,748 | 40,863 | ||||||
Spotify Technology S.A.* | 350 | 39,725 | ||||||
Total Internet | 193,005 | |||||||
Toys, Games & Hobbies - 1.0% | ||||||||
Hasbro, Inc. | 422 | 34,288 | ||||||
Food Service - 0.8% | ||||||||
Aramark | 975 | 28,246 | ||||||
Telecommunications - 0.6% | ||||||||
GCI Liberty, Inc. — Class A* | 537 | 22,103 | ||||||
Miscellaneous Manufacturing - 0.2% | ||||||||
American Outdoor Brands Corp.* | 683 | 8,783 | ||||||
Total Common Stocks | ||||||||
(Cost $2,125,973) | 3,560,286 | |||||||
RIGHTS††† - 0.0% | ||||||||
Nexstar Media Group, Inc. | ||||||||
Expires 01/18/19*,5 | 1,910 | — | ||||||
Total Rights | ||||||||
(Cost $—) | — | |||||||
| Face |
| ||||||
REPURCHASE AGREEMENTS††,2 - 0.4% | ||||||||
JPMorgan Chase & Co. | $ | 8,610 | 8,610 | |||||
Barclays Capital | 3,581 | 3,581 | ||||||
Bank of America Merrill Lynch | 2,387 | 2,387 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $14,578) | 14,578 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 2.0% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 2.32%4 | 71,610 | 71,610 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $71,610) | 71,610 | |||||||
Total Investments - 102.3% | ||||||||
(Cost $2,212,161) | $ | 3,646,474 | ||||||
Other Assets & Liabilities, net - (2.3)% | (81,889 | ) | ||||||
Total Net Assets - 100.0% | $ | 3,564,585 |
* | 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 a portion of this security is on loan at December 31, 2018 — 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, 2018. |
5 | Security was fair valued by the Valuation Committee at December 31, 2018. 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. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 81 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
LEISURE FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2018 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 3,560,286 | $ | — | $ | — | $ | 3,560,286 | ||||||||
Rights | — | — | — | * | — | |||||||||||
Repurchase Agreements | — | 14,578 | — | 14,578 | ||||||||||||
Securities Lending Collateral | 71,610 | — | — | 71,610 | ||||||||||||
Total Assets | $ | 3,631,896 | $ | 14,578 | $ | — | $ | 3,646,474 |
* | Includes securities with 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, 2018, there were no transfers between levels.
82| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
LEISURE FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments, at value - including $79,684 of securities loaned (cost $2,197,583) | $ | 3,631,896 | ||
Repurchase agreements, at value (cost $14,578) | 14,578 | |||
Cash | 12,119 | |||
Receivables: | ||||
Dividends | 9,461 | |||
Foreign tax reclaims | 610 | |||
Fund shares sold | 230 | |||
Securities lending income | 119 | |||
Total assets | 3,669,013 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 83,729 | |||
Management fees | 2,884 | |||
Transfer agent and administrative fees | 848 | |||
Investor service fees | 848 | |||
Fund shares redeemed | 516 | |||
Portfolio accounting fees | 339 | |||
Trustees’ fees* | 140 | |||
Miscellaneous | 15,124 | |||
Total liabilities | 104,428 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 3,564,585 | ||
Net assets consist of: | ||||
Paid in capital | $ | 2,697,377 | ||
Total distributable earnings (loss) | 867,208 | |||
Net assets | $ | 3,564,585 | ||
Capital shares outstanding | 42,941 | |||
Net asset value per share | $ | 83.01 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $448) | $ | 144,350 | ||
Interest | 848 | |||
Income from securities lending, net | 4,843 | |||
Total investment income | 150,041 | |||
Expenses: | ||||
Management fees | 65,363 | |||
Investor service fees | 19,224 | |||
Transfer agent and administrative fees | 19,224 | |||
Professional fees | 10,364 | |||
Portfolio accounting fees | 7,690 | |||
Trustees’ fees* | 2,246 | |||
Custodian fees | 1,123 | |||
Line of credit fees | 18 | |||
Miscellaneous | 6,454 | |||
Total expenses | 131,706 | |||
Net investment income | 18,335 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 235,639 | |||
Net realized gain | 235,639 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (1,077,539 | ) | ||
Net change in unrealized appreciation (depreciation) | (1,077,539 | ) | ||
Net realized and unrealized loss | (841,900 | ) | ||
Net decrease in net assets resulting from operations | $ | (823,565 | ) |
* | 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| 83 |
LEISURE FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 18,335 | $ | 21,293 | ||||
Net realized gain on investments | 235,639 | 890,275 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (1,077,539 | ) | 579,319 | |||||
Net increase (decrease) in net assets resulting from operations | (823,565 | ) | 1,490,887 | |||||
Distributions to shareholders | (238,213 | ) | (37,012 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 17,293,584 | 26,102,966 | ||||||
Distributions reinvested | 238,213 | 37,012 | ||||||
Cost of shares redeemed | (22,331,989 | ) | (26,958,562 | ) | ||||
Net decrease from capital share transactions | (4,800,192 | ) | (818,584 | ) | ||||
Net increase (decrease) in net assets | (5,861,970 | ) | 635,291 | |||||
Net assets: | ||||||||
Beginning of year | 9,426,555 | 8,791,264 | ||||||
End of year | $ | 3,564,585 | $ | 9,426,555 | ||||
Capital share activity: | ||||||||
Shares sold | 176,365 | 284,482 | ||||||
Shares issued from reinvestment of distributions | 2,434 | 401 | ||||||
Shares redeemed | (231,728 | ) | (295,944 | ) | ||||
Net decrease in shares | (52,929 | ) | (11,061 | ) |
1 | For the year ended December 31, 2017, the distributions from net investment income and realized gains were as follows (see Note 9): |
Net investment income | $ | (20,573 | ) | ||
Net realized gains | (16,439 | ) |
84| 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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 98.33 | $ | 82.21 | $ | 76.44 | $ | 87.81 | $ | 95.41 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .23 | .24 | .18 | .28 | .12 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | (13.07 | ) | 16.28 | 7.07 | .87 | 6.53 | ||||||||||||||
Total from investment operations | (12.84 | ) | 16.52 | 7.25 | 1.15 | 6.65 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.26 | ) | (.22 | ) | (.37 | ) | (.07 | ) | (.22 | ) | ||||||||||
Net realized gains | (2.22 | ) | (.18 | ) | (1.11 | ) | (12.45 | ) | (14.03 | ) | ||||||||||
Total distributions | (2.48 | ) | (.40 | ) | (1.48 | ) | (12.52 | ) | (14.25 | ) | ||||||||||
Net asset value, end of period | $ | 83.01 | $ | 98.33 | $ | 82.21 | $ | 76.44 | $ | 87.81 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (13.44 | %) | 20.11 | % | 9.56 | % | 0.30 | % | 7.49 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 3,565 | $ | 9,427 | $ | 8,791 | $ | 13,764 | $ | 8,150 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.24 | % | 0.26 | % | 0.23 | % | 0.34 | % | 0.13 | % | ||||||||||
Total expenses | 1.71 | % | 1.70 | % | 1.66 | % | 1.60 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 239 | % | 303 | % | 530 | % | 288 | % | 339 | % |
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| 85 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, Precious Metals Fund returned -16.61%, compared with the -4.38% return of the S&P 500 Index. The S&P 500 Materials Index returned -14.70%.
Metals & mining companies account for most of the holdings in the portfolio. Of these, the copper industry, the gold industry, and the silver industry all detracted from return. No industry contributed to return.
Kirkland Lake Gold Ltd., AngloGold Ashanti Ltd. ADR, and SSR Mining, Inc. were the leading contributors to return. Freeport-McMoRan, Inc., New Gold, Inc., and Goldcorp, 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 29, 1997 |
Ten Largest Holdings (% of Total Net Assets) | |
Newmont Mining Corp. | 6.7% |
Barrick Gold Corp. | 6.4% |
Freeport-McMoRan, Inc. | 6.1% |
Franco-Nevada Corp. | 5.7% |
Agnico Eagle Mines Ltd. | 5.0% |
Goldcorp, Inc. | 4.7% |
Wheaton Precious Metals Corp. | 4.7% |
Randgold Resources Ltd. ADR | 4.5% |
VanEck Vectors Junior Gold Miners ETF | 4.1% |
Royal Gold, Inc. | 3.9% |
Top Ten Total | 51.8% |
“Ten Largest Holdings” excludes any temporary cash investments.
86 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Precious Metals Fund | (16.61%) | (3.18%) | (3.68%) |
S&P 500 Materials Index | (14.70%) | 3.84% | 11.07% |
S&P 500 Index | (4.38%) | 8.49% | 13.12% |
* | 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. 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 | 87 |
SCHEDULE OF INVESTMENTS | December 31, 2018 |
PRECIOUS METALS FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 95.6% | ||||||||
Mining - 95.6% | ||||||||
Newmont Mining Corp. | 32,171 | $ | 1,114,725 | |||||
Barrick Gold Corp. | 79,195 | 1,072,300 | ||||||
Freeport-McMoRan, Inc. | 98,354 | 1,014,030 | ||||||
Franco-Nevada Corp. | 13,515 | 948,347 | ||||||
Agnico Eagle Mines Ltd. | 20,525 | 829,210 | ||||||
Goldcorp, Inc. | 79,101 | 775,190 | ||||||
Wheaton Precious Metals Corp. | 39,643 | 774,228 | ||||||
Randgold Resources Ltd. ADR1 | 9,043 | 750,326 | ||||||
Royal Gold, Inc. | 7,644 | 654,709 | ||||||
Kirkland Lake Gold Ltd.1 | 23,987 | 625,821 | ||||||
AngloGold Ashanti Ltd. ADR | 49,213 | 617,623 | ||||||
Kinross Gold Corp.*,1 | 169,279 | 548,464 | ||||||
Gold Fields Ltd. ADR | 134,603 | 473,802 | ||||||
B2Gold Corp.* | 156,717 | 457,614 | ||||||
Yamana Gold, Inc. | 172,441 | 406,961 | ||||||
Pan American Silver Corp. | 27,607 | 403,062 | ||||||
IAMGOLD Corp.* | 97,695 | 359,518 | ||||||
Sibanye Gold Ltd. ADR* | 124,769 | 353,096 | ||||||
Pretium Resources, Inc.*,1 | 39,971 | 337,755 | ||||||
SSR Mining, Inc.* | 26,462 | 319,925 | ||||||
Alamos Gold, Inc. — Class A | 85,600 | 308,160 | ||||||
Novagold Resources, Inc.*,1 | 77,209 | 304,975 | ||||||
Osisko Gold Royalties Ltd. | 34,633 | 304,078 | ||||||
First Majestic Silver Corp.*,1 | 50,479 | 297,321 | ||||||
Tahoe Resources, Inc.* | 77,964 | 284,569 | ||||||
Hecla Mining Co. | 115,666 | 272,972 | ||||||
Coeur Mining, Inc.* | 56,658 | 253,261 | ||||||
Seabridge Gold, Inc.* | 18,710 | 247,533 | ||||||
Sandstorm Gold Ltd.*,1 | 52,352 | 241,343 | ||||||
MAG Silver Corp.* | 29,079 | 212,277 | ||||||
Fortuna Silver Mines, Inc.* | 57,192 | 208,179 | ||||||
Gold Resource Corp. | 33,281 | 133,124 | ||||||
Total Mining | 15,904,498 | |||||||
Total Common Stocks | ||||||||
(Cost $9,146,308) | 15,904,498 | |||||||
EXCHANGE-TRADED FUNDS† - 4.1% | ||||||||
VanEck Vectors Junior Gold Miners ETF1 | 22,181 | 670,310 | ||||||
Total Exchange-Traded Funds | ||||||||
(Cost $445,177) | 670,310 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 1.2% | ||||||||
JPMorgan Chase & Co. | $ | 119,295 | 119,295 | |||||
Barclays Capital | 49,611 | 49,611 | ||||||
Bank of America Merrill Lynch | 33,074 | 33,074 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $201,980) | 201,980 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 8.7% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 2.32%4 | 1,445,291 | 1,445,291 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $1,445,291) | 1,445,291 | |||||||
Total Investments - 109.6% | ||||||||
(Cost $11,238,756) | $ | 18,222,079 | ||||||
Other Assets & Liabilities, net - (9.6)% | (1,589,916 | ) | ||||||
Total Net Assets - 100.0% | $ | 16,632,163 |
* | 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 a portion of this security is on loan at December 31, 2018 — 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, 2018. |
ADR — American Depositary Receipt | |
See Sector Classification in Other Information section. |
88| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
PRECIOUS METALS FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2018 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 15,904,498 | $ | — | $ | — | $ | 15,904,498 | ||||||||
Exchange-Traded Funds | 670,310 | — | — | 670,310 | ||||||||||||
Repurchase Agreements | — | 201,980 | — | 201,980 | ||||||||||||
Securities Lending Collateral | 1,445,291 | — | — | 1,445,291 | ||||||||||||
Total Assets | $ | 18,020,099 | $ | 201,980 | $ | — | $ | 18,222,079 |
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, 2018, there were no transfers between levels.
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 89 |
PRECIOUS METALS FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments, at value - including $1,662,584 of securities loaned (cost $11,036,776) | $ | 18,020,099 | ||
Repurchase agreements, at value (cost $201,980) | 201,980 | |||
Cash | 244,581 | |||
Receivables: | ||||
Securities sold | 175,222 | |||
Dividends | 7,021 | |||
Foreign tax reclaims | 520 | |||
Securities lending income | 304 | |||
Interest | 16 | |||
Fund shares sold | 2 | |||
Total assets | 18,649,745 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 1,689,872 | |||
Fund shares redeemed | 187,924 | |||
Deferred foreign capital gain taxes | 86,192 | |||
Management fees | 9,031 | |||
Transfer agent and administrative fees | 3,010 | |||
Investor service fees | 3,010 | |||
Portfolio accounting fees | 1,204 | |||
Trustees’ fees* | 324 | |||
Miscellaneous | 37,015 | |||
Total liabilities | 2,017,582 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 16,632,163 | ||
Net assets consist of: | ||||
Paid in capital | $ | 34,549,365 | ||
Total distributable earnings (loss) | (17,917,202 | ) | ||
Net assets | $ | 16,632,163 | ||
Capital shares outstanding | 689,070 | |||
Net asset value per share | $ | 24.14 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $11,119) | $ | 135,631 | ||
Interest | 3,681 | |||
Income from securities lending, net | 9,567 | |||
Total investment income | 148,879 | |||
Expenses: | ||||
Management fees | 138,681 | |||
Investor service fees | 46,227 | |||
Transfer agent and administrative fees | 46,227 | |||
Professional fees | 21,139 | |||
Portfolio accounting fees | 18,491 | |||
Custodian fees | 12,060 | |||
Trustees’ fees* | 5,427 | |||
Line of credit fees | 20 | |||
Miscellaneous | 21,638 | |||
Total expenses | 309,910 | |||
Net investment loss | (161,031 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (1,276,942 | ) | ||
Net realized loss | (1,276,942 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (3,405,828 | ) | ||
Net change in unrealized appreciation (depreciation) | (3,405,828 | ) | ||
Net realized and unrealized loss | (4,682,770 | ) | ||
Net decrease in net assets resulting from operations | $ | (4,843,801 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
90| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PRECIOUS METALS FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (161,031 | ) | $ | (239,405 | ) | ||
Net realized gain (loss) on investments | (1,276,942 | ) | 477,618 | |||||
Net change in unrealized appreciation (depreciation) on investments | (3,405,828 | ) | 797,473 | |||||
Net increase (decrease) in net assets resulting from operations | (4,843,801 | ) | 1,035,686 | |||||
Distributions to shareholders | (860,699 | ) | (1,123,988 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 130,118,052 | 188,066,776 | ||||||
Distributions reinvested | 860,699 | 1,123,988 | ||||||
Cost of shares redeemed | (138,843,308 | ) | (181,573,076 | ) | ||||
Net increase (decrease) from capital share transactions | (7,864,557 | ) | 7,617,688 | |||||
Net increase (decrease) in net assets | (13,569,057 | ) | 7,529,386 | |||||
Net assets: | ||||||||
Beginning of year | 30,201,220 | 22,671,834 | ||||||
End of year | $ | 16,632,163 | $ | 30,201,220 | ||||
Capital share activity: | ||||||||
Shares sold | 4,824,749 | 6,114,108 | ||||||
Shares issued from reinvestment of distributions | 32,068 | 39,549 | ||||||
Shares redeemed | (5,164,558 | ) | (5,919,754 | ) | ||||
Net increase (decrease) in shares | (307,741 | ) | 233,903 |
1 | For the year ended December 31, 2017, the total distributions to shareholders were all from net investment income (see Note 9). |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 91 |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 30.30 | $ | 29.72 | $ | 17.95 | $ | 27.60 | $ | 33.43 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.23 | ) | (.29 | ) | (.29 | ) | (.12 | ) | (.11 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | (4.68 | ) | 2.29 | 12.06 | (8.01 | ) | (5.67 | ) | ||||||||||||
Total from investment operations | (4.91 | ) | 2.00 | 11.77 | (8.13 | ) | (5.78 | ) | ||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (1.25 | ) | (1.42 | ) | — | (1.52 | ) | (.05 | ) | |||||||||||
Total distributions | (1.25 | ) | (1.42 | ) | — | (1.52 | ) | (.05 | ) | |||||||||||
Net asset value, end of period | $ | 24.14 | $ | 30.30 | $ | 29.72 | $ | 17.95 | $ | 27.60 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (16.61 | %) | 7.08 | % | 65.52 | % | (30.37 | %) | (17.34 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 16,632 | $ | 30,201 | $ | 22,672 | $ | 16,201 | $ | 18,313 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.87 | %) | (0.93 | %) | (0.90 | %) | (0.50 | %) | (0.32 | %) | ||||||||||
Total expensesc | 1.67 | % | 1.61 | % | 1.56 | % | 1.50 | % | 1.56 | % | ||||||||||
Portfolio turnover rate | 639 | % | 691 | % | 298 | % | 203 | % | 168 | % |
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 December 31, 2014 have been restated to reflect a 1:5 reverse share split effective January 24, 2014. |
92| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, Real Estate Fund returned -7.33%, compared to a return of -4.38% for the S&P 500 Index. The MSCI U.S. REIT Index returned -4.57%.
Within the Fund, the real estate investment trust (REIT) industry composes almost all the portfolio. Equity REITs were the leading detractor from return, followed by the real estate management & development industry. The specialized REITs industry was the only contributor to return.
American Tower Corp. Class A, Omega Healthcare Investors, Inc., and Quality Care Properties, Inc. were the best-performing holdings in the Fund for the year. The worst-performing holdings for the period were Weyerhaeuser Co., Equinix, Inc., and Colony Capital, Inc. Class A.
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 | 2.8% |
Simon Property Group, Inc. | 2.4% |
Crown Castle International Corp. | 2.3% |
Prologis, Inc. | 2.0% |
Public Storage | 2.0% |
Equinix, Inc. | 1.8% |
Welltower, Inc. | 1.7% |
Equity Residential | 1.6% |
AvalonBay Communities, Inc. | 1.6% |
Digital Realty Trust, Inc. | 1.6% |
Top Ten Total | 19.8% |
“Ten Largest Holdings” excludes any temporary cash investments.
THE RYDEX FUNDS ANNUAL REPORT | 93 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Real Estate Fund | (7.33%) | 5.13% | 9.71% |
MSCI U.S. REIT Index | (4.57%) | 7.80% | 12.17% |
S&P 500 Index | (4.38%) | 8.49% | 13.12% |
* | 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. The S&P 500 Index and 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. |
94 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2018 |
REAL ESTATE FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 98.9% | ||||||||
REITs - 95.3% | ||||||||
REITs-Diversified - 22.4% | ||||||||
American Tower Corp. — Class A | 2,223 | $ | 351,656 | |||||
Crown Castle International Corp. | 2,641 | 286,892 | ||||||
Equinix, Inc. | 633 | 223,170 | ||||||
Digital Realty Trust, Inc. | 1,902 | 202,658 | ||||||
SBA Communications Corp.* | 1,124 | 181,964 | ||||||
Weyerhaeuser Co. | 7,790 | 170,289 | ||||||
Vornado Realty Trust | 2,360 | 146,391 | ||||||
WP Carey, Inc. | 2,077 | 135,711 | ||||||
Duke Realty Corp. | 4,919 | 127,402 | ||||||
Lamar Advertising Co. — Class A | 1,691 | 116,983 | ||||||
VICI Properties, Inc. | 6,202 | 116,474 | ||||||
Gaming and Leisure Properties, Inc. | 3,444 | 111,276 | ||||||
New Residential Investment Corp. | 6,619 | 94,056 | ||||||
EPR Properties | 1,402 | 89,770 | ||||||
CoreSite Realty Corp. | 987 | 86,096 | ||||||
Rayonier, Inc. | 2,922 | 80,910 | ||||||
Uniti Group, Inc. | 4,617 | 71,887 | ||||||
Outfront Media, Inc. | 3,767 | 68,258 | ||||||
GEO Group, Inc. | 3,366 | 66,310 | ||||||
CoreCivic, Inc. | 3,525 | 62,851 | ||||||
PotlatchDeltic Corp. | 1,903 | 60,211 | ||||||
Total REITs-Diversified | 2,851,215 | |||||||
REITs-Apartments - 11.3% | ||||||||
Equity Residential | 3,148 | 207,799 | ||||||
AvalonBay Communities, Inc. | 1,185 | 206,249 | ||||||
Essex Property Trust, Inc. | 688 | 168,704 | ||||||
Mid-America Apartment Communities, Inc. | 1,456 | 139,339 | ||||||
UDR, Inc. | 3,490 | 138,274 | ||||||
Invitation Homes, Inc. | 6,850 | 137,548 | ||||||
Camden Property Trust | 1,377 | 121,245 | ||||||
Apartment Investment & Management Co. — Class A | 2,504 | 109,876 | ||||||
American Homes 4 Rent — Class A | 5,227 | 103,756 | ||||||
American Campus Communities, Inc. | 2,422 | 100,247 | ||||||
Total REITs-Apartments | 1,433,037 | |||||||
REITs-Office Property - 10.9% | ||||||||
Boston Properties, Inc. | 1,565 | 176,141 | ||||||
Alexandria Real Estate Equities, Inc. | 1,284 | 147,968 | ||||||
SL Green Realty Corp. | 1,394 | 110,238 | ||||||
Kilroy Realty Corp. | 1,723 | 108,342 | ||||||
Douglas Emmett, Inc. | 3,027 | 103,311 | ||||||
Hudson Pacific Properties, Inc. | 3,242 | 94,213 | ||||||
JBG SMITH Properties | 2,467 | 85,876 | ||||||
Highwoods Properties, Inc. | 2,189 | 84,692 | ||||||
Equity Commonwealth | 2,726 | 81,807 | ||||||
Paramount Group, Inc. | 5,816 | 73,049 | ||||||
Empire State Realty Trust, Inc. — Class A | 4,723 | 67,208 | ||||||
Columbia Property Trust, Inc. | 3,439 | 66,545 | ||||||
Corporate Office Properties Trust | 3,043 | 63,994 | ||||||
Brandywine Realty Trust | 4,944 | 63,629 | ||||||
Piedmont Office Realty Trust, Inc. — Class A | 3,682 | 62,741 | ||||||
Total REITs-Office Property | 1,389,754 | |||||||
REITs-Health Care - 9.6% | ||||||||
Welltower, Inc. | 3,110 | 215,865 | ||||||
Ventas, Inc. | 3,258 | 190,886 | ||||||
HCP, Inc. | 5,547 | 154,928 | ||||||
Omega Healthcare Investors, Inc. | 3,199 | 112,445 | ||||||
Medical Properties Trust, Inc. | 6,347 | 102,060 | ||||||
Healthcare Trust of America, Inc. — Class A | 3,779 | 95,646 | ||||||
Healthcare Realty Trust, Inc. | 2,771 | 78,807 | ||||||
Sabra Health Care REIT, Inc. | 4,376 | 72,116 | ||||||
Physicians Realty Trust | 4,491 | 71,991 | ||||||
Senior Housing Properties Trust | 6,087 | 71,340 | ||||||
CareTrust REIT, Inc. | 2,823 | 52,113 | ||||||
Total REITs-Health Care | 1,218,197 | |||||||
REITs-Warehouse/Industries - 7.0% | ||||||||
Prologis, Inc. | 4,367 | 256,430 | ||||||
Liberty Property Trust | 2,507 | 104,993 | ||||||
CyrusOne, Inc. | 1,850 | 97,828 | ||||||
Americold Realty Trust | 3,230 | 82,494 | ||||||
First Industrial Realty Trust, Inc. | 2,791 | 80,548 | ||||||
EastGroup Properties, Inc. | 842 | 77,237 | ||||||
Rexford Industrial Realty, Inc. | 2,406 | 70,905 | ||||||
STAG Industrial, Inc. | 2,846 | 70,808 | ||||||
QTS Realty Trust, Inc. — Class A | 1,527 | 56,575 | ||||||
Total REITs-Warehouse/Industries | 897,818 | |||||||
REITs-Shopping Centers - 6.6% | ||||||||
Regency Centers Corp. | 2,336 | 137,076 | ||||||
Federal Realty Investment Trust | 1,064 | 125,595 | ||||||
Kimco Realty Corp. | 7,305 | 107,018 | ||||||
Brixmor Property Group, Inc. | 6,108 | 89,727 | ||||||
Weingarten Realty Investors | 2,996 | 74,331 | ||||||
Retail Properties of America, Inc. — Class A | 5,975 | 64,829 | ||||||
SITE Centers Corp. | 5,503 | 60,918 | ||||||
Acadia Realty Trust | 2,484 | 59,020 | ||||||
Urban Edge Properties | 3,523 | 58,552 | ||||||
Retail Opportunity Investments Corp. | 3,620 | 57,486 | ||||||
Total REITs-Shopping Centers | 834,552 | |||||||
REITs-Hotels - 6.6% | ||||||||
Host Hotels & Resorts, Inc. | 8,954 | 149,263 | ||||||
MGM Growth Properties LLC — Class A | 4,221 | 111,477 | ||||||
Park Hotels & Resorts, Inc. | 3,681 | 95,632 | ||||||
Pebblebrook Hotel Trust | 3,256 | 92,177 | ||||||
Hospitality Properties Trust | 3,537 | 84,464 | ||||||
Ryman Hospitality Properties, Inc. | 1,196 | 79,761 | ||||||
Apple Hospitality REIT, Inc. | 5,447 | 77,674 | ||||||
Sunstone Hotel Investors, Inc. | 5,555 | 72,271 | ||||||
RLJ Lodging Trust | 4,315 | 70,766 | ||||||
Total REITs-Hotels | 833,485 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 95 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
REAL ESTATE FUND |
| Shares | Value | ||||||
REITs-Storage - 5.6% | ||||||||
Public Storage | 1,246 | $ | 252,203 | |||||
Extra Space Storage, Inc. | 1,569 | 141,963 | ||||||
Iron Mountain, Inc. | 3,996 | 129,510 | ||||||
CubeSmart | 3,384 | 97,087 | ||||||
Life Storage, Inc. | 933 | 86,760 | ||||||
Total REITs-Storage | 707,523 | |||||||
REITs-Mortgage - 5.3% | ||||||||
Annaly Capital Management, Inc. | 15,438 | 151,601 | ||||||
AGNC Investment Corp. | 7,394 | 129,691 | ||||||
Starwood Property Trust, Inc. | 4,821 | 95,022 | ||||||
Blackstone Mortgage Trust, Inc. — Class A | 2,562 | 81,625 | ||||||
Chimera Investment Corp. | 4,291 | 76,466 | ||||||
Two Harbors Investment Corp. | 5,727 | 73,535 | ||||||
Apollo Commercial Real Estate Finance, Inc. | 3,698 | 61,609 | ||||||
Total REITs-Mortgage | 669,549 | |||||||
REITs-Regional Malls - 4.3% | ||||||||
Simon Property Group, Inc. | 1,843 | 309,606 | ||||||
Macerich Co. | 2,521 | 109,109 | ||||||
Taubman Centers, Inc. | 1,590 | 72,329 | ||||||
Tanger Factory Outlet Centers, Inc. | 2,964 | 59,932 | ||||||
Total REITs-Regional Malls | 550,976 | |||||||
REITs-Single Tenant - 3.7% | ||||||||
Realty Income Corp. | 2,893 | 182,375 | ||||||
National Retail Properties, Inc. | 2,423 | 117,540 | ||||||
STORE Capital Corp. | 3,635 | 102,907 | ||||||
Spirit Realty Capital, Inc. | 2,119 | 74,695 | ||||||
Total REITs-Single Tenant | 477,517 | |||||||
REITs-Manufactured Homes - 2.0% | ||||||||
Sun Communities, Inc. | 1,242 | 126,324 | ||||||
Equity LifeStyle Properties, Inc. | 1,289 | 125,201 | ||||||
Total REITs-Manufactured Homes | 251,525 | |||||||
Total REITs | 12,115,148 | |||||||
Real Estate - 3.6% | ||||||||
Real Estate Management/Services - 2.9% | ||||||||
CBRE Group, Inc. — Class A* | 3,900 | 156,156 | ||||||
Jones Lang LaSalle, Inc. | 806 | 102,040 | ||||||
Realogy Holdings Corp. | 3,696 | 54,257 | ||||||
Redfin Corp.*,1 | 3,472 | 49,997 | ||||||
Total Real Estate Management/Services | 362,450 | |||||||
Real Estate Operations/Development - 0.7% | ||||||||
Howard Hughes Corp.* | 911 | 88,932 | ||||||
Total Real Estate | 451,382 | |||||||
Total Common Stocks | ||||||||
(Cost $9,021,944) | 12,566,530 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.7% | ||||||||
JPMorgan Chase & Co. | $ | 52,579 | 52,579 | |||||
Barclays Capital | 21,866 | 21,866 | ||||||
Bank of America Merrill Lynch | 14,577 | 14,577 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $89,022) | 89,022 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 0.2% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 2.32%4 | 31,803 | 31,803 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $31,803) | 31,803 | |||||||
Total Investments - 99.8% | ||||||||
(Cost $9,142,769) | $ | 12,687,355 | ||||||
Other Assets & Liabilities, net - 0.2% | 20,206 | |||||||
Total Net Assets - 100.0% | $ | 12,707,561 |
* | 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 a portion of this security is on loan at December 31, 2018 — 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, 2018. |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
96| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
REAL ESTATE FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2018 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 12,566,530 | $ | — | $ | — | $ | 12,566,530 | ||||||||
Repurchase Agreements | — | 89,022 | — | 89,022 | ||||||||||||
Securities Lending Collateral | 31,803 | — | — | 31,803 | ||||||||||||
Total Assets | $ | 12,598,333 | $ | 89,022 | $ | — | $ | 12,687,355 |
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, 2018, there were no transfers between levels.
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 97 |
REAL ESTATE FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments, at value - including $36,302 of securities loaned (cost $9,053,747) | $ | 12,598,333 | ||
Repurchase agreements, at value (cost $89,022) | 89,022 | |||
Cash | 5,382 | |||
Receivables: | ||||
Securities sold | 370,031 | |||
Dividends | 91,517 | |||
Fund shares sold | 32,349 | |||
Securities lending income | 144 | |||
Interest | 7 | |||
Total assets | 13,186,785 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 397,466 | |||
Return of securities lending collateral | 37,185 | |||
Management fees | 10,218 | |||
Transfer agent and administrative fees | 3,005 | |||
Investor service fees | 3,005 | |||
Portfolio accounting fees | 1,202 | |||
Trustees’ fees* | 222 | |||
Miscellaneous | 26,921 | |||
Total liabilities | 479,224 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 12,707,561 | ||
Net assets consist of: | ||||
Paid in capital | $ | 11,149,634 | ||
Total distributable earnings (loss) | 1,557,927 | |||
Net assets | $ | 12,707,561 | ||
Capital shares outstanding | 353,075 | |||
Net asset value per share | $ | 35.99 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $5) | $ | 421,258 | ||
Interest | 1,391 | |||
Income from securities lending, net | 3,740 | |||
Total investment income | 426,389 | |||
Expenses: | ||||
Management fees | 106,670 | |||
Investor service fees | 31,374 | |||
Transfer agent and administrative fees | 31,374 | |||
Professional fees | 14,087 | |||
Portfolio accounting fees | 12,549 | |||
Trustees’ fees* | 3,070 | |||
Custodian fees | 1,799 | |||
Line of credit fees | 85 | |||
Miscellaneous | 15,675 | |||
Total expenses | 216,683 | |||
Net investment income | 209,706 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (78,459 | ) | ||
Net realized loss | (78,459 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (1,301,738 | ) | ||
Net change in unrealized appreciation (depreciation) | (1,301,738 | ) | ||
Net realized and unrealized loss | (1,380,197 | ) | ||
Net decrease in net assets resulting from operations | $ | (1,170,491 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
98| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
REAL ESTATE FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 209,706 | $ | 112,814 | ||||
Net realized gain (loss) on investments | (78,459 | ) | 449,599 | |||||
Net change in unrealized appreciation (depreciation) on investments | (1,301,738 | ) | 69,877 | |||||
Net increase (decrease) in net assets resulting from operations | (1,170,491 | ) | 632,290 | |||||
Distributions to shareholders | (127,066 | ) | (316,400 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 44,849,856 | 40,487,501 | ||||||
Distributions reinvested | 127,066 | 316,400 | ||||||
Cost of shares redeemed | (41,232,363 | ) | (42,367,742 | ) | ||||
Net increase (decrease) from capital share transactions | 3,744,559 | (1,563,841 | ) | |||||
Net increase (decrease) in net assets | 2,447,002 | (1,247,951 | ) | |||||
Net assets: | ||||||||
Beginning of year | 10,260,559 | 11,508,510 | ||||||
End of year | $ | 12,707,561 | $ | 10,260,559 | ||||
Capital share activity: | ||||||||
Shares sold | 1,183,879 | 1,047,077 | ||||||
Shares issued from reinvestment of distributions | 3,246 | 8,440 | ||||||
Shares redeemed | (1,095,657 | ) | (1,098,982 | ) | ||||
Net increase (decrease) in shares | 91,468 | (43,465 | ) |
1 | For the year ended December 31, 2017, the total distributions to shareholders were all from net investment income (see Note 9). |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 99 |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 39.22 | $ | 37.72 | $ | 34.50 | $ | 36.41 | $ | 30.42 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .64 | .36 | .63 | .53 | .50 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | (3.48 | ) | 2.11 | 2.88 | (1.44 | ) | 5.88 | |||||||||||||
Total from investment operations | (2.84 | ) | 2.47 | 3.51 | (.91 | ) | 6.38 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.39 | ) | (.97 | ) | (.29 | ) | (1.00 | ) | (.39 | ) | ||||||||||
Total distributions | (.39 | ) | (.97 | ) | (.29 | ) | (1.00 | ) | (.39 | ) | ||||||||||
Net asset value, end of period | $ | 35.99 | $ | 39.22 | $ | 37.72 | $ | 34.50 | $ | 36.41 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (7.33 | %) | 6.65 | % | 10.15 | % | (2.52 | %) | 21.01 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 12,708 | $ | 10,261 | $ | 11,509 | $ | 16,324 | $ | 28,021 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.67 | % | 0.93 | % | 1.73 | % | 1.46 | % | 1.48 | % | ||||||||||
Total expenses | 1.73 | % | 1.70 | % | 1.65 | % | 1.60 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 313 | % | 331 | % | 279 | % | 259 | % | 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. |
100| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, Retailing Fund returned -3.23%, compared with a return of -4.38% for the S&P 500 Index. The S&P 500 Consumer Discretionary Index returned 0.83%.
Within the Fund, the internet & direct marketing retail industry detracted the most from the Fund’s return for the period, followed by the specialty retail industry. The entertainment industry and the multiline retail industry contributed the most.
Fund performance for the year benefited most from Amazon.com, Inc., Netflix, Inc., and O’Reilly Automotive, Inc. Vipshop Holdings Ltd. ADR, JD.com, Inc. ADR, and L Brands, 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. | 9.7% |
Walmart, Inc. | 6.2% |
Home Depot, Inc. | 5.3% |
Alibaba Group Holding Ltd. ADR | 3.8% |
Costco Wholesale Corp. | 3.5% |
Booking Holdings, Inc. | 3.3% |
Lowe’s Companies, Inc. | 3.3% |
Walgreens Boots Alliance, Inc. | 3.0% |
TJX Companies, Inc. | 2.8% |
Target Corp. | 2.3% |
Top Ten Total | 43.2% |
“Ten Largest Holdings” excludes any temporary cash investments.
THE RYDEX FUNDS ANNUAL REPORT | 101 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Retailing Fund | (3.23%) | 3.26% | 13.47% |
S&P 500 Consumer Discretionary Index | 0.83% | 9.69% | 18.35% |
S&P 500 Index | (4.38%) | 8.49% | 13.12% |
* | 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. 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. |
102 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2018 |
RETAILING FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.4% | ||||||||
Retail - 65.3% | ||||||||
Walmart, Inc. | 4,550 | $ | 423,833 | |||||
Home Depot, Inc. | 2,091 | 359,276 | ||||||
Costco Wholesale Corp. | 1,175 | 239,359 | ||||||
Lowe’s Companies, Inc. | 2,395 | 221,202 | ||||||
Walgreens Boots Alliance, Inc. | 2,934 | 200,480 | ||||||
TJX Companies, Inc. | 4,302 | 192,472 | ||||||
Target Corp. | 2,333 | 154,188 | ||||||
Ross Stores, Inc. | 1,742 | 144,934 | ||||||
Dollar General Corp. | 1,262 | 136,397 | ||||||
O’Reilly Automotive, Inc.* | 387 | 133,256 | ||||||
Dollar Tree, Inc.* | 1,307 | 118,048 | ||||||
AutoZone, Inc.* | 140 | 117,368 | ||||||
Best Buy Company, Inc. | 1,865 | 98,770 | ||||||
Ulta Beauty, Inc.* | 395 | 96,712 | ||||||
Genuine Parts Co. | 990 | 95,060 | ||||||
CarMax, Inc.* | 1,403 | 88,010 | ||||||
Kohl’s Corp. | 1,288 | 85,446 | ||||||
Advance Auto Parts, Inc. | 541 | 85,186 | ||||||
Burlington Stores, Inc.* | 511 | 83,124 | ||||||
Tiffany & Co. | 1,010 | 81,315 | ||||||
Gap, Inc. | 3,140 | 80,886 | ||||||
Tractor Supply Co. | 944 | 78,767 | ||||||
Macy’s, Inc. | 2,546 | 75,820 | ||||||
Qurate Retail, Inc. — Class A* | 3,860 | 75,347 | ||||||
Nordstrom, Inc. | 1,512 | 70,474 | ||||||
L Brands, Inc. | 2,652 | 68,077 | ||||||
Foot Locker, Inc. | 1,220 | 64,904 | ||||||
Five Below, Inc.* | 602 | 61,597 | ||||||
Ollie’s Bargain Outlet Holdings, Inc.* | 781 | 51,944 | ||||||
Williams-Sonoma, Inc. | 1,016 | 51,257 | ||||||
American Eagle Outfitters, Inc. | 2,490 | 48,132 | ||||||
Urban Outfitters, Inc.* | 1,433 | 47,576 | ||||||
AutoNation, Inc.* | 1,284 | 45,839 | ||||||
Dick’s Sporting Goods, Inc. | 1,398 | 43,618 | ||||||
Floor & Decor Holdings, Inc. — Class A* | 1,570 | 40,663 | ||||||
RH* | 331 | 39,660 | ||||||
Michaels Companies, Inc.* | 2,750 | 37,235 | ||||||
Sally Beauty Holdings, Inc.* | 2,116 | 36,078 | ||||||
DSW, Inc. — Class A | 1,422 | 35,123 | ||||||
Dillard’s, Inc. — Class A1 | 530 | 31,964 | ||||||
Bed Bath & Beyond, Inc. | 2,700 | 30,564 | ||||||
Abercrombie & Fitch Co. — Class A | 1,471 | 29,494 | ||||||
Children’s Place, Inc. | 326 | 29,369 | ||||||
GameStop Corp. — Class A | 2,285 | 28,837 | ||||||
At Home Group, Inc.* | 1,500 | 27,990 | ||||||
Big Lots, Inc. | 927 | 26,809 | ||||||
Tailored Brands, Inc. | 1,608 | 21,933 | ||||||
Total Retail | 4,434,393 | |||||||
Internet - 30.7% | ||||||||
Amazon.com, Inc.* | 439 | 659,365 | ||||||
Alibaba Group Holding Ltd. ADR* | 1,860 | 254,950 | ||||||
Booking Holdings, Inc.* | 131 | 225,637 | ||||||
eBay, Inc.* | 4,690 | 131,648 | ||||||
JD.com, Inc. ADR* | 6,248 | 130,771 | ||||||
Ctrip.com International Ltd. ADR* | 4,009 | 108,484 | ||||||
Expedia Group, Inc. | 908 | 102,286 | ||||||
MercadoLibre, Inc.* | 270 | 79,070 | ||||||
Wayfair, Inc. — Class A* | 805 | 72,514 | ||||||
GrubHub, Inc.* | 900 | 69,129 | ||||||
Baozun, Inc. ADR*,1 | 2,230 | 65,138 | ||||||
Etsy, Inc.* | 1,240 | 58,987 | ||||||
Stamps.com, Inc.* | 280 | 43,579 | ||||||
Stitch Fix, Inc. — Class A*,1 | 1,820 | 31,104 | ||||||
Shutterfly, Inc.* | 763 | 30,718 | ||||||
Overstock.com, Inc.*,1 | 1,260 | 17,111 | ||||||
Total Internet | 2,080,491 | |||||||
Distribution & Wholesale – 1.9% | ||||||||
LKQ Corp.* | 2,912 | 69,102 | ||||||
Pool Corp. | 415 | 61,689 | ||||||
Total Distribution & Wholesale | 130,791 | |||||||
Commercial Services - 1.5% | ||||||||
Rent-A-Center, Inc.* | 2,333 | 37,771 | ||||||
Monro, Inc. | 542 | 37,263 | ||||||
NutriSystem, Inc. | 648 | 28,434 | ||||||
Total Commercial Services | 103,468 | |||||||
Total Common Stocks | ||||||||
(Cost $5,649,740) | 6,749,143 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.8% | ||||||||
JPMorgan Chase & Co. | $ | 29,715 | 29,715 | |||||
Barclays Capital | 12,357 | 12,357 | ||||||
Bank of America Merrill Lynch | 8,238 | 8,238 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $50,310) | 50,310 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 103 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
RETAILING FUND |
| Shares | Value | ||||||
SECURITIES LENDING COLLATERAL†,3 - 1.2% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 2.32%4 | 81,694 | $ | 81,694 | |||||
Total Securities Lending Collateral | ||||||||
(Cost $81,694) | 81,694 | |||||||
Total Investments - 101.4% | ||||||||
(Cost $5,781,744) | $ | 6,881,147 | ||||||
Other Assets & Liabilities, net - (1.4)% | (92,925 | ) | ||||||
Total Net Assets - 100.0% | $ | 6,788,222 |
* | 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 a portion of this security is on loan at December 31, 2018 — 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, 2018. |
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, 2018 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 6,749,143 | $ | — | $ | — | $ | 6,749,143 | ||||||||
Repurchase Agreements | — | 50,310 | — | 50,310 | ||||||||||||
Securities Lending Collateral | 81,694 | — | — | 81,694 | ||||||||||||
Total Assets | $ | 6,830,837 | $ | 50,310 | $ | — | $ | 6,881,147 |
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, 2018, there were no transfers between levels.
104| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RETAILING FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments, at value - including $91,161 of securities loaned (cost $5,731,434) | $ | 6,830,837 | ||
Repurchase agreements, at value (cost $50,310) | 50,310 | |||
Cash | 13,827 | |||
Receivables: | ||||
Fund shares sold | 55,148 | |||
Dividends | 6,152 | |||
Securities lending income | 276 | |||
Interest | 4 | |||
Total assets | 6,956,554 | |||
Liabilities: | ||||
Payable for: | ||||
Return of lending collateral | 95,519 | |||
Securities purchased | 44,252 | |||
Management fees | 5,180 | |||
Transfer agent and administrative fees | 1,523 | |||
Investor service fees | 1,523 | |||
Portfolio accounting fees | 609 | |||
Fund shares redeemed | 569 | |||
Trustees’ fees* | 165 | |||
Miscellaneous | 18,992 | |||
Total liabilities | 168,332 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 6,788,222 | ||
Net assets consist of: | ||||
Paid in capital | $ | 7,107,365 | ||
Total distributable earnings (loss) | (319,143 | ) | ||
Net assets | $ | 6,788,222 | ||
Capital shares outstanding | 94,343 | |||
Net asset value per share | $ | 71.95 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $242) | $ | 129,865 | ||
Interest | 1,119 | |||
Income from securities lending, net | 3,668 | |||
Total investment income | 134,652 | |||
Expenses: | ||||
Management fees | 84,473 | |||
Investor service fees | 24,845 | |||
Transfer agent and administrative fees | 24,845 | |||
Professional fees | 15,008 | |||
Portfolio accounting fees | 9,938 | |||
Trustees’ fees* | 2,153 | |||
Custodian fees | 1,391 | |||
Line of credit fees | 11 | |||
Miscellaneous | 8,373 | |||
Total expenses | 171,037 | |||
Net investment loss | (36,385 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (198,522 | ) | ||
Net realized loss | (198,522 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (160,691 | ) | ||
Net change in unrealized appreciation (depreciation) | (160,691 | ) | ||
Net realized and unrealized loss | (359,213 | ) | ||
Net decrease in net assets resulting from operations | $ | (395,598 | ) |
* | 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| 105 |
RETAILING FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (36,385 | ) | $ | 1,360 | |||
Net realized loss on investments | (198,522 | ) | (375,717 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | (160,691 | ) | 884,370 | |||||
Net increase (decrease) in net assets resulting from operations | (395,598 | ) | 510,013 | |||||
Distributions to shareholders | (1,360 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 25,331,798 | 25,680,045 | ||||||
Distributions reinvested | 1,360 | — | ||||||
Cost of shares redeemed | (25,996,766 | ) | (23,619,210 | ) | ||||
Net increase (decrease) from capital share transactions | (663,608 | ) | 2,060,835 | |||||
Net increase (decrease) in net assets | (1,060,566 | ) | 2,570,848 | |||||
Net assets: | ||||||||
Beginning of year | 7,848,788 | 5,277,940 | ||||||
End of year | $ | 6,788,222 | $ | 7,848,788 | ||||
Capital share activity: | ||||||||
Shares sold | 313,528 | 374,888 | ||||||
Shares issued from reinvestment of distributions | 16 | — | ||||||
Shares redeemed | (324,743 | ) | (349,422 | ) | ||||
Net increase (decrease) in shares | (11,199 | ) | 25,466 |
106| 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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 74.37 | $ | 65.91 | $ | 69.96 | $ | 77.68 | $ | 81.49 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.30 | ) | .02 | (.05 | ) | (.16 | ) | (.40 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | (2.11 | ) | 8.44 | (2.93 | ) | (.20 | ) | 6.79 | ||||||||||||
Total from investment operations | (2.41 | ) | 8.46 | (2.98 | ) | (.36 | ) | 6.39 | ||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.01 | ) | — | — | — | — | ||||||||||||||
Net realized gains | — | — | (1.07 | ) | (7.36 | ) | (10.20 | ) | ||||||||||||
Total distributions | (.01 | ) | — | (1.07 | ) | (7.36 | ) | (10.20 | ) | |||||||||||
Net asset value, end of period | $ | 71.95 | $ | 74.37 | $ | 65.91 | $ | 69.96 | $ | 77.68 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (3.23 | %) | 12.82 | % | 0.30 | % | (1.33 | %) | 8.66 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 6,788 | $ | 7,849 | $ | 5,278 | $ | 8,328 | $ | 7,304 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.37 | %) | 0.03 | % | (0.25 | %) | (0.19 | %) | (0.51 | %) | ||||||||||
Total expenses | 1.72 | % | 1.70 | % | 1.66 | % | 1.60 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 260 | % | 447 | % | 668 | % | 225 | % | 452 | % |
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 period presented through December 1, 2016 have been restated to reflect a 1:4 reverse share split effective December 1, 2016. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 107 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, Technology Fund returned -1.49%, compared with a return of -4.38% for the S&P 500 Index. The S&P 500 Information Technology Index returned -0.29%.
Within the Fund, the software industry contributed the most to the Fund’s performance for the period, followed by the internet & direct marketing retail industry. The semiconductors & semiconductor equipment industry detracted the most from return, followed by the interactive media & services industry.
Top-contributing holdings were Microsoft Corp., Twilio, Inc. Class A, and Mastercard, Inc. Class A. Facebook, Inc. Class A, NVIDIA Corp., and International Business Machines Corp. 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. | 3.9% |
Microsoft Corp. | 3.9% |
Alphabet, Inc. — Class A | 3.9% |
Facebook, Inc. — Class A | 2.8% |
Visa, Inc. — Class A | 2.3% |
Intel Corp. | 2.1% |
Cisco Systems, Inc. | 2.0% |
Mastercard, Inc. — Class A | 2.0% |
Oracle Corp. | 1.8% |
Broadcom, Inc. | 1.5% |
Top Ten Total | 26.2% |
“Ten Largest Holdings” excludes any temporary cash investments.
108 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Technology Fund | (1.49%) | 10.10% | 14.53% |
S&P 500 Information Technology Index | (0.29%) | 14.93% | 18.36% |
S&P 500 Index | (4.38%) | 8.49% | 13.12% |
* | 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. 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 | 109 |
SCHEDULE OF INVESTMENTS | December 31, 2018 |
TECHNOLOGY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.2% | ||||||||
Software - 27.8% | ||||||||
Microsoft Corp. | 6,102 | $ | 619,780 | |||||
Oracle Corp. | 6,490 | 293,023 | ||||||
Adobe, Inc.* | 1,060 | 239,814 | ||||||
salesforce.com, Inc.* | 1,747 | 239,287 | ||||||
Intuit, Inc. | 837 | 164,763 | ||||||
VMware, Inc. — Class A1 | 1,158 | 158,797 | ||||||
Activision Blizzard, Inc. | 2,960 | 137,847 | ||||||
Workday, Inc. — Class A* | 850 | 135,728 | ||||||
Fidelity National Information Services, Inc. | 1,310 | 134,341 | ||||||
ServiceNow, Inc.* | 730 | 129,977 | ||||||
Red Hat, Inc.* | 724 | 127,163 | ||||||
Fiserv, Inc.* | 1,710 | 125,668 | ||||||
Autodesk, Inc.* | 947 | 121,794 | ||||||
Electronic Arts, Inc.* | 1,434 | 113,157 | ||||||
Paychex, Inc. | 1,708 | 111,276 | ||||||
NetEase, Inc. ADR | 431 | 101,444 | ||||||
Momo, Inc. ADR* | 3,947 | 93,741 | ||||||
Atlassian Corporation plc — Class A* | 1,050 | 93,429 | ||||||
First Data Corp. — Class A* | 5,500 | 93,005 | ||||||
Splunk, Inc.* | 880 | 92,268 | ||||||
Citrix Systems, Inc. | 814 | 83,402 | ||||||
Synopsys, Inc.* | 973 | 81,966 | ||||||
Cadence Design Systems, Inc.* | 1,874 | 81,482 | ||||||
ANSYS, Inc.* | 550 | 78,617 | ||||||
Take-Two Interactive Software, Inc.* | 762 | 78,440 | ||||||
SS&C Technologies Holdings, Inc. | 1,710 | 77,138 | ||||||
Broadridge Financial Solutions, Inc. | 790 | 76,037 | ||||||
Jack Henry & Associates, Inc. | 569 | 71,990 | ||||||
Akamai Technologies, Inc.* | 1,172 | 71,586 | ||||||
PTC, Inc.* | 850 | 70,465 | ||||||
Ultimate Software Group, Inc.* | 267 | 65,380 | ||||||
Dropbox, Inc. — Class A* | 3,160 | 64,559 | ||||||
Paycom Software, Inc.* | 500 | 61,225 | ||||||
DocuSign, Inc.* | 1,460 | 58,517 | ||||||
CDK Global, Inc. | 1,209 | 57,887 | ||||||
Aspen Technology, Inc.* | 670 | 55,061 | ||||||
Total Software | 4,460,054 | |||||||
Semiconductors - 20.2% | ||||||||
Intel Corp. | 7,132 | 334,705 | ||||||
Broadcom, Inc. | 960 | 244,109 | ||||||
Texas Instruments, Inc. | 2,374 | 224,343 | ||||||
NVIDIA Corp. | 1,542 | 205,857 | ||||||
QUALCOMM, Inc. | 3,357 | 191,047 | ||||||
Micron Technology, Inc.* | 4,494 | 142,595 | ||||||
NXP Semiconductor N.V. | 1,863 | 136,521 | ||||||
Analog Devices, Inc. | 1,557 | 133,637 | ||||||
Applied Materials, Inc. | 4,063 | 133,023 | ||||||
Lam Research Corp. | 802 | 109,208 | ||||||
Xilinx, Inc. | 1,265 | 107,740 | ||||||
Taiwan Semiconductor Manufacturing Company Ltd. ADR | 2,884 | 106,448 | ||||||
Advanced Micro Devices, Inc.* | 5,469 | 100,958 | ||||||
Microchip Technology, Inc. | 1,370 | 98,530 | ||||||
ASML Holding N.V. — Class G | 590 | 91,816 | ||||||
Maxim Integrated Products, Inc. | 1,760 | 89,496 | ||||||
KLA-Tencor Corp. | 970 | 86,805 | ||||||
Skyworks Solutions, Inc. | 1,200 | 80,424 | ||||||
Marvell Technology Group Ltd. | 4,907 | 79,444 | ||||||
Qorvo, Inc.* | 1,050 | 63,767 | ||||||
ON Semiconductor Corp.* | 3,766 | 62,177 | ||||||
Integrated Device Technology, Inc.* | 1,184 | 57,341 | ||||||
IPG Photonics Corp.* | 505 | 57,211 | ||||||
Teradyne, Inc. | 1,787 | 56,076 | ||||||
Monolithic Power Systems, Inc. | 452 | 52,545 | ||||||
Cypress Semiconductor Corp. | 3,908 | 49,710 | ||||||
Entegris, Inc. | 1,743 | 48,621 | ||||||
Cree, Inc.* | 1,128 | 48,250 | ||||||
MKS Instruments, Inc. | 681 | 43,999 | ||||||
Total Semiconductors | 3,236,403 | |||||||
Internet - 17.9% | ||||||||
Alphabet, Inc. — Class A* | 588 | 614,436 | ||||||
Facebook, Inc. — Class A* | 3,452 | 452,523 | ||||||
Baidu, Inc. ADR* | 958 | 151,939 | ||||||
Twitter, Inc.* | 3,504 | 100,705 | ||||||
Palo Alto Networks, Inc.* | 527 | 99,260 | ||||||
VeriSign, Inc.* | 652 | 96,685 | ||||||
Weibo Corp. ADR* | 1,600 | 93,488 | ||||||
Shopify, Inc. — Class A* | 665 | 92,069 | ||||||
IAC/InterActiveCorp* | 500 | 91,520 | ||||||
Wix.com Ltd.* | 950 | 85,823 | ||||||
YY, Inc. ADR* | 1,410 | 84,403 | ||||||
Match Group, Inc. | 1,888 | 80,750 | ||||||
Autohome, Inc. ADR* | 1,030 | 80,577 | ||||||
GoDaddy, Inc. — Class A* | 1,200 | 78,744 | ||||||
CDW Corp. | 970 | 78,618 | ||||||
Symantec Corp. | 4,071 | 76,922 | ||||||
F5 Networks, Inc.* | 451 | 73,076 | ||||||
Twilio, Inc. — Class A* | 790 | 70,547 | ||||||
TripAdvisor, Inc.* | 1,140 | 61,492 | ||||||
Okta, Inc.* | 940 | 59,972 | ||||||
Zillow Group, Inc. — Class C* | 1,894 | 59,812 | ||||||
Zendesk, Inc.* | 1,000 | 58,370 | ||||||
Proofpoint, Inc.* | 570 | 47,772 | ||||||
Yelp, Inc. — Class A* | 1,133 | 39,644 | ||||||
FireEye, Inc.* | 2,431 | 39,406 | ||||||
Total Internet | 2,868,553 | |||||||
Computers - 12.6% | ||||||||
Apple, Inc. | 3,974 | 626,859 | ||||||
International Business Machines Corp. | 2,016 | 229,159 | ||||||
Cognizant Technology Solutions Corp. — Class A | 2,184 | 138,640 | ||||||
HP, Inc. | 6,427 | 131,496 | ||||||
Accenture plc — Class A | 922 | 130,011 | ||||||
Hewlett Packard Enterprise Co. | 7,576 | 100,079 | ||||||
Check Point Software Technologies Ltd.* | 874 | 89,716 | ||||||
NetApp, Inc. | 1,493 | 89,087 | ||||||
DXC Technology Co. | 1,668 | 88,687 | ||||||
Seagate Technology plc | 2,068 | 79,804 |
110| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
TECHNOLOGY FUND |
| Shares | Value | ||||||
Fortinet, Inc.* | 1,120 | $ | 78,882 | |||||
Western Digital Corp. | 2,080 | 76,898 | ||||||
Amdocs Ltd. | 1,120 | 65,610 | ||||||
Nutanix, Inc. — Class A* | 1,510 | 62,801 | ||||||
Lumentum Holdings, Inc.* | 982 | 41,254 | ||||||
Total Computers | 2,028,983 | |||||||
Commercial Services - 6.3% | ||||||||
PayPal Holdings, Inc.* | 2,711 | 227,968 | ||||||
Automatic Data Processing, Inc. | 1,336 | 175,176 | ||||||
Worldpay, Inc. — Class A* | 1,470 | 112,352 | ||||||
Square, Inc. — Class A* | 1,910 | 107,132 | ||||||
FleetCor Technologies, Inc.* | 506 | 93,974 | ||||||
Global Payments, Inc. | 895 | 92,302 | ||||||
Total System Services, Inc. | 1,086 | 88,281 | ||||||
Western Union Co. | 3,675 | 62,696 | ||||||
Sabre Corp. | 2,516 | 54,446 | ||||||
Total Commercial Services | 1,014,327 | |||||||
Diversified Financial Services - 5.2% | ||||||||
Visa, Inc. — Class A | 2,836 | 374,182 | ||||||
Mastercard, Inc. — Class A | 1,719 | 324,289 | ||||||
Pagseguro Digital Ltd. — Class A* | 4,280 | 80,164 | ||||||
Alliance Data Systems Corp. | 433 | 64,985 | ||||||
Total Diversified Financial Services | 843,620 | |||||||
Telecommunications - 4.2% | ||||||||
Cisco Systems, Inc. | 7,485 | 324,325 | ||||||
Motorola Solutions, Inc. | 864 | 99,395 | ||||||
Arista Networks, Inc.* | 452 | 95,237 | ||||||
Juniper Networks, Inc. | 2,610 | 70,235 | ||||||
LogMeIn, Inc. | 581 | 47,392 | ||||||
CommScope Holding Company, Inc.* | 2,470 | 40,483 | ||||||
Total Telecommunications | 677,067 | |||||||
Electronics - 3.3% | ||||||||
Amphenol Corp. — Class A | 1,436 | 116,345 | ||||||
Corning, Inc. | 3,787 | 114,405 | ||||||
TE Connectivity Ltd. | 1,223 | 92,495 | ||||||
Trimble, Inc.* | 2,046 | 67,334 | ||||||
FLIR Systems, Inc. | 1,296 | 56,428 | ||||||
Avnet, Inc. | 1,282 | 46,280 | ||||||
Coherent, Inc.* | 360 | 38,056 | ||||||
Total Electronics | 531,343 | |||||||
Office & Business Equipment - 0.4% | ||||||||
Zebra Technologies Corp. — Class A* | 425 | 67,673 | ||||||
Machinery-Diversified - 0.4% | ||||||||
Cognex Corp. | 1,570 | 60,712 | ||||||
Advertising - 0.3% | ||||||||
Trade Desk, Inc. — Class A* | 440 | 51,066 | ||||||
Electrical Components & Equipment - 0.3% | ||||||||
Universal Display Corp. | 520 | 48,656 | ||||||
Energy-Alternate Sources - 0.3% | ||||||||
First Solar, Inc.* | 1,135 | 48,186 | ||||||
Total Common Stocks | ||||||||
(Cost $8,601,372) | 15,936,643 | |||||||
�� | ||||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 1.0% | ||||||||
JPMorgan Chase & Co. | $ | 91,188 | 91,188 | |||||
Barclays Capital | 37,922 | 37,922 | ||||||
Bank of America Merrill Lynch | 25,282 | 25,282 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $154,392) | 154,392 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 0.7% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 2.32%4 | 120,079 | 120,079 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $120,079) | 120,079 | |||||||
Total Investments - 100.9% | ||||||||
(Cost $8,875,843) | $ | 16,211,114 | ||||||
Other Assets & Liabilities, net - (0.9)% | (150,548 | ) | ||||||
Total Net Assets - 100.0% | $ | 16,060,566 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 111 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
TECHNOLOGY 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 a portion of this security is on loan at December 31, 2018 — 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, 2018. |
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, 2018 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 15,936,643 | $ | — | $ | — | $ | 15,936,643 | ||||||||
Repurchase Agreements | — | 154,392 | — | 154,392 | ||||||||||||
Securities Lending Collateral | 120,079 | — | — | 120,079 | ||||||||||||
Total Assets | $ | 16,056,722 | $ | 154,392 | $ | — | $ | 16,211,114 |
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, 2018, there were no transfers between levels.
112| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
TECHNOLOGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments, at value - including $119,029 of securities loaned (cost $8,721,451) | $ | 16,056,722 | ||
Repurchase agreements, at value (cost $154,392) | 154,392 | |||
Cash | 20,320 | |||
Receivables: | ||||
Fund shares sold | 53,241 | |||
Dividends | 8,243 | |||
Foreign tax reclaims | 590 | |||
Securities lending income | 24 | |||
Interest | 13 | |||
Total assets | 16,293,545 | |||
Liabilities: | ||||
Payable for: | ||||
Return of lending collateral | 140,399 | |||
Fund shares redeemed | 20,858 | |||
Management fees | 11,572 | |||
Transfer agent and administrative fees | 3,403 | |||
Investor service fees | 3,403 | |||
Portfolio accounting fees | 1,362 | |||
Trustees’ fees* | 466 | |||
Miscellaneous | 51,516 | |||
Total liabilities | 232,979 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 16,060,566 | ||
Net assets consist of: | ||||
Paid in capital | $ | 9,391,775 | ||
Total distributable earnings (loss) | 6,668,791 | |||
Net assets | $ | 16,060,566 | ||
Capital shares outstanding | 172,556 | |||
Net asset value per share | $ | 93.07 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $476) | $ | 260,912 | ||
Interest | 3,020 | |||
Income from securities lending, net | 7,893 | |||
Total investment income | 271,825 | |||
Expenses: | ||||
Management fees | 207,300 | |||
Investor service fees | 60,970 | |||
Transfer agent and administrative fees | 60,970 | |||
Professional fees | 31,463 | |||
Portfolio accounting fees | 24,388 | |||
Trustees’ fees* | 7,095 | |||
Custodian fees | 3,529 | |||
Line of credit fees | 121 | |||
Miscellaneous | 22,968 | |||
Total expenses | 418,804 | |||
Net investment loss | (146,979 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 1,605,280 | |||
Net realized gain | 1,605,280 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (1,731,288 | ) | ||
Net change in unrealized appreciation (depreciation) | (1,731,288 | ) | ||
Net realized and unrealized loss | (126,008 | ) | ||
Net decrease in net assets resulting from operations | $ | (272,987 | ) |
* | 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| 113 |
TECHNOLOGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (146,979 | ) | $ | (145,413 | ) | ||
Net realized gain on investments | 1,605,280 | 1,560,782 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (1,731,288 | ) | 4,572,472 | |||||
Net increase (decrease) in net assets resulting from operations | (272,987 | ) | 5,987,841 | |||||
Distributions to shareholders | (660,584 | ) | (599,849 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 41,595,282 | 48,485,786 | ||||||
Distributions reinvested | 660,584 | 599,849 | ||||||
Cost of shares redeemed | (48,201,267 | ) | (49,690,430 | ) | ||||
Net decrease from capital share transactions | (5,945,401 | ) | (604,795 | ) | ||||
Net increase (decrease) in net assets | (6,878,972 | ) | 4,783,197 | |||||
Net assets: | ||||||||
Beginning of year | 22,939,538 | 18,156,341 | ||||||
End of year | $ | 16,060,566 | $ | 22,939,538 | ||||
Capital share activity: | ||||||||
Shares sold | 392,507 | 551,981 | ||||||
Shares issued from reinvestment of distributions | 6,013 | 6,951 | ||||||
Shares redeemed | (463,173 | ) | (564,197 | ) | ||||
Net decrease in shares | (64,653 | ) | (5,265 | ) |
1 | For the year ended December 31, 2017, the total distributions to shareholders were all from net realized gains (See Note 9). |
114| 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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 96.71 | $ | 74.88 | $ | 71.70 | $ | 71.28 | $ | 64.65 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.63 | ) | (.56 | ) | (.21 | ) | (.32 | ) | (.32 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | (.43 | ) | 24.71 | 7.78 | 1.13 | 6.95 | ||||||||||||||
Total from investment operations | (1.06 | ) | 24.15 | 7.57 | .81 | 6.63 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (2.58 | ) | (2.32 | ) | (4.39 | ) | (.39 | ) | — | |||||||||||
Total distributions | (2.58 | ) | (2.32 | ) | (4.39 | ) | (.39 | ) | — | |||||||||||
Net asset value, end of period | $ | 93.07 | $ | 96.71 | $ | 74.88 | $ | 71.70 | $ | 71.28 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (1.49 | %) | 32.63 | % | 11.07 | % | 1.11 | % | 10.26 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 16,061 | $ | 22,940 | $ | 18,156 | $ | 19,042 | $ | 18,218 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.60 | %) | (0.64 | %) | (0.29 | %) | (0.45 | %) | (0.47 | %) | ||||||||||
Total expenses | 1.72 | % | 1.70 | % | 1.66 | % | 1.60 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 178 | % | 200 | % | 321 | % | 142 | % | 197 | % |
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| 115 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, Telecommunications Fund returned -5.29%, compared with a return of -4.38% for the S&P 500 Index. The S&P 500 Telecommunications Services Index returned -12.53%.
The industries contributing the most were the aerospace & defense industry, followed by the software industry. The diversified telecommunications services industry was the largest detractor from return, followed by the wireless communication services industry.
Cisco Systems, Inc., Verizon Communications, Inc., and Palo Alto Networks, Inc. were the strongest performers for the year. AT&T, Inc., CommScope Holding Co., Inc., and Zayo Group Holdings, 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) | |
Verizon Communications, Inc. | 11.6% |
Cisco Systems, Inc. | 10.8% |
AT&T, Inc. | 10.8% |
T-Mobile US, Inc. | 5.6% |
Sprint Corp. | 3.6% |
Motorola Solutions, Inc. | 3.3% |
Palo Alto Networks, Inc. | 3.3% |
Arista Networks, Inc. | 3.2% |
CenturyLink, Inc. | 3.0% |
F5 Networks, Inc. | 2.4% |
Top Ten Total | 57.6% |
“Ten Largest Holdings” excludes any temporary cash investments.
116 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Telecommunications Fund | (5.29%) | 2.41% | 5.76% |
S&P 500 Telecommunication Services Index | (12.53%) | 2.58% | 7.51% |
S&P 500 Index | (4.38%) | 8.49% | 13.12% |
* | 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. 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 | 117 |
SCHEDULE OF INVESTMENTS | December 31, 2018 |
TELECOMMUNICATIONS FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.3% | ||||||||
Telecommunications - 88.9% | ||||||||
Verizon Communications, Inc. | 6,669 | $ | 374,931 | |||||
Cisco Systems, Inc. | 8,064 | 349,413 | ||||||
AT&T, Inc. | 12,199 | 348,160 | ||||||
T-Mobile US, Inc.* | 2,820 | 179,380 | ||||||
Sprint Corp.* | 20,103 | 117,000 | ||||||
Motorola Solutions, Inc. | 930 | 106,987 | ||||||
Arista Networks, Inc.* | 486 | 102,400 | ||||||
CenturyLink, Inc. | 6,449 | 97,702 | ||||||
Juniper Networks, Inc. | 2,814 | 75,725 | ||||||
Ubiquiti Networks, Inc. | 674 | 67,002 | ||||||
Vodafone Group plc ADR | 3,093 | 59,633 | ||||||
Zayo Group Holdings, Inc.* | 2,605 | 59,498 | ||||||
ARRIS International plc* | 1,886 | 57,655 | ||||||
Ciena Corp.* | 1,691 | 57,342 | ||||||
EchoStar Corp. — Class A* | 1,288 | 47,295 | ||||||
Telephone & Data Systems, Inc. | 1,440 | 46,858 | ||||||
ViaSat, Inc.* | 769 | 45,333 | ||||||
CommScope Holding Company, Inc.* | 2,667 | 43,712 | ||||||
Intelsat S.A.* | 2,024 | 43,293 | ||||||
America Movil SAB de CV — Class L ADR | 3,005 | 42,821 | ||||||
Finisar Corp.* | 1,837 | 39,679 | ||||||
InterDigital, Inc. | 556 | 36,935 | ||||||
China Mobile Ltd. ADR | 760 | 36,480 | ||||||
Shenandoah Telecommunications Co. | 820 | 36,285 | ||||||
Iridium Communications, Inc.* | 1,880 | 34,686 | ||||||
Telefonica Brasil S.A. ADR | 2,838 | 33,857 | ||||||
BCE, Inc. | 849 | 33,561 | ||||||
TIM Participacoes S.A. ADR | 2,130 | 32,674 | ||||||
SK Telecom Company Ltd. ADR | 1,205 | 32,294 | ||||||
NETGEAR, Inc.* | 618 | 32,155 | ||||||
Rogers Communications, Inc. — Class B | 622 | 31,884 | ||||||
KT Corp. ADR * | 2,200 | 31,284 | ||||||
TELUS Corp. | 942 | 31,218 | ||||||
Acacia Communications, Inc.* | 812 | 30,856 | ||||||
Plantronics, Inc. | 843 | 27,903 | ||||||
Casa Systems, Inc.* | 1,994 | 26,181 | ||||||
Consolidated Communications Holdings, Inc. | 2,105 | 20,798 | ||||||
Total Telecommunications | 2,870,870 | |||||||
Internet - 7.5% | ||||||||
Palo Alto Networks, Inc.* | 564 | 106,230 | ||||||
F5 Networks, Inc.* | 478 | 77,450 | ||||||
Cogent Communications Holdings, Inc. | 794 | 35,897 | ||||||
Boingo Wireless, Inc.* | 1,137 | 23,388 | ||||||
Total Internet | 242,965 | |||||||
Computers - 2.4% | ||||||||
Lumentum Holdings, Inc.* | 1,056 | 44,351 | ||||||
NetScout Systems, Inc.* | 1,410 | 33,318 | ||||||
Total Computers | 77,669 | |||||||
Electronics - 0.5% | ||||||||
Applied Optoelectronics, Inc.* | 963 | 14,859 | ||||||
Total Common Stocks | ||||||||
(Cost $2,728,362) | 3,206,363 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,1 - 1.0% | ||||||||
JPMorgan Chase & Co. | $ | 19,721 | 19,721 | |||||
Barclays Capital | 8,201 | 8,201 | ||||||
Bank of America Merrill Lynch | 5,467 | 5,467 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $33,389) | 33,389 | |||||||
Total Investments - 100.3% | ||||||||
(Cost $2,761,751) | $ | 3,239,752 | ||||||
Other Assets & Liabilities, net - (0.3)% | (10,208 | ) | ||||||
Total Net Assets - 100.0% | $ | 3,229,544 |
* | 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 | Repurchase Agreements — See Note 4. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
118| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
TELECOMMUNICATIONS FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2018 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 3,206,363 | $ | — | $ | — | $ | 3,206,363 | ||||||||
Repurchase Agreements | — | 33,389 | — | 33,389 | ||||||||||||
Total Assets | $ | 3,206,363 | $ | 33,389 | $ | — | $ | 3,239,752 |
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, 2018, there were no transfers between levels.
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 119 |
TELECOMMUNICATIONS FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments, at value (cost $2,728,362) | $ | 3,206,363 | ||
Repurchase agreements, at value (cost $33,389) | 33,389 | |||
Receivables: | ||||
Dividends | 2,816 | |||
Foreign tax reclaims | 204 | |||
Securities lending income | 104 | |||
Interest | 3 | |||
Total assets | 3,242,879 | |||
Liabilities: | ||||
Payable for: | ||||
Management fees | 2,523 | |||
Fund shares redeemed | 2,254 | |||
Transfer agent and administrative fees | 742 | |||
Investor service fees | 742 | |||
Portfolio accounting fees | 297 | |||
Trustees’ fees* | 55 | |||
Miscellaneous | 6,722 | |||
Total liabilities | 13,335 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 3,229,544 | ||
Net assets consist of: | ||||
Paid in capital | $ | 3,379,715 | ||
Total distributable earnings (loss) | (150,171 | ) | ||
Net assets | $ | 3,229,544 | ||
Capital shares outstanding | 60,090 | |||
Net asset value per share | $ | 53.75 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $353) | $ | 74,405 | ||
Interest | 289 | |||
Income from securities lending, net | 5,576 | |||
Total investment income | 80,270 | |||
Expenses: | ||||
Management fees | 25,287 | |||
Investor service fees | 7,437 | |||
Transfer agent and administrative fees | 7,437 | |||
Professional fees | 3,558 | |||
Portfolio accounting fees | 2,975 | |||
Trustees’ fees* | 727 | |||
Custodian fees | 420 | |||
Line of credit fees | 41 | |||
Miscellaneous | 3,613 | |||
Total expenses | 51,495 | |||
Net investment income | 28,775 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (74,284 | ) | ||
Net realized loss | (74,284 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (300,467 | ) | ||
Net change in unrealized appreciation (depreciation) | (300,467 | ) | ||
Net realized and unrealized loss | (374,751 | ) | ||
Net decrease in net assets resulting from operations | $ | (345,976 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
120| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
TELECOMMUNICATIONS FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 28,775 | $ | 22,188 | ||||
Net realized gain (loss) on investments | (74,284 | ) | 174,301 | |||||
Net change in unrealized appreciation (depreciation) on investments | (300,467 | ) | (53,631 | ) | ||||
Net increase (decrease) in net assets resulting from operations | (345,976 | ) | 142,858 | |||||
Distributions to shareholders | (73,940 | ) | (83,794 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 11,508,223 | 13,601,984 | ||||||
Distributions reinvested | 73,940 | 83,794 | ||||||
Cost of shares redeemed | (11,446,388 | ) | (15,614,915 | ) | ||||
Net increase (decrease) from capital share transactions | 135,775 | (1,929,137 | ) | |||||
Net decrease in net assets | (284,141 | ) | (1,870,073 | ) | ||||
Net assets: | ||||||||
Beginning of year | 3,513,685 | 5,383,758 | ||||||
End of year | $ | 3,229,544 | $ | 3,513,685 | ||||
Capital share activity: | ||||||||
Shares sold | 193,484 | 236,843 | ||||||
Shares issued from reinvestment of distributions | 1,260 | 1,515 | ||||||
Shares redeemed | (194,735 | ) | (272,681 | ) | ||||
Net increase (decrease) in shares | 9 | (34,323 | ) |
1 | For the year ended December 31, 2017, the distributions from net investment income and net realized gains were as follows (See Note 9): |
Net investment income | $ | (36,179 | ) | |||||
Net realized gains | (47,615 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 121 |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 58.48 | $ | 57.03 | $ | 48.71 | $ | 53.12 | $ | 52.94 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .57 | .37 | .45 | .42 | .61 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | (3.51 | ) | 2.86 | 8.03 | (3.94 | ) | .79 | |||||||||||||
Total from investment operations | (2.94 | ) | 3.23 | 8.48 | (3.52 | ) | 1.40 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.47 | ) | (.77 | ) | (.16 | ) | (.89 | ) | (1.22 | ) | ||||||||||
Net realized gains | (1.32 | ) | (1.01 | ) | — | — | — | |||||||||||||
Total distributions | (1.79 | ) | (1.78 | ) | (.16 | ) | (.89 | ) | (1.22 | ) | ||||||||||
Net asset value, end of period | $ | 53.75 | $ | 58.48 | $ | 57.03 | $ | 48.71 | $ | 53.12 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (5.29 | %) | 5.85 | % | 17.40 | % | (6.73 | %) | 2.62 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 3,230 | $ | 3,514 | $ | 5,384 | $ | 2,329 | $ | 2,382 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.97 | % | 0.65 | % | 0.86 | % | 0.80 | % | 1.14 | % | ||||||||||
Total expenses | 1.73 | % | 1.70 | % | 1.66 | % | 1.60 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 365 | % | 372 | % | 410 | % | 232 | % | 495 | % |
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. |
122| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, Transportation Fund returned -20.05%, compared with a return of -4.38% for the S&P 500 Index. The S&P 500 Industrials Index returned -13.29%.
The auto components industry was the largest detractor from the Fund’s return for the period, followed by the automobiles segment. Only the interactive media & services segment contributed to return.
United Continental Holdings, Inc., CSX Corp., and Spirit Airlines, Inc. were the biggest contributors to performance for the year. FedEx Corp., Ford Motor Co., and Thor Industries, 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. | 5.6% |
United Parcel Service, Inc. — Class B | 5.3% |
Tesla, Inc. | 4.3% |
CSX Corp. | 4.2% |
FedEx Corp. | 3.9% |
General Motors Co. | 3.8% |
Norfolk Southern Corp. | 3.6% |
Delta Air Lines, Inc. | 3.2% |
Ford Motor Co. | 3.0% |
Southwest Airlines Co. | 2.8% |
Top Ten Total | 39.7% |
“Ten Largest Holdings” excludes any temporary cash investments.
THE RYDEX FUNDS ANNUAL REPORT | 123 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Transportation Fund | (20.05%) | 3.51% | 10.55% |
S&P 500 Industrials Index | (13.29%) | 5.95% | 12.68% |
S&P 500 Index | (4.38%) | 8.49% | 13.12% |
* | 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. The S&P 500 Index and 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. |
124 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2018 |
TRANSPORTATION FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.6% | ||||||||
Transportation - 44.4% | ||||||||
Union Pacific Corp. | 1,689 | $ | 233,471 | |||||
United Parcel Service, Inc. — Class B | 2,264 | 220,808 | ||||||
CSX Corp. | 2,787 | 173,156 | ||||||
FedEx Corp. | 998 | 161,007 | ||||||
Norfolk Southern Corp. | 1,010 | 151,035 | ||||||
Expeditors International of Washington, Inc. | 1,217 | 82,866 | ||||||
CH Robinson Worldwide, Inc. | 953 | 80,138 | ||||||
J.B. Hunt Transport Services, Inc. | 814 | 75,735 | ||||||
Old Dominion Freight Line, Inc. | 613 | 75,699 | ||||||
Kansas City Southern | 771 | 73,592 | ||||||
Canadian Pacific Railway Ltd. | 310 | 55,062 | ||||||
Genesee & Wyoming, Inc. — Class A* | 675 | 49,964 | ||||||
Canadian National Railway Co. | 666 | 49,357 | ||||||
Kirby Corp.* | 728 | 49,038 | ||||||
Knight-Swift Transportation Holdings, Inc. | 1,942 | 48,686 | ||||||
Landstar System, Inc. | 495 | 47,357 | ||||||
ZTO Express Cayman, Inc. ADR | 2,609 | 41,300 | ||||||
Ryder System, Inc. | 800 | 38,520 | ||||||
Hub Group, Inc. — Class A* | 948 | 35,142 | ||||||
Werner Enterprises, Inc. | 1,148 | 33,912 | ||||||
Saia, Inc.* | 509 | 28,412 | ||||||
Atlas Air Worldwide Holdings, Inc.* | 624 | 26,327 | ||||||
ArcBest Corp. | 635 | 21,755 | ||||||
Total Transportation | 1,852,339 | |||||||
Airlines - 18.8% | ||||||||
Delta Air Lines, Inc. | 2,702 | 134,830 | ||||||
Southwest Airlines Co. | 2,529 | 117,548 | ||||||
United Continental Holdings, Inc.* | 1,313 | 109,937 | ||||||
American Airlines Group, Inc. | 2,773 | 89,041 | ||||||
Alaska Air Group, Inc. | 1,037 | 63,101 | ||||||
JetBlue Airways Corp.* | 3,166 | 50,846 | ||||||
Spirit Airlines, Inc.* | 806 | 46,684 | ||||||
Copa Holdings S.A. — Class A | 525 | 41,323 | ||||||
Ryanair Holdings plc ADR* | 567 | 40,450 | ||||||
SkyWest, Inc. | 823 | 36,599 | ||||||
Allegiant Travel Co. — Class A | 279 | 27,961 | ||||||
Hawaiian Holdings, Inc. | 995 | 26,278 | ||||||
Total Airlines | 784,598 | |||||||
Auto Manufacturers - 14.3% | ||||||||
Tesla, Inc.* | 544 | 181,043 | ||||||
General Motors Co. | 4,687 | 156,780 | ||||||
Ford Motor Co. | 16,359 | 125,146 | ||||||
Ferrari N.V. | 480 | 47,731 | ||||||
Fiat Chrysler Automobiles N.V.* | 2,917 | 42,180 | ||||||
Tata Motors Ltd. ADR* | 3,366 | 40,998 | ||||||
Total Auto Manufacturers | 593,878 | |||||||
Auto Parts & Equipment - 14.0% | ||||||||
Aptiv plc | 1,387 | 85,398 | ||||||
Lear Corp. | 539 | 66,222 | ||||||
BorgWarner, Inc. | 1,837 | 63,817 | ||||||
Goodyear Tire & Rubber Co. | 2,510 | 51,229 | ||||||
Magna International, Inc. | 1,008 | 45,814 | ||||||
Delphi Technologies plc | 3,039 | 43,518 | ||||||
Autoliv, Inc. | 619 | 43,472 | ||||||
Tenneco, Inc. — Class A | 1,268 | 34,730 | ||||||
Dana, Inc. | 2,434 | 33,175 | ||||||
Visteon Corp.* | 521 | 31,406 | ||||||
Cooper Tire & Rubber Co. | 935 | 30,229 | ||||||
Adient plc | 1,726 | 25,994 | ||||||
American Axle & Manufacturing Holdings, Inc.* | 2,338 | 25,952 | ||||||
Total Auto Parts & Equipment | 580,956 | |||||||
Commercial Services - 3.7% | ||||||||
AMERCO | 179 | 58,732 | ||||||
Macquarie Infrastructure Corp. | 1,119 | 40,911 | ||||||
Avis Budget Group, Inc.* | 1,323 | 29,741 | ||||||
Hertz Global Holdings, Inc.* | 1,765 | 24,092 | ||||||
Total Commercial Services | 153,476 | |||||||
Leisure Time - 2.2% | ||||||||
Harley-Davidson, Inc. | 1,655 | 56,469 | ||||||
Fox Factory Holding Corp.* | 599 | 35,263 | ||||||
Total Leisure Time | 91,732 | |||||||
Electronics - 1.3% | ||||||||
Gentex Corp. | 2,688 | 54,324 | ||||||
Home Builders - 0.9% | ||||||||
Thor Industries, Inc. | 750 | 39,000 | ||||||
Total Common Stocks | ||||||||
(Cost $1,868,913) | 4,150,303 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,1 - 0.8% | ||||||||
JPMorgan Chase & Co. | $ | 20,009 | 20,009 | |||||
Barclays Capital | 8,321 | 8,321 | ||||||
Bank of America Merrill Lynch | 5,547 | 5,547 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $33,877) | 33,877 | |||||||
Total Investments - 100.4% | ||||||||
(Cost $1,902,790) | $ | 4,184,180 | ||||||
Other Assets & Liabilities, net - (0.4)% | (16,740 | ) | ||||||
Total Net Assets - 100.0% | $ | 4,167,440 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 125 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
TRANSPORTATION 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 | Repurchase Agreements — See Note 4. |
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, 2018 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 4,150,303 | $ | — | $ | — | $ | 4,150,303 | ||||||||
Repurchase Agreements | — | 33,877 | — | 33,877 | ||||||||||||
Total Assets | $ | 4,150,303 | $ | 33,877 | $ | — | $ | 4,184,180 |
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, 2018, there were no transfers between levels.
126| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
TRANSPORTATION FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments, at value (cost $1,868,913) | $ | 4,150,303 | ||
Repurchase agreements, at value (cost $33,877) | 33,877 | |||
Cash | 6 | |||
Receivables: | ||||
Fund shares sold | 3,361 | |||
Dividends | 2,391 | |||
Foreign tax reclaims | 81 | |||
Interest | 3 | |||
Total assets | 4,190,022 | |||
Liabilities: | ||||
Payable for: | ||||
Management fees | 3,439 | |||
Transfer agent and administrative fees | 1,011 | |||
Investor service fees | 1,011 | |||
Fund shares redeemed | 719 | |||
Portfolio accounting fees | 405 | |||
Trustees’ fees* | 145 | |||
Miscellaneous | 15,852 | |||
Total liabilities | 22,582 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 4,167,440 | ||
Net assets consist of: | ||||
Paid in capital | $ | 2,346,887 | ||
Total distributable earnings (loss) | 1,820,553 | |||
Net assets | $ | 4,167,440 | ||
Capital shares outstanding | 63,132 | |||
Net asset value per share | $ | 66.01 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $879) | $ | 101,779 | ||
Interest | 799 | |||
Income from securities lending, net | 1,700 | |||
Total investment income | 104,278 | |||
Expenses: | ||||
Management fees | 58,109 | |||
Investor service fees | 17,091 | |||
Transfer agent and administrative fees | 17,091 | |||
Professional fees | 8,473 | |||
Portfolio accounting fees | 6,836 | |||
Trustees’ fees* | 2,280 | |||
Custodian fees | 1,022 | |||
Line of credit fees | 35 | |||
Miscellaneous | 6,427 | |||
Total expenses | 117,364 | |||
Net investment loss | (13,086 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 983,030 | |||
Net realized gain | 983,030 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (2,177,203 | ) | ||
Net change in unrealized appreciation (depreciation) | (2,177,203 | ) | ||
Net realized and unrealized loss | (1,194,173 | ) | ||
Net decrease in net assets resulting from operations | $ | (1,207,259 | ) |
* | 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| 127 |
TRANSPORTATION FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (13,086 | ) | $ | (53,647 | ) | ||
Net realized gain on investments | 983,030 | 1,233,216 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (2,177,203 | ) | 546,486 | |||||
Net increase (decrease) in net assets resulting from operations | (1,207,259 | ) | 1,726,055 | |||||
Distributions to shareholders | (238,586 | ) | (23,779 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 17,105,443 | 31,357,021 | ||||||
Distributions reinvested | 238,586 | 23,779 | ||||||
Cost of shares redeemed | (23,469,276 | ) | (34,227,168 | ) | ||||
Net decrease from capital share transactions | (6,125,247 | ) | (2,846,368 | ) | ||||
Net decrease in net assets | (7,571,092 | ) | (1,144,092 | ) | ||||
Net assets: | ||||||||
Beginning of year | 11,738,532 | 12,882,624 | ||||||
End of year | $ | 4,167,440 | $ | 11,738,532 | ||||
Capital share activity: | ||||||||
Shares sold | 208,178 | 406,855 | ||||||
Shares issued from reinvestment of distributions | 3,009 | 308 | ||||||
Shares redeemed | (284,315 | ) | (452,837 | ) | ||||
Net decrease in shares | (73,128 | ) | (45,674 | ) |
1 | For the year ended December 31, 2017, the total distributions to shareholders were all from net investment income (See Note 9). |
128| 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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 86.15 | $ | 70.81 | $ | 100.87 | $ | 121.73 | $ | 99.13 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.16 | ) | (.43 | ) | .16 | (.08 | ) | (.12 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | (16.55 | ) | 15.99 | (20.23 | ) | (16.78 | ) | 22.72 | ||||||||||||
Total from investment operations | (16.71 | ) | 15.56 | (20.07 | ) | (16.86 | ) | 22.60 | ||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | — | (.22 | ) | — | — | — | ||||||||||||||
Net realized gains | (3.43 | ) | — | (9.99 | ) | (4.00 | ) | — | ||||||||||||
Total distributions | (3.43 | ) | (.22 | ) | (9.99 | ) | (4.00 | ) | — | |||||||||||
Net asset value, end of period | $ | 66.01 | $ | 86.15 | $ | 70.81 | $ | 100.87 | $ | 121.73 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (20.05 | %) | 22.02 | % | 15.43 | % | (14.09 | %) | 22.80 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 4,167 | $ | 11,739 | $ | 12,883 | $ | 6,810 | $ | 22,672 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.19 | %) | (0.56 | %) | 0.73 | % | (0.06 | %) | (0.11 | %) | ||||||||||
Total expenses | 1.72 | % | 1.70 | % | 1.66 | % | 1.60 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 237 | % | 308 | % | 174 | % | 99 | % | 196 | % |
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 years presented through December 31, 2016 have been restated to reflect a 1:4 reverse share split effective December 1, 2016. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 129 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
UTILITIES FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that operate public utilities (“Utilities Companies”).
For the year ended December 31, 2018, Utilities Fund returned 3.78%, compared with a return of -4.38% for the S&P 500 Index. The S&P 500 Utilities Index returned 4.11%.
The electric utilities industry was the largest contributor to return for the period, followed by the independent power & renewable electricity producers. Water utilities was the only segment to detract from return.
NextEra Energy, Inc., NRG Energy, Inc., and Exelon Corp. were the best-performing holdings over the one-year period. PG&E Corp., Dominion Energy, Inc., and Consolidated Edison, Inc. 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. | 4.9% |
Duke Energy Corp. | 4.2% |
Dominion Energy, Inc. | 3.6% |
Southern Co. | 3.6% |
Exelon Corp. | 3.5% |
American Electric Power Company, Inc. | 3.2% |
Sempra Energy | 2.9% |
Public Service Enterprise Group, Inc. | 2.8% |
Xcel Energy, Inc. | 2.7% |
Consolidated Edison, Inc. | 2.6% |
Top Ten Total | 34.0% |
“Ten Largest Holdings” excludes any temporary cash investments.
130 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Utilities Fund | 3.78% | 8.82% | 9.51% |
S&P 500 Utilities Index | 4.11% | 10.74% | 10.46% |
S&P 500 Index | (4.38%) | 8.49% | 13.12% |
* | 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. 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 | 131 |
SCHEDULE OF INVESTMENTS | December 31, 2018 |
UTILITIES FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.1% | ||||||||
Electric - 82.4% | ||||||||
NextEra Energy, Inc. | 5,418 | $ | 941,757 | |||||
Duke Energy Corp. | 9,433 | 814,068 | ||||||
Dominion Energy, Inc. | 9,766 | 697,878 | ||||||
Southern Co. | 15,659 | 687,743 | ||||||
Exelon Corp. | 15,070 | 679,657 | ||||||
American Electric Power Company, Inc. | 8,344 | 623,631 | ||||||
Sempra Energy | 5,110 | 552,851 | ||||||
Public Service Enterprise Group, Inc. | 10,229 | 532,419 | ||||||
Xcel Energy, Inc. | 10,518 | 518,222 | ||||||
Consolidated Edison, Inc. | 6,639 | 507,618 | ||||||
PPL Corp. | 17,080 | 483,876 | ||||||
WEC Energy Group, Inc. | 6,944 | 480,941 | ||||||
Eversource Energy | 7,118 | 462,955 | ||||||
DTE Energy Co. | 4,159 | 458,738 | ||||||
FirstEnergy Corp. | 12,207 | 458,373 | ||||||
Edison International | 7,736 | 439,173 | ||||||
Ameren Corp. | 6,262 | 408,470 | ||||||
Entergy Corp. | 4,740 | 407,972 | ||||||
Avangrid, Inc. | 8,110 | 406,230 | ||||||
Evergy, Inc. | 7,006 | 397,731 | ||||||
CenterPoint Energy, Inc. | 13,916 | 392,849 | ||||||
CMS Energy Corp. | 7,748 | 384,688 | ||||||
PG&E Corp.* | 15,561 | 369,574 | ||||||
Vistra Energy Corp.* | 15,566 | 356,306 | ||||||
NRG Energy, Inc. | 8,937 | 353,905 | ||||||
Alliant Energy Corp. | 7,798 | 329,465 | ||||||
AES Corp. | 22,113 | 319,754 | ||||||
Pinnacle West Capital Corp. | 3,700 | 315,240 | ||||||
OGE Energy Corp. | 7,381 | 289,261 | ||||||
SCANA Corp. | 5,589 | 267,042 | ||||||
IDACORP, Inc. | 2,375 | 221,017 | ||||||
Portland General Electric Co. | 4,509 | 206,738 | ||||||
ALLETE, Inc. | 2,699 | 205,718 | ||||||
Hawaiian Electric Industries, Inc. | 5,614 | 205,585 | ||||||
Black Hills Corp. | 3,185 | 199,954 | ||||||
PNM Resources, Inc. | 4,522 | 185,809 | ||||||
NorthWestern Corp. | 2,963 | 176,121 | ||||||
Avista Corp. | 4,048 | 171,959 | ||||||
Total Electric | 15,911,288 | |||||||
Gas - 11.4% | ||||||||
Atmos Energy Corp. | 3,691 | 342,230 | ||||||
NiSource, Inc. | 12,388 | 314,036 | ||||||
UGI Corp. | 5,817 | 310,337 | ||||||
Vectren Corp. | 3,529 | 254,017 | ||||||
National Fuel Gas Co. | 4,157 | 212,755 | ||||||
ONE Gas, Inc. | 2,635 | 209,746 | ||||||
New Jersey Resources Corp. | 4,468 | 204,054 | ||||||
Spire, Inc. | 2,706 | 200,460 | ||||||
South Jersey Industries, Inc. | 5,710 | 158,738 | ||||||
Total Gas | 2,206,373 | |||||||
Water - 3.5% | ||||||||
American Water Works Company, Inc. | 4,613 | 418,722 | ||||||
Aqua America, Inc. | 7,496 | 256,288 | ||||||
Total Water | 675,010 | |||||||
Building Materials - 1.1% | ||||||||
MDU Resources Group, Inc. | 9,304 | 221,808 | ||||||
Energy-Alternate Sources - 0.7% | ||||||||
Pattern Energy Group, Inc. — Class A | 7,653 | 142,499 | ||||||
Pipelines - 0.0% | ||||||||
Kinder Morgan, Inc. | 1 | 15 | ||||||
Total Common Stocks | ||||||||
(Cost $13,369,044) | 19,156,993 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,1 - 0.6% | ||||||||
JPMorgan Chase & Co. | $ | 67,377 | 67,377 | |||||
Barclays Capital | 28,020 | 28,020 | ||||||
Bank of America Merrill Lynch | 18,680 | 18,680 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $114,077) | 114,077 | |||||||
Total Investments - 99.7% | ||||||||
(Cost $13,483,121) | $ | 19,271,070 | ||||||
Other Assets & Liabilities, net - 0.3% | 49,335 | |||||||
Total Net Assets - 100.0% | $ | 19,320,405 |
* | 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 | Repurchase Agreements — See Note 4. |
See Sector Classification in Other Information section. |
132| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
UTILITIES FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2018 (See Note 3 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 19,156,993 | $ | — | $ | — | $ | 19,156,993 | ||||||||
Repurchase Agreements | — | 114,077 | — | 114,077 | ||||||||||||
Total Assets | $ | 19,156,993 | $ | 114,077 | $ | — | $ | 19,271,070 |
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, 2018, there were no transfers between levels.
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 133 |
UTILITIES FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments, at value (cost $13,369,044) | $ | 19,156,993 | ||
Repurchase agreements, at value (cost $114,077) | 114,077 | |||
Receivables: | ||||
Fund shares sold | 94,378 | |||
Dividends | 44,585 | |||
Foreign tax reclaims | 123 | |||
Interest | 9 | |||
Total assets | 19,410,165 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 27,753 | |||
Management fees | 15,421 | |||
Transfer agent and administrative fees | 4,536 | |||
Investor service fees | 4,536 | |||
Portfolio accounting fees | 1,814 | |||
Trustees’ fees* | 283 | |||
Miscellaneous | 35,417 | |||
Total liabilities | 89,760 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 19,320,405 | ||
Net assets consist of: | ||||
Paid in capital | $ | 15,282,764 | ||
Total distributable earnings (loss) | 4,037,641 | |||
Net assets | $ | 19,320,405 | ||
Capital shares outstanding | 679,496 | |||
Net asset value per share | $ | 28.43 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends | $ | 507,118 | ||
Interest | 1570 | |||
Income from securities lending, net | 44 | |||
Total investment income | 508,732 | |||
Expenses: | ||||
Management fees | 132,074 | |||
Investor service fees | 38,845 | |||
Transfer agent and administrative fees | 38,845 | |||
Professional fees | 16,399 | |||
Portfolio accounting fees | 15,538 | |||
Trustees’ fees* | 3,880 | |||
Custodian fees | 2,234 | |||
Line of credit fees | 52 | |||
Miscellaneous | 20,997 | |||
Total expenses | 268,864 | |||
Net investment income | 239,868 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 70,434 | |||
Net realized gain | 70,434 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (467,247 | ) | ||
Net change in unrealized appreciation (depreciation) | (467,247 | ) | ||
Net realized and unrealized loss | (396,813 | ) | ||
Net decrease in net assets resulting from operations | $ | (156,945 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
134| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
UTILITIES FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 239,868 | $ | 287,688 | ||||
Net realized gain on investments | 70,434 | 350,959 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (467,247 | ) | 1,123,878 | |||||
Net increase (decrease) in net assets resulting from operations | (156,945 | ) | 1,762,525 | |||||
Distributions to shareholders | (360,629 | ) | (721,307 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 57,547,298 | 40,236,819 | ||||||
Distributions reinvested | 360,629 | 721,307 | ||||||
Cost of shares redeemed | (52,739,822 | ) | (42,571,657 | ) | ||||
Net increase (decrease) from capital share transactions | 5,168,105 | (1,613,531 | ) | |||||
Net increase (decrease) in net assets | 4,650,531 | (572,313 | ) | |||||
Net assets: | ||||||||
Beginning of year | 14,669,874 | 15,242,187 | ||||||
End of year | $ | 19,320,405 | $ | 14,669,874 | ||||
Capital share activity: | ||||||||
Shares sold | 2,027,789 | 1,434,672 | ||||||
Shares issued from reinvestment of distributions | 12,884 | 26,985 | ||||||
Shares redeemed | (1,885,612 | ) | (1,518,042 | ) | ||||
Net increase (decrease) in shares | 155,061 | (56,385 | ) |
1 | For the year ended December 31, 2017, the distributions from net investment income and net realized gains were as follows (See Note 9): |
Net investment income | $ | (357,236 | ) | |||||
Net realized gains | (364,071 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 135 |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 27.97 | $ | 26.24 | $ | 22.86 | $ | 25.35 | $ | 20.89 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .43 | .42 | .36 | .39 | .48 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | .62 | c | 2.42 | 3.38 | (2.24 | ) | 4.30 | |||||||||||||
Total from investment operations | 1.05 | 2.84 | 3.74 | (1.85 | ) | 4.78 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.46 | ) | (.55 | ) | (.17 | ) | (.64 | ) | (.32 | ) | ||||||||||
Net realized gains | (.13 | ) | (.56 | ) | (.19 | ) | — | — | ||||||||||||
Total distributions | (.59 | ) | (1.11 | ) | (.36 | ) | (.64 | ) | (.32 | ) | ||||||||||
Net asset value, end of period | $ | 28.43 | $ | 27.97 | $ | 26.24 | $ | 22.86 | $ | 25.35 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 3.78 | % | 11.02 | % | 16.34 | % | (7.36 | %) | 22.89 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 19,320 | $ | 14,670 | $ | 15,242 | $ | 17,064 | $ | 28,415 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.54 | % | 1.48 | % | 1.39 | % | 1.66 | % | 2.07 | % | ||||||||||
Total expenses | 1.73 | % | 1.70 | % | 1.65 | % | 1.61 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 299 | % | 183 | % | 234 | % | 312 | % | 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 | The amount shown for a share outstanding throughout the period does not agree with the aggregate net losses on investments for the year because of the sales and repurchases of fund shares in relation to fluctuating market value of investments of the Fund. |
136| 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, 2018, 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 diversified investment company, with the exception of Biotechnology Fund, Electronics Fund, Energy Services Fund, Precious Metals Fund and Telecommunications Fund which are 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 a fund’s securities and other assets, less all liabilities, by the number of outstanding shares of that 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.
THE RYDEX FUNDS ANNUAL REPORT | 137 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Exchange-traded funds are valued at the last quoted sales price.
Money market funds are valued at their NAV.
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, subject to review and approval by the Valuation Committee, pursuant to methods established or ratified by the Board. Valuations in accordance with these methods are intended to reflect each security’s (or asset’s or liability’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 U.S. Treasury securities, and other information analysis.
(b) Currency Translations
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.
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 gain or loss and unrealized appreciation or depreciation 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 appreciation or depreciation 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, 2018, 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 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 realized gains. The actual amounts of income, return of capital, and realized 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 2.40% at December 31, 2018.
138 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
(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 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/or GFD. The Trust does not compensate its officers or trustees who are officers, directors and/or employees of GI or 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. 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 each Fund’s average daily net assets and out of pocket expenses.
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.
THE RYDEX FUNDS ANNUAL REPORT | 139 |
NOTES TO FINANCIAL STATEMENTS (continued) |
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, 2018, the repurchase agreements in the joint account were as follows:
Counterparty and | Face Value | Repurchase Price |
| Collateral | Par Value | Fair Value | ||||||||||||||
JP Morgan Chase & Co. | U.S. Treasury Note | |||||||||||||||||||
2.95% | 1.13% | |||||||||||||||||||
Due 01/02/19 | $ | 54,122,377 | $ | 54,131,247 | 06/30/21 | $ | 57,040,000 | $ | 55,203,996 | |||||||||||
U.S. Treasury Bill | ||||||||||||||||||||
0.00% | ||||||||||||||||||||
01/03/19 | 900 | 900 | ||||||||||||||||||
57,040,900 | 55,204,896 | |||||||||||||||||||
Barclays Capital | U.S. Treasury Note | |||||||||||||||||||
2.93% | 2.50% | |||||||||||||||||||
Due 01/02/19 | 22,507,947 | 22,511,611 | 05/15/24 | 22,942,600 | 22,958,127 | |||||||||||||||
Bank of America Merrill Lynch | U.S. Treasury Strip | |||||||||||||||||||
2.95% | 0.00% | |||||||||||||||||||
Due 01/02/19 | 15,005,298 | 15,007,757 | 08/15/31 | 22,092,096 | 15,305,404 |
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 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.
140 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
At December 31, 2018, the Funds participated in securities lending transactions, which are subject to enforceable netting arrangements, as follows:
Gross Amounts Not Offset in the | Securities Lending Collateral | ||||||||||||||||||||||||
Fund | Value of | Collateral | Net | Cash | Cash | Total | |||||||||||||||||||
Basic Materials Fund | $ | 91,008 | $ | (91,008 | ) | $ | — | $ | 79,384 | $ | 13,434 | $ | 92,818 | ||||||||||||
Consumer Products Fund | 43,328 | (43,328 | ) | — | 37,403 | 6,330 | 43,733 | ||||||||||||||||||
Electronics Fund | 41,558 | (41,558 | ) | — | 36,202 | 6,126 | 42,328 | ||||||||||||||||||
Energy Services Fund | 44,252 | (44,252 | ) | — | 40,896 | 6,921 | 47,817 | ||||||||||||||||||
Internet Fund | 16,241 | (16,241 | ) | — | 14,860 | 2,515 | 17,375 | ||||||||||||||||||
Leisure Fund | 79,684 | (79,684 | ) | — | 71,610 | 12,119 | 83,729 | ||||||||||||||||||
Precious Metals Fund | 1,662,584 | (1,662,584 | ) | — | 1,445,291 | 244,581 | 1,689,872 | ||||||||||||||||||
Real Estate Fund | 36,302 | (36,302 | ) | — | 31,803 | 5,382 | 37,185 | ||||||||||||||||||
Retailing Fund | 91,161 | (91,161 | ) | — | 81,694 | 13,825 | 95,519 | ||||||||||||||||||
Technology Fund | 119,029 | (119,029 | ) | — | 120,079 | 20,320 | 140,399 |
(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 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 RYDEX FUNDS ANNUAL REPORT | 141 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The tax character of distributions paid during the year ended December 31, 2018 was as follows:
Fund | Ordinary | Long-Term | Total | |||||||||
Banking Fund | $ | 34,621 | $ | 1,768 | $ | 36,389 | ||||||
Basic Materials Fund | 209,047 | — | 209,047 | |||||||||
Biotechnology Fund | — | 71,198 | 71,198 | |||||||||
Consumer Products Fund | 85,677 | 432,239 | 517,916 | |||||||||
Electronics Fund | 185,380 | 57,284 | 242,664 | |||||||||
Energy Fund | 100,740 | — | 100,740 | |||||||||
Energy Services Fund | 203,149 | — | 203,149 | |||||||||
Financial Services Fund | 80,650 | — | 80,650 | |||||||||
Health Care Fund | — | 331,012 | 331,012 | |||||||||
Internet Fund | 206,047 | — | 206,047 | |||||||||
Leisure Fund | 238,213 | — | 238,213 | |||||||||
Precious Metals Fund | 860,699 | — | 860,699 | |||||||||
Real Estate Fund | 127,066 | — | 127,066 | |||||||||
Retailing Fund | 1,360 | — | 1,360 | |||||||||
Technology Fund | 660,584 | — | 660,584 | |||||||||
Telecommunications Fund | 19,468 | 54,472 | 73,940 | |||||||||
Transportation Fund | 141,129 | 97,457 | 238,586 | |||||||||
Utilities Fund | 292,483 | 68,146 | 360,629 |
The tax character of distributions paid during the year ended December 31, 2017 was as follows:
Fund | Ordinary | Long-Term | Total | |||||||||
Banking Fund | $ | 33,765 | $ | — | $ | 33,765 | ||||||
Basic Materials Fund | 105,780 | — | 105,780 | |||||||||
Consumer Products Fund | 647,918 | 65,047 | 712,965 | |||||||||
Electronics Fund | — | — | — | |||||||||
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 |
Note: For federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
142 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
The tax components of accumulated earnings (deficit) as of December 31, 2018 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 | $ | 40,316 | $ | — | $ | 542,160 | $ | (875,367 | ) | $ | — | $ | (292,891 | ) | |||||||||
Basic Materials Fund | 15,290 | 284,073 | 1,370,689 | — | — | 1,670,052 | |||||||||||||||||
Biotechnology Fund | — | 553,949 | 8,755,952 | — | — | 9,309,901 | |||||||||||||||||
Consumer Products Fund | 158,056 | 33,877 | 2,988,014 | — | — | 3,179,947 | |||||||||||||||||
Electronics Fund | — | 94,379 | 1,629,411 | — | — | 1,723,790 | |||||||||||||||||
Energy Fund | 40,839 | — | 1,427,837 | (7,639,446 | ) | — | (6,170,770 | ) | |||||||||||||||
Energy Services Fund | — | — | (1,354,140 | ) | (7,734,977 | ) | — | (9,089,117 | ) | ||||||||||||||
Financial Services Fund | 85,079 | 413,743 | 1,451,329 | — | 6,073 | 1,956,224 | |||||||||||||||||
Health Care Fund | — | 408,723 | 7,424,260 | — | — | 7,832,983 | |||||||||||||||||
Internet Fund | — | — | 2,470,990 | — | — | 2,470,990 | |||||||||||||||||
Leisure Fund | 25,588 | 42,635 | 798,985 | — | — | 867,208 | |||||||||||||||||
Precious Metals Fund | — | — | (2,204,476 | ) | (15,626,534 | ) | (86,192 | ) | (17,917,202 | ) | |||||||||||||
Real Estate Fund | 242,602 | 150,052 | 1,115,339 | — | 49,934 | 1,557,927 | |||||||||||||||||
Retailing Fund | — | — | 17,149 | (336,292 | ) | — | (319,143 | ) | |||||||||||||||
Technology Fund | — | 782,667 | 5,886,124 | — | — | 6,668,791 | |||||||||||||||||
Telecommunications Fund | — | — | (39,926 | ) | (110,245 | ) | — | (150,171 | ) | ||||||||||||||
Transportation Fund | — | 1,399 | 1,819,154 | — | — | 1,820,553 | |||||||||||||||||
Utilities Fund | 49,561 | — | 3,988,080 | — | — | 4,037,641 |
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. 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, 2018, capital loss carryforwards for the Funds were as follows:
Fund | Unlimited | Total | |||||||||
Short-Term | Long-Term | ||||||||||
Banking Fund | $ | (875,367 | ) | $ | — | $ | (875,367 | ) | |||
Energy Fund | (895,676 | ) | (6,743,770 | ) | (7,639,446 | ) | |||||
Energy Services Fund | (1,152,122 | ) | (6,582,855 | ) | (7,734,977 | ) | |||||
Precious Metals Fund | (3,822,388 | ) | (11,804,146 | ) | (15,626,534 | ) | |||||
Retailing Fund | — | (336,292 | ) | (336,292 | ) | ||||||
Telecommunications Fund* | (21,160 | ) | (89,085 | ) | (110,245 | ) |
* | 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, 2018, the following capital loss carryforward amounts expired or were utilized:
Fund | Expired | Utilized | Total | |||||||||
Banking Fund | $ | — | $ | 474,926 | $ | 474,926 | ||||||
Electronics Fund | — | 329,594 | 329,594 | |||||||||
Financial Services Fund | — | 273,255 | 273,255 | |||||||||
Telecommunications Fund | — | 60,983 | 60,983 | |||||||||
Transportation Fund | — | 719,336 | 719,336 |
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
THE RYDEX FUNDS ANNUAL REPORT | 143 |
NOTES TO FINANCIAL STATEMENTS (continued) |
from the tax treatment of net operating losses, foreign capital gains taxes, and corporate actions. To the extent these differences are permanent and would require a reclassification between Paid in Capital and Total Distributable Earnings (Loss), such reclassifications are made 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, 2018 for permanent book/tax differences:
Fund | Paid In | Total | ||||||
Basic Materials Fund | $ | 363,649 | $ | (363,649 | ) | |||
Biotechnology Fund | 517,755 | (517,755 | ) | |||||
Consumer Products Fund | 355,788 | (355,788 | ) | |||||
Electronics Fund | 389,195 | (389,195 | ) | |||||
Energy Services Fund | (9,036 | ) | 9,036 | |||||
Financial Services Fund | 5,190 | (5,190 | ) | |||||
Health Care Fund | 835,231 | (835,231 | ) | |||||
Internet Fund | 307,130 | (307,130 | ) | |||||
Leisure Fund | 157,987 | (157,987 | ) | |||||
Precious Metals Fund | (254,640 | ) | 254,640 | |||||
Real Estate Fund | 19,573 | (19,573 | ) | |||||
Retailing Fund | (36,386 | ) | 36,386 | |||||
Technology Fund | 491,960 | (491,960 | ) | |||||
Telecommunications Fund | 138,722 | (138,722 | ) | |||||
Transportation Fund | (8,237 | ) | 8,237 | |||||
Utilities Fund | 599,963 | (599,963 | ) |
At December 31, 2018, the cost of securities for Federal income tax purposes, the aggregate gross unrealized appreciation for all securities for which there was an excess of value over tax cost and the aggregate gross unrealized depreciation for all securities for which there was an excess of tax cost over value, were as follows:
Fund | Tax | Tax | Tax | Net | ||||||||||||
Banking Fund | $ | 4,978,909 | $ | 571,889 | $ | (29,729 | ) | $ | 542,160 | |||||||
Basic Materials Fund | 4,925,305 | 1,423,188 | (52,499 | ) | 1,370,689 | |||||||||||
Biotechnology Fund | 12,477,476 | 8,916,231 | (160,279 | ) | 8,755,952 | |||||||||||
Consumer Products Fund | 10,110,611 | 3,157,979 | (169,965 | ) | 2,988,014 | |||||||||||
Electronics Fund | 3,279,971 | 1,664,857 | (35,446 | ) | 1,629,411 | |||||||||||
Energy Fund | 8,251,144 | 1,998,629 | (570,792 | ) | 1,427,837 | |||||||||||
Energy Services Fund | 4,889,863 | — | (1,354,140 | ) | (1,354,140 | ) | ||||||||||
Financial Services Fund | 5,695,654 | 1,536,449 | (85,120 | ) | 1,451,329 | |||||||||||
Health Care Fund | 13,057,596 | 7,603,419 | (179,159 | ) | 7,424,260 | |||||||||||
Internet Fund | 6,031,843 | 2,632,843 | (161,853 | ) | 2,470,990 | |||||||||||
Leisure Fund | 2,847,489 | 884,826 | (85,841 | ) | 798,985 | |||||||||||
Precious Metals Fund | 20,426,555 | — | (2,204,476 | ) | (2,204,476 | ) | ||||||||||
Real Estate Fund | 11,572,016 | 1,305,369 | (190,030 | ) | 1,115,339 | |||||||||||
Retailing Fund | 6,863,998 | 323,869 | (306,720 | ) | 17,149 | |||||||||||
Technology Fund | 10,324,990 | 5,913,776 | (27,652 | ) | 5,886,124 | |||||||||||
Telecommunications Fund | 3,279,678 | 47,798 | (87,724 | ) | (39,926 | ) | ||||||||||
Transportation Fund | 2,365,026 | 1,840,616 | (21,462 | ) | 1,819,154 | |||||||||||
Utilities Fund | 15,282,990 | 4,016,795 | (28,715 | ) | 3,988,080 |
144 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 7 – Securities Transactions
For the year ended December 31, 2018, 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 | $ | 22,853,992 | $ | 26,043,139 | ||||
Basic Materials Fund | 8,227,603 | 17,472,492 | ||||||
Biotechnology Fund | 28,500,604 | 34,322,307 | ||||||
Consumer Products Fund | 23,425,656 | 23,980,606 | ||||||
Electronics Fund | 20,588,710 | 26,133,175 | ||||||
Energy Fund | 78,704,214 | 82,121,617 | ||||||
Energy Services Fund | 22,265,149 | 24,646,106 | ||||||
Financial Services Fund | 44,983,032 | 52,981,069 | ||||||
Health Care Fund | 46,022,466 | 47,827,275 | ||||||
Internet Fund | 53,450,945 | 53,507,727 | ||||||
Leisure Fund | 18,145,780 | 23,187,144 | ||||||
Precious Metals Fund | 121,690,444 | 130,549,092 | ||||||
Real Estate Fund | 42,053,768 | 38,097,484 | ||||||
Retailing Fund | 25,317,630 | 26,022,321 | ||||||
Technology Fund | 42,146,346 | 48,924,216 | ||||||
Telecommunications Fund | 11,032,643 | 10,948,123 | ||||||
Transportation Fund | 16,603,572 | 22,937,289 | ||||||
Utilities Fund | 51,153,297 | 46,187,754 |
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. 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, 2018, the Funds engaged in purchases and sales of securities, pursuant to Rule 17a-7 of the 1940 Act, as follows:
Fund | Purchases | Sales | Realized | |||||||||
Banking Fund | $ | 4,153,280 | $ | 6,186,491 | $ | 144,639 | ||||||
Basic Materials Fund | 875,422 | 2,983,547 | 101,954 | |||||||||
Biotechnology Fund | 4,095,176 | 7,543,378 | (160,992 | ) | ||||||||
Consumer Products Fund | 3,503,521 | 2,325,525 | 2,144 | |||||||||
Electronics Fund | 4,742,188 | 7,268,763 | 606,885 | |||||||||
Energy Fund | 12,355,449 | 12,360,748 | (164,881 | ) | ||||||||
Energy Services Fund | 5,410,323 | 6,899,353 | 84,169 | |||||||||
Financial Services Fund | 9,728,974 | 11,734,519 | 179,048 | |||||||||
Health Care Fund | 9,666,715 | 10,567,830 | (32,552 | ) | ||||||||
Internet Fund | 11,766,182 | 14,938,549 | (302,403 | ) | ||||||||
Leisure Fund | 3,407,800 | 3,131,913 | (76,882 | ) | ||||||||
Precious Metals Fund | 13,526,783 | 10,023,965 | (69,760 | ) | ||||||||
Real Estate Fund | 9,963,817 | 6,716,129 | (89,873 | ) | ||||||||
Retailing Fund | 4,996,232 | 6,668,726 | 11,430 | |||||||||
Technology Fund | 8,738,114 | 12,777,381 | 425,602 | |||||||||
Telecommunications Fund | 2,167,376 | 2,475,531 | (19,039 | ) | ||||||||
Transportation Fund | 2,038,627 | 2,908,909 | 64,282 | |||||||||
Utilities Fund | 11,820,766 | 7,688,259 | (109,916 | ) |
THE RYDEX FUNDS ANNUAL REPORT | 145 |
NOTES TO FINANCIAL STATEMENTS (continued) |
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 9, 2019. 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 2.91% for the year ended December 31, 2018. On December 31, 2018, the Banking Fund borrowed $7,000, under this agreement. The remaining funds did not have any borrowings outstanding under this agreement at December 31, 2018.
The average daily balances borrowed for the year ended December 31, 2018, were as follows:
Fund | Average Daily Balance | |||
Banking Fund | $ | 578 | ||
Basic Materials Fund | 134 | |||
Biotechnology Fund | 12,660 | |||
Consumer Products Fund | 1,775 | |||
Electronics Fund | 781 | |||
Energy Fund | 932 | |||
Energy Services Fund | 1,411 | |||
Financial Services Fund | 2,110 | |||
Health Care Fund | 6,022 | |||
Internet Fund | 1,989 | |||
Leisure Fund | 696 | |||
Precious Metals Fund | 756 | |||
Real Estate Fund | 2,770 | |||
Retailing Fund | 416 | |||
Technology Fund | 4,329 | |||
Telecommunications Fund | 1,307 | |||
Transportation Fund | 1,293 | |||
Utilities Fund | 1,775 |
Note 9 – Recent Regulatory Reporting Updates
In August 2018, the U.S. Securities and Exchange Commission adopted amendments to certain disclosure requirements under Regulation S-X to conform to U.S. GAAP, including: (i) an amendment to require presentation of the total, rather than the components, of distributable earnings on the Statements of Assets and Liabilities; and (ii) an amendment to require presentation of the total, rather than the components, of distributions to shareholders, except for tax return of capital distributions, on the Statements of Changes in Net Assets.
As of December 31, 2018, management has implemented the amendments to Regulation S-X, which did not have a material impact on the Funds’ financial statements and related disclosures or impact the Funds’ net assets or results of operations.
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.
146 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
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. On April 3, 2018, Justice Kennedy and Justice Thomas issued a “Statement” related to the petition for certiorari suggesting that the Second Circuit and/or District Court may want to take steps to reexamine the application of the Section 546(e) safe harbor to the previously dismissed state law constructive fraudulent transfer claims based on the Supreme Court’s decision in Merit Management Group LP v. FTI Consulting, Inc. On April 10, 2018, Plaintiffs filed in the Second Circuit a motion for that court to recall its mandate, vacate its prior decision, and remand to the district court for further proceedings consistent with Merit Management. On April 20, 2018, the shareholder defendants filed an opposition to Plaintiffs’ motion to recall the mandate. On May 15, 2018, the Second Circuit issued an order recalling the mandate “in anticipation of further panel review.”
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. On March 8, 2018, the plaintiff renewed his request for leave to file a motion to amend the complaint to assert a constructive fraudulent transfer claim based on the Supreme Court’s ruling in Merit Management Group LP v. FTI Consulting, Inc. The shareholder defendants opposed that request. On June 18, 2018 the District Court ordered that the request would be stayed pending further action by the Second Circuit in the SLCFC actions.
On December 18, 2018, plaintiff filed a letter with the District Court requesting that the stay be dissolved in order to permit briefing on the motion to amend the complaint and indicating plaintiff’s intention to file another motion to amend the complaint to reinstate claims for intentional fraudulent transfer. The shareholder defendants opposed that request. On January 14, 2019, the court held a case management conference, during which the court stated that it would not lift the stay prior to further action from the Second Circuit in the SLCFC actions. The court further stated that it would allow the plaintiff to file a motion to amend to try to reinstate its intentional fraudulent transfer claim. The plaintiff has not yet filed any such motion. On January 23, 2019, the court ordered the parties still facing pending claims to participate in a mediation, to commence on January 28, 2019.
THE RYDEX FUNDS ANNUAL REPORT | 147 |
NOTES TO FINANCIAL STATEMENTS (concluded) |
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.
Note 11 – Recent Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (the “ASU”) which adds, modifies and removes disclosure requirements related to certain aspects of fair value measurement. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. At this time, management is evaluating the implications of these changes on the financial statements.
Note 12 – Subsequent Events
The Funds evaluated subsequent events through the date the financial statements were available for issue and determined there were no additional material events that would require adjustment to or disclosure in the Funds’ financial statements.
148 | THE RYDEX FUNDS ANNUAL REPORT |
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, 2018, 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, 2018, 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, 2018, 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 26, 2019
THE RYDEX FUNDS ANNUAL REPORT | 149 |
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 2019, 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 2018.
The Funds’ investment income (dividend income plus short-term gains, if any) qualifies as follows:
Of the taxable ordinary income distributions paid during the fiscal year ending December 31, 2018, the following Funds had the corresponding percentages qualify for the dividends received deduction for corporations.
Fund | Dividend |
Banking Fund | 100.00% |
Basic Materials Fund | 74.88% |
Biotechnology Fund | 0.00% |
Consumer Products Fund | 100.00% |
Electronics Fund | 48.01% |
Energy Fund | 100.00% |
Energy Services Fund | 100.00% |
Financial Services Fund | 100.00% |
Health Care Fund | 0.00% |
Internet Fund | 12.57% |
Leisure Fund | 36.41% |
Precious Metals Fund | 4.46% |
Real Estate Fund | 0.00% |
Retailing Fund | 100.00% |
Technology Fund | 24.24% |
Telecommunications Fund | 100.00% |
Transportation Fund | 82.36% |
Utilities Fund | 100.00% |
With respect to the taxable year ended December 31, 2018, 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 | From long-term capital | ||||||
Banking Fund | $ | 1,768 | $ | — | ||||
Basic Materials Fund | — | 363,649 | ||||||
Biotechnology Fund | 71,198 | 800,578 | ||||||
Consumer Products Fund | 432,239 | 355,788 | ||||||
Electronics Fund | 57,284 | 399,929 | ||||||
Health Care Fund | 331,012 | 1,002,291 | ||||||
Internet Fund | — | 449,224 | ||||||
Leisure Fund | — | 157,987 | ||||||
Technology Fund | — | 589,947 | ||||||
Telecommunications Fund | 54,472 | 83,940 | ||||||
Transportation Fund | 97,457 | — | ||||||
Utilities Fund | 68,146 | 409,655 |
150 | 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 | 151 |
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 | Position(s) Held with the | Principal Occupation(s) | Number of | Other |
INDEPENDENT TRUSTEES | ||||
Angela Brock-Kyle (1959) | Trustee, Member of the Audit Committee and Member of the Governance and Nominating Committee (2017-present). | Current: Founder and Chief Executive Officer, B.O.A.R.D.S (consulting firm)
Former: Senior Leader, TIAA (financial services firm) (1987-2012). | 109 | None. |
Corey A. Colehour (1945) | Trustee (1993-present); Member of the Audit Committee from (1994-present); Member of the Governance and Nominating Committee (2017-present). | Retired. | 109 | None. |
J. Kenneth Dalton (1941) | Trustee (1995-present); Chairman and Member of the Audit Committee (1997-present); and Member of the Governance and Nominating Committee (2018-present). | Retired. | 109 | Epiphany Funds (2) (2009-present). |
Thomas F. Lydon, Jr. (1960) | Trustee,Member of the Audit Committee (2005-present); Chairman and Member of the Governance and Nominating Committee (2017-present). | Current: President, Global Trends Investments (registered investment adviser) (1996-present). | 109 | US Global Investors (GROW) (1995-present) and Harvest Volatility Edge Trust (3) (2017-present). |
Sandra G. Sponem (1958) | Trustee, Chairwoman and Member of the Audit Committee (2016-present); and Member of the Governance and Nominating Committee (2017-present). | Retired.
Former: Senior Vice President and Chief Financial Officer, M.A. Mortenson Companies, Inc. (general contracting firm) (2007-2017). | 109 | SSGA Funds (125) (2018-present). |
152 | THE RYDEX FUNDS ANNUAL REPORT |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) Held with the | Principal Occupation(s) |
OFFICERS | ||
Michael P. Byrum (1970) | Vice President (2000-present) | Current: Senior Vice President, Security Investors, LLC (2010-present); Senior Managing Director, Guggenheim Investments (2010-present); President and Chief Investment Officer, Rydex Holdings, LLC (2008-present) and Director and Chairman, Advisory Research Center, Inc. (2006-present).
Former: Manager, Guggenheim Specialized Products, LLC (2005-2018); 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 (2016-present) | 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 (2016-present) | Current: Treasurer and Assistant Treasurer, certain other funds in the Fund Complex (2010-present); Managing Director, Guggenheim Investments (2015-present).
Former: Chief Financial Officer, Guggenheim Specialized Products, LLC (2016-2018); 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 | President (2017-present) | Current: Interested Trustee, certain other funds in the Fund Complex (2018-present); President, certain other funds in the Fund Complex (2017-present); Chief Legal Officer, certain other funds in the Fund Complex (2014-present); Vice President, certain other funds in the Fund Complex (2007-present); Senior Managing Director, Guggenheim Investments (2012-present).
Former: Trustee (2018-February 2019); President and Chief Executive Officer, certain other funds in the Fund Complex (2017-2018); and Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004-2012). |
Mark E. Mathiasen (1978) | Secretary (2017-present) | Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present). |
Glenn McWhinnie (1969) | Assistant Treasurer (2016-present) | Current: Vice President, Guggenheim Investments (2009-present); Assistant Treasurer, certain other funds in the Fund Complex (2016-present). |
Michael P. Megaris (1984) | Assistant Secretary (2018-present) | Current: Assistant Secretary, certain other funds in the Fund Complex (2014-present); Director, Guggenheim Investments (2012-present). |
THE RYDEX FUNDS ANNUAL REPORT | 153 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) Held with the | Principal Occupation(s) |
OFFICERS - continued | ||
Elisabeth Miller (1968) | Chief Compliance Officer (2012-present) | Current: Chief Compliance Officer, certain other funds in the Fund Complex (2012-present); Managing Director, Guggenheim Investments (2012-present); Vice President, Guggenheim Funds Distributors, LLC (2014-present).
Former: Chief Compliance Officer, Security Investors, LLC (2012-2018); Chief Compliance Officer, Guggenheim Funds Investment Advisors, LLC (2012-2018); Chief Compliance Officer, Guggenheim Distributors, LLC (2009-2014); Senior Manager, Security Investors, LLC (2004-2014); Senior Manager, Guggenheim Distributors, LLC (2004-2014). |
Margaux Misantone (1978) | AML Officer (2017-present) | Current: Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investment Advisors, LLC (2018-present); AML Officer, Security Investors, LLC and certain other funds in the Fund Complex (2017-present); Managing Director, Guggenheim Investments (2015-present).
Former: Assistant Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investments Advisors, LLC (2015-2018). |
Adam J. Nelson (1979) | Assistant Treasurer (2016-present) | 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). |
William Rehder (1967) | Assistant Vice President (2018-present) | Current: Managing Director, Guggenheim Investments (2002-present). |
Kimberly J. Scott (1974) | Assistant Treasurer (2016-present) | 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 (2016-present) | Current: Chief Financial Officer, 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 Chief Compliance Officer, 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); Chief Financial Officer and Treasurer, Van Kampen Funds (1996-2004). |
154 | THE RYDEX FUNDS ANNUAL REPORT |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(concluded) |
Name, Address* | Position(s) Held with the | Principal Occupation(s) |
OFFICERS - continued | ||
Jon Szafran (1989) | Assistant Treasurer (2017-Present) | 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 “Fund Complex” includes all closed-end and open-end funds (including all of their portfolios) advised by the Adviser and any funds that have an investment adviser or servicing agent that is an affiliated person of the Adviser. Information provided is as of the date of this report. |
*** | Certain of the Trustees may serve as directors on the boards of companies not required to be disclosed above, including certain non-profit companies and charitable foundations. |
THE RYDEX FUNDS ANNUAL REPORT | 155 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited) |
Who We Are
This Privacy Notice describes the data protection practices of Guggenheim Investments. Guggenheim Investments as used herein refers to the affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC, Security Investors, LLC, Guggenheim Investment Advisors (Europe) Limited, Guggenheim Real Estate, LLC, GS Gamma Advisors, LLC, Guggenheim Partners India Management, LLC, Guggenheim Partners Europe Limited, as well as the funds in the Guggenheim Funds complex (the “Funds”) (“Guggenheim Investments,” “we,” “us,” or “our”).
Guggenheim Partners Investment Management Holdings, LLC, located at 330 Madison Avenue, New York, New York 10017 is the data controller for your information. The affiliates who are also controllers of certain of your information are: Guggenheim Investment Advisors (Europe) Limited, Guggenheim Partners Europe Limited, 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.
Our Commitment to You
Guggenheim Investments considers your privacy our utmost concern. When you become our client or investor, you entrust us with not only your hard-earned money but also with your personal and financial information. Because we have access to your private information, we hold ourselves to the highest standards in its safekeeping and use. We strictly limit how we share your information with others, whether you are a current or former Guggenheim Investments client or investor.
The Information We Collect About You
We collect certain nonpublic personal information about you from information you provide on applications, other forms, our website, and/or from third parties including investment advisors. This information includes Social Security or other tax identification number, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, bank account information, marital status, family relationships, information that we collect on our website through the use of “cookies,” and other personal information that you or others provide to us. We may also collect such information through your inquiries by mail, e-mail or telephone. We may also collect customer due diligence information, as required by applicable law and regulation, through third party service providers.
How We Handle Your Personal Information
The legal basis for using your information as set out in this Privacy Notice is as follows: (a) use of your personal data is necessary to perform our obligations under any contract with you (such as a contract for us to provide financial services to you); or (b) where use of your personal data is not necessary for performance of a contract, use of your personal data is necessary for our legitimate interests or the legitimate interests of others (for example, to enforce the legal terms governing our services, operate and market our website and other services we offer, ensure safe environments for our personnel and others, make and receive payments, prevent fraud and to know the customer to whom we are providing the services). Some processing is done to comply with applicable law.
In addition to the specific uses described above, we also use your information in the following manner:
● | We use your information in connection with servicing your accounts. |
● | We use information to respond to your requests or questions. For example, we might use your information to respond to your customer feedback. |
● | We use information to improve our products and services. We may use your information to make our website and products better. We may use your information to customize your experience with us. |
● | We use information for security purposes. We may use your information to protect our company and our customers. |
● | We use information to communicate with you. For example, we will communicate with you about your account or our relationship. We may contact you about your feedback. We might also contact you about this Privacy Notice. We may also enroll you in our email newsletter. |
156 | THE RYDEX FUNDS ANNUAL REPORT |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited)(continued) |
● | We use information as otherwise permitted by law, as we may notify you. |
● | Aggregate/Anonymous Data. We may aggregate and/or anonymize any information collected through the website so that such information can no longer be linked to you or your device (“Aggregate/Anonymous Information”). We may use Aggregate/Anonymous Information for any purpose, including without limitation for research and marketing purposes, and may also share such data with any third parties, including advertisers, promotional partners, and sponsors. |
We do not sell information about current or former clients or their accounts to third parties. Nor do we share this information, except when necessary to complete transactions at your request, to make you aware of investment products and services that we or our affiliates offer, or as permitted or required by law.
We provide information about you to companies and individuals not affiliated with Guggenheim Investments to complete certain transactions or account changes, or to perform services for us related to your account. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we must provide certain information about you to that company to complete the transaction. We provide the third party with only the information necessary to carry out its responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. To alert you to other Guggenheim Investments products and services, we share your information within our family of affiliated companies. You may limit our sharing with affiliated companies as set out below. We may also share information with any successor to all or part of our business, or in connection with steps leading up to a merger or acquisition. For example, if part of our business was sold we may give customer information as part of that transaction. We may also share information about you with your consent.
We will release information about you if you direct us to do so, if we are compelled by law to do so, or in other circumstances as permitted by law (for example, to protect your account from fraud).
If you close your account(s) or become an inactive client or investor, we will continue to adhere to the privacy policies and practices described in this notice.
Opt-Out Provisions and Your Data Choices
The law allows you to “opt out” of certain kinds of information sharing with third parties. We do not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.
When you are no longer our client or investor, we continue to share your information as described in this notice, and you may contact us at any time to limit our sharing by sending an email to CorporateDataPrivacy@GuggenheimPartners.com.
European Union Data Subjects and certain others: In addition to the choices set forth above, residents of the European Union and certain other jurisdictions have certain rights to (1) request access to or rectification or deletion of information we collect about them, (2) request a restriction on the processing of their information, (3) object to the processing of their information, or (4) request the portability of certain information. To exercise these or other rights, please contact us using the contact information below. We will consider all requests and provide our response within the time period stated by applicable law. Please note, however, that certain information may be exempt from such requests in some circumstances, which may include if we need to keep processing your information for our legitimate interests or to comply with a legal obligation. We may request you provide us with information necessary to confirm your identity before responding to your request.
Residents of France and certain other jurisdictions may also provide us with instructions regarding the manner in which we may continue to store, erase and share your information after your death, and where applicable, the person you have designated to exercise these rights after your death.
THE RYDEX FUNDS ANNUAL REPORT | 157 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited)(concluded) |
How We Protect Privacy Online
We take steps to protect your privacy when you use our web site – www.guggenheiminvestments.com – by using secure forms of online communication, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These safeguards vary based on the sensitivity of the information that we collect and store. However, we cannot and do not guarantee that these measures will prevent every unauthorized attempt to access, use, or disclose your information since despite our efforts, no Internet and/or other electronic transmissions can be completely secure. Our web site uses “http cookies”—tiny pieces of information that we ask your browser to store. We use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your e-mail address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.
How We Safeguard Your Personal Information and Data Retention
We restrict access to nonpublic personal information about you to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
We keep your information for no longer than necessary for the purposes for which it is processed. The length of time for which we retain information depends on the purposes for which we collected and use it and/or as required to comply with applicable laws. Information may persist in copies made for backup and business continuity purposes for additional time.
International Visitors
If you are not a resident of the United States, please be aware that your information may be transferred to, stored and processed in the United States where our servers are located and our databases are operated. The data protection and other laws of the United States and other countries might not be as comprehensive as those in your country.
In such cases, we ensure that a legal basis for such a transfer exists and that adequate protection is provided as required by applicable law, for example, by using standard contractual clauses or by transferring your data to a jurisdiction that has obtained an adequacy finding. Individuals whose data may be transferred on the basis of standard contractual clauses may contact us as described below.
We’ll Keep You Informed
If you have any questions or concerns about how we treat your personal data, we encourage you to consult with us first. You may also contact the relevant supervisory authority.
We reserve the right to modify this policy at any time and will inform you promptly of material changes. You may access our privacy policy from our web site at www.guggenheiminvestments.com. Should you have any questions regarding our privacy policy, contact us by email at CorporateDataPrivacy@GuggenheimPartners.com.
158 | THE RYDEX FUNDS ANNUAL REPORT |
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12.31.2018
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 |
Beginning on January 1, 2021, paper copies of the Funds’ annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from a Fund or from your financial intermediary. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change, and you need not take any action. At any time, you may elect to receive reports and other communications from a Fund electronically by calling 800.820.0888, going to GuggenheimInvestments.com/myaccount, or by contacting your financial intermediary.
You may elect to receive all future shareholder reports in paper free of charge. If you hold shares of a Fund directly, you can inform a Fund that you wish to receive paper copies of reports by calling 800.820.0888. If you hold shares of a Fund through a financial intermediary, please contact the financial intermediary to make this election. Your election to receive reports in paper will apply to all Guggenheim Funds in which you are invested and may apply to all funds held with your financial intermediary.
GuggenheimInvestments.com | RVATB1-ANN-2-1218x1219 |
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 | 29 |
INVERSE NASDAQ-100® STRATEGY FUND | 38 |
S&P 500® 2x STRATEGY FUND | 45 |
NASDAQ-100® 2x STRATEGY FUND | 57 |
MID-CAP 1.5x STRATEGY FUND | 66 |
INVERSE MID-CAP STRATEGY FUND | 78 |
RUSSELL 2000® 2x STRATEGY FUND | 85 |
RUSSELL 2000® 1.5x STRATEGY FUND | 103 |
INVERSE RUSSELL 2000® STRATEGY FUND | 128 |
DOW 2x STRATEGY FUND | 136 |
INVERSE DOW 2x STRATEGY FUND | 144 |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND | 151 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND | 158 |
HIGH YIELD STRATEGY FUND | 166 |
U.S. GOVERNMENT MONEY MARKET FUND | 174 |
NOTES TO FINANCIAL STATEMENTS | 180 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 200 |
OTHER INFORMATION | 202 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS | 204 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE | 208 |
THE RYDEX FUNDS ANNUAL REPORT | 1 |
| December 31, 2018 |
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, 2018.
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, 2019
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, 2018 |
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, 2018 |
U.S. economic data has been broadly strong, but there is already evidence that certain sectors are losing steam. Consumers are becoming less positive on purchases of homes, autos, and appliances, citing rising rates as a major reason. Growth in nonresidential fixed investment is also slowing, reflecting a combination of higher borrowing costs and tariff uncertainty.
With three major pillars of the economy showing signs of weakness, a broad-based slowdown in real U.S. gross domestic product (“GDP”) growth to below 2% year over year by the fourth quarter of 2019 is possible. Global growth momentum has weakened over the last 12 months, and the souring picture for the global economy collided with rising production from U.S. oil producers to drive a 38% decline in oil prices in the fourth quarter. Subsequently, inflation expectations collapsed, and rate hikes priced for 2019 in the fed funds futures market evaporated.
A key bright spot in late 2018 was the U.S. labor market. The unemployment rate remained below 4.0%, near 50-year lows. Non-farm payrolls increased nearly twice as fast as expected, while average hourly earnings increased at 3.3% year over year, the fastest growth in wages since 2009. With above-potential GDP growth likely to cause job gains to run above labor force growth, unemployment could fall further in 2019, leading to an acceleration of wage growth.
With an eye on the labor market, but cognizant of softening inflation, the U.S. Federal Reserve (the “Fed”) proceeded to raise the fed funds target to 2.25–2.50% in December 2018. The Fed added to its December statement that it would monitor global economic and financial developments, but in the press conference, Fed Chair Powell failed to convey flexibility on both interest rate and balance sheet policy should conditions deteriorate further. Markets sold off further in the days following the Fed decision.
Easing inflationary pressures against a very tight labor market present a conundrum to the Fed as policymakers walk a tightrope managing policy around the Fed’s dual mandate of price stability and full employment. Ultimately, the Fed may be forced to pause in early 2019 to monitor economic data in order to avoid inflicting further pain. With real GDP growth running above potential, unemployment below full employment and falling, and core inflation near the 2% target, the 2019 data should be solid enough for the Fed to deliver another hike in the second half of the year.
For the 12 months ended December 31, 2018, the Standard & Poor’s 500® (“S&P 500®”) Index* generated a total return of -4.38%. After two years of strong appreciation in 2016 and 2017, equities were choppy, including a nearly 20% drawdown from early October to December 24th, as markets contended with the ramifications of a trade uncertainty with China, a government shutdown, and the prospects of a new direction in monetary policy.
A pause in monetary policy tightening may grant a short-lived reprieve to debtors at risk of caving under pressure from rising borrowing costs. Credit conditions would appear benign if the Fed seemingly saves the day by staying on hold. We believe any pause would only allow excesses to become more pronounced and afford risk assets one more rally. This rally may be the last opportunity to sell into strength before the Fed resumes raising interest rates, which may push the U.S. into an economic recession in 2020.
For the 12 months ended December 31, 2018, the MSCI Europe-Australasia-Far East (“EAFE”) Index* returned -13.79%. The return of the MSCI Emerging Markets Index* was -14.58%.
In the bond market, the Bloomberg Barclays U.S. Aggregate Bond Index* posted a 0.01% return for the period, while the Bloomberg Barclays U.S. Corporate High Yield Index* returned -2.08%. The return of the ICE Bank of America (“BofA”) Merrill Lynch 3-Month U.S. Treasury Bill Index* was 1.87% 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. Long 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 U.S. Long Treasury Index is market capitalization weighted and the securities in the index are updated on the last business day of each month.
4 | THE RYDEX FUNDS ANNUAL REPORT |
ECONOMIC AND MARKET OVERVIEW (Unaudited)(concluded) | December 31, 2018 |
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.
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) |
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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 | Index | Fund | Fund | Fund | 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 to ensure that they are 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) |
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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, 2018 and ending December 31, 2018.
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 | Fund | Beginning | Ending | Expenses |
Table 1. Based on actual Fund return3 | |||||
Nova Fund | 1.65% | (12.16%) | $1,000.00 | $878.40 | $7.81 |
Inverse S&P 500® Strategy Fund | 1.78% | 7.03% | 1,000.00 | 1,070.30 | 9.29 |
NASDAQ-100® Fund | 1.69% | (10.59%) | 1,000.00 | 894.10 | 8.07 |
Inverse NASDAQ-100® Strategy Fund | 1.86% | 8.84% | 1,000.00 | 1,088.40 | 9.79 |
S&P 500® 2x Strategy Fund | 1.80% | (16.78%) | 1,000.00 | 832.20 | 8.31 |
NASDAQ-100® 2x Strategy Fund | 1.83% | (22.71%) | 1,000.00 | 772.90 | 8.18 |
Mid-Cap 1.5x Strategy Fund | 1.82% | (22.10%) | 1,000.00 | 779.00 | 8.16 |
Inverse Mid-Cap Strategy Fund | 1.80% | 15.00% | 1,000.00 | 1,150.00 | 9.75 |
Russell 2000® 2x Strategy Fund | 1.84% | (34.45%) | 1,000.00 | 655.50 | 7.68 |
Russell 2000® 1.5x Strategy Fund | 1.85% | (26.64%) | 1,000.00 | 733.60 | 8.08 |
Inverse Russell 2000® Strategy Fund | 1.85% | 20.19% | 1,000.00 | 1,201.90 | 10.27 |
Dow 2x Strategy Fund | 1.84% | (9.75%) | 1,000.00 | 902.50 | 8.82 |
Inverse Dow 2x Strategy Fund | 1.82% | 2.68% | 1,000.00 | 1,026.80 | 9.30 |
Government Long Bond 1.2x Strategy Fund | 1.35% | (0.10%) | 1,000.00 | 999.00 | 6.80 |
Inverse Government Long Bond Strategy Fund | 4.25% | (0.10%) | 1,000.00 | 999.00 | 21.41 |
High Yield Strategy Fund | 1.65% | 0.26% | 1,000.00 | 1,002.60 | 8.33 |
U.S. Government Money Market Fund | 1.36% | 0.41% | 1,000.00 | 1,004.10 | 6.87 |
| |||||
Table 2. Based on hypothetical 5% return (before expenses) | |||||
Nova Fund | 1.65% | 5.00% | $1,000.00 | $1,016.89 | $8.39 |
Inverse S&P 500® Strategy Fund | 1.78% | 5.00% | 1,000.00 | 1,016.23 | 9.05 |
NASDAQ-100® Fund | 1.69% | 5.00% | 1,000.00 | 1,016.69 | 8.59 |
Inverse NASDAQ-100® Strategy Fund | 1.86% | 5.00% | 1,000.00 | 1,015.83 | 9.45 |
S&P 500® 2x Strategy Fund | 1.80% | 5.00% | 1,000.00 | 1,016.13 | 9.15 |
NASDAQ-100® 2x Strategy Fund | 1.83% | 5.00% | 1,000.00 | 1,015.98 | 9.30 |
Mid-Cap 1.5x Strategy Fund | 1.82% | 5.00% | 1,000.00 | 1,016.03 | 9.25 |
Inverse Mid-Cap Strategy Fund | 1.80% | 5.00% | 1,000.00 | 1,016.13 | 9.15 |
Russell 2000® 2x Strategy Fund | 1.84% | 5.00% | 1,000.00 | 1,015.93 | 9.35 |
Russell 2000® 1.5x Strategy Fund | 1.85% | 5.00% | 1,000.00 | 1,015.88 | 9.40 |
Inverse Russell 2000® Strategy Fund | 1.85% | 5.00% | 1,000.00 | 1,015.88 | 9.40 |
Dow 2x Strategy Fund | 1.84% | 5.00% | 1,000.00 | 1,015.93 | 9.35 |
Inverse Dow 2x Strategy Fund | 1.82% | 5.00% | 1,000.00 | 1,016.03 | 9.25 |
Government Long Bond 1.2x Strategy Fund | 1.35% | 5.00% | 1,000.00 | 1,018.40 | 6.87 |
Inverse Government Long Bond Strategy Fund | 4.25% | 5.00% | 1,000.00 | 1,003.78 | 21.47 |
High Yield Strategy Fund | 1.65% | 5.00% | 1,000.00 | 1,016.89 | 8.39 |
U.S. Government Money Market Fund | 1.36% | 5.00% | 1,000.00 | 1,018.35 | 6.92 |
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, 2018 to December 31, 2018. |
8 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, 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 -10.32%, while the S&P 500 Index returned -4.38% over the same time period.
The sectors contributing the most to the performance of the underlying index for the period were Information Technology and Consumer Discretionary. The Financials sector detracted the most from return of the underlying index for the period, followed by the Industrials sector.
Microsoft Corp., Amazon.com, Inc., and Merck & Co., Inc. contributed the most to performance of the underlying index for 2018. Facebook, Inc. Class A, General Electric Co., and AT&T, Inc. 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. Derivatives performed as expected.
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, 2018 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. 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.
Cumulative Fund Performance*,†
Inception Date: May 7, 1997 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 32.2% |
Guggenheim Ultra Short Duration Fund | 19.1% |
Microsoft Corp. | 0.6% |
Apple, Inc. | 0.5% |
Amazon.com, Inc. | 0.5% |
Berkshire Hathaway, Inc. — Class B | 0.3% |
Johnson & Johnson | 0.3% |
JPMorgan Chase & Co. | 0.2% |
Alphabet, Inc. — Class C | 0.2% |
Facebook, Inc. — Class A | 0.2% |
Top Ten Total | 54.1% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments.
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Nova Fund | (10.32%) | 9.99% | 16.77% |
S&P 500 Index | (4.38%) | 8.49% | 13.12% |
* | 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. 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, 2018 |
NOVA FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 15.4% | ||||||||
Consumer, Non-cyclical - 3.6% | ||||||||
Johnson & Johnson | 632 | $ | 81,560 | |||||
Pfizer, Inc. | 1,362 | 59,451 | ||||||
UnitedHealth Group, Inc. | 227 | 56,550 | ||||||
Procter & Gamble Co. | 587 | 53,957 | ||||||
Merck & Company, Inc. | 613 | 46,839 | ||||||
Coca-Cola Co. | 902 | 42,710 | ||||||
PepsiCo, Inc. | 333 | 36,790 | ||||||
AbbVie, Inc. | 354 | 32,635 | ||||||
Abbott Laboratories | 414 | 29,945 | ||||||
Amgen, Inc. | 150 | 29,200 | ||||||
Medtronic plc | 316 | 28,743 | ||||||
Eli Lilly & Co. | 222 | 25,690 | ||||||
Philip Morris International, Inc. | 366 | 24,434 | ||||||
PayPal Holdings, Inc.* | 278 | 23,377 | ||||||
Altria Group, Inc. | 443 | 21,880 | ||||||
Thermo Fisher Scientific, Inc. | 95 | 21,260 | ||||||
CVS Health Corp. | 306 | 20,040 | ||||||
Bristol-Myers Squibb Co. | 385 | 20,012 | ||||||
Gilead Sciences, Inc. | 305 | 19,078 | ||||||
Cigna Corp. | 91 | 17,269 | ||||||
Anthem, Inc. | 61 | 16,021 | ||||||
Danaher Corp. | 145 | 14,952 | ||||||
Becton Dickinson and Co. | 63 | 14,195 | ||||||
Biogen, Inc.* | 47 | 14,143 | ||||||
Mondelez International, Inc. — Class A | 343 | 13,730 | ||||||
Automatic Data Processing, Inc. | 103 | 13,505 | ||||||
Intuitive Surgical, Inc.* | 27 | 12,931 | ||||||
Colgate-Palmolive Co. | 204 | 12,142 | ||||||
Boston Scientific Corp.* | 326 | 11,521 | ||||||
Stryker Corp. | 73 | 11,443 | ||||||
Celgene Corp.* | 165 | 10,575 | ||||||
Illumina, Inc.* | 35 | 10,497 | ||||||
S&P Global, Inc. | 59 | 10,026 | ||||||
Allergan plc | 75 | 10,024 | ||||||
Vertex Pharmaceuticals, Inc.* | 60 | 9,943 | ||||||
Zoetis, Inc. | 113 | 9,666 | ||||||
Kimberly-Clark Corp. | 82 | 9,343 | ||||||
Humana, Inc. | 32 | 9,167 | ||||||
Ecolab, Inc. | 60 | 8,841 | ||||||
HCA Healthcare, Inc. | 63 | 7,840 | ||||||
Baxter International, Inc. | 117 | 7,701 | ||||||
Edwards Lifesciences Corp.* | 49 | 7,505 | ||||||
Sysco Corp. | 113 | 7,081 | ||||||
Estee Lauder Companies, Inc. — Class A | 52 | 6,765 | ||||||
Regeneron Pharmaceuticals, Inc.* | 18 | 6,723 | ||||||
Kraft Heinz Co. | 147 | 6,327 | ||||||
Constellation Brands, Inc. — Class A | 39 | 6,272 | ||||||
Centene Corp.* | 48 | 5,534 | ||||||
Moody’s Corp. | 39 | 5,462 | ||||||
General Mills, Inc. | 140 | 5,452 | ||||||
Archer-Daniels-Midland Co. | 132 | 5,408 | ||||||
Kroger Co. | 188 | 5,170 | ||||||
Alexion Pharmaceuticals, Inc.* | 53 | 5,160 | ||||||
McKesson Corp. | 46 | 5,082 | ||||||
Zimmer Biomet Holdings, Inc. | 48 | 4,979 | ||||||
Monster Beverage Corp.* | 94 | 4,627 | ||||||
Clorox Co. | 30 | 4,624 | ||||||
IQVIA Holdings, Inc.* | 37 | 4,298 | ||||||
Verisk Analytics, Inc. — Class A* | 39 | 4,253 | ||||||
IHS Markit Ltd.* | 85 | 4,077 | ||||||
McCormick & Company, Inc. | 29 | 4,038 | ||||||
FleetCor Technologies, Inc.* | 21 | 3,900 | ||||||
ResMed, Inc. | 34 | 3,872 | ||||||
Global Payments, Inc. | 37 | 3,816 | ||||||
Church & Dwight Company, Inc. | 58 | 3,814 | ||||||
Tyson Foods, Inc. — Class A | 70 | 3,738 | ||||||
IDEXX Laboratories, Inc.* | 20 | 3,720 | ||||||
ABIOMED, Inc.* | 11 | 3,575 | ||||||
Align Technology, Inc.* | 17 | 3,560 | ||||||
Hershey Co. | 33 | 3,537 | ||||||
Kellogg Co. | 60 | 3,421 | ||||||
Cintas Corp. | 20 | 3,360 | ||||||
Mylan N.V.* | 121 | 3,315 | ||||||
Total System Services, Inc. | 40 | 3,252 | ||||||
Cardinal Health, Inc. | 70 | 3,122 | ||||||
Cooper Companies, Inc. | 12 | 3,054 | ||||||
Laboratory Corporation of America Holdings* | 24 | 3,033 | ||||||
WellCare Health Plans, Inc.* | 12 | 2,833 | ||||||
Henry Schein, Inc.* | 36 | 2,827 | ||||||
AmerisourceBergen Corp. — Class A | 37 | 2,753 | ||||||
Hormel Foods Corp. | 64 | 2,731 | ||||||
Gartner, Inc.* | 21 | 2,685 | ||||||
Incyte Corp.* | 42 | 2,671 | ||||||
Quest Diagnostics, Inc. | 32 | 2,665 | ||||||
Equifax, Inc. | 28 | 2,608 | ||||||
Hologic, Inc.* | 63 | 2,589 | ||||||
Lamb Weston Holdings, Inc. | 35 | 2,575 | ||||||
JM Smucker Co. | 27 | 2,524 | ||||||
Molson Coors Brewing Co. — Class B | 44 | 2,471 | ||||||
Conagra Brands, Inc. | 114 | 2,435 | ||||||
Varian Medical Systems, Inc.* | 21 | 2,380 | ||||||
Universal Health Services, Inc. — Class B | 20 | 2,331 | ||||||
Nielsen Holdings plc | 84 | 1,960 | ||||||
United Rentals, Inc.* | 19 | 1,948 | ||||||
Dentsply Sirona, Inc. | 52 | 1,935 | ||||||
Brown-Forman Corp. — Class B | 39 | 1,855 | ||||||
Avery Dennison Corp. | 20 | 1,797 | ||||||
Western Union Co. | 104 | 1,774 | ||||||
Robert Half International, Inc. | 29 | 1,659 | ||||||
DaVita, Inc.* | 30 | 1,544 | ||||||
Campbell Soup Co. | 45 | 1,484 | ||||||
Nektar Therapeutics* | 41 | 1,348 | ||||||
Rollins, Inc. | 35 | 1,263 | ||||||
H&R Block, Inc. | 48 | 1,218 | ||||||
Perrigo Company plc | 29 | 1,124 | ||||||
Quanta Services, Inc. | 34 | 1,023 | ||||||
Coty, Inc. — Class A | 106 | 696 | ||||||
Total Consumer, Non-cyclical | 1,156,258 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 11 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
NOVA FUND |
| Shares | Value | ||||||
Financial - 2.8% | ||||||||
Berkshire Hathaway, Inc. — Class B* | 458 | $ | 93,514 | |||||
JPMorgan Chase & Co. | 783 | 76,437 | ||||||
Visa, Inc. — Class A | 414 | 54,623 | ||||||
Bank of America Corp. | 2,150 | 52,976 | ||||||
Wells Fargo & Co. | 998 | 45,988 | ||||||
Mastercard, Inc. — Class A | 214 | 40,371 | ||||||
Citigroup, Inc. | 575 | 29,935 | ||||||
American Tower Corp. — Class A REIT | 104 | 16,452 | ||||||
U.S. Bancorp | 358 | 16,361 | ||||||
CME Group, Inc. — Class A | 84 | 15,802 | ||||||
American Express Co. | 165 | 15,728 | ||||||
Chubb Ltd. | 109 | 14,081 | ||||||
Goldman Sachs Group, Inc. | 81 | 13,531 | ||||||
PNC Financial Services Group, Inc. | 109 | 12,743 | ||||||
Simon Property Group, Inc. REIT | 73 | 12,263 | ||||||
Morgan Stanley | 308 | 12,212 | ||||||
Charles Schwab Corp. | 283 | 11,753 | ||||||
BlackRock, Inc. — Class A | 29 | 11,392 | ||||||
Crown Castle International Corp. REIT | 98 | 10,646 | ||||||
Intercontinental Exchange, Inc. | 134 | 10,094 | ||||||
Bank of New York Mellon Corp. | 214 | 10,073 | ||||||
MetLife, Inc. | 232 | 9,526 | ||||||
Marsh & McLennan Companies, Inc. | 119 | 9,490 | ||||||
Prologis, Inc. REIT | 148 | 8,691 | ||||||
Capital One Financial Corp. | 112 | 8,466 | ||||||
Aon plc | 57 | 8,286 | ||||||
Progressive Corp. | 137 | 8,265 | ||||||
American International Group, Inc. | 208 | 8,197 | ||||||
Aflac, Inc. | 179 | 8,155 | ||||||
Prudential Financial, Inc. | 97 | 7,910 | ||||||
BB&T Corp. | 182 | 7,884 | ||||||
Travelers Companies, Inc. | 62 | 7,424 | ||||||
Public Storage REIT | 35 | 7,084 | ||||||
Equinix, Inc. REIT | 19 | 6,699 | ||||||
Allstate Corp. | 81 | 6,693 | ||||||
Welltower, Inc. REIT | 88 | 6,108 | ||||||
AvalonBay Communities, Inc. REIT | 33 | 5,744 | ||||||
Equity Residential REIT | 87 | 5,743 | ||||||
State Street Corp. | 89 | 5,613 | ||||||
SunTrust Banks, Inc. | 106 | 5,347 | ||||||
T. Rowe Price Group, Inc. | 57 | 5,262 | ||||||
Digital Realty Trust, Inc. REIT | 49 | 5,221 | ||||||
Ventas, Inc. REIT | 84 | 4,922 | ||||||
M&T Bank Corp. | 33 | 4,723 | ||||||
Willis Towers Watson plc | 31 | 4,708 | ||||||
Discover Financial Services | 79 | 4,660 | ||||||
Realty Income Corp. REIT | 70 | 4,413 | ||||||
SBA Communications Corp. REIT* | 27 | 4,371 | ||||||
Northern Trust Corp. | 52 | 4,347 | ||||||
Boston Properties, Inc. REIT | 36 | 4,052 | ||||||
Essex Property Trust, Inc. REIT | 16 | 3,923 | ||||||
Weyerhaeuser Co. REIT | 177 | 3,869 | ||||||
Hartford Financial Services Group, Inc. | 85 | 3,778 | ||||||
Synchrony Financial | 156 | 3,660 | ||||||
Fifth Third Bancorp | 154 | 3,624 | ||||||
KeyCorp | 244 | 3,606 | ||||||
Ameriprise Financial, Inc. | 33 | 3,444 | ||||||
First Republic Bank | 39 | 3,389 | ||||||
Citizens Financial Group, Inc. | 110 | 3,270 | ||||||
Regions Financial Corp. | 244 | 3,265 | ||||||
Arthur J Gallagher & Co. | 43 | 3,169 | ||||||
HCP, Inc. REIT | 112 | 3,128 | ||||||
CBRE Group, Inc. — Class A* | 75 | 3,003 | ||||||
Huntington Bancshares, Inc. | 250 | 2,980 | ||||||
Loews Corp. | 65 | 2,959 | ||||||
Host Hotels & Resorts, Inc. REIT | 175 | 2,917 | ||||||
Alexandria Real Estate Equities, Inc. REIT | 25 | 2,881 | ||||||
Cincinnati Financial Corp. | 36 | 2,787 | ||||||
Principal Financial Group, Inc. | 62 | 2,739 | ||||||
Extra Space Storage, Inc. REIT | 30 | 2,714 | ||||||
E*TRADE Financial Corp. | 60 | 2,633 | ||||||
Comerica, Inc. | 38 | 2,610 | ||||||
Mid-America Apartment Communities, Inc. REIT | 27 | 2,584 | ||||||
UDR, Inc. REIT | 65 | 2,575 | ||||||
Lincoln National Corp. | 50 | 2,566 | ||||||
Cboe Global Markets, Inc. | 26 | 2,544 | ||||||
Vornado Realty Trust REIT | 41 | 2,543 | ||||||
SVB Financial Group* | 13 | 2,469 | ||||||
Regency Centers Corp. REIT | 40 | 2,347 | ||||||
Raymond James Financial, Inc. | 30 | 2,232 | ||||||
Nasdaq, Inc. | 27 | 2,202 | ||||||
Everest Re Group Ltd. | 10 | 2,178 | ||||||
Duke Realty Corp. REIT | 84 | 2,176 | ||||||
Iron Mountain, Inc. REIT | 67 | 2,171 | ||||||
Franklin Resources, Inc. | 70 | 2,076 | ||||||
Federal Realty Investment Trust REIT | 17 | 2,007 | ||||||
Zions Bancorp North America | 45 | 1,833 | ||||||
Torchmark Corp. | 24 | 1,789 | ||||||
Alliance Data Systems Corp. | 11 | 1,651 | ||||||
Invesco Ltd. | 97 | 1,624 | ||||||
Apartment Investment & Management Co. — Class A REIT | 37 | 1,623 | ||||||
SL Green Realty Corp. REIT | 20 | 1,582 | ||||||
Unum Group | 52 | 1,528 | ||||||
Kimco Realty Corp. REIT | 99 | 1,450 | ||||||
People’s United Financial, Inc. | 89 | 1,284 | ||||||
Affiliated Managers Group, Inc. | 12 | 1,169 | ||||||
Jefferies Financial Group, Inc. | 66 | 1,146 | ||||||
Macerich Co. REIT | 25 | 1,082 | ||||||
Assurant, Inc. | 12 | 1,073 | ||||||
Brighthouse Financial, Inc.* | 28 | 853 | ||||||
Total Financial | 887,684 | |||||||
Technology - 2.4% | ||||||||
Microsoft Corp. | 1,821 | 184,959 | ||||||
Apple, Inc. | 1,062 | 167,520 | ||||||
Intel Corp. | 1,075 | 50,450 | ||||||
Oracle Corp. | 600 | 27,090 | ||||||
Adobe, Inc.* | 115 | 26,018 | ||||||
Broadcom, Inc. | 97 | 24,665 | ||||||
salesforce.com, Inc.* | 180 | 24,655 |
12| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
NOVA FUND |
| Shares | Value | ||||||
International Business Machines Corp. | 214 | $ | 24,325 | |||||
Texas Instruments, Inc. | 226 | 21,357 | ||||||
Accenture plc — Class A | 150 | 21,151 | ||||||
NVIDIA Corp. | 144 | 19,224 | ||||||
QUALCOMM, Inc. | 286 | 16,276 | ||||||
Intuit, Inc. | 61 | 12,008 | ||||||
Cognizant Technology Solutions Corp. — Class A | 136 | 8,633 | ||||||
Activision Blizzard, Inc. | 180 | 8,383 | ||||||
Micron Technology, Inc.* | 264 | 8,377 | ||||||
Fidelity National Information Services, Inc. | 77 | 7,896 | ||||||
HP, Inc. | 373 | 7,632 | ||||||
Applied Materials, Inc. | 232 | 7,596 | ||||||
Analog Devices, Inc. | 87 | 7,467 | ||||||
Red Hat, Inc.* | 42 | 7,377 | ||||||
Fiserv, Inc.* | 94 | 6,908 | ||||||
Autodesk, Inc.* | 52 | 6,688 | ||||||
Electronic Arts, Inc.* | 71 | 5,603 | ||||||
Xilinx, Inc. | 60 | 5,110 | ||||||
Lam Research Corp. | 37 | 5,038 | ||||||
Paychex, Inc. | 75 | 4,886 | ||||||
Hewlett Packard Enterprise Co. | 335 | 4,425 | ||||||
Cerner Corp.* | 78 | 4,090 | ||||||
Microchip Technology, Inc. | 56 | 4,028 | ||||||
Advanced Micro Devices, Inc.* | 207 | 3,821 | ||||||
NetApp, Inc. | 59 | 3,521 | ||||||
DXC Technology Co. | 66 | 3,509 | ||||||
Maxim Integrated Products, Inc. | 65 | 3,305 | ||||||
KLA-Tencor Corp. | 36 | 3,222 | ||||||
MSCI, Inc. — Class A | 21 | 3,096 | ||||||
Citrix Systems, Inc. | 30 | 3,074 | ||||||
Synopsys, Inc.* | 35 | 2,948 | ||||||
Cadence Design Systems, Inc.* | 66 | 2,870 | ||||||
ANSYS, Inc.* | 20 | 2,859 | ||||||
Skyworks Solutions, Inc. | 42 | 2,815 | ||||||
Take-Two Interactive Software, Inc.* | 27 | 2,779 | ||||||
Broadridge Financial Solutions, Inc. | 28 | 2,695 | ||||||
Western Digital Corp. | 68 | 2,514 | ||||||
Fortinet, Inc.* | 34 | 2,395 | ||||||
Seagate Technology plc | 61 | 2,354 | ||||||
Akamai Technologies, Inc.* | 38 | 2,321 | ||||||
Jack Henry & Associates, Inc. | 18 | 2,277 | ||||||
Qorvo, Inc.* | 29 | 1,761 | ||||||
Xerox Corp. | 49 | 968 | ||||||
IPG Photonics Corp.* | 8 | 906 | ||||||
Total Technology | 785,845 | |||||||
Communications - 2.2% | ||||||||
Amazon.com, Inc.* | 97 | 145,691 | ||||||
Alphabet, Inc. — Class C* | 72 | 74,564 | ||||||
Facebook, Inc. — Class A* | 566 | 74,197 | ||||||
Alphabet, Inc. — Class A* | 70 | 73,147 | ||||||
Verizon Communications, Inc. | 973 | 54,702 | ||||||
AT&T, Inc. | 1,715 | 48,946 | ||||||
Cisco Systems, Inc. | 1,059 | 45,886 | ||||||
Walt Disney Co. | 351 | 38,487 | ||||||
Comcast Corp. — Class A | 1,070 | 36,433 | ||||||
Netflix, Inc.* | 103 | 27,569 | ||||||
Booking Holdings, Inc.* | 11 | 18,947 | ||||||
Twenty-First Century Fox, Inc. — Class A | 249 | 11,982 | ||||||
Charter Communications, Inc. — Class A* | 42 | 11,969 | ||||||
eBay, Inc.* | 213 | 5,979 | ||||||
Twenty-First Century Fox, Inc. — Class B | 115 | 5,495 | ||||||
Twitter, Inc.* | 170 | 4,886 | ||||||
Motorola Solutions, Inc. | 39 | 4,487 | ||||||
Omnicom Group, Inc. | 53 | 3,882 | ||||||
VeriSign, Inc.* | 25 | 3,707 | ||||||
CBS Corp. — Class B | 79 | 3,454 | ||||||
CenturyLink, Inc. | 224 | 3,394 | ||||||
Expedia Group, Inc. | 28 | 3,154 | ||||||
Symantec Corp. | 151 | 2,853 | ||||||
Arista Networks, Inc.* | 12 | 2,528 | ||||||
F5 Networks, Inc.* | 14 | 2,268 | ||||||
Juniper Networks, Inc. | 81 | 2,180 | ||||||
Viacom, Inc. — Class B | 83 | 2,133 | ||||||
Discovery, Inc. — Class C* | 85 | 1,962 | ||||||
Interpublic Group of Companies, Inc. | 91 | 1,877 | ||||||
DISH Network Corp. — Class A* | 54 | 1,348 | ||||||
TripAdvisor, Inc.* | 24 | 1,295 | ||||||
News Corp. — Class A | 91 | 1,033 | ||||||
Discovery, Inc. — Class A* | 37 | 915 | ||||||
News Corp. — Class B | 29 | 335 | ||||||
Total Communications | 721,685 | |||||||
Industrial - 1.4% | ||||||||
Boeing Co. | 124 | 39,990 | ||||||
3M Co. | 137 | 26,104 | ||||||
Union Pacific Corp. | 174 | 24,052 | ||||||
Honeywell International, Inc. | 174 | 22,989 | ||||||
United Technologies Corp. | 191 | 20,366 | ||||||
Caterpillar, Inc. | 139 | 17,663 | ||||||
United Parcel Service, Inc. — Class B | 164 | 15,995 | ||||||
General Electric Co. | 2,049 | 15,511 | ||||||
Lockheed Martin Corp. | 58 | 15,187 | ||||||
CSX Corp. | 189 | 11,742 | ||||||
Deere & Co. | 76 | 11,337 | ||||||
General Dynamics Corp. | 66 | 10,376 | ||||||
Raytheon Co. | 67 | 10,274 | ||||||
Northrop Grumman Corp. | 41 | 10,041 | ||||||
Norfolk Southern Corp. | 64 | 9,570 | ||||||
FedEx Corp. | 57 | 9,196 | ||||||
Illinois Tool Works, Inc. | 72 | 9,122 | ||||||
Emerson Electric Co. | 148 | 8,843 | ||||||
Waste Management, Inc. | 92 | 8,187 | ||||||
Eaton Corporation plc | 102 | 7,003 | ||||||
Johnson Controls International plc | 218 | 6,464 | ||||||
Roper Technologies, Inc. | 24 | 6,397 | ||||||
TE Connectivity Ltd. | 81 | 6,126 | ||||||
Amphenol Corp. — Class A | 71 | 5,752 | ||||||
Corning, Inc. | 189 | 5,710 | ||||||
Ingersoll-Rand plc | 58 | 5,291 | ||||||
Agilent Technologies, Inc. | 75 | 5,059 | ||||||
Cummins, Inc. | 35 | 4,677 | ||||||
Fortive Corp. | 69 | 4,669 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 13 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
NOVA FUND |
| Shares | Value | ||||||
Parker-Hannifin Corp. | 31 | $ | 4,623 | |||||
Stanley Black & Decker, Inc. | 36 | 4,310 | ||||||
Rockwell Automation, Inc. | 28 | 4,213 | ||||||
Harris Corp. | 28 | 3,770 | ||||||
TransDigm Group, Inc.* | 11 | 3,741 | ||||||
AMETEK, Inc. | 55 | 3,724 | ||||||
Ball Corp. | 80 | 3,678 | ||||||
Republic Services, Inc. — Class A | 51 | 3,676 | ||||||
Waters Corp.* | 18 | 3,396 | ||||||
Mettler-Toledo International, Inc.* | 6 | 3,393 | ||||||
L3 Technologies, Inc. | 19 | 3,300 | ||||||
Vulcan Materials Co. | 31 | 3,063 | ||||||
Xylem, Inc. | 42 | 2,802 | ||||||
Expeditors International of Washington, Inc. | 41 | 2,792 | ||||||
Keysight Technologies, Inc.* | 44 | 2,731 | ||||||
CH Robinson Worldwide, Inc. | 32 | 2,691 | ||||||
Textron, Inc. | 57 | 2,622 | ||||||
Martin Marietta Materials, Inc. | 15 | 2,578 | ||||||
Dover Corp. | 34 | 2,412 | ||||||
Kansas City Southern | 24 | 2,291 | ||||||
WestRock Co. | 60 | 2,266 | ||||||
Masco Corp. | 72 | 2,105 | ||||||
PerkinElmer, Inc. | 26 | 2,042 | ||||||
J.B. Hunt Transport Services, Inc. | 21 | 1,954 | ||||||
Huntington Ingalls Industries, Inc. | 10 | 1,903 | ||||||
Snap-on, Inc. | 13 | 1,889 | ||||||
Packaging Corporation of America | 22 | 1,836 | ||||||
Garmin Ltd. | 28 | 1,773 | ||||||
Allegion plc | 22 | 1,754 | ||||||
Arconic, Inc. | 101 | 1,703 | ||||||
Jacobs Engineering Group, Inc. | 28 | 1,637 | ||||||
AO Smith Corp. | 34 | 1,452 | ||||||
FLIR Systems, Inc. | 33 | 1,437 | ||||||
Pentair plc | 38 | 1,436 | ||||||
Sealed Air Corp. | 37 | 1,289 | ||||||
Fortune Brands Home & Security, Inc. | 33 | 1,254 | ||||||
Flowserve Corp. | 31 | 1,179 | ||||||
Fluor Corp. | 33 | 1,062 | ||||||
Total Industrial | 449,470 | |||||||
Consumer, Cyclical - 1.3% | ||||||||
Home Depot, Inc. | 266 | 45,704 | ||||||
McDonald’s Corp. | 182 | 32,318 | ||||||
Walmart, Inc. | 335 | 31,205 | ||||||
NIKE, Inc. — Class B | 300 | 22,242 | ||||||
Costco Wholesale Corp. | 103 | 20,982 | ||||||
Starbucks Corp. | 292 | 18,805 | ||||||
Lowe’s Companies, Inc. | 189 | 17,456 | ||||||
TJX Companies, Inc. | 292 | 13,064 | ||||||
Walgreens Boots Alliance, Inc. | 189 | 12,914 | ||||||
General Motors Co. | 309 | 10,336 | ||||||
Target Corp. | 123 | 8,129 | ||||||
Delta Air Lines, Inc. | 147 | 7,335 | ||||||
Ross Stores, Inc. | 88 | 7,322 | ||||||
Marriott International, Inc. — Class A | 67 | 7,273 | ||||||
Ford Motor Co. | 920 | 7,038 | ||||||
Yum! Brands, Inc. | 74 | 6,802 | ||||||
Dollar General Corp. | 62 | 6,701 | ||||||
O’Reilly Automotive, Inc.* | 19 | 6,542 | ||||||
Southwest Airlines Co. | 119 | 5,531 | ||||||
VF Corp. | 77 | 5,493 | ||||||
Dollar Tree, Inc.* | 56 | 5,058 | ||||||
AutoZone, Inc.* | 6 | 5,030 | ||||||
Hilton Worldwide Holdings, Inc. | 70 | 5,026 | ||||||
PACCAR, Inc. | 82 | 4,685 | ||||||
Carnival Corp. | 94 | 4,634 | ||||||
United Continental Holdings, Inc.* | 54 | 4,521 | ||||||
Royal Caribbean Cruises Ltd. | 40 | 3,912 | ||||||
Aptiv plc | 62 | 3,817 | ||||||
Fastenal Co. | 68 | 3,556 | ||||||
Genuine Parts Co. | 35 | 3,361 | ||||||
Ulta Beauty, Inc.* | 13 | 3,183 | ||||||
American Airlines Group, Inc. | 97 | 3,115 | ||||||
WW Grainger, Inc. | 11 | 3,106 | ||||||
Best Buy Company, Inc. | 55 | 2,913 | ||||||
Darden Restaurants, Inc. | 29 | 2,896 | ||||||
MGM Resorts International | 118 | 2,863 | ||||||
DR Horton, Inc. | 81 | 2,808 | ||||||
Lennar Corp. — Class A | 69 | 2,701 | ||||||
Advance Auto Parts, Inc. | 17 | 2,677 | ||||||
Chipotle Mexican Grill, Inc. — Class A* | 6 | 2,591 | ||||||
Kohl’s Corp. | 39 | 2,587 | ||||||
CarMax, Inc.* | 41 | 2,572 | ||||||
Tractor Supply Co. | 29 | 2,420 | ||||||
Copart, Inc.* | 49 | 2,341 | ||||||
Tapestry, Inc. | 68 | 2,295 | ||||||
Wynn Resorts Ltd. | 23 | 2,275 | ||||||
Norwegian Cruise Line Holdings Ltd.* | 52 | 2,204 | ||||||
Hasbro, Inc. | 27 | 2,194 | ||||||
Macy’s, Inc. | 72 | 2,144 | ||||||
Tiffany & Co. | 26 | 2,093 | ||||||
Newell Brands, Inc. | 101 | 1,878 | ||||||
LKQ Corp.* | 75 | 1,780 | ||||||
Alaska Air Group, Inc. | 29 | 1,765 | ||||||
Mohawk Industries, Inc.* | 15 | 1,754 | ||||||
BorgWarner, Inc. | 49 | 1,702 | ||||||
PVH Corp. | 18 | 1,673 | ||||||
Whirlpool Corp. | 15 | 1,603 | ||||||
PulteGroup, Inc. | 61 | 1,585 | ||||||
Foot Locker, Inc. | 27 | 1,436 | ||||||
L Brands, Inc. | 54 | 1,386 | ||||||
Ralph Lauren Corp. — Class A | 13 | 1,345 | ||||||
Michael Kors Holdings Ltd.* | 35 | 1,327 | ||||||
Harley-Davidson, Inc. | 38 | 1,297 | ||||||
Gap, Inc. | 50 | 1,288 | ||||||
Nordstrom, Inc. | 27 | 1,259 | ||||||
Goodyear Tire & Rubber Co. | 55 | 1,123 | ||||||
Leggett & Platt, Inc. | 31 | 1,111 | ||||||
Hanesbrands, Inc. | 85 | 1,065 | ||||||
Mattel, Inc.* | 81 | 809 | ||||||
Under Armour, Inc. — Class A* | 44 | 778 |
14| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
NOVA FUND |
| Shares | Value | ||||||
Under Armour, Inc. — Class C* | 45 | $ | 728 | |||||
Total Consumer, Cyclical | 417,462 | |||||||
Energy - 0.8% | ||||||||
Exxon Mobil Corp. | 997 | 67,985 | ||||||
Chevron Corp. | 450 | 48,955 | ||||||
ConocoPhillips | 271 | 16,897 | ||||||
EOG Resources, Inc. | 137 | 11,948 | ||||||
Schlumberger Ltd. | 326 | 11,762 | ||||||
Occidental Petroleum Corp. | 178 | 10,926 | ||||||
Marathon Petroleum Corp. | 163 | 9,619 | ||||||
Phillips 66 | 100 | 8,615 | ||||||
Valero Energy Corp. | 100 | 7,497 | ||||||
Kinder Morgan, Inc. | 447 | 6,875 | ||||||
Williams Companies, Inc. | 285 | 6,285 | ||||||
Halliburton Co. | 206 | 5,475 | ||||||
Pioneer Natural Resources Co. | 40 | 5,261 | ||||||
ONEOK, Inc. | 97 | 5,233 | ||||||
Anadarko Petroleum Corp. | 119 | 5,217 | ||||||
Concho Resources, Inc.* | 47 | 4,831 | ||||||
Diamondback Energy, Inc. | 36 | 3,337 | ||||||
Marathon Oil Corp. | 196 | 2,811 | ||||||
Baker Hughes a GE Co. | 121 | 2,602 | ||||||
Devon Energy Corp. | 110 | 2,479 | ||||||
Hess Corp. | 59 | 2,389 | ||||||
Apache Corp. | 89 | 2,336 | ||||||
National Oilwell Varco, Inc. | 90 | 2,313 | ||||||
Cabot Oil & Gas Corp. — Class A | 102 | 2,280 | ||||||
Noble Energy, Inc. | 113 | 2,120 | ||||||
TechnipFMC plc | 100 | 1,958 | ||||||
HollyFrontier Corp. | 38 | 1,943 | ||||||
Cimarex Energy Co. | 23 | 1,418 | ||||||
Helmerich & Payne, Inc. | 26 | 1,246 | ||||||
Newfield Exploration Co.* | 47 | 689 | ||||||
Total Energy | 263,302 | |||||||
Utilities - 0.5% | ||||||||
NextEra Energy, Inc. | 113 | 19,642 | ||||||
Duke Energy Corp. | 168 | 14,498 | ||||||
Dominion Energy, Inc. | 155 | 11,076 | ||||||
Southern Co. | 242 | 10,629 | ||||||
Exelon Corp. | 228 | 10,283 | ||||||
American Electric Power Company, Inc. | 116 | 8,670 | ||||||
Sempra Energy | 64 | 6,924 | ||||||
Public Service Enterprise Group, Inc. | 119 | 6,194 | ||||||
Xcel Energy, Inc. | 121 | 5,962 | ||||||
Consolidated Edison, Inc. | 73 | 5,582 | ||||||
WEC Energy Group, Inc. | 74 | 5,125 | ||||||
Eversource Energy | 75 | 4,878 | ||||||
PPL Corp. | 170 | 4,816 | ||||||
DTE Energy Co. | 43 | 4,743 | ||||||
Edison International | 77 | 4,371 | ||||||
FirstEnergy Corp. | 114 | 4,281 | ||||||
American Water Works Company, Inc. | 43 | 3,903 | ||||||
Ameren Corp. | 58 | 3,783 | ||||||
Entergy Corp. | 43 | 3,701 | ||||||
Evergy, Inc. | 62 | 3,520 | ||||||
CenterPoint Energy, Inc. | 118 | 3,331 | ||||||
CMS Energy Corp. | 67 | 3,327 | ||||||
PG&E Corp.* | 122 | 2,897 | ||||||
NRG Energy, Inc. | 68 | 2,693 | ||||||
Alliant Energy Corp. | 56 | 2,366 | ||||||
AES Corp. | 156 | 2,256 | ||||||
Pinnacle West Capital Corp. | 26 | 2,215 | ||||||
NiSource, Inc. | 86 | 2,180 | ||||||
SCANA Corp. | 34 | 1,624 | ||||||
Total Utilities | 165,470 | |||||||
Basic Materials - 0.4% | ||||||||
DowDuPont, Inc. | 540 | 28,879 | ||||||
Linde plc | 130 | 20,285 | ||||||
Air Products & Chemicals, Inc. | 52 | 8,323 | ||||||
Sherwin-Williams Co. | 19 | 7,476 | ||||||
LyondellBasell Industries N.V. — Class A | 74 | 6,154 | ||||||
PPG Industries, Inc. | 57 | 5,827 | ||||||
Newmont Mining Corp. | 125 | 4,331 | ||||||
International Paper Co. | 95 | 3,834 | ||||||
Nucor Corp. | 74 | 3,834 | ||||||
Freeport-McMoRan, Inc. | 341 | 3,516 | ||||||
International Flavors & Fragrances, Inc. | 24 | 3,222 | ||||||
Celanese Corp. — Class A | 32 | 2,879 | ||||||
Mosaic Co. | 84 | 2,454 | ||||||
Eastman Chemical Co. | 33 | 2,413 | ||||||
FMC Corp. | 32 | 2,367 | ||||||
CF Industries Holdings, Inc. | 54 | 2,349 | ||||||
Albemarle Corp. | 25 | 1,927 | ||||||
Total Basic Materials | 110,070 | |||||||
Total Common Stocks | ||||||||
(Cost $4,243,819) | 4,957,246 | |||||||
MUTUAL FUNDS† - 51.3% | ||||||||
Guggenheim Strategy Fund II1 | 419,232 | 10,405,341 | ||||||
Guggenheim Ultra Short Duration Fund1,5 | 619,179 | 6,167,022 | ||||||
Total Mutual Funds | ||||||||
(Cost $16,574,900) | 16,572,363 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 7.5% | ||||||||
U.S. Treasury Bills | ||||||||
2.35% due 03/14/192,3 | $ | 1,542,000 | 1,534,750 | |||||
2.31% due 03/14/193 | 900,000 | 895,769 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $2,430,460) | 2,430,519 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 15 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
NOVA FUND |
| Face | Value | ||||||
REPURCHASE AGREEMENTS††,4 - 7.6% | ||||||||
JPMorgan Chase & Co. | $ | 1,458,880 | $ | 1,458,880 | ||||
Barclays Capital | 606,707 | 606,707 | ||||||
Bank of America Merrill Lynch | 404,471 | 404,471 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $2,470,058) | 2,470,058 | |||||||
Total Investments - 81.8% | ||||||||
(Cost $25,719,237) | $ | 26,430,186 | ||||||
Other Assets & Liabilities, net - 18.2% | 5,878,957 | |||||||
Total Net Assets - 100.0% | $ | 32,309,143 |
Futures Contracts | |||||||||||||
Description | Number of | Expiration | Notional | Value and | |||||||||
Equity Futures Contracts Purchased† | |||||||||||||
S&P 500 Index Mini Futures Contracts | 25 | Mar 2019 | $ | 3,136,875 | $ | 2,042 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||
Barclays Bank plc | S&P 500 Index | 2.87 | % | At Maturity | 01/31/19 | 5,511 | $ | 13,814,390 | $ | 99,302 | |||||||||
BNP Paribas | S&P 500 Index | 2.97 | % | At Maturity | 01/29/19 | 4,940 | 12,385,004 | 89,028 | |||||||||||
Goldman Sachs International | S&P 500 Index | 2.92 | % | At Maturity | 01/28/19 | 5,677 | 14,231,116 | 51,043 | |||||||||||
$ | 40,430,510 | $ | 239,373 |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | 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, 2018. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | Repurchase Agreements — See Note 6. |
5 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
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, 2018 |
NOVA FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 4,957,246 | $ | — | $ | — | $ | 4,957,246 | ||||||||
Mutual Funds | 16,572,363 | — | — | 16,572,363 | ||||||||||||
U.S. Treasury Bills | — | 2,430,519 | — | 2,430,519 | ||||||||||||
Repurchase Agreements | — | 2,470,058 | — | 2,470,058 | ||||||||||||
Equity Futures Contracts** | 2,042 | — | — | 2,042 | ||||||||||||
Equity Index Swap Agreements** | — | 239,373 | — | 239,373 | ||||||||||||
Total Assets | $ | 21,531,651 | $ | 5,139,950 | $ | — | $ | 26,671,601 |
** | This derivative is reported as unrealized appreciation/depreciation 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, 2018, there were no transfers between levels.
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III,(collectively, the “Cash Management Funds”), each of which are 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, 2018, 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/1601445/000089180418000513/gug75569-ncsr.htm.
Transactions during the year ended December 31, 2018, in which the company is an “affiliated person”, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | Capital | |||||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 16,526,813 | $ | 9,146,294 | $ | (15,200,000 | ) | $ | (12,931 | ) | $ | (54,835 | ) | $ | 10,405,341 | 419,232 | $ | 321,192 | $ | 4,767 | ||||||||||||||||
Guggenheim Ultra Short Duration Fund 1 | 10,142,312 | 12,949,577 | (16,875,000 | ) | (16,702 | ) | (33,165 | ) | 6,167,022 | 619,179 | 273,115 | 6,293 | ||||||||||||||||||||||||
$ | 26,669,125 | $ | 22,095,871 | $ | (32,075,000 | ) | $ | (29,633 | ) | $ | (88,000 | ) | $ | 16,572,363 | $ | 594,307 | $ | 11,060 |
1 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 17 |
NOVA FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $6,674,279) | $ | 7,387,765 | ||
Investments in affiliated issuers, at value (cost $16,574,900) | 16,572,363 | |||
Repurchase agreements, at value (cost $2,470,058) | 2,470,058 | |||
Cash | 45 | |||
Unrealized appreciation on swap agreements | 239,373 | |||
Receivables: | ||||
Fund shares sold | 9,249,295 | |||
Dividends | 37,570 | |||
Variation margin on futures contracts | 2,042 | |||
Interest | 202 | |||
Securities lending income | 1 | |||
Total assets | 35,958,714 | |||
Liabilities: | ||||
Payable for: | ||||
Securities purchased | 3,533,348 | |||
Management fees | 17,163 | |||
Transfer agent and administrative fees | 6,257 | |||
Investor service fees | 6,257 | |||
Fund shares redeemed | 5,972 | |||
Portfolio accounting fees | 2,502 | |||
Swap settlement | 1,028 | |||
Trustees’ fees* | 662 | |||
Miscellaneous | 76,382 | |||
Total liabilities | 3,649,571 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 32,309,143 | ||
Net assets consist of: | ||||
Paid in capital | $ | 34,197,065 | ||
Total distributable earnings (loss) | (1,887,922 | ) | ||
Net assets | $ | 32,309,143 | ||
Capital shares outstanding | 341,700 | |||
Net asset value per share | $ | 94.55 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 236,312 | ||
Dividends from securities of affiliated issuers | 594,307 | |||
Interest | 124,353 | |||
Income from securities lending, net | 92 | |||
Total investment income | 955,064 | |||
Expenses: | ||||
Management fees | 305,276 | |||
Investor service fees | 101,759 | |||
Transfer agent and administrative fees | 101,759 | |||
Professional fees | 59,693 | |||
Portfolio accounting fees | 40,703 | |||
Trustees’ fees* | 10,515 | |||
Custodian fees | 5,908 | |||
Line of credit fees | 34 | |||
Miscellaneous | 32,920 | |||
Total expenses | 658,567 | |||
Less: | ||||
Expenses waived by Adviser | (1,606 | ) | ||
Net expenses | 656,961 | |||
Net investment income | 298,103 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 345,530 | |||
Investments in affiliated issuers | (29,633 | ) | ||
Distributions received from affiliated investment company shares | 11,060 | |||
Swap agreements | (2,860,021 | ) | ||
Futures contracts | 89,987 | |||
Net realized loss | (2,443,077 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (1,399,200 | ) | ||
Investments in affiliated issuers | (88,000 | ) | ||
Swap agreements | 353,158 | |||
Futures contracts | (131,993 | ) | ||
Net change in unrealized appreciation (depreciation) | (1,266,035 | ) | ||
Net realized and unrealized loss | (3,709,112 | ) | ||
Net decrease in net assets resulting from operations | $ | (3,411,009 | ) |
* | 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 | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 298,103 | $ | 73,932 | ||||
Net realized gain (loss) on investments | (2,443,077 | ) | 9,528,086 | |||||
Net change in unrealized appreciation (depreciation) on investments | (1,266,035 | ) | 682,028 | |||||
Net increase (decrease) in net assets resulting from operations | (3,411,009 | ) | 10,284,046 | |||||
Distributions to shareholders | (2,952,794 | ) | (1,197,032 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 272,253,605 | 293,927,461 | ||||||
Distributions reinvested | 2,952,794 | 1,197,032 | ||||||
Cost of shares redeemed | (288,258,460 | ) | (291,254,450 | ) | ||||
Net increase (decrease) from capital share transactions | (13,052,061 | ) | 3,870,043 | |||||
Net increase (decrease) in net assets | (19,415,864 | ) | 12,957,057 | |||||
Net assets: | ||||||||
Beginning of year | 51,725,007 | 38,767,950 | ||||||
End of year | $ | 32,309,143 | $ | 51,725,007 | ||||
Capital share activity: | ||||||||
Shares sold | 2,415,472 | 2,916,039 | ||||||
Shares issued from reinvestment of distributions | 26,030 | 12,137 | ||||||
Shares redeemed | (2,557,565 | ) | (2,903,190 | ) | ||||
Net increase (decrease) in shares | (116,063 | ) | 24,986 |
1 | For the year ended December 31, 2017, the distributions from net investment income and net realized gains were as follows (See Note 11): |
Net investment income | $ | (13,432 | ) | ||
Net realized gains | (1,183,600 | ) |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 113.00 | $ | 89.58 | $ | 77.42 | $ | 77.97 | $ | 65.81 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .83 | .22 | .06 | (.12 | ) | (.02 | ) | |||||||||||||
Net gain (loss) on investments (realized and unrealized) | (11.15 | ) | 27.62 | 12.10 | (.43 | ) | 12.25 | |||||||||||||
Total from investment operations | (10.32 | ) | 27.84 | 12.16 | (.55 | ) | 12.23 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.21 | ) | (.05 | ) | — | — | (.07 | ) | ||||||||||||
Net realized gains | (7.92 | ) | (4.37 | ) | — | — | — | |||||||||||||
Total distributions | (8.13 | ) | (4.42 | ) | — | — | (.07 | ) | ||||||||||||
Net asset value, end of period | $ | 94.55 | $ | 113.00 | $ | 89.58 | $ | 77.42 | $ | 77.97 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (10.32 | %) | 31.78 | % | 15.72 | % | (0.72 | %) | 18.59 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 32,309 | $ | 51,725 | $ | 38,768 | $ | 30,483 | $ | 38,983 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.73 | % | 0.22 | % | 0.04 | % | (0.15 | %) | (0.03 | %) | ||||||||||
Total expensesc | 1.62 | % | 1.61 | % | 1.56 | % | 1.51 | % | 1.59 | % | ||||||||||
Net expensesd | 1.61 | % | 1.61 | % | 1.56 | % | 1.51 | % | 1.59 | % | ||||||||||
Portfolio turnover rate | 604 | % | 412 | % | 636 | % | 342 | % | 694 | % |
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 reimbursements, as applicable. |
e | 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. |
20| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, 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 3.95%, while the S&P 500 Index returned -4.38% over the same time period.
The sectors contributing the most to the performance of the underlying index for the period were Information Technology and Consumer Discretionary. The Financials sector detracted the most from return of the underlying index for the period, followed by the Industrials sector.
Microsoft Corp., Amazon.com, Inc., and Merck & Co., Inc. contributed the most to performance of the underlying index for 2018. Facebook, Inc. Class A, General Electric Co., and AT&T, Inc. 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. Derivatives performed as expected.
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, 2018 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. 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.
Cumulative Fund Performance*,†
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 | 29.4% |
Guggenheim Ultra Short Duration Fund | 26.9% |
Total | 56.3% |
“Largest Holdings” excludes any temporary cash or derivative investments.
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Inverse S&P 500® Strategy Fund | 3.95% | (9.17%) | (14.60%) |
S&P 500 Index | (4.38%) | 8.49% | 13.12% |
* | Fund positions at December 31, 2018 did not represent the Fund’s daily target of -100% exposure to the underlying index. |
* | 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, 2018 |
INVERSE S&P 500® STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 56.3% | ||||||||
Guggenheim Strategy Fund II1 | 52,346 | $ | 1,299,238 | |||||
Guggenheim Ultra Short Duration Fund1,7 | 119,058 | 1,185,822 | ||||||
Total Mutual Funds | ||||||||
(Cost $2,486,228) | 2,485,060 | |||||||
Face | ||||||||
FEDERAL AGENCY NOTES†† - 4.5% | ||||||||
Freddie Mac | ||||||||
1.75% due 05/30/192 | $ | 100,000 | 99,683 | |||||
Farmer Mac | ||||||||
1.55% due 07/03/193 | 100,000 | 99,443 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $199,181) | 199,126 | |||||||
U.S. TREASURY BILLS†† - 2.3% | ||||||||
U.S. Treasury Bills | ||||||||
2.35% due 03/14/194 | 100,000 | 99,530 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $99,525) | 99,530 | |||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 1.1% | ||||||||
Freddie Mac | ||||||||
2.24% due 01/03/192,4 | 50,000 | 49,997 | ||||||
Total Federal Agency Discount Notes | ||||||||
(Cost $49,994) | 49,997 | |||||||
REPURCHASE AGREEMENTS††,5 - 31.6% | ||||||||
JPMorgan Chase & Co. | 822,295 | 822,295 | ||||||
Barclays Capital | 341,969 | 341,969 | ||||||
Bank of America Merrill Lynch | 227,979 | 227,979 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $1,392,243) | 1,392,243 | |||||||
Total Investments - 95.8% | ||||||||
(Cost $4,227,171) | $ | 4,225,956 | ||||||
Other Assets & Liabilities, net - 4.2% | 187,106 | |||||||
Total Net Assets - 100.0% | $ | 4,413,062 |
Futures Contracts | |||||||||||||
Description | Number of | Expiration | Notional | Value and | |||||||||
Equity Futures Contracts Sold Short† | |||||||||||||
S&P 500 Index Mini Futures Contracts | 1 | Mar 2019 | $ | 125,475 | $ | (754 | ) |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements Sold Short†† | |||||||||||||||||||
BNP Paribas | S&P 500 Index | (2.47 | %) | At Maturity | 01/29/19 | 223 | $ | 558,893 | $ | (4,017 | ) | ||||||||
Barclays Bank plc | S&P 500 Index | (2.72 | %) | At Maturity | 01/31/19 | 516 | 1,294,278 | (9,304 | ) | ||||||||||
Goldman Sachs International | S&P 500 Index | (2.82 | %) | At Maturity | 01/28/19 | 781 | 1,957,662 | (30,574 | ) | ||||||||||
$ | 3,810,833 | $ | (43,895 | ) |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | 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 | 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 | Repurchase Agreements — See Note 6. |
6 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2018. |
7 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 23 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
INVERSE S&P 500® STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 2,485,060 | $ | — | $ | — | $ | 2,485,060 | ||||||||
Federal Agency Notes | — | 199,126 | — | 199,126 | ||||||||||||
U.S. Treasury Bills | — | 99,530 | — | 99,530 | ||||||||||||
Federal Agency Discount Notes | — | 49,997 | — | 49,997 | ||||||||||||
Repurchase Agreements | — | 1,392,243 | — | 1,392,243 | ||||||||||||
Total Assets | $ | 2,485,060 | $ | 1,740,896 | $ | — | $ | 4,225,956 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Futures Contracts** | $ | 754 | $ | — | $ | — | $ | 754 | ||||||||
Equity Index Swap Agreements** | — | 43,895 | — | 43,895 | ||||||||||||
Total Liabilities | $ | 754 | $ | 43,895 | $ | — | $ | 44,649 |
** | This derivative is reported as unrealized appreciation/depreciation 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, 2018, there were no transfers between levels.
24| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
INVERSE S&P 500® STRATEGY FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Cash Management Funds”), each of which are 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, 2018, 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/1601445/000089180418000513/gug75569-ncsr.htm.
Transactions during the year ended December 31, 2018, in which the company is an “affiliated person”, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | Capital | |||||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 914,204 | $ | 5,102,679 | $ | (4,710,000 | ) | $ | 1,689 | $ | (9,334 | ) | $ | 1,299,238 | 52,346 | $ | 26,935 | $ | 642 | |||||||||||||||||
Guggenheim Ultra Short Duration Fund1 | 671,339 | 5,239,790 | (4,720,000 | ) | 1,342 | (6,649 | ) | 1,185,822 | 119,058 | 23,837 | 861 | |||||||||||||||||||||||||
$ | 1,585,543 | $ | 10,342,469 | $ | (9,430,000 | ) | $ | 3,031 | $ | (15,983 | ) | $ | 2,485,060 | $ | 50,772 | $ | 1,503 |
1 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 25 |
INVERSE S&P 500® STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $348,700) | $ | 348,653 | ||
Investments in affiliated issuers, at value (cost $2,486,228) | 2,485,060 | |||
Repurchase agreements, at value (cost $1,392,243) | 1,392,243 | |||
Receivables: | ||||
Fund shares sold | 359,793 | |||
Dividends | 3,663 | |||
Interest | 1,035 | |||
Variation margin on futures contracts | 922 | |||
Total assets | 4,591,369 | |||
Liabilities: | ||||
Unrealized depreciation on swap agreements | 43,895 | |||
Payable for: | ||||
Securities purchased | 103,936 | |||
Swap settlement | 15,586 | |||
Management fees | 3,120 | |||
Fund shares redeemed | 2,873 | |||
Transfer agent and administrative fees | 926 | |||
Investor service fees | 926 | |||
Portfolio accounting fees | 370 | |||
Trustees’ fees* | 51 | |||
Miscellaneous | 6,624 | |||
Total liabilities | 178,307 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 4,413,062 | ||
Net assets consist of: | ||||
Paid in capital | $ | 18,292,488 | ||
Total distributable earnings (loss) | (13,879,426 | ) | ||
Net assets | $ | 4,413,062 | ||
Capital shares outstanding | 60,992 | |||
Net asset value per share | $ | 72.35 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 50,772 | ||
Interest | 27,370 | |||
Total investment income | 78,142 | |||
�� | ||||
Expenses: | ||||
Management fees | 29,728 | |||
Investor service fees | 8,258 | |||
Transfer agent and administrative fees | 8,258 | |||
Portfolio accounting fees | 3,303 | |||
Professional fees | 3,120 | |||
Trustees’ fees* | 1,454 | |||
Custodian fees | 519 | |||
Line of credit fees | 20 | |||
Miscellaneous | 3,666 | |||
Total expenses | 58,326 | |||
Less: | ||||
Expenses waived by Adviser | (214 | ) | ||
Net expenses | 58,112 | |||
Net investment income | 20,030 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | (115 | ) | ||
Investments in affiliated issuers | 3,031 | |||
Distributions received from affiliated investment company shares | 1,503 | |||
Swap agreements | 209,686 | |||
Futures contracts | (58,436 | ) | ||
Net realized gain | 155,669 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (46 | ) | ||
Investments in affiliated issuers | (15,983 | ) | ||
Swap agreements | (53,476 | ) | ||
Futures contracts | 1,025 | |||
Net change in unrealized appreciation (depreciation) | (68,480 | ) | ||
Net realized and unrealized gain | 87,189 | |||
Net increase in net assets resulting from operations | $ | 107,219 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
26| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE S&P 500® STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | 20,030 | $ | (6,460 | ) | |||
Net realized gain (loss) on investments | 155,669 | (804,841 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | (68,480 | ) | (29,101 | ) | ||||
Net increase (decrease) in net assets resulting from operations | 107,219 | (840,402 | ) | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 78,535,789 | 52,117,952 | ||||||
Cost of shares redeemed | (76,802,880 | ) | (53,288,975 | ) | ||||
Net increase (decrease) from capital share transactions | 1,732,909 | (1,171,023 | ) | |||||
Net increase (decrease) in net assets | 1,840,128 | (2,011,425 | ) | |||||
Net assets: | ||||||||
Beginning of year | 2,572,934 | 4,584,359 | ||||||
End of year | $ | 4,413,062 | $ | 2,572,934 | ||||
Capital share activity: | ||||||||
Shares sold | 1,168,828 | 681,570 | ||||||
Shares redeemed | (1,144,802 | ) | (699,041 | ) | ||||
Net increase (decrease) in shares | 24,026 | (17,471 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 27 |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 69.60 | $ | 84.21 | $ | 95.71 | $ | 100.13 | $ | 117.09 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .41 | (.11 | ) | (.11 | ) | (1.32 | ) | (1.62 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | 2.34 | (14.50 | ) | (11.39 | ) | (3.10 | ) | (15.34 | ) | |||||||||||
Total from investment operations | 2.75 | (14.61 | ) | (11.50 | ) | (4.42 | ) | (16.96 | ) | |||||||||||
Net asset value, end of period | $ | 72.35 | $ | 69.60 | $ | 84.21 | $ | 95.71 | $ | 100.13 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 3.95 | % | (17.35 | %) | (12.01 | %) | (4.43 | %) | (14.45 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 4,413 | $ | 2,573 | $ | 4,584 | $ | 9,497 | $ | 4,456 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.61 | % | (0.15 | %) | (0.69 | %) | (1.38 | %) | (1.46 | %) | ||||||||||
Total expensesc | 1.77 | % | 1.76 | % | 1.71 | % | 1.66 | % | 1.72 | % | ||||||||||
Net expensesd | 1.76 | % | 1.76 | % | 1.71 | % | 1.66 | % | 1.72 | % | ||||||||||
Portfolio turnover rate | 540 | % | 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 | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | 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. |
28| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, 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 -1.81%, while the NASDAQ-100 Index returned 0.04% over the same time period.
The Consumer Discretionary and Information Technology sectors contributed the most to the performance of the underlying index during the year. The Communication Services sector detracted the most from the performance of the underlying index for the year, followed by the Consumer Staples sector.
Amazon.com, Inc., Microsoft Corp., and Netflix, Inc. contributed the most to performance of the underlying index for 2018. Facebook, Inc. Class A, Apple, Inc., and Kraft Heinz Co. 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. Derivatives performed as expected.
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, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. 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 | 33.5% |
Guggenheim Ultra Short Duration Fund | 19.7% |
Microsoft Corp. | 3.5% |
Apple, Inc. | 3.4% |
Amazon.com, Inc. | 3.3% |
Alphabet, Inc. — Class C | 1.7% |
Alphabet, Inc. — Class A | 1.5% |
Facebook, Inc. — Class A | 1.4% |
Intel Corp. | 1.1% |
Cisco Systems, Inc. | 1.0% |
Top Ten Total | 70.1% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments.
THE RYDEX FUNDS ANNUAL REPORT | 29 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
NASDAQ-100® Fund | (1.81%) | 11.64% | 17.50% |
NASDAQ-100 Index | 0.04% | 13.34% | 19.29% |
* | 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. |
30 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2018 |
NASDAQ-100® FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 34.9% | ||||||||
Technology - 13.5% | ||||||||
Microsoft Corp. | 21,142 | $ | 2,147,393 | |||||
Apple, Inc. | 13,070 | 2,061,662 | ||||||
Intel Corp. | 13,950 | 654,674 | ||||||
Adobe, Inc.* | 1,492 | 337,550 | ||||||
Broadcom, Inc. | 1,263 | 321,156 | ||||||
Texas Instruments, Inc. | 2,936 | 277,452 | ||||||
NVIDIA Corp. | 1,865 | 248,977 | ||||||
QUALCOMM, Inc. | 3,705 | 210,852 | ||||||
Intuit, Inc. | 793 | 156,102 | ||||||
Cognizant Technology Solutions Corp. — Class A | 1,770 | 112,360 | ||||||
Micron Technology, Inc.* | 3,466 | 109,976 | ||||||
Activision Blizzard, Inc. | 2,331 | 108,555 | ||||||
Applied Materials, Inc. | 3,005 | 98,384 | ||||||
Analog Devices, Inc. | 1,131 | 97,074 | ||||||
Fiserv, Inc.* | 1,218 | 89,511 | ||||||
Autodesk, Inc.* | 667 | 85,783 | ||||||
NXP Semiconductor N.V. | 1,005 | 73,646 | ||||||
Electronic Arts, Inc.* | 924 | 72,913 | ||||||
Workday, Inc. — Class A* | 455 | 72,654 | ||||||
Paychex, Inc. | 1,097 | 71,469 | ||||||
Xilinx, Inc. | 773 | 65,836 | ||||||
Lam Research Corp. | 474 | 64,545 | ||||||
Advanced Micro Devices, Inc.* | 3,055 | 56,395 | ||||||
Cerner Corp.* | 1,007 | 52,807 | ||||||
NetEase, Inc. ADR | 224 | 52,723 | ||||||
Microchip Technology, Inc. | 723 | 51,998 | ||||||
Check Point Software Technologies Ltd.* | 478 | 49,067 | ||||||
NetApp, Inc. | 769 | 45,886 | ||||||
Maxim Integrated Products, Inc. | 847 | 43,070 | ||||||
Citrix Systems, Inc. | 412 | 42,213 | ||||||
KLA-Tencor Corp. | 467 | 41,792 | ||||||
Synopsys, Inc.* | 453 | 38,161 | ||||||
Cadence Design Systems, Inc.* | 862 | 37,480 | ||||||
Skyworks Solutions, Inc. | 543 | 36,392 | ||||||
Take-Two Interactive Software, Inc.* | 348 | 35,823 | ||||||
Western Digital Corp. | 885 | 32,718 | ||||||
ASML Holding N.V. — Class G | 207 | 32,213 | ||||||
Total Technology | 8,187,262 | |||||||
Communications - 12.7% | ||||||||
Amazon.com, Inc.* | 1,347 | 2,023,154 | ||||||
Alphabet, Inc. — Class C* | 970 | 1,004,542 | ||||||
Alphabet, Inc. — Class A* | 846 | 884,036 | ||||||
Facebook, Inc. — Class A* | 6,679 | 875,550 | ||||||
Cisco Systems, Inc. | 13,742 | 595,441 | ||||||
Comcast Corp. — Class A | 13,877 | 472,512 | ||||||
Netflix, Inc.* | 1,333 | 356,791 | ||||||
Booking Holdings, Inc.* | 142 | 244,584 | ||||||
Charter Communications, Inc. — Class A* | 700 | 199,479 | ||||||
T-Mobile US, Inc.* | 2,593 | 164,941 | ||||||
Twenty-First Century Fox, Inc. — Class A | 3,231 | 155,475 | ||||||
Baidu, Inc. ADR* | 858 | 136,079 | ||||||
Twenty-First Century Fox, Inc. — Class B | 2,441 | 116,631 | ||||||
eBay, Inc.* | 2,942 | 82,582 | ||||||
Sirius XM Holdings, Inc.1 | 13,576 | 77,519 | ||||||
JD.com, Inc. ADR* | 2,824 | 59,106 | ||||||
VeriSign, Inc.* | 370 | 54,867 | ||||||
Expedia Group, Inc. | 416 | 46,862 | ||||||
MercadoLibre, Inc.* | 138 | 40,413 | ||||||
Ctrip.com International Ltd. ADR* | 1,488 | 40,265 | ||||||
Symantec Corp. | 1,953 | 36,902 | ||||||
Liberty Global plc — Class C* | 1,645 | 33,953 | ||||||
Liberty Global plc — Class A* | 624 | 13,316 | ||||||
Total Communications | 7,715,000 | |||||||
Consumer, Non-cyclical - 5.5% | ||||||||
PepsiCo, Inc. | 4,364 | 482,135 | ||||||
Amgen, Inc. | 1,948 | 379,217 | ||||||
PayPal Holdings, Inc.* | 3,602 | 302,892 | ||||||
Gilead Sciences, Inc. | 3,954 | 247,323 | ||||||
Biogen, Inc.* | 616 | 185,367 | ||||||
Mondelez International, Inc. — Class A | 4,444 | 177,893 | ||||||
Automatic Data Processing, Inc. | 1,337 | 175,308 | ||||||
Intuitive Surgical, Inc.* | 349 | 167,143 | ||||||
Kraft Heinz Co. | 3,728 | 160,453 | ||||||
Celgene Corp.* | 2,137 | 136,960 | ||||||
Illumina, Inc.* | 449 | 134,669 | ||||||
Vertex Pharmaceuticals, Inc.* | 781 | 129,419 | ||||||
Regeneron Pharmaceuticals, Inc.* | 325 | 121,387 | ||||||
Monster Beverage Corp.* | 1,690 | 83,182 | ||||||
Alexion Pharmaceuticals, Inc.* | 682 | 66,400 | ||||||
Cintas Corp. | 327 | 54,933 | ||||||
Verisk Analytics, Inc. — Class A* | 503 | 54,847 | ||||||
Align Technology, Inc.* | 244 | 51,101 | ||||||
IDEXX Laboratories, Inc.* | 264 | 49,109 | ||||||
BioMarin Pharmaceutical, Inc.* | 544 | 46,322 | ||||||
Mylan N.V.* | 1,576 | 43,182 | ||||||
Incyte Corp.* | 650 | 41,333 | ||||||
Henry Schein, Inc.* | 466 | 36,591 | ||||||
Total Consumer, Non-cyclical | 3,327,166 | |||||||
Consumer, Cyclical - 2.7% | ||||||||
Costco Wholesale Corp. | 1,339 | 272,768 | ||||||
Starbucks Corp. | 3,792 | 244,205 | ||||||
Walgreens Boots Alliance, Inc. | 2,901 | 198,225 | ||||||
Tesla, Inc.* | 525 | 174,720 | ||||||
Marriott International, Inc. — Class A | 1,043 | 113,228 | ||||||
Ross Stores, Inc. | 1,141 | 94,931 | ||||||
O’Reilly Automotive, Inc.* | 245 | 84,361 | ||||||
United Continental Holdings, Inc.* | 833 | 69,747 | ||||||
Dollar Tree, Inc.* | 727 | 65,662 | ||||||
PACCAR, Inc. | 1,068 | 61,026 | ||||||
Fastenal Co. | 877 | 45,858 | ||||||
Lululemon Athletica, Inc.* | 374 | 45,482 | ||||||
American Airlines Group, Inc. | 1,408 | 45,211 | ||||||
Ulta Beauty, Inc.* | 183 | 44,806 | ||||||
Wynn Resorts Ltd. | 332 | 32,838 | ||||||
Hasbro, Inc. | 387 | 31,444 | ||||||
Total Consumer, Cyclical | 1,624,512 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 31 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
NASDAQ-100® FUND |
| Shares | Value | ||||||
Industrial - 0.3% | ||||||||
CSX Corp. | 2,581 | $ | 160,358 | |||||
J.B. Hunt Transport Services, Inc. | 334 | 31,075 | ||||||
Total Industrial | 191,433 | |||||||
Utilities - 0.1% | ||||||||
Xcel Energy, Inc. | 1,571 | 77,403 | ||||||
Financial - 0.1% | ||||||||
Willis Towers Watson plc | 397 | 60,288 | ||||||
Total Common Stocks | ||||||||
(Cost $7,197,626) | 21,183,064 | |||||||
MUTUAL FUNDS† - 53.2% | ||||||||
Guggenheim Strategy Fund II2 | 817,586 | 20,292,487 | ||||||
Guggenheim Ultra Short Duration Fund2,10 | 1,202,039 | 11,972,309 | ||||||
Total Mutual Funds | ||||||||
(Cost $32,433,461) | 32,264,796 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 3.5% | ||||||||
U.S. Treasury Bills | ||||||||
2.21% due 01/08/193,4 | $ | 1,558,000 | 1,557,416 | |||||
2.31% due 03/14/194,5 | 280,000 | 278,684 | ||||||
2.35% due 03/14/194,5 | 273,000 | 271,717 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $2,107,700) | 2,107,817 | |||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 1.7% | ||||||||
Federal Home Loan Bank | ||||||||
2.15% due 01/02/194,6 | 1,000,000 | 999,940 | ||||||
Total Federal Agency Discount Notes | ||||||||
(Cost $999,940) | 999,940 | |||||||
REPURCHASE AGREEMENTS††,7 - 6.2% | ||||||||
JPMorgan Chase & Co. | 2,222,079 | 2,222,079 | ||||||
Barclays Capital | 924,099 | 924,099 | ||||||
Bank of America Merrill Lynch | 616,066 | 616,066 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $3,762,244) | 3,762,244 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,8 - 0.1% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 2.32%9 | 47,334 | 47,334 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $47,334) | 47,334 | |||||||
Total Investments - 99.6% | ||||||||
(Cost $46,548,305) | $ | 60,365,195 | ||||||
Other Assets & Liabilities, net - 0.4% | 250,531 | |||||||
Total Net Assets - 100.0% | $ | 60,615,726 |
Futures Contracts | |||||||||||||
Description | Number of | Expiration | Notional | Value and | |||||||||
Equity Futures Contracts Purchased† | |||||||||||||
NASDAQ-100 Index Mini Futures Contracts | 79 | Mar 2019 | $ | 10,025,495 | $ | (681,910 | ) |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||
Goldman Sachs International | NASDAQ-100 Index | 3.02 | % | At Maturity | 01/28/19 | 2,223 | $ | 14,070,510 | $ | 129,385 | |||||||||
BNP Paribas | NASDAQ-100 Index | 3.02 | % | At Maturity | 01/29/19 | 1,984 | 12,559,401 | 82,661 | |||||||||||
Barclays Bank plc | NASDAQ-100 Index | 2.92 | % | At Maturity | 01/31/19 | 492 | 3,114,678 | 20,500 | |||||||||||
$ | 29,744,589 | $ | 232,546 |
32| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
NASDAQ-100® FUND |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | 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 on loan at December 31, 2018 — See Note 7. |
2 | Affiliated issuer. |
3 | All or a portion of this security is pledged as futures collateral at December 31, 2018. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2018. |
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, 2018. |
10 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
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, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 21,183,064 | $ | — | $ | — | $ | 21,183,064 | ||||||||
Mutual Funds | 32,264,796 | — | — | 32,264,796 | ||||||||||||
U.S. Treasury Bills | — | 2,107,817 | — | 2,107,817 | ||||||||||||
Federal Agency Discount Notes | — | 999,940 | — | 999,940 | ||||||||||||
Repurchase Agreements | — | 3,762,244 | — | 3,762,244 | ||||||||||||
Securities Lending Collateral | 47,334 | — | — | 47,334 | ||||||||||||
Equity Index Swap Agreements** | — | 232,546 | — | 232,546 | ||||||||||||
Total Assets | $ | 53,495,194 | $ | 7,102,547 | $ | — | $ | 60,597,741 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Futures Contracts** | $ | 681,910 | $ | — | $ | — | $ | 681,910 |
** | This derivative is reported as unrealized appreciation/depreciation 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, 2018, there were no transfers between levels.
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 33 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
NASDAQ-100® FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Cash Management Funds”), each of which are 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, 2018, 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/1601445/000089180418000513/gug75569-ncsr.htm.
Transactions during the year ended December 31, 2018, in which the company is an “affiliated person”, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | Capital | |||||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 12,259,973 | $ | 15,692,588 | $ | (7,495,000 | ) | $ | (26,116 | ) | $ | (138,958 | ) | $ | 20,292,487 | 817,586 | $ | 529,041 | $ | 11,665 | ||||||||||||||||
Guggenheim Ultra Short Duration Fund1 | 4,351,654 | 17,691,706 | (10,000,000 | ) | (7,274 | ) | (63,777 | ) | 11,972,309 | 1,202,039 | 320,960 | 8,692 | ||||||||||||||||||||||||
$ | 16,611,627 | $ | 33,384,294 | $ | (17,495,000 | ) | $ | (33,390 | ) | $ | (202,735 | ) | $ | 32,264,796 | $ | 850,001 | $ | 20,357 |
1 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
34| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
NASDAQ-100® FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $52,669 of securities loaned (cost $10,352,600) | $ | 24,338,155 | ||
Investments in affiliated issuers, at value (cost $32,433,461) | 32,264,796 | |||
Repurchase agreements, at value (cost $3,762,244) | 3,762,244 | |||
Cash | 8,010 | |||
Unrealized appreciation on swap agreements | 232,546 | |||
Receivables: | ||||
Fund shares sold | 319,639 | |||
Variation margin on futures contracts | 82,160 | |||
Dividends | 74,077 | |||
Swap settlement | 13,005 | |||
Interest | 308 | |||
Securities lending income | 183 | |||
Total assets | 61,095,123 | |||
Liabilities: | ||||
Payable for: | ||||
Professional fees | 108,947 | |||
Fund shares redeemed | 93,799 | |||
Securities purchased | 61,255 | |||
Return of securities lending collateral | 55,344 | |||
Management fees | 40,204 | |||
Transfer agent and administrative fees | 14,152 | |||
Investor service fees | 14,152 | |||
Portfolio accounting fees | 5,661 | |||
Trustees’ fees* | 1,540 | |||
Miscellaneous | 84,343 | |||
Total liabilities | 479,397 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 60,615,726 | ||
Net assets consist of: | ||||
Paid in capital | $ | 45,474,391 | ||
Total distributable earnings (loss) | 15,141,335 | |||
Net assets | $ | 60,615,726 | ||
Capital shares outstanding | 1,658,065 | |||
Net asset value per share | $ | 36.56 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $260) | $ | 562,173 | ||
Dividends from securities of affiliated issuers | 850,001 | |||
Interest | 132,281 | |||
Income from securities lending, net | 5,756 | |||
Total investment income | 1,550,211 | |||
Expenses: | ||||
Management fees | 660,033 | |||
Investor service fees | 220,011 | |||
Transfer agent and administrative fees | 220,011 | |||
Professional fees | 114,764 | |||
Portfolio accounting fees | 88,004 | |||
Trustees’ fees* | 23,573 | |||
Custodian fees | 12,655 | |||
Line of credit fees | 342 | |||
Tax expense | 185 | |||
Miscellaneous | 119,408 | |||
Total expenses | 1,458,986 | |||
Less: | ||||
Expenses waived by Adviser | (2,253 | ) | ||
Net expenses | 1,456,733 | |||
Net investment income | 93,478 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 10,058,904 | |||
Investments in affiliated issuers | (33,390 | ) | ||
Distributions received from affiliated investment company shares | 20,357 | |||
Swap agreements | 385,956 | |||
Futures contracts | (1,728,621 | ) | ||
Net realized gain | 8,703,206 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (8,973,023 | ) | ||
Investments in affiliated issuers | (202,735 | ) | ||
Swap agreements | 298,165 | |||
Futures contracts | (764,091 | ) | ||
Net change in unrealized appreciation (depreciation) | (9,641,684 | ) | ||
Net realized and unrealized loss | (938,478 | ) | ||
Net decrease in net assets resulting from operations | $ | (845,000 | ) |
* | 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 |
NASDAQ-100® FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | 93,478 | $ | (223,450 | ) | |||
Net realized gain on investments | 8,703,206 | 8,952,799 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (9,641,684 | ) | 11,028,602 | |||||
Net increase (decrease) in net assets resulting from operations | (845,000 | ) | 19,757,951 | |||||
Distributions to shareholders | (3,450,545 | ) | (5,453,414 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 288,921,222 | 192,464,835 | ||||||
Distributions reinvested | 3,450,545 | 5,453,414 | ||||||
Cost of shares redeemed | (304,322,331 | ) | (196,876,945 | ) | ||||
Net increase (decrease) from capital share transactions | (11,950,564 | ) | 1,041,304 | |||||
Net increase (decrease) in net assets | (16,246,109 | ) | 15,345,841 | |||||
Net assets: | ||||||||
Beginning of year | 76,861,835 | 61,515,994 | ||||||
End of year | $ | 60,615,726 | $ | 76,861,835 | ||||
Capital share activity: | ||||||||
Shares sold | 7,067,129 | 5,318,119 | ||||||
Shares issued from reinvestment of distributions | 80,451 | 155,368 | ||||||
Shares redeemed | (7,475,603 | ) | (5,416,663 | ) | ||||
Net increase (decrease) in shares | (328,023 | ) | 56,824 |
1 | For the year ended December 31, 2017, the distributions to shareholders were all from net realized gains (See Note 11). |
36| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 38.70 | $ | 31.89 | $ | 34.16 | $ | 33.70 | $ | 30.37 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .04 | (.11 | ) | (.11 | ) | (.16 | ) | (.11 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | (.49 | ) | 9.73 | 1.92 | 2.90 | 5.40 | ||||||||||||||
Total from investment operations | (.45 | ) | 9.62 | 1.81 | 2.74 | 5.29 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (1.69 | ) | (2.81 | ) | (4.08 | ) | (2.28 | ) | (1.96 | ) | ||||||||||
Total distributions | (1.69 | ) | (2.81 | ) | (4.08 | ) | (2.28 | ) | (1.96 | ) | ||||||||||
Net asset value, end of period | $ | 36.56 | $ | 38.70 | $ | 31.89 | $ | 34.16 | $ | 33.70 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (1.81 | %) | 31.12 | % | 5.98 | % | 8.24 | % | 17.45 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 60,616 | $ | 76,862 | $ | 61,516 | $ | 98,543 | $ | 82,082 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.11 | % | (0.30 | %) | (0.34 | %) | (0.47 | %) | (0.33 | %) | ||||||||||
Total expensesc | 1.66 | % | 1.64 | % | 1.60 | % | 1.54 | % | 1.60 | % | ||||||||||
Net expensesd | 1.66 | % | 1.64 | % | 1.60 | % | 1.54 | % | 1.60 | % | ||||||||||
Portfolio turnover rate | 80 | % | 101 | % | 284 | % | 241 | % | 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. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 37 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, with the NASDAQ-100 Index returning 0.04%, the Inverse NASDAQ-100® Strategy Fund returned -2.77%. For the one-year period ended December 31, 2018, 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 Consumer Discretionary and Information Technology sectors contributed the most to the performance of the underlying index during the year. The Communication Services sector detracted the most from the performance of the underlying index for the year, followed by the Consumer Staples sector.
Amazon.com, Inc., Microsoft Corp., and Netflix, Inc. contributed the most to performance of the underlying index for 2018. Facebook, Inc. Class A, Apple, Inc., and Kraft Heinz Co. 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. Derivatives performed as expected.
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.
38 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. 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.
Cumulative Fund Performance*,†
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 Ultra Short Duration Fund | 24.6% |
Guggenheim Strategy Fund II | 24.6% |
Total | 49.2% |
“Largest Holdings” excludes any temporary cash or derivative investments.
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Inverse NASDAQ-100® Strategy Fund | (2.77%) | (14.01%) | (19.44%) |
NASDAQ-100 Index | 0.04% | 13.34% | 19.29% |
* | 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 | 39 |
SCHEDULE OF INVESTMENTS | December 31, 2018 |
INVERSE NASDAQ-100® STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 49.2% | ||||||||
Guggenheim Ultra Short Duration Fund1,7 | 193,233 | $ | 1,924,597 | |||||
Guggenheim Strategy Fund II1 | 77,336 | 1,919,490 | ||||||
Total Mutual Funds | ||||||||
(Cost $3,846,227) | 3,844,087 | |||||||
Face | ||||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 9.3% | ||||||||
Federal Home Loan Bank | ||||||||
2.00% due 01/02/192,3 | $ | 700,000 | 699,961 | |||||
Freddie Mac | ||||||||
2.25% due 01/03/193,4 | 25,000 | 24,999 | ||||||
Total Federal Agency Discount Notes | ||||||||
(Cost $724,958) | 724,960 | |||||||
FEDERAL AGENCY NOTES†† - 0.4% | ||||||||
Freddie Mac | ||||||||
1.75% due 05/30/194 | 30,000 | 29,905 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $29,916) | 29,905 | |||||||
REPURCHASE AGREEMENTS††,5 - 42.9% | ||||||||
JPMorgan Chase & Co. | 1,980,539 | 1,980,539 | ||||||
Barclays Capital | 823,650 | 823,650 | ||||||
Bank of America Merrill Lynch | 549,100 | 549,100 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $3,353,289) | 3,353,289 | |||||||
Total Investments - 101.8% | ||||||||
(Cost $7,954,390) | $ | 7,952,241 | ||||||
Other Assets & Liabilities, net - (1.8)% | (136,998 | ) | ||||||
Total Net Assets - 100.0% | $ | 7,815,243 |
Futures Contracts | |||||||||||||
Description | Number of | Expiration | Notional | Value and | |||||||||
Equity Futures Contracts Sold Short† | |||||||||||||
NASDAQ-100 Index Mini Futures Contracts | 1 | Mar 2019 | $ | 126,905 | $ | 3,438 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements Sold Short†† | |||||||||||||||||||
Barclays Bank plc | NASDAQ-100 Index | (2.77 | %) | At Maturity | 01/31/19 | 16 | $ | 101,540 | $ | (669 | ) | ||||||||
BNP Paribas | NASDAQ-100 Index | (2.52 | %) | At Maturity | 01/29/19 | 75 | 472,787 | (3,109 | ) | ||||||||||
Goldman Sachs International | NASDAQ-100 Index | (2.72 | %) | At Maturity | 01/28/19 | 1,092 | 6,910,772 | (72,645 | ) | ||||||||||
$ | 7,485,099 | $ | (76,423 | ) |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | 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 | 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 | Repurchase Agreements — See Note 6. |
6 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2018. |
7 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
See Sector Classification in Other Information section. |
40| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
INVERSE NASDAQ-100® STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 3,844,087 | $ | — | $ | — | $ | 3,844,087 | ||||||||
Federal Agency Discount Notes | — | 724,960 | — | 724,960 | ||||||||||||
Federal Agency Notes | — | 29,905 | — | 29,905 | ||||||||||||
Repurchase Agreements | — | 3,353,289 | — | 3,353,289 | ||||||||||||
Equity Futures Contracts** | 3,438 | — | — | 3,438 | ||||||||||||
Total Assets | $ | 3,847,525 | $ | 4,108,154 | $ | — | $ | 7,955,679 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Index Swap Agreements** | $ | — | $ | 76,423 | $ | — | $ | 76,423 |
** | This derivative is reported as unrealized appreciation/depreciation 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, 2018, there were no transfers between levels.
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Cash Management Funds”), each of which are 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, 2018, 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/1601445/000089180418000513/gug75569-ncsr.htm.
Transactions during the year ended December 31, 2018, in which the company is an “affiliated person”, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | Capital | |||||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||||||
Guggenheim Ultra Short Duration Fund1 | $ | 158,610 | $ | 2,448,132 | $ | (680,000 | ) | $ | 294 | $ | (2,439 | ) | $ | 1,924,597 | 193,233 | $ | 7,633 | $ | 308 | |||||||||||||||||
Guggenheim Strategy Fund II | 158,498 | 2,153,979 | (390,000 | ) | (129 | ) | (2,858 | ) | 1,919,490 | 77,336 | 8,533 | 224 | ||||||||||||||||||||||||
$ | 317,108 | $ | 4,602,111 | $ | (1,070,000 | ) | $ | 165 | $ | (5,297 | ) | $ | 3,844,087 | $ | 16,166 | $ | 532 |
1 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 41 |
INVERSE NASDAQ-100® STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $754,874) | $ | 754,865 | ||
Investments in affiliated issuers, at value (cost $3,846,227) | 3,844,087 | |||
Repurchase agreements, at value (cost $3,353,289) | 3,353,289 | |||
Segregated cash with broker | 22,800 | |||
Receivables: | ||||
Dividends | 1,629 | |||
Interest | 320 | |||
Total assets | 7,976,990 | |||
Liabilities: | ||||
Unrealized depreciation on swap agreements | 76,423 | |||
Payable for: | ||||
Fund shares redeemed | 68,084 | |||
Swap settlement | 3,936 | |||
Management fees | 3,082 | |||
Securities purchased | 2,070 | |||
Variation margin on futures contracts | 1,224 | |||
Transfer agent and administrative fees | 879 | |||
Investor service fees | 879 | |||
Portfolio accounting fees | 352 | |||
Trustees’ fees* | 33 | |||
Miscellaneous | 4,785 | |||
Total liabilities | 161,747 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 7,815,243 | ||
Net assets consist of: | ||||
Paid in capital | $ | 13,896,262 | ||
Total distributable earnings (loss) | (6,081,019 | ) | ||
Net assets | $ | 7,815,243 | ||
Capital shares outstanding | 135,587 | |||
Net asset value per share | $ | 57.64 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 16,166 | ||
Interest | 14,199 | |||
Total investment income | 30,365 | |||
Expenses: | ||||
Management fees | 11,347 | |||
Investor service fees | 3,152 | |||
Transfer agent and administrative fees | 3,152 | |||
Portfolio accounting fees | 1,261 | |||
Professional fees | 1,179 | |||
Trustees’ fees* | 473 | |||
Custodian fees | 177 | |||
Line of credit fees | 1 | |||
Miscellaneous | 2,365 | |||
Total expenses | 23,107 | |||
Less: | ||||
Expenses waived by Adviser | (82 | ) | ||
Net expenses | 23,025 | |||
Net investment income | 7,340 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 11 | |||
Investments in affiliated issuers | 165 | |||
Distributions received from affiliated investment company shares | 532 | |||
Swap agreements | 176,461 | |||
Futures contracts | 5,359 | |||
Net realized gain | 182,528 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (9 | ) | ||
Investments in affiliated issuers | (5,297 | ) | ||
Swap agreements | (81,311 | ) | ||
Futures contracts | 3,438 | |||
Net change in unrealized appreciation (depreciation) | (83,179 | ) | ||
Net realized and unrealized gain | 99,349 | |||
Net increase in net assets resulting from operations | $ | 106,689 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
42| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE NASDAQ-100® STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | 7,340 | $ | (2,643 | ) | |||
Net realized gain (loss) on investments | 182,528 | (458,800 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | (83,179 | ) | (27,968 | ) | ||||
Net increase (decrease) in net assets resulting from operations | 106,689 | (489,411 | ) | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 37,155,764 | 38,954,509 | ||||||
Cost of shares redeemed | (30,219,208 | ) | (40,345,194 | ) | ||||
Net increase (decrease) from capital share transactions | 6,936,556 | (1,390,685 | ) | |||||
Net increase (decrease) in net assets | 7,043,245 | (1,880,096 | ) | |||||
Net assets: | ||||||||
Beginning of year | 771,998 | 2,652,094 | ||||||
End of year | $ | 7,815,243 | $ | 771,998 | ||||
Capital share activity: | ||||||||
Shares sold | 687,240 | 588,712 | ||||||
Shares redeemed | (564,676 | ) | (609,395 | ) | ||||
Net increase (decrease) in shares | 122,564 | (20,683 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 43 |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 59.28 | $ | 78.68 | $ | 86.94 | $ | 99.74 | $ | 122.62 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .32 | (.11 | ) | (.18 | ) | (1.36 | ) | (1.68 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | (1.96 | )f | (19.29 | ) | (8.08 | ) | (11.44 | ) | (21.20 | ) | ||||||||||
Total from investment operations | (1.64 | ) | (19.40 | ) | (8.26 | ) | (12.80 | ) | (22.88 | ) | ||||||||||
Net asset value, end of period | $ | 57.64 | $ | 59.28 | $ | 78.68 | $ | 86.94 | $ | 99.74 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (2.77 | %) | (24.66 | %) | (9.48 | %) | (12.87 | %) | (18.63 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 7,815 | $ | 772 | $ | 2,652 | $ | 1,527 | $ | 1,634 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.58 | % | (0.17 | %) | (0.78 | %) | (1.47 | %) | (1.47 | %) | ||||||||||
Total expensesc | 1.83 | % | 1.79 | % | 1.74 | % | 1.70 | % | 1.77 | % | ||||||||||
Net expensesd | 1.83 | % | 1.79 | % | 1.74 | % | 1.70 | % | 1.77 | % | ||||||||||
Portfolio turnover rate | 136 | % | 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 | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Reverse share split — Per share amounts for the years presented through December 31, 2016, have been restated to reflect a 1:4 reverse share split effective December 1, 2016. |
f | The amount shown for a share outstanding throughout the period does not accord with the aggregate net gains on investments for the year because of the sales and repurchases of fund shares in relation to fluctuating market value of the investments of the Fund. |
44| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, 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 -15.41%, while the S&P 500 Index returned -4.38% over the same time period.
The sectors contributing the most to the performance of the underlying index for the period were Information Technology and Consumer Discretionary. The Financials sector detracted the most from return of the underlying index for the period, followed by the Industrials sector.
Microsoft Corp., Amazon.com, Inc., and Merck & Co., Inc. contributed the most to performance of the underlying index for 2018. Facebook, Inc. Class A, General Electric Co., and AT&T, Inc. 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. Derivatives performed as expected.
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 | 45 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. 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.
Cumulative Fund Performance*,†
Inception Date: October 1, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 33.5% |
Guggenheim Ultra Short Duration Fund | 23.4% |
Microsoft Corp. | 0.2% |
Apple, Inc. | 0.2% |
Amazon.com, Inc. | 0.2% |
Berkshire Hathaway, Inc. — Class B | 0.1% |
Johnson & Johnson | 0.1% |
Alphabet, Inc. — Class C | 0.1% |
JPMorgan Chase & Co. | 0.1% |
Alphabet, Inc. — Class A | 0.1% |
Top Ten Total | 58.0% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments.
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
S&P 500® 2x Strategy Fund | (15.41%) | 12.37% | 21.30% |
S&P 500 Index | (4.38%) | 8.49% | 13.12% |
* | 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. 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. |
46 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2018 |
S&P 500® 2x STRATEGY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 5.2% | ||||||||
Consumer, Non-cyclical - 1.2% | ||||||||
Johnson & Johnson | 203 | $ | 26,197 | |||||
Pfizer, Inc. | 438 | 19,119 | ||||||
UnitedHealth Group, Inc. | 73 | 18,186 | ||||||
Procter & Gamble Co. | 189 | 17,373 | ||||||
Merck & Company, Inc. | 197 | 15,053 | ||||||
Coca-Cola Co. | 290 | 13,731 | ||||||
PepsiCo, Inc. | 107 | 11,821 | ||||||
AbbVie, Inc. | 114 | 10,510 | ||||||
Abbott Laboratories | 133 | 9,620 | ||||||
Amgen, Inc. | 49 | 9,539 | ||||||
Medtronic plc | 102 | 9,278 | ||||||
Eli Lilly & Co. | 71 | 8,216 | ||||||
Philip Morris International, Inc. | 118 | 7,877 | ||||||
PayPal Holdings, Inc.* | 89 | 7,484 | ||||||
Altria Group, Inc. | 143 | 7,063 | ||||||
Thermo Fisher Scientific, Inc. | 31 | 6,937 | ||||||
CVS Health Corp. | 99 | 6,476 | ||||||
Bristol-Myers Squibb Co. | 124 | 6,446 | ||||||
Gilead Sciences, Inc. | 98 | 6,130 | ||||||
Cigna Corp. | 29 | 5,592 | ||||||
Anthem, Inc. | 20 | 5,253 | ||||||
Danaher Corp. | 47 | 4,847 | ||||||
Becton Dickinson and Co. | 21 | 4,732 | ||||||
Biogen, Inc.* | 15 | 4,514 | ||||||
Mondelez International, Inc. — Class A | 110 | 4,403 | ||||||
Automatic Data Processing, Inc. | 33 | 4,327 | ||||||
Intuitive Surgical, Inc.* | 9 | 4,310 | ||||||
Colgate-Palmolive Co. | 66 | 3,928 | ||||||
Stryker Corp. | 24 | 3,762 | ||||||
Boston Scientific Corp.* | 105 | 3,711 | ||||||
Celgene Corp.* | 53 | 3,397 | ||||||
Allergan plc | 25 | 3,341 | ||||||
Illumina, Inc.* | 11 | 3,299 | ||||||
S&P Global, Inc. | 19 | 3,229 | ||||||
Humana, Inc. | 11 | 3,151 | ||||||
Vertex Pharmaceuticals, Inc.* | 19 | 3,148 | ||||||
Zoetis, Inc. | 36 | 3,079 | ||||||
Regeneron Pharmaceuticals, Inc.* | 8 | 2,988 | ||||||
Kimberly-Clark Corp. | 26 | 2,962 | ||||||
Ecolab, Inc. | 20 | 2,947 | ||||||
Baxter International, Inc. | 38 | 2,501 | ||||||
HCA Healthcare, Inc. | 20 | 2,489 | ||||||
Edwards Lifesciences Corp.* | 16 | 2,451 | ||||||
Sysco Corp. | 36 | 2,256 | ||||||
Estee Lauder Companies, Inc. — Class A | 17 | 2,212 | ||||||
Constellation Brands, Inc. — Class A | 13 | 2,091 | ||||||
Kraft Heinz Co. | 47 | 2,023 | ||||||
Centene Corp.* | 16 | 1,845 | ||||||
Moody’s Corp. | 13 | 1,820 | ||||||
Zimmer Biomet Holdings, Inc. | 17 | 1,763 | ||||||
General Mills, Inc. | 45 | 1,752 | ||||||
Archer-Daniels-Midland Co. | 42 | 1,721 | ||||||
McKesson Corp. | 15 | 1,657 | ||||||
Alexion Pharmaceuticals, Inc.* | 17 | 1,655 | ||||||
Kroger Co. | 60 | 1,650 | ||||||
Clorox Co. | 10 | 1,541 | ||||||
IQVIA Holdings, Inc.* | 13 | 1,510 | ||||||
Monster Beverage Corp.* | 30 | 1,477 | ||||||
Verisk Analytics, Inc. — Class A* | 12 | 1,308 | ||||||
IDEXX Laboratories, Inc.* | 7 | 1,302 | ||||||
ABIOMED, Inc.* | 4 | 1,300 | ||||||
FleetCor Technologies, Inc.* | 7 | 1,300 | ||||||
IHS Markit Ltd.* | 27 | 1,295 | ||||||
Align Technology, Inc.* | 6 | 1,257 | ||||||
McCormick & Company, Inc. | 9 | 1,253 | ||||||
ResMed, Inc. | 11 | 1,253 | ||||||
Church & Dwight Company, Inc. | 19 | 1,250 | ||||||
Global Payments, Inc. | 12 | 1,238 | ||||||
WellCare Health Plans, Inc.* | 5 | 1,180 | ||||||
Hershey Co. | 11 | 1,179 | ||||||
Cintas Corp. | 7 | 1,176 | ||||||
Tyson Foods, Inc. — Class A | 22 | 1,175 | ||||||
Mylan N.V.* | 40 | 1,096 | ||||||
Kellogg Co. | 19 | 1,083 | ||||||
Total System Services, Inc. | 13 | 1,057 | ||||||
Cardinal Health, Inc. | 23 | 1,026 | ||||||
Gartner, Inc.* | 8 | 1,023 | ||||||
Cooper Companies, Inc. | 4 | 1,018 | ||||||
Laboratory Corporation of America Holdings* | 8 | 1,011 | ||||||
Henry Schein, Inc.* | 12 | 942 | ||||||
Universal Health Services, Inc. — Class B | 8 | 932 | ||||||
Hormel Foods Corp. | 21 | 896 | ||||||
AmerisourceBergen Corp. — Class A | 12 | 893 | ||||||
Hologic, Inc.* | 21 | 863 | ||||||
JM Smucker Co. | 9 | 842 | ||||||
Equifax, Inc. | 9 | 838 | ||||||
Quest Diagnostics, Inc. | 10 | 833 | ||||||
Incyte Corp.* | 13 | 827 | ||||||
Lamb Weston Holdings, Inc. | 11 | 809 | ||||||
Varian Medical Systems, Inc.* | 7 | 793 | ||||||
Conagra Brands, Inc. | 37 | 790 | ||||||
Molson Coors Brewing Co. — Class B | 14 | 786 | ||||||
United Rentals, Inc.* | 7 | 718 | ||||||
Dentsply Sirona, Inc. | 17 | 632 | ||||||
Nielsen Holdings plc | 27 | 630 | ||||||
Avery Dennison Corp. | 7 | 629 | ||||||
Brown-Forman Corp. — Class B | 13 | 619 | ||||||
Western Union Co. | 34 | 580 | ||||||
DaVita, Inc.* | 11 | 566 | ||||||
Robert Half International, Inc. | 9 | 515 | ||||||
Campbell Soup Co. | 15 | 495 | ||||||
Nektar Therapeutics* | 13 | 427 | ||||||
Rollins, Inc. | 12 | 415 | ||||||
H&R Block, Inc. | 16 | 406 | ||||||
Quanta Services, Inc. | 12 | 361 | ||||||
Perrigo Company plc | 9 | 349 | ||||||
Coty, Inc. — Class A | 34 | 223 | ||||||
Total Consumer, Non-cyclical | 375,779 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 47 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
S&P 500® 2x STRATEGY FUND |
| Shares | Value | ||||||
Financial - 0.9% | ||||||||
Berkshire Hathaway, Inc. — Class B* | 147 | $ | 30,014 | |||||
JPMorgan Chase & Co. | 252 | 24,600 | ||||||
Visa, Inc. — Class A | 133 | 17,548 | ||||||
Bank of America Corp. | 692 | 17,051 | ||||||
Wells Fargo & Co. | 321 | 14,792 | ||||||
Mastercard, Inc. — Class A | 69 | 13,017 | ||||||
Citigroup, Inc. | 185 | 9,631 | ||||||
American Tower Corp. — Class A REIT | 34 | 5,378 | ||||||
CME Group, Inc. — Class A | 28 | 5,267 | ||||||
U.S. Bancorp | 115 | 5,255 | ||||||
American Express Co. | 53 | 5,052 | ||||||
Chubb Ltd. | 35 | 4,521 | ||||||
Goldman Sachs Group, Inc. | 26 | 4,343 | ||||||
BlackRock, Inc. — Class A | 11 | 4,321 | ||||||
PNC Financial Services Group, Inc. | 36 | 4,209 | ||||||
Simon Property Group, Inc. REIT | 24 | 4,032 | ||||||
Morgan Stanley | 99 | 3,925 | ||||||
Charles Schwab Corp. | 91 | 3,779 | ||||||
Crown Castle International Corp. REIT | 31 | 3,368 | ||||||
Bank of New York Mellon Corp. | 69 | 3,248 | ||||||
Intercontinental Exchange, Inc. | 43 | 3,239 | ||||||
Marsh & McLennan Companies, Inc. | 39 | 3,110 | ||||||
MetLife, Inc. | 75 | 3,080 | ||||||
Prologis, Inc. REIT | 48 | 2,819 | ||||||
Aon plc | 19 | 2,762 | ||||||
Capital One Financial Corp. | 36 | 2,721 | ||||||
Progressive Corp. | 44 | 2,655 | ||||||
Aflac, Inc. | 58 | 2,643 | ||||||
American International Group, Inc. | 67 | 2,641 | ||||||
Prudential Financial, Inc. | 32 | 2,610 | ||||||
BB&T Corp. | 59 | 2,556 | ||||||
Equinix, Inc. REIT | 7 | 2,468 | ||||||
Public Storage REIT | 12 | 2,429 | ||||||
Travelers Companies, Inc. | 20 | 2,395 | ||||||
Allstate Corp. | 26 | 2,148 | ||||||
AvalonBay Communities, Inc. REIT | 12 | 2,089 | ||||||
Welltower, Inc. REIT | 28 | 1,943 | ||||||
Equity Residential REIT | 28 | 1,848 | ||||||
State Street Corp. | 29 | 1,829 | ||||||
Digital Realty Trust, Inc. REIT | 17 | 1,811 | ||||||
T. Rowe Price Group, Inc. | 19 | 1,754 | ||||||
SunTrust Banks, Inc. | 34 | 1,715 | ||||||
Ventas, Inc. REIT | 27 | 1,582 | ||||||
M&T Bank Corp. | 11 | 1,574 | ||||||
Discover Financial Services | 26 | 1,534 | ||||||
Willis Towers Watson plc | 10 | 1,519 | ||||||
SBA Communications Corp. REIT* | 9 | 1,457 | ||||||
Northern Trust Corp. | 17 | 1,421 | ||||||
Realty Income Corp. REIT | 22 | 1,387 | ||||||
Boston Properties, Inc. REIT | 12 | 1,351 | ||||||
Weyerhaeuser Co. REIT | 57 | 1,246 | ||||||
Essex Property Trust, Inc. REIT | 5 | 1,226 | ||||||
Hartford Financial Services Group, Inc. | 27 | 1,200 | ||||||
Fifth Third Bancorp | 50 | 1,176 | ||||||
Synchrony Financial | 50 | 1,173 | ||||||
KeyCorp | 78 | 1,153 | ||||||
Ameriprise Financial, Inc. | 11 | 1,148 | ||||||
First Republic Bank | 13 | 1,130 | ||||||
Regions Financial Corp. | 78 | 1,044 | ||||||
Citizens Financial Group, Inc. | 35 | 1,041 | ||||||
HCP, Inc. REIT | 37 | 1,033 | ||||||
Arthur J Gallagher & Co. | 14 | 1,032 | ||||||
CBRE Group, Inc. — Class A* | 25 | 1,001 | ||||||
Cboe Global Markets, Inc. | 10 | 978 | ||||||
Huntington Bancshares, Inc. | 81 | 965 | ||||||
Loews Corp. | 21 | 956 | ||||||
SVB Financial Group* | 5 | 950 | ||||||
Host Hotels & Resorts, Inc. REIT | 56 | 933 | ||||||
Vornado Realty Trust REIT | 15 | 930 | ||||||
Alexandria Real Estate Equities, Inc. REIT | 8 | 922 | ||||||
Extra Space Storage, Inc. REIT | 10 | 905 | ||||||
Comerica, Inc. | 13 | 893 | ||||||
Principal Financial Group, Inc. | 20 | 883 | ||||||
E*TRADE Financial Corp. | 20 | 878 | ||||||
Lincoln National Corp. | 17 | 872 | ||||||
Everest Re Group Ltd. | 4 | 871 | ||||||
Mid-America Apartment Communities, Inc. REIT | 9 | 861 | ||||||
Cincinnati Financial Corp. | 11 | 852 | ||||||
UDR, Inc. REIT | 21 | 832 | ||||||
Federal Realty Investment Trust REIT | 7 | 826 | ||||||
Raymond James Financial, Inc. | 11 | 819 | ||||||
Regency Centers Corp. REIT | 13 | 763 | ||||||
Nasdaq, Inc. | 9 | 734 | ||||||
Iron Mountain, Inc. REIT | 22 | 713 | ||||||
Duke Realty Corp. REIT | 27 | 699 | ||||||
Franklin Resources, Inc. | 23 | 682 | ||||||
Zions Bancorp North America | 16 | 652 | ||||||
SL Green Realty Corp. REIT | 8 | 633 | ||||||
Alliance Data Systems Corp. | 4 | 600 | ||||||
Torchmark Corp. | 8 | 596 | ||||||
Invesco Ltd. | 32 | 536 | ||||||
Apartment Investment & Management Co. — Class A REIT | 12 | 527 | ||||||
Unum Group | 17 | 499 | ||||||
Affiliated Managers Group, Inc. | 5 | 487 | ||||||
Kimco Realty Corp. REIT | 32 | 469 | ||||||
Assurant, Inc. | 5 | 447 | ||||||
People’s United Financial, Inc. | 29 | 419 | ||||||
Jefferies Financial Group, Inc. | 21 | 365 | ||||||
Macerich Co. REIT | 8 | 346 | ||||||
Brighthouse Financial, Inc.* | 9 | 274 | ||||||
Total Financial | 289,611 | |||||||
Technology - 0.8% | ||||||||
Microsoft Corp. | 586 | 59,520 | ||||||
Apple, Inc. | 342 | 53,947 | ||||||
Intel Corp. | 346 | 16,238 | ||||||
Oracle Corp. | 196 | 8,849 | ||||||
Adobe, Inc.* | 37 | 8,371 | ||||||
Broadcom, Inc. | 32 | 8,137 | ||||||
salesforce.com, Inc.* | 58 | 7,944 |
48| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
S&P 500® 2x STRATEGY FUND |
| Shares | Value | ||||||
International Business Machines Corp. | 69 | $ | 7,843 | |||||
Accenture plc — Class A | 49 | 6,910 | ||||||
Texas Instruments, Inc. | 73 | 6,898 | ||||||
NVIDIA Corp. | 46 | 6,141 | ||||||
QUALCOMM, Inc. | 92 | 5,236 | ||||||
Intuit, Inc. | 20 | 3,937 | ||||||
Cognizant Technology Solutions Corp. — Class A | 44 | 2,793 | ||||||
Activision Blizzard, Inc. | 58 | 2,701 | ||||||
Micron Technology, Inc.* | 85 | 2,697 | ||||||
Fidelity National Information Services, Inc. | 25 | 2,564 | ||||||
Red Hat, Inc.* | 14 | 2,459 | ||||||
Applied Materials, Inc. | 75 | 2,456 | ||||||
HP, Inc. | 120 | 2,455 | ||||||
Analog Devices, Inc. | 28 | 2,403 | ||||||
Fiserv, Inc.* | 31 | 2,278 | ||||||
Autodesk, Inc.* | 17 | 2,186 | ||||||
Electronic Arts, Inc.* | 23 | 1,815 | ||||||
Lam Research Corp. | 12 | 1,634 | ||||||
Paychex, Inc. | 25 | 1,629 | ||||||
Xilinx, Inc. | 19 | 1,618 | ||||||
Hewlett Packard Enterprise Co. | 108 | 1,427 | ||||||
Cerner Corp.* | 25 | 1,311 | ||||||
Microchip Technology, Inc. | 18 | 1,295 | ||||||
Advanced Micro Devices, Inc.* | 67 | 1,237 | ||||||
NetApp, Inc. | 20 | 1,193 | ||||||
Maxim Integrated Products, Inc. | 22 | 1,119 | ||||||
DXC Technology Co. | 21 | 1,117 | ||||||
KLA-Tencor Corp. | 12 | 1,074 | ||||||
MSCI, Inc. — Class A | 7 | 1,032 | ||||||
Citrix Systems, Inc. | 10 | 1,025 | ||||||
Skyworks Solutions, Inc. | 14 | 938 | ||||||
Synopsys, Inc.* | 11 | 927 | ||||||
Take-Two Interactive Software, Inc.* | 9 | 926 | ||||||
Cadence Design Systems, Inc.* | 21 | 913 | ||||||
Broadridge Financial Solutions, Inc. | 9 | 866 | ||||||
ANSYS, Inc.* | 6 | 858 | ||||||
Western Digital Corp. | 22 | 813 | ||||||
Akamai Technologies, Inc.* | 13 | 794 | ||||||
Fortinet, Inc.* | 11 | 775 | ||||||
Seagate Technology plc | 20 | 772 | ||||||
Jack Henry & Associates, Inc. | 6 | 759 | ||||||
Qorvo, Inc.* | 10 | 607 | ||||||
IPG Photonics Corp.* | 3 | 340 | ||||||
Xerox Corp. | 16 | 316 | ||||||
Total Technology | 254,093 | |||||||
Communications - 0.8% | ||||||||
Amazon.com, Inc.* | 32 | 48,063 | ||||||
Alphabet, Inc. — Class C* | 25 | 25,890 | ||||||
Alphabet, Inc. — Class A* | 23 | 24,034 | ||||||
Facebook, Inc. — Class A* | 182 | 23,858 | ||||||
Verizon Communications, Inc. | 313 | 17,597 | ||||||
AT&T, Inc. | 552 | 15,754 | ||||||
Cisco Systems, Inc. | 341 | 14,775 | ||||||
Walt Disney Co. | 113 | 12,390 | ||||||
Comcast Corp. — Class A | 344 | 11,713 | ||||||
Netflix, Inc.* | 33 | 8,833 | ||||||
Booking Holdings, Inc.* | 5 | 8,612 | ||||||
Twenty-First Century Fox, Inc. — Class A | 80 | 3,850 | ||||||
Charter Communications, Inc. — Class A* | 13 | 3,705 | ||||||
eBay, Inc.* | 69 | 1,937 | ||||||
Twenty-First Century Fox, Inc. — Class B | 37 | 1,768 | ||||||
Twitter, Inc.* | 55 | 1,581 | ||||||
Motorola Solutions, Inc. | 13 | 1,495 | ||||||
Omnicom Group, Inc. | 17 | 1,245 | ||||||
VeriSign, Inc.* | 8 | 1,186 | ||||||
CBS Corp. — Class B | 26 | 1,137 | ||||||
CenturyLink, Inc. | 72 | 1,091 | ||||||
Expedia Group, Inc. | 9 | 1,014 | ||||||
Symantec Corp. | 48 | 907 | ||||||
Arista Networks, Inc.* | 4 | 843 | ||||||
F5 Networks, Inc.* | 5 | 810 | ||||||
Juniper Networks, Inc. | 26 | 700 | ||||||
Viacom, Inc. — Class B | 27 | 694 | ||||||
Discovery, Inc. — Class C* | 27 | 623 | ||||||
Interpublic Group of Companies, Inc. | 29 | 599 | ||||||
TripAdvisor, Inc.* | 8 | 432 | ||||||
DISH Network Corp. — Class A* | 17 | 424 | ||||||
News Corp. — Class A | 29 | 329 | ||||||
Discovery, Inc. — Class A*,1 | 12 | 297 | ||||||
News Corp. — Class B | 11 | 127 | ||||||
Total Communications | 238,313 | |||||||
Industrial - 0.5% | ||||||||
Boeing Co. | 40 | 12,900 | ||||||
3M Co. | 44 | 8,384 | ||||||
Union Pacific Corp. | 56 | 7,741 | ||||||
Honeywell International, Inc. | 56 | 7,399 | ||||||
United Technologies Corp. | 62 | 6,616 | ||||||
Caterpillar, Inc. | 45 | 5,718 | ||||||
United Parcel Service, Inc. — Class B | 53 | 5,169 | ||||||
General Electric Co. | 659 | 4,989 | ||||||
Lockheed Martin Corp. | 19 | 4,975 | ||||||
CSX Corp. | 61 | 3,790 | ||||||
Deere & Co. | 24 | 3,580 | ||||||
Northrop Grumman Corp. | 14 | 3,429 | ||||||
Raytheon Co. | 22 | 3,374 | ||||||
General Dynamics Corp. | 21 | 3,301 | ||||||
Norfolk Southern Corp. | 21 | 3,140 | ||||||
Illinois Tool Works, Inc. | 24 | 3,041 | ||||||
FedEx Corp. | 18 | 2,904 | ||||||
Emerson Electric Co. | 48 | 2,868 | ||||||
Waste Management, Inc. | 31 | 2,759 | ||||||
Eaton Corporation plc | 33 | 2,266 | ||||||
Roper Technologies, Inc. | 8 | 2,132 | ||||||
Johnson Controls International plc | 70 | 2,075 | ||||||
TE Connectivity Ltd. | 26 | 1,966 | ||||||
Amphenol Corp. — Class A | 23 | 1,863 | ||||||
Corning, Inc. | 61 | 1,843 | ||||||
Ingersoll-Rand plc | 19 | 1,733 | ||||||
Agilent Technologies, Inc. | 25 | 1,687 | ||||||
Parker-Hannifin Corp. | 11 | 1,640 | ||||||
Fortive Corp. | 23 | 1,556 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 49 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
S&P 500® 2x STRATEGY FUND |
| Shares | Value | ||||||
Cummins, Inc. | 11 | $ | 1,470 | |||||
TransDigm Group, Inc.* | 4 | 1,360 | ||||||
Rockwell Automation, Inc. | 9 | 1,355 | ||||||
Harris Corp. | 10 | 1,346 | ||||||
Stanley Black & Decker, Inc. | 11 | 1,317 | ||||||
AMETEK, Inc. | 19 | 1,286 | ||||||
Republic Services, Inc. — Class A | 17 | 1,225 | ||||||
L3 Technologies, Inc. | 7 | 1,216 | ||||||
Ball Corp. | 26 | 1,195 | ||||||
Waters Corp.* | 6 | 1,132 | ||||||
Mettler-Toledo International, Inc.* | 2 | 1,131 | ||||||
Vulcan Materials Co. | 10 | 988 | ||||||
Expeditors International of Washington, Inc. | 14 | 953 | ||||||
Xylem, Inc. | 14 | 934 | ||||||
Keysight Technologies, Inc.* | 15 | 931 | ||||||
CH Robinson Worldwide, Inc. | 11 | 925 | ||||||
Martin Marietta Materials, Inc. | 5 | 859 | ||||||
Textron, Inc. | 18 | 828 | ||||||
Dover Corp. | 11 | 781 | ||||||
Kansas City Southern | 8 | 764 | ||||||
Huntington Ingalls Industries, Inc. | 4 | 761 | ||||||
WestRock Co. | 20 | 755 | ||||||
Snap-on, Inc. | 5 | 727 | ||||||
PerkinElmer, Inc. | 9 | 707 | ||||||
Masco Corp. | 23 | 673 | ||||||
Packaging Corporation of America | 8 | 668 | ||||||
J.B. Hunt Transport Services, Inc. | 7 | 651 | ||||||
Jacobs Engineering Group, Inc. | 10 | 585 | ||||||
Garmin Ltd. | 9 | 570 | ||||||
Allegion plc | 7 | 558 | ||||||
Arconic, Inc. | 33 | 556 | ||||||
Pentair plc | 14 | 529 | ||||||
AO Smith Corp. | 12 | 512 | ||||||
FLIR Systems, Inc. | 11 | 479 | ||||||
Flowserve Corp. | 12 | 456 | ||||||
Sealed Air Corp. | 13 | 453 | ||||||
Fortune Brands Home & Security, Inc. | 11 | 418 | ||||||
Fluor Corp. | 11 | 354 | ||||||
Total Industrial | 147,246 | |||||||
Consumer, Cyclical - 0.4% | ||||||||
Home Depot, Inc. | 86 | 14,777 | ||||||
McDonald’s Corp. | 58 | 10,299 | ||||||
Walmart, Inc. | 108 | 10,060 | ||||||
NIKE, Inc. — Class B | 97 | 7,192 | ||||||
Costco Wholesale Corp. | 34 | 6,926 | ||||||
Starbucks Corp. | 94 | 6,054 | ||||||
Lowe’s Companies, Inc. | 61 | 5,634 | ||||||
TJX Companies, Inc. | 94 | 4,206 | ||||||
Walgreens Boots Alliance, Inc. | 61 | 4,168 | ||||||
General Motors Co. | 100 | 3,345 | ||||||
Target Corp. | 40 | 2,644 | ||||||
AutoZone, Inc.* | 3 | 2,515 | ||||||
Ross Stores, Inc. | 30 | 2,496 | ||||||
O’Reilly Automotive, Inc.* | 7 | 2,410 | ||||||
Delta Air Lines, Inc. | 48 | 2,395 | ||||||
Marriott International, Inc. — Class A | 22 | 2,388 | ||||||
Ford Motor Co. | 296 | 2,264 | ||||||
Yum! Brands, Inc. | 24 | 2,206 | ||||||
Dollar General Corp. | 20 | 2,162 | ||||||
VF Corp. | 26 | 1,855 | ||||||
Southwest Airlines Co. | 38 | 1,766 | ||||||
Hilton Worldwide Holdings, Inc. | 23 | 1,652 | ||||||
Dollar Tree, Inc.* | 18 | 1,626 | ||||||
United Continental Holdings, Inc.* | 19 | 1,591 | ||||||
Carnival Corp. | 31 | 1,528 | ||||||
PACCAR, Inc. | 26 | 1,486 | ||||||
Royal Caribbean Cruises Ltd. | 14 | 1,369 | ||||||
Aptiv plc | 21 | 1,293 | ||||||
Fastenal Co. | 22 | 1,150 | ||||||
WW Grainger, Inc. | 4 | 1,129 | ||||||
Genuine Parts Co. | 11 | 1,056 | ||||||
American Airlines Group, Inc. | 31 | 995 | ||||||
Ulta Beauty, Inc.* | 4 | 979 | ||||||
Best Buy Company, Inc. | 18 | 953 | ||||||
Advance Auto Parts, Inc. | 6 | 945 | ||||||
Lennar Corp. — Class A | 24 | 940 | ||||||
MGM Resorts International | 38 | 922 | ||||||
DR Horton, Inc. | 26 | 901 | ||||||
Darden Restaurants, Inc. | 9 | 899 | ||||||
Chipotle Mexican Grill, Inc. — Class A* | 2 | 864 | ||||||
Kohl’s Corp. | 13 | 862 | ||||||
CarMax, Inc.* | 13 | 815 | ||||||
Wynn Resorts Ltd. | 8 | 791 | ||||||
Copart, Inc.* | 16 | 765 | ||||||
Tractor Supply Co. | 9 | 751 | ||||||
Tapestry, Inc. | 22 | 742 | ||||||
Hasbro, Inc. | 9 | 731 | ||||||
Norwegian Cruise Line Holdings Ltd.* | 17 | 721 | ||||||
Macy’s, Inc. | 23 | 685 | ||||||
Tiffany & Co. | 8 | 644 | ||||||
Whirlpool Corp. | 6 | 641 | ||||||
Newell Brands, Inc. | 33 | 614 | ||||||
Mohawk Industries, Inc.* | 5 | 585 | ||||||
LKQ Corp.* | 24 | 570 | ||||||
PVH Corp. | 6 | 558 | ||||||
BorgWarner, Inc. | 16 | 556 | ||||||
Alaska Air Group, Inc. | 9 | 548 | ||||||
PulteGroup, Inc. | 21 | 546 | ||||||
Foot Locker, Inc. | 9 | 479 | ||||||
L Brands, Inc. | 18 | 462 | ||||||
Michael Kors Holdings Ltd.* | 12 | 455 | ||||||
Gap, Inc. | 17 | 438 | ||||||
Nordstrom, Inc. | 9 | 419 | ||||||
Ralph Lauren Corp. — Class A | 4 | 414 | ||||||
Harley-Davidson, Inc. | 12 | 409 | ||||||
Leggett & Platt, Inc. | 11 | 394 | ||||||
Goodyear Tire & Rubber Co. | 18 | 367 | ||||||
Hanesbrands, Inc. | 27 | 338 | ||||||
Mattel, Inc.* | 26 | 260 | ||||||
Under Armour, Inc. — Class A* | 14 | 247 |
50| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
S&P 500® 2x STRATEGY FUND |
| Shares | Value | ||||||
Under Armour, Inc. — Class C* | 15 | $ | 242 | |||||
Total Consumer, Cyclical | 137,089 | |||||||
Energy - 0.3% | ||||||||
Exxon Mobil Corp. | 321 | 21,889 | ||||||
Chevron Corp. | 145 | 15,775 | ||||||
ConocoPhillips | 87 | 5,424 | ||||||
EOG Resources, Inc. | 44 | 3,837 | ||||||
Schlumberger Ltd. | 105 | 3,789 | ||||||
Occidental Petroleum Corp. | 57 | 3,499 | ||||||
Marathon Petroleum Corp. | 52 | 3,068 | ||||||
Phillips 66 | 32 | 2,757 | ||||||
Valero Energy Corp. | 32 | 2,399 | ||||||
Kinder Morgan, Inc. | 144 | 2,215 | ||||||
Williams Companies, Inc. | 92 | 2,029 | ||||||
ONEOK, Inc. | 33 | 1,780 | ||||||
Halliburton Co. | 66 | 1,754 | ||||||
Pioneer Natural Resources Co. | 13 | 1,710 | ||||||
Anadarko Petroleum Corp. | 39 | 1,710 | ||||||
Concho Resources, Inc.* | 16 | 1,645 | ||||||
Diamondback Energy, Inc. | 12 | 1,112 | ||||||
Marathon Oil Corp. | 63 | 903 | ||||||
Baker Hughes a GE Co. | 39 | 839 | ||||||
Hess Corp. | 20 | 810 | ||||||
Devon Energy Corp. | 35 | 789 | ||||||
Apache Corp. | 29 | 761 | ||||||
National Oilwell Varco, Inc. | 29 | 745 | ||||||
Cabot Oil & Gas Corp. — Class A | 33 | 738 | ||||||
Noble Energy, Inc. | 36 | 675 | ||||||
HollyFrontier Corp. | 13 | 665 | ||||||
TechnipFMC plc | 33 | 646 | ||||||
Cimarex Energy Co. | 8 | 493 | ||||||
Helmerich & Payne, Inc. | 8 | 383 | ||||||
Newfield Exploration Co.* | 15 | 220 | ||||||
Total Energy | 85,059 | |||||||
Utilities - 0.2% | ||||||||
NextEra Energy, Inc. | 36 | 6,258 | ||||||
Duke Energy Corp. | 54 | 4,660 | ||||||
Dominion Energy, Inc. | 50 | 3,573 | ||||||
Southern Co. | 78 | 3,426 | ||||||
Exelon Corp. | 73 | 3,292 | ||||||
American Electric Power Company, Inc. | 37 | 2,765 | ||||||
Sempra Energy | 21 | 2,272 | ||||||
Public Service Enterprise Group, Inc. | 39 | 2,030 | ||||||
Xcel Energy, Inc. | 39 | 1,922 | ||||||
Consolidated Edison, Inc. | 24 | 1,835 | ||||||
WEC Energy Group, Inc. | 24 | 1,662 | ||||||
Eversource Energy | 24 | 1,561 | ||||||
PPL Corp. | 55 | 1,558 | ||||||
DTE Energy Co. | 14 | 1,544 | ||||||
Edison International | 25 | 1,419 | ||||||
FirstEnergy Corp. | 37 | 1,389 | ||||||
Ameren Corp. | 20 | 1,305 | ||||||
American Water Works Company, Inc. | 14 | 1,271 | ||||||
Entergy Corp. | 14 | 1,205 | ||||||
Evergy, Inc. | 20 | 1,135 | ||||||
CenterPoint Energy, Inc. | 38 | 1,073 | ||||||
CMS Energy Corp. | 21 | 1,043 | ||||||
PG&E Corp.* | 39 | 926 | ||||||
NRG Energy, Inc. | 22 | 871 | ||||||
Pinnacle West Capital Corp. | 9 | 767 | ||||||
Alliant Energy Corp. | 18 | 760 | ||||||
NiSource, Inc. | 29 | 735 | ||||||
AES Corp. | 50 | 723 | ||||||
SCANA Corp. | 11 | 526 | ||||||
Total Utilities | 53,506 | |||||||
Basic Materials - 0.1% | ||||||||
DowDuPont, Inc. | 174 | 9,305 | ||||||
Linde plc | 42 | 6,554 | ||||||
Air Products & Chemicals, Inc. | 17 | 2,721 | ||||||
Sherwin-Williams Co. | 6 | 2,361 | ||||||
LyondellBasell Industries N.V. — Class A | 24 | 1,996 | ||||||
PPG Industries, Inc. | 18 | 1,840 | ||||||
Newmont Mining Corp. | 42 | 1,455 | ||||||
International Paper Co. | 31 | 1,251 | ||||||
Nucor Corp. | 24 | 1,244 | ||||||
Freeport-McMoRan, Inc. | 110 | 1,134 | ||||||
International Flavors & Fragrances, Inc. | 8 | 1,074 | ||||||
Celanese Corp. — Class A | 10 | 900 | ||||||
Eastman Chemical Co. | 11 | 804 | ||||||
Mosaic Co. | 27 | 789 | ||||||
CF Industries Holdings, Inc. | 18 | 783 | ||||||
FMC Corp. | 10 | 740 | ||||||
Albemarle Corp. | 8 | 616 | ||||||
Total Basic Materials | 35,567 | |||||||
Total Common Stocks | ||||||||
(Cost $1,561,328) | 1,616,263 | |||||||
MUTUAL FUNDS† - 56.9% | ||||||||
Guggenheim Strategy Fund II2 | 421,312 | 10,456,955 | ||||||
Guggenheim Ultra Short Duration Fund2,8 | 732,846 | 7,299,146 | ||||||
Total Mutual Funds | ||||||||
(Cost $17,827,230) | 17,756,101 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 14.7% | ||||||||
U.S. Treasury Bills | ||||||||
2.35% due 03/14/193,4 | $ | 4,080,000 | 4,060,819 | |||||
2.21% due 01/08/194 | 272,000 | 271,898 | ||||||
2.31% due 03/14/194 | 250,000 | 248,825 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $4,581,321) | 4,581,542 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 51 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
S&P 500® 2x STRATEGY FUND |
| Face | Value | ||||||
REPURCHASE AGREEMENTS††,5 - 26.6% | ||||||||
JPMorgan Chase & Co. | $ | 4,890,923 | $ | 4,890,923 | ||||
Barclays Capital | 2,033,995 | 2,033,995 | ||||||
Bank of America Merrill Lynch | 1,355,996 | 1,355,996 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $8,280,914) | 8,280,914 | |||||||
| Shares |
| ||||||
SECURITIES LENDING COLLATERAL†,6 - 0.0% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 2.32%7 | 200 | 200 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $200) | 200 | |||||||
Total Investments - 103.4% | ||||||||
(Cost $32,250,993) | $ | 32,235,020 | ||||||
Other Assets & Liabilities, net - (3.4)% | (1,057,655 | ) | ||||||
Total Net Assets - 100.0% | $ | 31,177,365 |
Futures Contracts | |||||||||||||
Description | Number of | Expiration | Notional | Value and | |||||||||
Equity Futures Contracts Purchased† | |||||||||||||
S&P 500 Index Mini Futures Contracts | 25 | Mar 2019 | $ | 3,136,875 | $ | 2,042 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||
Goldman Sachs International | S&P 500 Index | 2.92 | % | At Maturity | 01/28/19 | 10,205 | $ | 25,581,427 | $ | 399,510 | |||||||||
Barclays Bank plc | S&P 500 Index | 2.87 | % | At Maturity | 01/31/19 | 6,852 | 17,177,190 | 123,474 | |||||||||||
BNP Paribas | S&P 500 Index | 2.97 | % | At Maturity | 01/29/19 | 5,959 | 14,937,337 | 107,374 | |||||||||||
$ | 57,695,954 | $ | 630,358 |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | 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 on loan at December 31, 2018 — See Note 7. |
2 | Affiliated issuer. |
3 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2018. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | Repurchase Agreements — See Note 6. |
6 | Securities lending collateral — See Note 7. |
7 | Rate indicated is the 7-day yield as of December 31, 2018. |
8 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
52| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
S&P 500® 2x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 1,616,263 | $ | — | $ | — | $ | 1,616,263 | ||||||||
Mutual Funds | 17,756,101 | — | — | 17,756,101 | ||||||||||||
U.S. Treasury Bills | — | 4,581,542 | — | 4,581,542 | ||||||||||||
Repurchase Agreements | — | 8,280,914 | — | 8,280,914 | ||||||||||||
Securities Lending Collateral | 200 | — | — | 200 | ||||||||||||
Equity Futures Contracts** | 2,042 | — | — | 2,042 | ||||||||||||
Equity Index Swap Agreements** | — | 630,358 | — | 630,358 | ||||||||||||
Total Assets | $ | 19,374,606 | $ | 13,492,814 | $ | — | $ | 32,867,420 |
** | This derivative is reported as unrealized appreciation/depreciation 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, 2018, there were no transfers between levels.
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Cash Management Funds”), each of which are 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, 2018, 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/1601445/000089180418000513/gug75569-ncsr.htm.
Transactions during the year ended December 31, 2018, in which the company is an “affiliated person”, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | Capital | |||||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 10,864,972 | $ | 4,869,420 | $ | (5,200,000 | ) | $ | (6,526 | ) | $ | (70,911 | ) | $ | 10,456,955 | 421,312 | $ | 338,746 | $ | 5,062 | ||||||||||||||||
Guggenheim Ultra Short Duration Fund1 | 10,677,417 | 12,526,840 | (15,850,000 | ) | (13,827 | ) | (41,284 | ) | 7,299,146 | 732,846 | 289,608 | 6,970 | ||||||||||||||||||||||||
$ | 21,542,389 | $ | 17,396,260 | $ | (21,050,000 | ) | $ | (20,353 | ) | $ | (112,195 | ) | $ | 17,756,101 | $ | 628,354 | $ | 12,032 |
1 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 53 |
S&P 500® 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $223 of securities loaned (cost $6,142,849) | $ | 6,198,005 | ||
Investments in affiliated issuers, at value (cost $17,827,230) | 17,756,101 | |||
Repurchase agreements, at value (cost $8,280,914) | 8,280,914 | |||
Cash | 34 | |||
Unrealized appreciation on swap agreements | 630,358 | |||
Receivables: | ||||
Fund shares sold | 422,287 | |||
Swap settlement | 57,172 | |||
Dividends | 32,306 | |||
Variation margin on futures contracts | 2,042 | |||
Interest | 678 | |||
Total assets | 33,379,897 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 1,039,485 | |||
Securities purchased | 1,034,265 | |||
Management fees | 23,661 | |||
Transfer agent and administrative fees | 7,068 | |||
Investor service fees | 7,068 | |||
Portfolio accounting fees | 2,827 | |||
Trustees’ fees* | 755 | |||
Return of securities lending collateral | 234 | |||
Miscellaneous | 87,169 | |||
Total liabilities | 2,202,532 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 31,177,365 | ||
Net assets consist of: | ||||
Paid in capital | $ | 38,810,885 | ||
Total distributable earnings (loss) | (7,633,520 | ) | ||
Net assets | $ | 31,177,365 | ||
Capital shares outstanding | 161,763 | |||
Net asset value per share | $ | 192.73 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 181,064 | ||
Dividends from securities of affiliated issuers | 628,354 | |||
Interest | 227,911 | |||
Income from securities lending, net | 65 | |||
Total investment income | 1,037,394 | |||
Expenses: | ||||
Management fees | 394,087 | |||
Investor service fees | 109,468 | |||
Transfer agent and administrative fees | 109,468 | |||
Professional fees | 59,795 | |||
Portfolio accounting fees | 43,787 | |||
Trustees’ fees* | 12,423 | |||
Custodian fees | 6,323 | |||
Line of credit fees | 182 | |||
Miscellaneous | 40,133 | |||
Total expenses | 775,666 | |||
Less: | ||||
Expenses waived by Adviser | (1,784 | ) | ||
Net expenses | 773,882 | |||
Net investment income | 263,512 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 1,784,827 | |||
Investments in affiliated issuers | (20,353 | ) | ||
Distributions received from affiliated investment company shares | 12,032 | |||
Swap agreements | (9,006,156 | ) | ||
Futures contracts | (382,718 | ) | ||
Net realized loss | (7,612,368 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (1,603,901 | ) | ||
Investments in affiliated issuers | (112,195 | ) | ||
Swap agreements | 855,047 | |||
Futures contracts | (155,178 | ) | ||
Net change in unrealized appreciation (depreciation) | (1,016,227 | ) | ||
Net realized and unrealized loss | (8,628,595 | ) | ||
Net decrease in net assets resulting from operations | $ | (8,365,083 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
54| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P 500® 2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 263,512 | $ | 22,091 | ||||
Net realized gain (loss) on investments | (7,612,368 | ) | 10,796,168 | |||||
Net change in unrealized appreciation (depreciation) on investments | (1,016,227 | ) | 1,470,151 | |||||
Net increase (decrease) in net assets resulting from operations | (8,365,083 | ) | 12,288,410 | |||||
Distributions to shareholders | (3,409,316 | ) | (1,231,746 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 399,584,471 | 300,834,376 | ||||||
Distributions reinvested | 3,409,316 | 1,231,746 | ||||||
Cost of shares redeemed | (396,554,714 | ) | (301,504,599 | ) | ||||
Net increase from capital share transactions | 6,439,073 | 561,523 | ||||||
Net increase (decrease) in net assets | (5,335,326 | ) | 11,618,187 | |||||
Net assets: | ||||||||
Beginning of year | 36,512,691 | 24,894,504 | ||||||
End of year | $ | 31,177,365 | $ | 36,512,691 | ||||
Capital share activity: | ||||||||
Shares sold | 1,618,168 | 1,422,906 | ||||||
Shares issued from reinvestment of distributions | 13,736 | 6,025 | ||||||
Shares redeemed | (1,619,549 | ) | (1,420,551 | ) | ||||
Net increase in shares | 12,355 | 8,380 |
1 | For the year ended December 31, 2017, the total distributions to shareholders were all from net realized gains (See Note 11). |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 55 |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 244.38 | $ | 176.52 | $ | 165.22 | $ | 227.28 | $ | 235.85 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | 1.48 | .13 | (.53 | ) | (1.11 | ) | (.86 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | (35.10 | ) | 75.18 | 32.62 | 1.42 | 57.67 | ||||||||||||||
Total from investment operations | (33.62 | ) | 75.31 | 32.09 | .31 | 56.81 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.14 | ) | — | — | — | — | ||||||||||||||
Net realized gains | (17.89 | ) | (7.45 | ) | (20.79 | ) | (62.37 | ) | (65.38 | ) | ||||||||||
Total distributions | (18.03 | ) | (7.45 | ) | (20.79 | ) | (62.37 | ) | (65.38 | ) | ||||||||||
Net asset value, end of period | $ | 192.73 | $ | 244.38 | $ | 176.52 | $ | 165.22 | $ | 227.28 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (15.41 | %) | 43.49 | % | 20.40 | % | (1.66 | %) | 24.66 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 31,177 | $ | 36,513 | $ | 24,895 | $ | 21,167 | $ | 38,795 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.60 | % | 0.06 | % | (0.32 | %) | (0.55 | %) | (0.35 | %) | ||||||||||
Total expensesc | 1.77 | % | 1.76 | % | 1.71 | % | 1.66 | % | 1.74 | % | ||||||||||
Net expensesd | 1.77 | % | 1.76 | % | 1.71 | % | 1.66 | % | 1.74 | % | ||||||||||
Portfolio turnover rate | 424 | % | 282 | % | 578 | % | 558 | % | 475 | % |
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 reimbursements, as applicable. |
56| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, with the NASDAQ-100 Index returning 0.04%, the NASDAQ-100® 2x Strategy Fund returned -9.31%. For the one year period ended December 31, 2018, 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 Consumer Discretionary and Information Technology sectors contributed the most to the performance of the underlying index during the year. The Communication Services sector detracted the most from the performance of the underlying index for the year, followed by the Consumer Staples sector.
Amazon.com, Inc., Microsoft Corp., and Netflix, Inc. contributed the most to performance of the underlying index for 2018. Facebook, Inc. Class A, Apple, Inc., and Kraft Heinz Co. 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. Derivatives performed as expected.
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 | 57 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. 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.
Cumulative Fund Performance*,†
Inception Date: October 1, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 29.2% |
Guggenheim Ultra Short Duration Fund | 20.3% |
Microsoft Corp. | 0.8% |
Apple, Inc. | 0.8% |
Amazon.com, Inc. | 0.8% |
Alphabet, Inc. — Class C | 0.4% |
Alphabet, Inc. — Class A | 0.3% |
Facebook, Inc. — Class A | 0.3% |
Intel Corp. | 0.3% |
Cisco Systems, Inc. | 0.2% |
Top Ten Total | 53.4% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments.
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
NASDAQ-100® 2x Strategy Fund | (9.31%) | 21.40% | 34.15% |
NASDAQ-100 Index | 0.04% | 13.34% | 19.29% |
* | 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. |
58 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2018 |
NASDAQ-100® 2x STRATEGY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 8.3% | ||||||||
Technology - 3.2% | ||||||||
Microsoft Corp. | 4,827 | $ | 490,278 | |||||
Apple, Inc. | 2,984 | 470,696 | ||||||
Intel Corp. | 3,185 | 149,472 | ||||||
Adobe, Inc.* | 341 | 77,148 | ||||||
Broadcom, Inc. | 289 | 73,487 | ||||||
Texas Instruments, Inc. | 670 | 63,315 | ||||||
NVIDIA Corp. | 426 | 56,871 | ||||||
QUALCOMM, Inc. | 846 | 48,146 | ||||||
Intuit, Inc. | 181 | 35,630 | ||||||
Cognizant Technology Solutions Corp. — Class A | 404 | 25,646 | ||||||
Micron Technology, Inc.* | 792 | 25,130 | ||||||
Activision Blizzard, Inc. | 533 | 24,822 | ||||||
Applied Materials, Inc. | 686 | 22,460 | ||||||
Analog Devices, Inc. | 258 | 22,144 | ||||||
Fiserv, Inc.* | 278 | 20,430 | ||||||
Autodesk, Inc.* | 153 | 19,677 | ||||||
NXP Semiconductor N.V. | 229 | 16,781 | ||||||
Workday, Inc. — Class A* | 105 | 16,766 | ||||||
Electronic Arts, Inc.* | 211 | 16,650 | ||||||
Paychex, Inc. | 251 | 16,353 | ||||||
Xilinx, Inc. | 177 | 15,075 | ||||||
Lam Research Corp. | 108 | 14,706 | ||||||
Advanced Micro Devices, Inc.* | 698 | 12,885 | ||||||
Cerner Corp.* | 230 | 12,061 | ||||||
NetEase, Inc. ADR | 51 | 12,004 | ||||||
Microchip Technology, Inc. | 165 | 11,867 | ||||||
Check Point Software Technologies Ltd.* | 109 | 11,189 | ||||||
NetApp, Inc. | 176 | 10,502 | ||||||
Maxim Integrated Products, Inc. | 193 | 9,814 | ||||||
Citrix Systems, Inc. | 94 | 9,631 | ||||||
KLA-Tencor Corp. | 107 | 9,575 | ||||||
Synopsys, Inc.* | 104 | 8,761 | ||||||
Cadence Design Systems, Inc.* | 197 | 8,566 | ||||||
Skyworks Solutions, Inc. | 124 | 8,311 | ||||||
Take-Two Interactive Software, Inc.* | 79 | 8,132 | ||||||
ASML Holding N.V. — Class G | 48 | 7,470 | ||||||
Western Digital Corp. | 202 | 7,468 | ||||||
Total Technology | 1,869,919 | |||||||
Communications - 3.0% | ||||||||
Amazon.com, Inc.* | 308 | 462,607 | ||||||
Alphabet, Inc. — Class C* | 222 | 229,905 | ||||||
Alphabet, Inc. — Class A* | 193 | 201,677 | ||||||
Facebook, Inc. — Class A* | 1,525 | 199,912 | ||||||
Cisco Systems, Inc. | 3,138 | 135,970 | ||||||
Comcast Corp. — Class A | 3,169 | 107,904 | ||||||
Netflix, Inc.* | 304 | 81,369 | ||||||
Booking Holdings, Inc.* | 32 | 55,118 | ||||||
Charter Communications, Inc. — Class A* | 160 | 45,595 | ||||||
T-Mobile US, Inc.* | 592 | 37,657 | ||||||
Twenty-First Century Fox, Inc. — Class A | 738 | 35,513 | ||||||
Baidu, Inc. ADR* | 196 | 31,086 | ||||||
Twenty-First Century Fox, Inc. — Class B | 557 | 26,613 | ||||||
eBay, Inc.* | 672 | 18,863 | ||||||
Sirius XM Holdings, Inc.1 | 3,100 | 17,701 | ||||||
JD.com, Inc. ADR* | 645 | 13,500 | ||||||
VeriSign, Inc.* | 84 | 12,456 | ||||||
Expedia Group, Inc. | 95 | 10,702 | ||||||
MercadoLibre, Inc.* | 32 | 9,371 | ||||||
Ctrip.com International Ltd. ADR* | 340 | 9,200 | ||||||
Symantec Corp. | 446 | 8,427 | ||||||
Liberty Global plc — Class C* | 376 | 7,761 | ||||||
Liberty Global plc — Class A* | 143 | 3,052 | ||||||
Total Communications | 1,761,959 | |||||||
Consumer, Non-cyclical - 1.3% | ||||||||
PepsiCo, Inc. | 996 | 110,038 | ||||||
Amgen, Inc. | 445 | 86,628 | ||||||
PayPal Holdings, Inc.* | 822 | 69,122 | ||||||
Gilead Sciences, Inc. | 903 | 56,483 | ||||||
Biogen, Inc.* | 141 | 42,430 | ||||||
Mondelez International, Inc. — Class A | 1,015 | 40,630 | ||||||
Automatic Data Processing, Inc. | 306 | 40,123 | ||||||
Intuitive Surgical, Inc.* | 80 | 38,314 | ||||||
Kraft Heinz Co. | 851 | 36,627 | ||||||
Celgene Corp.* | 488 | 31,276 | ||||||
Illumina, Inc.* | 103 | 30,893 | ||||||
Vertex Pharmaceuticals, Inc.* | 178 | 29,496 | ||||||
Regeneron Pharmaceuticals, Inc.* | 74 | 27,639 | ||||||
Monster Beverage Corp.* | 386 | 18,999 | ||||||
Alexion Pharmaceuticals, Inc.* | 156 | 15,188 | ||||||
Cintas Corp. | 75 | 12,599 | ||||||
Verisk Analytics, Inc. — Class A* | 115 | 12,540 | ||||||
Align Technology, Inc.* | 56 | 11,728 | ||||||
IDEXX Laboratories, Inc.* | 60 | 11,161 | ||||||
BioMarin Pharmaceutical, Inc.* | 124 | 10,558 | ||||||
Mylan N.V.* | 360 | 9,864 | ||||||
Incyte Corp.* | 149 | 9,475 | ||||||
Henry Schein, Inc.* | 106 | 8,323 | ||||||
Total Consumer, Non-cyclical | 760,134 | |||||||
Consumer, Cyclical - 0.7% | ||||||||
Costco Wholesale Corp. | 306 | 62,335 | ||||||
Starbucks Corp. | 866 | 55,770 | ||||||
Walgreens Boots Alliance, Inc. | 662 | 45,235 | ||||||
Tesla, Inc.* | 120 | 39,936 | ||||||
Marriott International, Inc. — Class A | 238 | 25,837 | ||||||
Ross Stores, Inc. | 261 | 21,715 | ||||||
O’Reilly Automotive, Inc.* | 56 | 19,283 | ||||||
United Continental Holdings, Inc.* | 190 | 15,909 | ||||||
Dollar Tree, Inc.* | 166 | 14,993 | ||||||
PACCAR, Inc. | 244 | 13,942 | ||||||
Lululemon Athletica, Inc.* | 86 | 10,459 | ||||||
Fastenal Co. | 200 | 10,458 | ||||||
American Airlines Group, Inc. | 321 | 10,307 | ||||||
Ulta Beauty, Inc.* | 42 | 10,283 | ||||||
Wynn Resorts Ltd. | 76 | 7,517 | ||||||
Hasbro, Inc. | 88 | 7,150 | ||||||
Total Consumer, Cyclical | 371,129 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 59 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
NASDAQ-100® 2x STRATEGY FUND |
| Shares | Value | ||||||
Industrial - 0.1% | ||||||||
CSX Corp. | 589 | $ | 36,595 | |||||
J.B. Hunt Transport Services, Inc. | 76 | 7,071 | ||||||
Total Industrial | 43,666 | |||||||
Utilities - 0.0% | ||||||||
Xcel Energy, Inc. | 359 | 17,688 | ||||||
Financial - 0.0% | ||||||||
Willis Towers Watson plc | 91 | 13,819 | ||||||
Total Common Stocks | ||||||||
(Cost $4,198,057) | 4,838,314 | |||||||
MUTUAL FUNDS† - 49.5% | ||||||||
Guggenheim Strategy Fund II2 | 691,556 | 17,164,426 | ||||||
Guggenheim Ultra Short Duration Fund2,10 | 1,193,627 | 11,888,529 | ||||||
Total Mutual Funds | ||||||||
(Cost $29,186,472) | 29,052,955 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 19.1% | ||||||||
U.S. Treasury Bills | ||||||||
2.35% due 03/14/193,4 | $ | 6,997,000 | 6,964,105 | |||||
2.31% due 03/14/193,4 | 2,650,000 | 2,637,541 | ||||||
2.21% due 01/08/194,5 | 1,586,000 | 1,585,406 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $11,186,643) | 11,187,052 | |||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 3.4% | ||||||||
Federal Home Loan Bank | ||||||||
2.15% due 01/02/194,6 | 2,000,000 | 1,999,881 | ||||||
Total Federal Agency Discount Notes | ||||||||
(Cost $1,999,881) | 1,999,881 | |||||||
REPURCHASE AGREEMENTS††,7 - 7.7% | ||||||||
JPMorgan Chase & Co. | 2,670,109 | 2,670,109 | ||||||
Barclays Capital | 1,110,422 | 1,110,422 | ||||||
Bank of America Merrill Lynch | 740,281 | 740,281 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $4,520,812) | 4,520,812 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,8 - 0.0% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 2.32%9 | 11,931 | 11,931 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $11,931) | 11,931 | |||||||
Total Investments - 88.0% | ||||||||
(Cost $51,103,796) | $ | 51,610,945 | ||||||
Other Assets & Liabilities, net - 12.0% | 7,068,696 | |||||||
Total Net Assets - 100.0% | $ | 58,679,641 |
Futures Contracts | |||||||||||||
Description | Number of | Expiration | Notional | Value and | |||||||||
Equity Futures Contracts Purchased† | |||||||||||||
NASDAQ-100 Index Mini Futures Contracts | 92 | Mar 2019 | $ | 11,675,260 | $ | (621,269 | ) |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||
Barclays Bank plc | NASDAQ-100 Index | 2.92 | % | At Maturity | 01/31/19 | 7,688 | $ | 48,665,752 | $ | 320,304 | |||||||||
BNP Paribas | NASDAQ-100 Index | 3.02 | % | At Maturity | 01/29/19 | 4,344 | 27,495,979 | 180,970 | |||||||||||
Goldman Sachs International | NASDAQ-100 Index | 3.02 | % | At Maturity | 01/28/19 | 3,989 | 25,249,653 | 138,286 | |||||||||||
$ | 101,411,384 | $ | 639,560 |
60| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
NASDAQ-100® 2x STRATEGY FUND |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | 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 on loan at December 31, 2018 — See Note 7. |
2 | Affiliated issuer. |
3 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2018. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | All or a portion of this security is pledged as futures collateral at December 31, 2018. |
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, 2018. |
10 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
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, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 4,838,314 | $ | — | $ | — | $ | 4,838,314 | ||||||||
Mutual Funds | 29,052,955 | — | — | 29,052,955 | ||||||||||||
U.S. Treasury Bills | — | 11,187,052 | — | 11,187,052 | ||||||||||||
Federal Agency Discount Notes | — | 1,999,881 | — | 1,999,881 | ||||||||||||
Repurchase Agreements | — | 4,520,812 | — | 4,520,812 | ||||||||||||
Securities Lending Collateral | 11,931 | — | — | 11,931 | ||||||||||||
Equity Index Swap Agreements** | — | 639,560 | — | 639,560 | ||||||||||||
Total Assets | $ | 33,903,200 | $ | 18,347,305 | $ | — | $ | 52,250,505 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Futures Contracts** | $ | 621,269 | $ | — | $ | — | $ | 621,269 |
** | This derivative is reported as unrealized appreciation/depreciation 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, 2018, there were no transfers between levels.
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 61 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
NASDAQ-100® 2x STRATEGY FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Cash Management Funds”), each of which are 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, 2018, 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/1601445/000089180418000513/gug75569-ncsr.htm.
Transactions during the year ended December 31, 2018, in which the company is an “affiliated person”, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | Capital | |||||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 11,699,809 | $ | 13,296,786 | $ | (7,695,000 | ) | $ | (24,845 | ) | $ | (112,324 | ) | $ | 17,164,426 | 691,556 | $ | 460,668 | $ | 9,586 | ||||||||||||||||
Guggenheim Ultra Short Duration Fund1 | 18,999,077 | 16,768,667 | (23,800,000 | ) | (18,551 | ) | (60,664 | ) | 11,888,529 | 1,193,627 | 428,956 | 9,358 | ||||||||||||||||||||||||
$ | 30,698,886 | $ | 30,065,453 | $ | (31,495,000 | ) | $ | (43,396 | ) | $ | (172,988 | ) | $ | 29,052,955 | $ | 889,624 | $ | 18,944 |
1 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
62| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
NASDAQ-100® 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $13,276 of securities loaned (cost $17,396,512) | $ | 18,037,178 | ||
Investments in affiliated issuers, at value (cost $29,186,472) | 29,052,955 | |||
Repurchase agreements, at value (cost $4,520,812) | 4,520,812 | |||
Cash | 2,019 | |||
Unrealized appreciation on swap agreements | 639,560 | |||
Receivables: | ||||
Fund shares sold | 6,649,483 | |||
Variation margin on futures contracts | 75,098 | |||
Dividends | 54,452 | |||
Swap settlement | 15,092 | |||
Interest | 370 | |||
Securities lending income | 17 | |||
Total assets | 59,047,036 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 59,774 | |||
Securities purchased | 56,057 | |||
Management fees | 40,359 | |||
Return of securities lending collateral | 13,950 | |||
Transfer agent and administrative fees | 11,908 | |||
Investor service fees | 11,908 | |||
Portfolio accounting fees | 4,763 | |||
Trustees’ fees* | 1,341 | |||
Miscellaneous | 167,335 | |||
Total liabilities | 367,395 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 58,679,641 | ||
Net assets consist of: | ||||
Paid in capital | $ | 61,757,470 | ||
Total distributable earnings (loss) | (3,077,829 | ) | ||
Net assets | $ | 58,679,641 | ||
Capital shares outstanding | 1,157,944 | |||
Net asset value per share | $ | 50.68 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $126) | $ | 249,244 | ||
Dividends from securities of affiliated issuers | 889,624 | |||
Interest | 342,033 | |||
Income from securities lending, net | 2,813 | |||
Total investment income | 1,483,714 | |||
Expenses: | ||||
Management fees | 664,752 | |||
Investor service fees | 184,653 | |||
Transfer agent and administrative fees | 184,653 | |||
Professional fees | 103,324 | |||
Portfolio accounting fees | 73,861 | |||
Trustees’ fees* | 20,031 | |||
Custodian fees | 10,667 | |||
Line of credit fees | 133 | |||
Miscellaneous | 91,897 | |||
Total expenses | 1,333,971 | |||
Less: | ||||
Expenses waived by Adviser | (2,510 | ) | ||
Net expenses | 1,331,461 | |||
Net investment income | 152,253 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 8,690,584 | |||
Investments in affiliated issuers | (43,396 | ) | ||
Distributions received from affiliated investment company shares | 18,944 | |||
Swap agreements | (10,185,330 | ) | ||
Futures contracts | (1,236,679 | ) | ||
Net realized loss | (2,755,877 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (6,855,420 | ) | ||
Investments in affiliated issuers | (172,988 | ) | ||
Swap agreements | 1,295,096 | |||
Futures contracts | (627,467 | ) | ||
Net change in unrealized appreciation (depreciation) | (6,360,779 | ) | ||
Net realized and unrealized loss | (9,116,656 | ) | ||
Net decrease in net assets resulting from operations | $ | (8,964,403 | ) |
* | 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| 63 |
NASDAQ-100® 2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | 152,253 | $ | (182,978 | ) | |||
Net realized gain (loss) on investments | (2,755,877 | ) | 21,643,566 | |||||
Net change in unrealized appreciation (depreciation) on investments | (6,360,779 | ) | 5,783,469 | |||||
Net increase (decrease) in net assets resulting from operations | (8,964,403 | ) | 27,244,057 | |||||
Distributions to shareholders | (11,852,712 | ) | (681,689 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 401,658,572 | 126,976,096 | ||||||
Distributions reinvested | 11,852,712 | 681,689 | ||||||
Cost of shares redeemed | (404,867,151 | ) | (124,482,969 | ) | ||||
Net increase from capital share transactions | 8,644,133 | 3,174,816 | ||||||
Net increase (decrease) in net assets | (12,172,982 | ) | 29,737,184 | |||||
Net assets: | ||||||||
Beginning of year | 70,852,623 | 41,115,439 | ||||||
End of year | $ | 58,679,641 | $ | 70,852,623 | ||||
Capital share activity: | ||||||||
Shares sold | 5,896,035 | 2,423,912 | ||||||
Shares issued from reinvestment of distributions | 164,530 | 12,661 | ||||||
Shares redeemed | (5,993,427 | ) | (2,405,839 | ) | ||||
Net increase in shares | 67,138 | 30,734 |
1 | For the year ended December 31, 2017, the total distributions to shareholders were all from net realized gains (see Note 11). |
64| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 64.95 | $ | 38.79 | $ | 38.67 | $ | 41.60 | $ | 45.40 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .14 | (.17 | ) | (.22 | ) | (.31 | ) | (.34 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | (2.70 | ) | 26.97 | 3.57 | 6.26 | 16.78 | ||||||||||||||
Total from investment operations | (2.56 | ) | 26.80 | 3.35 | 5.95 | 16.44 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (11.71 | ) | (.64 | ) | (3.23 | ) | (8.88 | ) | (20.24 | ) | ||||||||||
Total distributions | (11.71 | ) | (.64 | ) | (3.23 | ) | (8.88 | ) | (20.24 | ) | ||||||||||
Net asset value, end of period | $ | 50.68 | $ | 64.95 | $ | 38.79 | $ | 38.67 | $ | 41.60 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (9.31 | %) | 69.49 | % | 9.60 | % | 14.63 | % | 36.57 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 58,680 | $ | 70,853 | $ | 41,115 | $ | 49,994 | $ | 58,484 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.21 | % | (0.32 | %) | (0.62 | %) | (0.75 | %) | (0.69 | %) | ||||||||||
Total expensesc | 1.81 | % | 1.80 | % | 1.75 | % | 1.68 | % | 1.75 | % | ||||||||||
Net expensesd | 1.80 | % | 1.80 | % | 1.75 | % | 1.68 | % | 1.75 | % | ||||||||||
Portfolio turnover rate | 220 | % | 97 | % | 494 | % | 294 | % | 275 | % |
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 reimbursements, as applicable. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 65 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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 year ended December 31, 2018, the Mid-Cap 1.5x Strategy Fund returned -19.40%. Over the year, its benchmark, the S&P MidCap 400 Index, returned -11.08%. The Fund had a daily correlation of more than 99% to its benchmark of 150% of the daily price movement of the S&P MidCap 400 Index.
The Utilities and Health Care sectors contributed the most to performance of the underlying index during the year. The Industrials and Financials sectors detracted the most from performance of the underlying index for the year.
ABIOMED, Inc., Bioverativ, Inc., and Fortinet, Inc. contributed the most to performance of the underlying index for the year. Thor Industries, Inc., Coherent, Inc., and Cognex Corp. 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. Derivatives performed as expected.
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.
66 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. 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.
Cumulative Fund Performance*,†
Inception Date: October 1, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 35.7% |
Guggenheim Ultra Short Duration Fund | 21.9% |
Teleflex, Inc. | 0.2% |
Atmos Energy Corp. | 0.2% |
Domino’s Pizza, Inc. | 0.2% |
IDEX Corp. | 0.2% |
UGI Corp. | 0.2% |
Alleghany Corp. | 0.2% |
STERIS plc | 0.2% |
PTC, Inc. | 0.2% |
Top Ten Total | 59.2% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments.
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Mid-Cap 1.5x Strategy Fund | (19.40%) | 6.24% | 17.22% |
S&P MidCap 400 Index | (11.08%) | 6.03% | 13.68% |
* | 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 | 67 |
SCHEDULE OF INVESTMENTS | December 31, 2018 |
MID-CAP 1.5x STRATEGY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 25.7% | ||||||||
Financial - 6.5% | ||||||||
Alleghany Corp. | 14 | $ | 8,726 | |||||
Reinsurance Group of America, Inc. — Class A | 59 | 8,274 | ||||||
Camden Property Trust REIT | 88 | 7,748 | ||||||
National Retail Properties, Inc. REIT | 150 | 7,277 | ||||||
WR Berkley Corp. | 91 | 6,726 | ||||||
Omega Healthcare Investors, Inc. REIT | 189 | 6,643 | ||||||
Brown & Brown, Inc. | 221 | 6,091 | ||||||
American Financial Group, Inc. | 66 | 5,975 | ||||||
Kilroy Realty Corp. REIT | 95 | 5,974 | ||||||
East West Bancorp, Inc. | 137 | 5,964 | ||||||
Liberty Property Trust REIT | 139 | 5,821 | ||||||
SEI Investments Co. | 123 | 5,683 | ||||||
Lamar Advertising Co. — Class A REIT | 80 | 5,534 | ||||||
Medical Properties Trust, Inc. REIT | 343 | 5,516 | ||||||
Old Republic International Corp. | 267 | 5,492 | ||||||
Jones Lang LaSalle, Inc. | 43 | 5,444 | ||||||
American Campus Communities, Inc. REIT | 129 | 5,339 | ||||||
Commerce Bancshares, Inc. | 95 | 5,338 | ||||||
Cullen/Frost Bankers, Inc. | 60 | 5,276 | ||||||
CyrusOne, Inc. REIT | 99 | 5,235 | ||||||
Douglas Emmett, Inc. REIT | 152 | 5,188 | ||||||
Signature Bank | 50 | 5,141 | ||||||
RenaissanceRe Holdings Ltd. | 38 | 5,081 | ||||||
Synovus Financial Corp. | 157 | 5,022 | ||||||
First American Financial Corp. | 105 | 4,687 | ||||||
Hanover Insurance Group, Inc. | 39 | 4,554 | ||||||
EPR Properties REIT | 70 | 4,482 | ||||||
New York Community Bancorp, Inc. | 462 | 4,347 | ||||||
Webster Financial Corp. | 87 | 4,288 | ||||||
Life Storage, Inc. REIT | 44 | 4,092 | ||||||
First Horizon National Corp. | 305 | 4,014 | ||||||
Primerica, Inc. | 41 | 4,006 | ||||||
Prosperity Bancshares, Inc. | 63 | 3,925 | ||||||
Interactive Brokers Group, Inc. — Class A | 71 | 3,880 | ||||||
Eaton Vance Corp. | 109 | 3,835 | ||||||
PacWest Bancorp | 115 | 3,827 | ||||||
Highwoods Properties, Inc. REIT | 98 | 3,792 | ||||||
Kemper Corp. | 57 | 3,784 | ||||||
Hospitality Properties Trust REIT | 155 | 3,701 | ||||||
JBG SMITH Properties REIT | 102 | 3,551 | ||||||
Wintrust Financial Corp. | 53 | 3,524 | ||||||
Sterling Bancorp | 211 | 3,484 | ||||||
First Industrial Realty Trust, Inc. REIT | 119 | 3,434 | ||||||
SLM Corp.* | 410 | 3,407 | ||||||
Pebblebrook Hotel Trust REIT | 120 | 3,397 | ||||||
Rayonier, Inc. REIT | 122 | 3,378 | ||||||
Healthcare Realty Trust, Inc. REIT | 118 | 3,356 | ||||||
Umpqua Holdings Corp. | 207 | 3,291 | ||||||
Janus Henderson Group plc | 157 | 3,253 | ||||||
Pinnacle Financial Partners, Inc. | 69 | 3,181 | ||||||
MB Financial, Inc. | 80 | 3,170 | ||||||
Cousins Properties, Inc. REIT | 396 | 3,129 | ||||||
Associated Banc-Corp. | 157 | 3,107 | ||||||
TCF Financial Corp. | 157 | 3,060 | ||||||
CoreSite Realty Corp. REIT | 35 | 3,053 | ||||||
United Bankshares, Inc. | 97 | 3,018 | ||||||
FNB Corp. | 305 | 3,001 | ||||||
Weingarten Realty Investors REIT | 112 | 2,779 | ||||||
Stifel Financial Corp. | 67 | 2,775 | ||||||
Hancock Whitney Corp. | 80 | 2,772 | ||||||
Valley National Bancorp | 312 | 2,771 | ||||||
Sabra Health Care REIT, Inc. REIT | 168 | 2,769 | ||||||
Evercore, Inc. — Class A | 38 | 2,719 | ||||||
Bank of Hawaii Corp. | 39 | 2,625 | ||||||
Senior Housing Properties Trust REIT | 224 | 2,625 | ||||||
Uniti Group, Inc. REIT | 168 | 2,616 | ||||||
Taubman Centers, Inc. REIT | 57 | 2,593 | ||||||
Bank OZK | 113 | 2,580 | ||||||
UMB Financial Corp. | 42 | 2,561 | ||||||
Fulton Financial Corp. | 165 | 2,554 | ||||||
Chemical Financial Corp. | 67 | 2,453 | ||||||
Home BancShares, Inc. | 150 | 2,451 | ||||||
Cathay General Bancorp | 73 | 2,448 | ||||||
Texas Capital Bancshares, Inc.* | 47 | 2,401 | ||||||
Federated Investors, Inc. — Class B | 90 | 2,390 | ||||||
Aspen Insurance Holdings Ltd. | 56 | 2,351 | ||||||
CNO Financial Group, Inc. | 155 | 2,306 | ||||||
GEO Group, Inc. REIT | 115 | 2,266 | ||||||
BancorpSouth Bank | 85 | 2,222 | ||||||
Genworth Financial, Inc. — Class A* | 472 | 2,199 | ||||||
Corporate Office Properties Trust REIT | 102 | 2,145 | ||||||
Legg Mason, Inc. | 81 | 2,066 | ||||||
Washington Federal, Inc. | 77 | 2,057 | ||||||
CoreCivic, Inc. REIT | 112 | 1,997 | ||||||
PotlatchDeltic Corp. REIT | 63 | 1,993 | ||||||
Navient Corp. | 216 | 1,903 | ||||||
Urban Edge Properties REIT | 108 | 1,795 | ||||||
Trustmark Corp. | 63 | 1,791 | ||||||
International Bancshares Corp. | 52 | 1,789 | ||||||
Tanger Factory Outlet Centers, Inc. REIT | 88 | 1,779 | ||||||
Mack-Cali Realty Corp. REIT | 85 | 1,665 | ||||||
Realogy Holdings Corp. | 111 | 1,629 | ||||||
LendingTree, Inc.* | 7 | 1,537 | ||||||
Mercury General Corp. | 25 | 1,293 | ||||||
Alexander & Baldwin, Inc. REIT* | 64 | 1,176 | ||||||
Total Financial | 349,357 | |||||||
Industrial - 4.8% | ||||||||
IDEX Corp. | 73 | 9,217 | ||||||
Trimble, Inc.* | 236 | 7,767 | ||||||
Old Dominion Freight Line, Inc. | 62 | 7,656 | ||||||
Lennox International, Inc. | 34 | 7,441 | ||||||
Teledyne Technologies, Inc.* | 34 | 7,040 | ||||||
Graco, Inc. | 157 | 6,570 | ||||||
Cognex Corp. | 162 | 6,265 | ||||||
Nordson Corp. | 49 | 5,848 | ||||||
Wabtec Corp. | 81 | 5,690 | ||||||
Arrow Electronics, Inc.* | 82 | 5,654 | ||||||
Carlisle Companies, Inc. | 56 | 5,629 | ||||||
AptarGroup, Inc. | 59 | 5,550 |
68| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
MID-CAP 1.5x STRATEGY FUND |
| Shares | Value | ||||||
Donaldson Company, Inc. | 120 | $ | 5,207 | |||||
Hubbell, Inc. | 52 | 5,166 | ||||||
Sonoco Products Co. | 94 | 4,994 | ||||||
Gentex Corp. | 246 | 4,972 | ||||||
National Instruments Corp. | 106 | 4,810 | ||||||
Lincoln Electric Holdings, Inc. | 60 | 4,731 | ||||||
MDU Resources Group, Inc. | 185 | 4,411 | ||||||
Acuity Brands, Inc. | 38 | 4,368 | ||||||
Curtiss-Wright Corp. | 41 | 4,187 | ||||||
Littelfuse, Inc. | 24 | 4,116 | ||||||
Oshkosh Corp. | 67 | 4,108 | ||||||
Genesee & Wyoming, Inc. — Class A* | 55 | 4,071 | ||||||
ITT, Inc. | 83 | 4,006 | ||||||
Bemis Company, Inc. | 85 | 3,902 | ||||||
AECOM* | 147 | 3,895 | ||||||
Woodward, Inc. | 52 | 3,863 | ||||||
Avnet, Inc. | 105 | 3,791 | ||||||
Universal Display Corp. | 40 | 3,743 | ||||||
Landstar System, Inc. | 39 | 3,731 | ||||||
Crane Co. | 48 | 3,465 | ||||||
nVent Electric plc | 154 | 3,459 | ||||||
AGCO Corp. | 62 | 3,452 | ||||||
Jabil, Inc. | 136 | 3,371 | ||||||
Kirby Corp.* | 50 | 3,368 | ||||||
EMCOR Group, Inc. | 54 | 3,223 | ||||||
SYNNEX Corp. | 39 | 3,153 | ||||||
MSA Safety, Inc. | 33 | 3,111 | ||||||
Esterline Technologies Corp.* | 25 | 3,036 | ||||||
EnerSys | 39 | 3,027 | ||||||
Knight-Swift Transportation Holdings, Inc. | 119 | 2,983 | ||||||
Louisiana-Pacific Corp. | 133 | 2,955 | ||||||
Stericycle, Inc.* | 80 | 2,935 | ||||||
Regal Beloit Corp. | 41 | 2,872 | ||||||
Tech Data Corp.* | 35 | 2,863 | ||||||
Trinity Industries, Inc. | 137 | 2,821 | ||||||
Eagle Materials, Inc. | 45 | 2,746 | ||||||
Owens-Illinois, Inc. | 150 | 2,586 | ||||||
Kennametal, Inc. | 77 | 2,563 | ||||||
Energizer Holdings, Inc. | 56 | 2,528 | ||||||
GATX Corp. | 35 | 2,478 | ||||||
Timken Co. | 66 | 2,463 | ||||||
MasTec, Inc.* | 60 | 2,434 | ||||||
Coherent, Inc.* | 23 | 2,431 | ||||||
Ryder System, Inc. | 50 | 2,408 | ||||||
Resideo Technologies, Inc.* | 116 | 2,384 | ||||||
Clean Harbors, Inc.* | 48 | 2,369 | ||||||
Valmont Industries, Inc. | 21 | 2,330 | ||||||
Vishay Intertechnology, Inc. | 124 | 2,233 | ||||||
KBR, Inc. | 133 | 2,019 | ||||||
Granite Construction, Inc. | 45 | 1,813 | ||||||
Silgan Holdings, Inc. | 73 | 1,724 | ||||||
Terex Corp. | 61 | 1,682 | ||||||
Belden, Inc. | 38 | 1,587 | ||||||
Dycom Industries, Inc.* | 29 | 1,567 | ||||||
Worthington Industries, Inc. | 38 | 1,324 | ||||||
Werner Enterprises, Inc. | 42 | 1,241 | ||||||
Greif, Inc. — Class A | 24 | 891 | ||||||
Arcosa, Inc. | 1 | 18 | ||||||
Total Industrial | 258,312 | |||||||
Consumer, Non-cyclical - 4.2% | ||||||||
Teleflex, Inc. | 43 | 11,115 | ||||||
STERIS plc | 80 | 8,548 | ||||||
MarketAxess Holdings, Inc. | 35 | 7,396 | ||||||
Service Corporation International | 171 | 6,884 | ||||||
West Pharmaceutical Services, Inc. | 70 | 6,862 | ||||||
Molina Healthcare, Inc.* | 59 | 6,857 | ||||||
Ingredion, Inc. | 67 | 6,124 | ||||||
Encompass Health Corp. | 94 | 5,800 | ||||||
WEX, Inc.* | 41 | 5,742 | ||||||
Post Holdings, Inc.* | 63 | 5,615 | ||||||
Sabre Corp. | 259 | 5,605 | ||||||
Hill-Rom Holdings, Inc. | 63 | 5,579 | ||||||
Exelixis, Inc.* | 281 | 5,527 | ||||||
Charles River Laboratories International, Inc.* | 45 | 5,093 | ||||||
Bio-Techne Corp. | 35 | 5,065 | ||||||
PRA Health Sciences, Inc.* | 55 | 5,058 | ||||||
Masimo Corp.* | 46 | 4,939 | ||||||
Haemonetics Corp.* | 49 | 4,902 | ||||||
United Therapeutics Corp.* | 41 | 4,465 | ||||||
Bio-Rad Laboratories, Inc. — Class A* | 19 | 4,412 | ||||||
Catalent, Inc.* | 137 | 4,272 | ||||||
Chemed Corp. | 15 | 4,249 | ||||||
LivaNova plc* | 46 | 4,208 | ||||||
ManpowerGroup, Inc. | 59 | 3,823 | ||||||
ICU Medical, Inc.* | 15 | 3,444 | ||||||
Insperity, Inc. | 36 | 3,361 | ||||||
Helen of Troy Ltd.* | 25 | 3,279 | ||||||
Lancaster Colony Corp. | 18 | 3,183 | ||||||
Flowers Foods, Inc. | 172 | 3,177 | ||||||
Brink’s Co. | 48 | 3,103 | ||||||
HealthEquity, Inc.* | 52 | 3,102 | ||||||
Globus Medical, Inc. — Class A* | 71 | 3,073 | ||||||
Integra LifeSciences Holdings Corp.* | 67 | 3,022 | ||||||
Sprouts Farmers Market, Inc.* | 120 | 2,821 | ||||||
Healthcare Services Group, Inc. | 70 | 2,813 | ||||||
MEDNAX, Inc.* | 84 | 2,772 | ||||||
Ligand Pharmaceuticals, Inc. — Class B* | 20 | 2,714 | ||||||
Aaron’s, Inc. | 64 | 2,691 | ||||||
TreeHouse Foods, Inc.* | 53 | 2,688 | ||||||
ASGN, Inc.* | 49 | 2,671 | ||||||
Adtalem Global Education, Inc.* | 56 | 2,650 | ||||||
Graham Holdings Co. — Class B | 4 | 2,562 | ||||||
CoreLogic, Inc.* | 76 | 2,540 | ||||||
Cantel Medical Corp. | 34 | 2,531 | ||||||
LiveRamp Holdings, Inc.* | 64 | 2,472 | ||||||
NuVasive, Inc.* | 49 | 2,428 | ||||||
Syneos Health, Inc.* | 57 | 2,243 | ||||||
Acadia Healthcare Company, Inc.* | 83 | 2,134 | ||||||
Inogen, Inc.* | 17 | 2,111 | ||||||
Avanos Medical, Inc.* | 45 | 2,016 | ||||||
Boston Beer Company, Inc. — Class A* | 8 | 1,927 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 69 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
MID-CAP 1.5x STRATEGY FUND |
| Shares | Value | ||||||
Edgewell Personal Care Co.* | 51 | $ | 1,905 | |||||
Sanderson Farms, Inc. | 19 | 1,887 | ||||||
Deluxe Corp. | 43 | 1,653 | ||||||
Patterson Companies, Inc. | 78 | 1,533 | ||||||
Prestige Consumer Healthcare, Inc.* | 49 | 1,513 | ||||||
Weight Watchers International, Inc.* | 36 | 1,388 | ||||||
Avis Budget Group, Inc.* | 61 | 1,371 | ||||||
Tenet Healthcare Corp.* | 78 | 1,337 | ||||||
Hain Celestial Group, Inc.* | 84 | 1,332 | ||||||
Sotheby’s* | 32 | 1,272 | ||||||
Mallinckrodt plc* | 78 | 1,232 | ||||||
Tootsie Roll Industries, Inc. | 17 | 568 | ||||||
Total Consumer, Non-cyclical | 228,659 | |||||||
Consumer, Cyclical - 3.3% | ||||||||
Domino’s Pizza, Inc. | 39 | 9,672 | ||||||
NVR, Inc.* | 3 | 7,311 | ||||||
Live Nation Entertainment, Inc.* | 130 | 6,402 | ||||||
Pool Corp. | 38 | 5,649 | ||||||
Toro Co. | 99 | 5,532 | ||||||
Five Below, Inc.* | 53 | 5,423 | ||||||
Dunkin’ Brands Group, Inc. | 78 | 5,001 | ||||||
JetBlue Airways Corp.* | 287 | 4,609 | ||||||
Casey’s General Stores, Inc. | 35 | 4,485 | ||||||
Watsco, Inc. | 31 | 4,313 | ||||||
Wyndham Hotels & Resorts, Inc. | 94 | 4,265 | ||||||
Polaris Industries, Inc. | 55 | 4,217 | ||||||
Toll Brothers, Inc. | 127 | 4,182 | ||||||
Williams-Sonoma, Inc. | 76 | 3,834 | ||||||
Brunswick Corp. | 81 | 3,763 | ||||||
Texas Roadhouse, Inc. — Class A | 63 | 3,761 | ||||||
Six Flags Entertainment Corp. | 67 | 3,727 | ||||||
Cinemark Holdings, Inc. | 101 | 3,616 | ||||||
Deckers Outdoor Corp.* | 28 | 3,582 | ||||||
Cracker Barrel Old Country Store, Inc.1 | 22 | 3,517 | ||||||
Carter’s, Inc. | 43 | 3,510 | ||||||
MSC Industrial Direct Company, Inc. — Class A | 43 | 3,308 | ||||||
Wyndham Destinations, Inc. | 92 | 3,297 | ||||||
Ollie’s Bargain Outlet Holdings, Inc.* | 49 | 3,259 | ||||||
Nu Skin Enterprises, Inc. — Class A | 52 | 3,189 | ||||||
American Eagle Outfitters, Inc. | 158 | 3,054 | ||||||
Skechers U.S.A., Inc. — Class A* | 126 | 2,884 | ||||||
Marriott Vacations Worldwide Corp. | 39 | 2,750 | ||||||
Wendy’s Co. | 176 | 2,747 | ||||||
Churchill Downs, Inc. | 11 | 2,683 | ||||||
Thor Industries, Inc. | 47 | 2,444 | ||||||
Urban Outfitters, Inc.* | 71 | 2,357 | ||||||
Scotts Miracle-Gro Co. — Class A | 37 | 2,274 | ||||||
Eldorado Resorts, Inc.* | 61 | 2,209 | ||||||
Dick’s Sporting Goods, Inc. | 70 | 2,184 | ||||||
AutoNation, Inc.* | 54 | 1,928 | ||||||
Sally Beauty Holdings, Inc.* | 113 | 1,927 | ||||||
Penn National Gaming, Inc.* | 102 | 1,921 | ||||||
Jack in the Box, Inc. | 24 | 1,863 | ||||||
Dana, Inc. | 136 | 1,854 | ||||||
Tempur Sealy International, Inc.* | 43 | 1,780 | ||||||
Cheesecake Factory, Inc. | 39 | 1,697 | ||||||
Herman Miller, Inc. | 56 | 1,694 | ||||||
Visteon Corp.* | 27 | 1,627 | ||||||
Brinker International, Inc. | 36 | 1,583 | ||||||
Boyd Gaming Corp. | 76 | 1,579 | ||||||
Signet Jewelers Ltd. | 49 | 1,557 | ||||||
KB Home | 81 | 1,547 | ||||||
Bed Bath & Beyond, Inc. | 130 | 1,472 | ||||||
TRI Pointe Group, Inc.* | 134 | 1,465 | ||||||
HNI Corp. | 41 | 1,453 | ||||||
Tupperware Brands Corp. | 46 | 1,452 | ||||||
World Fuel Services Corp. | 63 | 1,349 | ||||||
Adient plc | 81 | 1,220 | ||||||
Delphi Technologies plc | 84 | 1,203 | ||||||
Michaels Companies, Inc.* | 84 | 1,137 | ||||||
Big Lots, Inc. | 38 | 1,099 | ||||||
Dillard’s, Inc. — Class A1 | 17 | 1,025 | ||||||
International Speedway Corp. — Class A | 23 | 1,009 | ||||||
Scientific Games Corp. — Class A* | 52 | 930 | ||||||
Papa John’s International, Inc. | 21 | 836 | ||||||
Total Consumer, Cyclical | 177,217 | |||||||
Technology - 2.4% | ||||||||
PTC, Inc.* | 101 | 8,373 | ||||||
Zebra Technologies Corp. — Class A* | 50 | 7,962 | ||||||
Leidos Holdings, Inc. | 141 | 7,433 | ||||||
Ultimate Software Group, Inc.* | 29 | 7,101 | ||||||
Tyler Technologies, Inc.* | 36 | 6,690 | ||||||
Integrated Device Technology, Inc.* | 122 | 5,909 | ||||||
CDK Global, Inc. | 122 | 5,841 | ||||||
Teradyne, Inc. | 169 | 5,303 | ||||||
Fair Isaac Corp.* | 27 | 5,049 | ||||||
Dun & Bradstreet Corp. | 35 | 4,996 | ||||||
Cypress Semiconductor Corp. | 340 | 4,325 | ||||||
Teradata Corp.* | 112 | 4,296 | ||||||
Monolithic Power Systems, Inc. | 36 | 4,185 | ||||||
Cree, Inc.* | 97 | 4,149 | ||||||
MAXIMUS, Inc. | 60 | 3,905 | ||||||
Medidata Solutions, Inc.* | 57 | 3,843 | ||||||
CACI International, Inc. — Class A* | 24 | 3,457 | ||||||
MKS Instruments, Inc. | 51 | 3,295 | ||||||
Silicon Laboratories, Inc.* | 41 | 3,231 | ||||||
j2 Global, Inc. | 44 | 3,053 | ||||||
ACI Worldwide, Inc.* | 109 | 3,016 | ||||||
Lumentum Holdings, Inc.* | 70 | 2,941 | ||||||
Blackbaud, Inc. | 46 | 2,893 | ||||||
Manhattan Associates, Inc.* | 62 | 2,627 | ||||||
NCR Corp.* | 112 | 2,585 | ||||||
Science Applications International Corp. | 40 | 2,548 | ||||||
Perspecta, Inc. | 133 | 2,290 | ||||||
CommVault Systems, Inc.* | 36 | 2,127 | ||||||
Cirrus Logic, Inc.* | 56 | 1,858 | ||||||
Allscripts Healthcare Solutions, Inc.* | 165 | 1,591 | ||||||
NetScout Systems, Inc.* | 66 | 1,560 | ||||||
Synaptics, Inc.* | 32 | 1,191 |
70| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
MID-CAP 1.5x STRATEGY FUND |
| Shares | Value | ||||||
Pitney Bowes, Inc. | 176 | $ | 1,040 | |||||
Total Technology | 130,663 | |||||||
Utilities - 1.4% | ||||||||
Atmos Energy Corp. | 110 | 10,199 | ||||||
UGI Corp. | 164 | 8,749 | ||||||
OGE Energy Corp. | 188 | 7,367 | ||||||
Aqua America, Inc. | 168 | 5,744 | ||||||
Vectren Corp. | 78 | 5,615 | ||||||
IDACORP, Inc. | 48 | 4,467 | ||||||
National Fuel Gas Co. | 81 | 4,146 | ||||||
ONE Gas, Inc. | 49 | 3,900 | ||||||
New Jersey Resources Corp. | 84 | 3,836 | ||||||
Southwest Gas Holdings, Inc. | 50 | 3,825 | ||||||
Hawaiian Electric Industries, Inc. | 102 | 3,735 | ||||||
ALLETE, Inc. | 49 | 3,735 | ||||||
Black Hills Corp. | 51 | 3,202 | ||||||
PNM Resources, Inc. | 75 | 3,082 | ||||||
NorthWestern Corp. | 48 | 2,853 | ||||||
Total Utilities | 74,455 | |||||||
Basic Materials - 1.2% | ||||||||
RPM International, Inc. | 125 | 7,348 | ||||||
Steel Dynamics, Inc. | 216 | 6,489 | ||||||
Royal Gold, Inc. | 62 | 5,311 | ||||||
Reliance Steel & Aluminum Co. | 66 | 4,697 | ||||||
Chemours Co. | 161 | 4,543 | ||||||
Ashland Global Holdings, Inc. | 59 | 4,187 | ||||||
Valvoline, Inc. | 178 | 3,444 | ||||||
NewMarket Corp. | 8 | 3,297 | ||||||
Olin Corp. | 157 | 3,157 | ||||||
United States Steel Corp. | 167 | 3,046 | ||||||
Versum Materials, Inc. | 102 | 2,827 | ||||||
Allegheny Technologies, Inc.* | 119 | 2,591 | ||||||
Cabot Corp. | 56 | 2,405 | ||||||
Sensient Technologies Corp. | 39 | 2,178 | ||||||
PolyOne Corp. | 75 | 2,145 | ||||||
Domtar Corp. | 59 | 2,073 | ||||||
Commercial Metals Co. | 111 | 1,778 | ||||||
Minerals Technologies, Inc. | 33 | 1,694 | ||||||
Carpenter Technology Corp. | 45 | 1,602 | ||||||
Compass Minerals International, Inc. | 32 | 1,334 | ||||||
Total Basic Materials | 66,146 | |||||||
Energy - 1.0% | ||||||||
Equities Corp. | 239 | 4,515 | ||||||
WPX Energy, Inc.* | 372 | 4,222 | ||||||
Equitrans Midstream Corp.* | 192 | 3,844 | ||||||
PBF Energy, Inc. — Class A | 113 | 3,692 | ||||||
Murphy Oil Corp. | 153 | 3,579 | ||||||
Transocean Ltd.* | 476 | 3,303 | ||||||
First Solar, Inc.* | 71 | 3,014 | ||||||
Core Laboratories N.V. | 42 | 2,506 | ||||||
CNX Resources Corp.* | 192 | 2,193 | ||||||
Murphy USA, Inc.* | 28 | 2,146 | ||||||
Patterson-UTI Energy, Inc. | 204 | 2,111 | ||||||
Apergy Corp.* | 73 | 1,977 | ||||||
Range Resources Corp. | 195 | 1,866 | ||||||
Southwestern Energy Co.* | 547 | 1,865 | ||||||
Chesapeake Energy Corp.*,1 | 861 | 1,808 | ||||||
Matador Resources Co.* | 98 | 1,522 | ||||||
SM Energy Co. | 97 | 1,502 | ||||||
Ensco plc — Class A | 411 | 1,463 | ||||||
Oasis Petroleum, Inc.* | 252 | 1,394 | ||||||
Callon Petroleum Co.* | 214 | 1,389 | ||||||
QEP Resources, Inc.* | 223 | 1,256 | ||||||
NOW, Inc.* | 102 | 1,187 | ||||||
Oceaneering International, Inc.* | 92 | 1,113 | ||||||
McDermott International, Inc.* | 170 | 1,112 | ||||||
Dril-Quip, Inc.* | 34 | 1,021 | ||||||
Rowan Companies plc — Class A* | 119 | 998 | ||||||
Diamond Offshore Drilling, Inc.* | 60 | 566 | ||||||
Total Energy | 57,164 | |||||||
Communications - 0.9% | ||||||||
FactSet Research Systems, Inc. | 36 | 7,205 | ||||||
ARRIS International plc* | 154 | 4,708 | ||||||
Ciena Corp.* | 133 | 4,510 | ||||||
LogMeIn, Inc. | 48 | 3,915 | ||||||
Cable One, Inc. | 4 | 3,280 | ||||||
ViaSat, Inc.* | 53 | 3,124 | ||||||
World Wrestling Entertainment, Inc. — Class A | 41 | 3,063 | ||||||
New York Times Co. — Class A | 133 | 2,964 | ||||||
Telephone & Data Systems, Inc. | 88 | 2,864 | ||||||
Yelp, Inc. — Class A* | 72 | 2,519 | ||||||
AMC Networks, Inc. — Class A* | 42 | 2,305 | ||||||
TEGNA, Inc. | 203 | 2,207 | ||||||
InterDigital, Inc. | 32 | 2,126 | ||||||
Meredith Corp. | 38 | 1,974 | ||||||
John Wiley & Sons, Inc. — Class A | 42 | 1,973 | ||||||
Cars.com, Inc.* | 59 | 1,269 | ||||||
Plantronics, Inc. | 31 | 1,026 | ||||||
Total Communications | 51,032 | |||||||
Total Common Stocks | ||||||||
(Cost $1,345,040) | 1,393,005 | |||||||
MUTUAL FUNDS† - 57.6% | ||||||||
Guggenheim Strategy Fund II2 | 77,747 | 1,929,681 | ||||||
Guggenheim Ultra Short Duration Fund2,10 | 118,833 | 1,183,579 | ||||||
Total Mutual Funds | ||||||||
(Cost $3,117,005) | 3,113,260 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 71 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
MID-CAP 1.5x STRATEGY FUND |
| Face | Value | ||||||
U.S. TREASURY BILLS†† - 4.6% | ||||||||
U.S. Treasury Bills | ||||||||
2.21% due 01/08/193,4 | $ | 149,000 | $ | 148,944 | ||||
2.35% due 03/14/194,5 | 100,000 | 99,530 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $248,459) | 248,474 | |||||||
FEDERAL AGENCY NOTES†† - 0.1% | ||||||||
Freddie Mac | ||||||||
1.75% due 05/30/196 | 6,000 | 5,981 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $5,983) | 5,981 | |||||||
REPURCHASE AGREEMENTS††,7 - 70.9% | ||||||||
JPMorgan Chase & Co. | 2,263,906 | 2,263,906 | ||||||
Barclays Capital | 941,493 | 941,493 | ||||||
Bank of America Merrill Lynch | 627,662 | 627,662 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $3,833,061) | 3,833,061 | |||||||
| Shares |
| ||||||
SECURITIES LENDING COLLATERAL†,8 - 0.3% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 2.32%9 | 16,262 | 16,262 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $16,262) | 16,262 | |||||||
Total Investments - 159.2% | ||||||||
(Cost $8,565,810) | $ | 8,610,043 | ||||||
Other Assets & Liabilities, net - (59.2)% | (3,202,133 | ) | ||||||
Total Net Assets - 100.0% | $ | 5,407,910 |
Futures Contracts | |||||||||||||
Description | Number of | Expiration | Notional | Value and | |||||||||
Equity Futures Contracts Purchased† | |||||||||||||
S&P MidCap 400 Index Mini Futures Contracts | 14 | Mar 2019 | $ | 2,329,040 | $ | (97,352 | ) |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||
Goldman Sachs International | S&P MidCap 400 Index | 2.77 | % | At Maturity | 01/28/19 | 1,448 | $ | 2,408,706 | $ | 33,689 | |||||||||
Barclays Bank plc | S&P MidCap 400 Index | 2.77 | % | At Maturity | 01/31/19 | 789 | 1,312,838 | 12,473 | |||||||||||
BNP Paribas | S&P MidCap 400 Index | 2.87 | % | At Maturity | 01/29/19 | 500 | 832,052 | 7,905 | |||||||||||
$ | 4,553,596 | $ | 54,067 |
72| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
MID-CAP 1.5x STRATEGY FUND |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | 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 on loan at December 31, 2018 — See Note 7. |
2 | Affiliated issuer. |
3 | All or a portion of this security is pledged as futures collateral at December 31, 2018. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2018. |
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 | Securities lending collateral — See Note 7. |
9 | Rate indicated is the 7-day yield as of December 31, 2018. |
10 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
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, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 1,393,005 | $ | — | $ | — | $ | 1,393,005 | ||||||||
Mutual Funds | 3,113,260 | — | — | 3,113,260 | ||||||||||||
U.S. Treasury Bills | — | 248,474 | — | 248,474 | ||||||||||||
Federal Agency Notes | — | 5,981 | — | 5,981 | ||||||||||||
Repurchase Agreements | — | 3,833,061 | — | 3,833,061 | ||||||||||||
Securities Lending Collateral | 16,262 | — | — | 16,262 | ||||||||||||
Equity Index Swap Agreements** | — | 54,067 | — | 54,067 | ||||||||||||
Total Assets | $ | 4,522,527 | $ | 4,141,583 | $ | — | $ | 8,664,110 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Futures Contracts** | $ | 97,352 | $ | — | $ | — | $ | 97,352 |
** | This derivative is reported as unrealized appreciation/depreciation 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, 2018, there were no transfers between levels.
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 73 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
MID-CAP 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 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 certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Cash Management Funds”), each of which are 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, 2018, 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/1601445/000089180418000513/gug75569-ncsr.htm.
Transactions during the year ended December 31, 2018, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | Capital | |||||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 2,376,905 | $ | 3,745,284 | $ | (4,166,000 | ) | $ | (13,823 | ) | $ | (12,685 | ) | $ | 1,929,681 | 77,747 | $ | 78,148 | $ | 1,996 | ||||||||||||||||
Guggenheim Ultra Short Duration Fund1 | 2,371,103 | 3,236,091 | (4,406,000 | ) | (11,164 | ) | (6,451 | ) | 1,183,579 | 118,833 | 68,881 | 2,385 | ||||||||||||||||||||||||
$ | 4,748,008 | $ | 6,981,375 | $ | (8,572,000 | ) | $ | (24,987 | ) | $ | (19,136 | ) | $ | 3,113,260 | $ | 147,029 | $ | 4,381 |
1 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
74| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
MID-CAP 1.5x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $18,456 of securities loaned (cost $1,615,744) | $ | 1,663,722 | ||
Investments in affiliated issuers, at value (cost $3,117,005) | 3,113,260 | |||
Repurchase agreements, at value (cost $3,833,061) | 3,833,061 | |||
Cash | 2,773 | |||
Segregated cash with broker | 271,614 | |||
Unrealized appreciation on swap agreements | 54,067 | |||
Receivables: | ||||
Securities sold | 8,243,489 | |||
Swap settlement | 152,849 | |||
Variation margin on futures contracts | 24,780 | |||
Dividends | 17,047 | |||
Interest | 323 | |||
Securities lending income | 18 | |||
Total assets | 17,377,003 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 10,913,691 | |||
Securities purchased | 1,007,387 | |||
Return of securities lending collateral | 19,014 | |||
Management fees | 10,294 | |||
Transfer agent and administrative fees | 3,021 | |||
Investor service fees | 3,021 | |||
Portfolio accounting fees | 1,208 | |||
Trustees’ fees* | 57 | |||
Miscellaneous | 11,400 | |||
Total liabilities | 11,969,093 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 5,407,910 | ||
Net assets consist of: | ||||
Paid in capital | $ | 7,186,107 | ||
Total distributable earnings (loss) | (1,778,197 | ) | ||
Net assets | $ | 5,407,910 | ||
Capital shares outstanding | 375,562 | |||
Net asset value per share | $ | 14.40 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $6) | $ | 29,832 | ||
Dividends from securities of affiliated issuers | 147,029 | |||
Interest | 36,441 | |||
Income from securities lending, net | 144 | |||
Total investment income | 213,446 | |||
Expenses: | ||||
Management fees | 78,475 | |||
Investor service fees | 21,798 | |||
Transfer agent and administrative fees | 21,798 | |||
Professional fees | 15,770 | |||
Portfolio accounting fees | 8,719 | |||
Trustees’ fees* | 1,828 | |||
Custodian fees | 1,259 | |||
Line of credit fees | 79 | |||
Miscellaneous | 5,853 | |||
Total expenses | 155,579 | |||
Less: | ||||
Expenses waived by Adviser | (582 | ) | ||
Net expenses | 154,997 | |||
Net investment income | 58,449 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | (2,923 | ) | ||
Investments in affiliated issuers | (24,987 | ) | ||
Distributions received from affiliated investment company shares | 4,381 | |||
Swap agreements | (1,700,077 | ) | ||
Futures contracts | 1,353 | |||
Net realized loss | (1,722,253 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (70,371 | ) | ||
Investments in affiliated issuers | (19,136 | ) | ||
Swap agreements | 74,186 | |||
Futures contracts | (128,295 | ) | ||
Net change in unrealized appreciation (depreciation) | (143,616 | ) | ||
Net realized and unrealized loss | (1,865,869 | ) | ||
Net decrease in net assets resulting from operations | $ | (1,807,420 | ) |
* | 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| 75 |
MID-CAP 1.5x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 58,449 | $ | 8,009 | ||||
Net realized gain (loss) on investments | (1,722,253 | ) | 2,830,858 | |||||
Net change in unrealized appreciation (depreciation) on investments | (143,616 | ) | 98,420 | |||||
Net increase (decrease) in net assets resulting from operations | (1,807,420 | ) | 2,937,287 | |||||
Distributions to shareholders | (1,545,520 | ) | (3,053,428 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 32,788,786 | 51,121,306 | ||||||
Distributions reinvested | 1,545,520 | 3,053,428 | ||||||
Cost of shares redeemed | (33,448,918 | ) | (66,131,295 | ) | ||||
Net increase (decrease) from capital share transactions | 885,388 | (11,956,561 | ) | |||||
Net decrease in net assets | (2,467,552 | ) | (12,072,702 | ) | ||||
Net assets: | ||||||||
Beginning of year | 7,875,462 | 19,948,164 | ||||||
End of year | $ | 5,407,910 | $ | 7,875,462 | ||||
Capital share activity: | ||||||||
Shares sold | 1,892,297 | 2,058,544 | ||||||
Shares issued from reinvestment of distributions | 80,538 | 146,658 | ||||||
Shares redeemed | (1,934,256 | ) | (2,419,500 | ) | ||||
Net increase (decrease) in shares | 38,579 | (214,298 | ) |
1 | For the year ended December 31, 2017, the distributions to shareholders were all from net realized gains (See Note 11). |
76| 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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 23.37 | $ | 36.19 | $ | 31.14 | $ | 35.05 | $ | 35.47 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .13 | .02 | (.10 | ) | (.20 | ) | (.25 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | (3.20 | ) | 5.81 | 8.87 | (1.45 | ) | 4.39 | |||||||||||||
Total from investment operations | (3.07 | ) | 5.83 | 8.77 | (1.65 | ) | 4.14 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.06 | ) | — | — | — | — | ||||||||||||||
Net realized gains | (5.84 | ) | (18.65 | ) | (3.72 | ) | (2.26 | ) | (4.56 | ) | ||||||||||
Total distributions | (5.90 | ) | (18.65 | ) | (3.72 | ) | (2.26 | ) | (4.56 | ) | ||||||||||
Net asset value, end of period | $ | 14.40 | $ | 23.37 | $ | 36.19 | $ | 31.14 | $ | 35.05 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (19.40 | %) | 22.44 | % | 29.64 | % | (5.50 | %) | 11.93 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 5,408 | $ | 7,875 | $ | 19,948 | $ | 15,093 | $ | 10,673 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.67 | % | 0.07 | % | (0.30 | %) | (0.58 | %) | (0.69 | %) | ||||||||||
Total expensesc | 1.78 | % | 1.76 | % | 1.72 | % | 1.67 | % | 1.72 | % | ||||||||||
Net expensesd | 1.78 | % | 1.76 | % | 1.72 | % | 1.67 | % | 1.72 | % | ||||||||||
Portfolio turnover rate | 368 | % | 403 | % | 368 | % | 477 | % | 255 | % |
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 reimbursements, as applicable. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 77 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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 year ended December 31, 2018, Inverse Mid-Cap Strategy Fund returned 10.90%. Over the year, its benchmark, the S&P MidCap 400 Index, returned -11.08%. 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 Utilities and Health Care sectors contributed the most to performance of the underlying index during the year. The Industrials and Financials sectors detracted the most from performance of the underlying index for the year.
ABIOMED, Inc., Bioverativ, Inc., and Fortinet, Inc. contributed the most to performance of the underlying index for the year. Thor Industries, Inc., Coherent, Inc., and Cognex Corp. 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. Derivatives performed as expected.
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.
78 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. 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.
Cumulative Fund Performance*,†
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 | 20.1% |
Guggenheim Ultra Short Duration Fund | 18.5% |
Total | 38.6% |
“Largest Holdings” excludes any temporary cash or derivative investments.
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Inverse Mid-Cap Strategy Fund | 10.90% | (7.48%) | (15.77%) |
S&P MidCap 400 Index | (11.08%) | 6.03% | 13.68% |
* | Fund positions at December 31, 2018 did not represent the Fund’s daily target of -100% exposure to the underlying index. |
* | 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 | 79 |
SCHEDULE OF INVESTMENTS | December 31, 2018 |
INVERSE MID-CAP STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 38.6% | ||||||||
Guggenheim Strategy Fund II1 | 5,232 | $ | 129,855 | |||||
Guggenheim Ultra Short Duration Fund1,6 | 11,991 | 119,433 | ||||||
Total Mutual Funds | ||||||||
(Cost $249,835) | 249,288 | |||||||
Face | ||||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 1.6% | ||||||||
Freddie Mac | ||||||||
2.25% due 01/03/192,3 | $ | 10,000 | 9,999 | |||||
Total Federal Agency Discount Notes | ||||||||
(Cost $9,998) | 9,999 | |||||||
REPURCHASE AGREEMENTS††,4 - 40.5% | ||||||||
JPMorgan Chase & Co. | 154,197 | 154,197 | ||||||
Barclays Capital | 64,126 | 64,126 | ||||||
Bank of America Merrill Lynch | 42,751 | 42,751 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $261,074) | 261,074 | |||||||
Total Investments - 80.7% | ||||||||
(Cost $520,907) | $ | 520,361 | ||||||
Other Assets & Liabilities, net - 19.3% | 124,707 | |||||||
Total Net Assets - 100.0% | $ | 645,068 |
Futures Contracts | |||||||||||||
Description | Number of | Expiration | Notional | Value and | |||||||||
Equity Futures Contracts Sold Short† | |||||||||||||
S&P MidCap 400 Index Mini Futures Contracts | 1 | Mar 2019 | $ | 166,360 | $ | (661 | ) |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements Sold Short†† | |||||||||||||||||||
Barclays Bank plc | S&P MidCap 400 Index | 2.62 | % | At Maturity | 01/31/19 | 21 | $ | 35,718 | $ | (339 | ) | ||||||||
BNP Paribas | S&P MidCap 400 Index | 2.37 | % | At Maturity | 01/29/19 | 63 | 105,532 | (1,003 | ) | ||||||||||
Goldman Sachs International | S&P MidCap 400 Index | 2.47 | % | At Maturity | 01/28/19 | 65 | 108,413 | (1,251 | ) | ||||||||||
$ | 249,663 | $ | (2,593 | ) |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | 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 | Repurchase Agreements — See Note 6. |
5 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2018. |
6 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
See Sector Classification in Other Information section. |
80| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
INVERSE MID-CAP STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 249,288 | $ | — | $ | — | $ | 249,288 | ||||||||
Federal Agency Discount Notes | — | 9,999 | — | 9,999 | ||||||||||||
Repurchase Agreements | — | 261,074 | — | 261,074 | ||||||||||||
Total Assets | $ | 249,288 | $ | 271,073 | $ | — | $ | 520,361 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Futures Contracts** | $ | 661 | $ | — | $ | — | $ | 661 | ||||||||
Equity Index Swap Agreements** | — | 2,593 | — | 2,593 | ||||||||||||
Total Liabilities | $ | 661 | $ | 2,593 | $ | — | $ | 3,254 |
** | This derivative is reported as unrealized appreciation/depreciation 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, 2018, there were no transfers between levels.
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Cash Management Funds”), each of which are 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, 2018, 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/1601445/000089180418000513/gug75569-ncsr.htm.
Transactions during the year ended December 31, 2018, in which the company is an “affiliated person”, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | Capital | |||||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 59,830 | $ | 270,595 | $ | (200,000 | ) | $ | 201 | $ | (771 | ) | $ | 129,855 | 5,232 | $ | 1,546 | $ | 43 | |||||||||||||||||
Guggenheim Ultra Short Duration Fund1 | 22,474 | 343,402 | (246,000 | ) | (71 | ) | (372 | ) | 119,433 | 11,991 | 1,345 | 50 | ||||||||||||||||||||||||
$ | 82,304 | $ | 613,997 | $ | (446,000 | ) | $ | 130 | $ | (1,143 | ) | $ | 249,288 | $ | 2,891 | $ | 93 |
1 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 81 |
INVERSE MID-CAP STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $9,998) | $ | 9,999 | ||
Investments in affiliated issuers, at value (cost $249,835) | 249,288 | |||
Repurchase agreements, at value (cost $261,074) | 261,074 | |||
Receivables: | ||||
Fund shares sold | 234,193 | |||
Variation margin on futures contracts | 452 | |||
Dividends | 256 | |||
Interest | 22 | |||
Total assets | 755,284 | |||
Liabilities: | ||||
Unrealized depreciation on swap agreements | 2,593 | |||
Payable for: | ||||
Securities purchased | 100,273 | |||
Swap settlement | 6,376 | |||
Management fees | 243 | |||
Transfer agent and administrative fees | 71 | |||
Investor service fees | 71 | |||
Fund shares redeemed | 37 | |||
Portfolio accounting fees | 29 | |||
Trustees’ fees* | 4 | |||
Miscellaneous | 519 | |||
Total liabilities | 110,216 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 645,068 | ||
Net assets consist of: | ||||
Paid in capital | $ | 2,332,188 | ||
Total distributable earnings (loss) | (1,687,120 | ) | ||
Net assets | $ | 645,068 | ||
Capital shares outstanding | 8,525 | |||
Net asset value per share | $ | 75.67 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 2,891 | ||
Interest | 2,719 | |||
Total investment income | 5,610 | |||
Expenses: | ||||
Management fees | 2,214 | |||
Investor service fees | 615 | |||
Transfer agent and administrative fees | 615 | |||
Professional fees | 254 | |||
Portfolio accounting fees | 246 | |||
Trustees’ fees* | 62 | |||
Custodian fees | 34 | |||
Line of credit fees | 2 | |||
Miscellaneous | 321 | |||
Total expenses | 4,363 | |||
Less: | ||||
Expenses waived by Adviser | (14 | ) | ||
Net expenses | 4,349 | |||
Net investment income | 1,261 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in affiliated issuers | 130 | |||
Distributions received from affiliated investment company shares | 93 | |||
Swap agreements | (30,206 | ) | ||
Futures contracts | 1,057 | |||
Net realized loss | (28,926 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 1 | |||
Investments in affiliated issuers | (1,143 | ) | ||
Swap agreements | (3,194 | ) | ||
Futures contracts | (661 | ) | ||
Net change in unrealized appreciation (depreciation) | (4,997 | ) | ||
Net realized and unrealized loss | (33,923 | ) | ||
Net decrease in net assets resulting from operations | $ | (32,662 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
82| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE MID-CAP STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | 1,261 | $ | (653 | ) | |||
Net realized loss on investments | (28,926 | ) | (47,729 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | (4,997 | ) | (1,194 | ) | ||||
Net decrease in net assets resulting from operations | (32,662 | ) | (49,576 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 5,179,494 | 4,129,307 | ||||||
Cost of shares redeemed | (4,679,265 | ) | (4,282,310 | ) | ||||
Net increase (decrease) from capital share transactions | 500,229 | (153,003 | ) | |||||
Net increase (decrease) in net assets | 467,567 | (202,579 | ) | |||||
Net assets: | ||||||||
Beginning of year | 177,501 | 380,080 | ||||||
End of year | $ | 645,068 | $ | 177,501 | ||||
Capital share activity: | ||||||||
Shares sold | 74,967 | 55,807 | ||||||
Shares redeemed | (69,044 | ) | (58,021 | ) | ||||
Net increase (decrease) in shares | 5,923 | (2,214 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 83 |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 68.22 | $ | 78.92 | $ | 97.61 | $ | 98.69 | $ | 111.65 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .35 | (.16 | ) | (.26 | ) | (1.38 | ) | (1.59 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | 7.10 | g | (10.54 | ) | (18.43 | ) | .30 | (11.37 | ) | |||||||||||
Total from investment operations | 7.45 | (10.70 | ) | (18.69 | ) | (1.08 | ) | (12.96 | ) | |||||||||||
Net asset value, end of period | $ | 75.67 | $ | 68.22 | $ | 78.92 | $ | 97.61 | $ | 98.69 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 10.90 | % | (13.55 | %) | (19.13 | %) | (1.12 | %) | (11.56 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 645 | $ | 178 | $ | 380 | $ | 611 | $ | 850 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.51 | % | (0.22 | %) | (0.82 | %) | (1.46 | %) | (1.51 | %) | ||||||||||
Total expensesc | 1.77 | % | 1.76 | % | 1.71 | % | 1.66 | % | 1.72 | % | ||||||||||
Net expensesd | 1.77 | % | — | — | — | — | ||||||||||||||
Portfolio turnover rate | 404 | % | 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 | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | 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. |
f | 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. |
g | The amount shown for a share outstanding throughout the period does not accord with the aggregate net losses on investments for the year because of the sales and repurchases of fund shares in relation to fluctuating market value of the investments in the Fund. |
84| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, 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 -26.21%, while the Russell 2000 Index returned -11.01% over the same time period.
Among sectors, the only performance contributor to the underlying index during the period was Information Technology. Utilities detracted the least. The leading detractors from return were Industrials and Financials.
Sarepta Therapeutics, Inc., AveXis, Inc., and GrubHub, Inc. were the largest contributors to performance of the underlying index for the year. Dana, Inc., McDermott International, Inc., and Clovis Oncology, Inc. 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. Derivatives performed as expected.
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 | 85 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. 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.
Cumulative Fund Performance*,†
Inception Date: October 27, 2006 |
Largest Holdings (% of Total Net Assets) | |
Guggenheim Ultra Short Duration Fund | 27.2% |
Guggenheim Strategy Fund II | 26.5% |
Total | 53.7% |
“Largest Holdings” excludes any temporary cash or derivative investments.
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Russell 2000® 2x Strategy Fund | (26.21%) | 3.28% | 16.43% |
Russell 2000 Index | (11.01%) | 7.64% | 15.22% |
* | 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. |
86 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2018 |
RUSSELL 2000® 2x STRATEGY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 2.0% | ||||||||
Financial - 0.5% | ||||||||
PS Business Parks, Inc. REIT | 1 | $ | 131 | |||||
UMB Financial Corp. | 2 | 122 | ||||||
Community Bank System, Inc. | 2 | 117 | ||||||
First Financial Bankshares, Inc. | 2 | 115 | ||||||
Primerica, Inc. | 1 | 98 | ||||||
PotlatchDeltic Corp. REIT | 3 | 95 | ||||||
First Industrial Realty Trust, Inc. REIT | 3 | 87 | ||||||
Healthcare Realty Trust, Inc. REIT | 3 | 85 | ||||||
Radian Group, Inc. | 5 | 82 | ||||||
ProAssurance Corp. | 2 | 81 | ||||||
MB Financial, Inc. | 2 | 79 | ||||||
National Health Investors, Inc. REIT | 1 | 76 | ||||||
QTS Realty Trust, Inc. — Class A REIT | 2 | 74 | ||||||
Columbia Banking System, Inc. | 2 | 73 | ||||||
Independent Bank Corp. | 1 | 70 | ||||||
Hancock Whitney Corp. | 2 | 69 | ||||||
International Bancshares Corp. | 2 | 69 | ||||||
First Merchants Corp. | 2 | 69 | ||||||
Essent Group Ltd.* | 2 | 68 | ||||||
Cathay General Bancorp | 2 | 67 | ||||||
Ryman Hospitality Properties, Inc. REIT | 1 | 67 | ||||||
Kemper Corp. | 1 | 66 | ||||||
Sunstone Hotel Investors, Inc. REIT | 5 | 65 | ||||||
IBERIABANK Corp. | 1 | 64 | ||||||
Blackstone Mortgage Trust, Inc. — Class A REIT | 2 | 64 | ||||||
Cousins Properties, Inc. REIT | 8 | 63 | ||||||
Ellie Mae, Inc.* | 1 | 63 | ||||||
MGIC Investment Corp.* | 6 | 63 | ||||||
Great Western Bancorp, Inc. | 2 | 63 | ||||||
United Bankshares, Inc. | 2 | 62 | ||||||
Selective Insurance Group, Inc. | 1 | 61 | ||||||
Agree Realty Corp. REIT | 1 | 59 | ||||||
GEO Group, Inc. REIT | 3 | 59 | ||||||
Trustmark Corp. | 2 | 57 | ||||||
AMERISAFE, Inc. | 1 | 57 | ||||||
Pebblebrook Hotel Trust REIT | 2 | 57 | ||||||
American Equity Investment Life Holding Co. | 2 | 56 | ||||||
Westamerica Bancorporation | 1 | 56 | ||||||
Kinsale Capital Group, Inc. | 1 | 56 | ||||||
Kennedy-Wilson Holdings, Inc. | 3 | 54 | ||||||
Banner Corp. | 1 | 53 | ||||||
Washington Federal, Inc. | 2 | 53 | ||||||
Valley National Bancorp | 6 | 53 | ||||||
Federated Investors, Inc. — Class B | 2 | 53 | ||||||
RMR Group, Inc. — Class A | 1 | 53 | ||||||
Four Corners Property Trust, Inc. REIT | 2 | 52 | ||||||
Nelnet, Inc. — Class A | 1 | 52 | ||||||
BancorpSouth Bank | 2 | 52 | ||||||
Seacoast Banking Corporation of Florida* | 2 | 52 | ||||||
Investors Bancorp, Inc. | 5 | 52 | ||||||
Piedmont Office Realty Trust, Inc. — Class A REIT | 3 | 51 | ||||||
Apollo Commercial Real Estate Finance, Inc. REIT | 3 | 50 | ||||||
BancFirst Corp. | 1 | 50 | ||||||
STAG Industrial, Inc. REIT | 2 | 50 | ||||||
Sabra Health Care REIT, Inc. | 3 | 49 | ||||||
RLJ Lodging Trust REIT | 3 | 49 | ||||||
First Busey Corp. | 2 | 49 | ||||||
Home BancShares, Inc. | 3 | 49 | ||||||
Chesapeake Lodging Trust REIT | 2 | 49 | ||||||
National General Holdings Corp. | 2 | 48 | ||||||
Provident Financial Services, Inc. | 2 | 48 | ||||||
Simmons First National Corp. — Class A | 2 | 48 | ||||||
Physicians Realty Trust REIT | 3 | 48 | ||||||
TowneBank | 2 | 48 | ||||||
Acadia Realty Trust REIT | 2 | 48 | ||||||
First Financial Bancorp | 2 | 47 | ||||||
Fulton Financial Corp. | 3 | 46 | ||||||
Old National Bancorp | 3 | 46 | ||||||
FRP Holdings, Inc.* | 1 | 46 | ||||||
Innovative Industrial Properties, Inc. REIT | 1 | 45 | ||||||
CNO Financial Group, Inc. | 3 | 45 | ||||||
Heartland Financial USA, Inc. | 1 | 44 | ||||||
Preferred Bank/Los Angeles CA | 1 | 43 | ||||||
First BanCorp | 5 | 43 | ||||||
United Community Banks, Inc. | 2 | 43 | ||||||
CenterState Bank Corp. | 2 | 42 | ||||||
Genworth Financial, Inc. — Class A* | 9 | 42 | ||||||
Stifel Financial Corp. | 1 | 42 | ||||||
Lexington Realty Trust REIT | 5 | 41 | ||||||
CVB Financial Corp. | 2 | 40 | ||||||
Tanger Factory Outlet Centers, Inc. REIT | 2 | 40 | ||||||
1st Source Corp. | 1 | 40 | ||||||
American Assets Trust, Inc. REIT | 1 | 40 | ||||||
Glacier Bancorp, Inc. | 1 | 40 | ||||||
First Midwest Bancorp, Inc. | 2 | 40 | ||||||
ACNB Corp. | 1 | 39 | ||||||
Mack-Cali Realty Corp. REIT | 2 | 39 | ||||||
PJT Partners, Inc. — Class A | 1 | 39 | ||||||
eHealth, Inc.* | 1 | 38 | ||||||
Capitol Federal Financial, Inc. | 3 | 38 | ||||||
S&T Bancorp, Inc. | 1 | 38 | ||||||
Enterprise Financial Services Corp. | 1 | 38 | ||||||
Horace Mann Educators Corp. | 1 | 37 | ||||||
Alexander & Baldwin, Inc. REIT* | 2 | 37 | ||||||
WesBanco, Inc. | 1 | 37 | ||||||
Chemical Financial Corp. | 1 | 37 | ||||||
First Interstate BancSystem, Inc. — Class A | 1 | 37 | ||||||
Waddell & Reed Financial, Inc. — Class A | 2 | 36 | ||||||
Granite Point Mortgage Trust, Inc. REIT | 2 | 36 | ||||||
NMI Holdings, Inc. — Class A* | 2 | 36 | ||||||
CoreCivic, Inc. REIT | 2 | 36 | ||||||
Hilltop Holdings, Inc. | 2 | 36 | ||||||
Terreno Realty Corp. REIT | 1 | 35 | ||||||
NBT Bancorp, Inc. | 1 | 35 | ||||||
Bryn Mawr Bank Corp. | 1 | 34 | ||||||
Moelis & Co. — Class A | 1 | 34 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 87 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 2x STRATEGY FUND |
| Shares | Value | ||||||
Marcus & Millichap, Inc.* | 1 | $ | 34 | |||||
Cohen & Steers, Inc. | 1 | 34 | ||||||
Northwest Bancshares, Inc. | 2 | 34 | ||||||
Urban Edge Properties REIT | 2 | 33 | ||||||
HFF, Inc. — Class A | 1 | 33 | ||||||
Stock Yards Bancorp, Inc. | 1 | 33 | ||||||
LegacyTexas Financial Group, Inc. | 1 | 32 | ||||||
Southern First Bancshares, Inc.* | 1 | 32 | ||||||
ServisFirst Bancshares, Inc. | 1 | 32 | ||||||
Retail Opportunity Investments Corp. REIT | 2 | 32 | ||||||
Southside Bancshares, Inc. | 1 | 32 | ||||||
Ameris Bancorp | 1 | 32 | ||||||
Colony Credit Real Estate, Inc. REIT | 2 | 32 | ||||||
First Community Bankshares, Inc. | 1 | 32 | ||||||
Bank of NT Butterfield & Son Ltd. | 1 | 31 | ||||||
Sandy Spring Bancorp, Inc. | 1 | 31 | ||||||
Ladder Capital Corp. — Class A REIT | 2 | 31 | ||||||
Renasant Corp. | 1 | 30 | ||||||
Rexford Industrial Realty, Inc. REIT | 1 | 30 | ||||||
CBTX, Inc. | 1 | 29 | ||||||
Invesco Mortgage Capital, Inc. REIT | 2 | 29 | ||||||
Community Healthcare Trust, Inc. REIT | 1 | 29 | ||||||
Beneficial Bancorp, Inc. | 2 | 29 | ||||||
Union Bankshares Corp. | 1 | 28 | ||||||
Kite Realty Group Trust REIT | 2 | 28 | ||||||
Brookline Bancorp, Inc. | 2 | 28 | ||||||
DiamondRock Hospitality Co. REIT | 3 | 27 | ||||||
WageWorks, Inc.* | 1 | 27 | ||||||
Berkshire Hills Bancorp, Inc. | 1 | 27 | ||||||
Blucora, Inc.* | 1 | 27 | ||||||
National Storage Affiliates Trust REIT | 1 | 26 | ||||||
Flagstar Bancorp, Inc.* | 1 | 26 | ||||||
First Bancorp, Inc. | 1 | 26 | ||||||
Fidelity Southern Corp. | 1 | 26 | ||||||
Kearny Financial Corp. | 2 | 26 | ||||||
Americold Realty Trust REIT | 1 | 26 | ||||||
Pacific Premier Bancorp, Inc.* | 1 | 25 | ||||||
Peapack Gladstone Financial Corp. | 1 | 25 | ||||||
Axos Financial, Inc.* | 1 | 25 | ||||||
Greenhill & Company, Inc. | 1 | 24 | ||||||
PRA Group, Inc.* | 1 | 24 | ||||||
First Commonwealth Financial Corp. | 2 | 24 | ||||||
Newmark Group, Inc. — Class A | 3 | 24 | ||||||
Hope Bancorp, Inc. | 2 | 24 | ||||||
Washington Real Estate Investment Trust | 1 | 23 | ||||||
CNB Financial Corp. | 1 | 23 | ||||||
OceanFirst Financial Corp. | 1 | 22 | ||||||
Midland States Bancorp, Inc. | 1 | 22 | ||||||
Artisan Partners Asset Management, Inc. — Class A | 1 | 22 | ||||||
State Bank Financial Corp. | 1 | 22 | ||||||
Univest Financial Corp. | 1 | 22 | ||||||
Flushing Financial Corp. | 1 | 22 | ||||||
Blue Hills Bancorp, Inc. | 1 | 21 | ||||||
PennyMac Financial Services, Inc. | 1 | 21 | ||||||
InfraREIT, Inc. | 1 | 21 | ||||||
Guaranty Bancorp | 1 | 21 | ||||||
Tier REIT, Inc. | 1 | 21 | ||||||
ARMOUR Residential REIT, Inc. | 1 | 21 | ||||||
SB One Bancorp | 1 | 20 | ||||||
FGL Holdings* | 3 | 20 | ||||||
1st Constitution Bancorp | 1 | 20 | ||||||
Malvern Bancorp, Inc.* | 1 | 20 | ||||||
PCSB Financial Corp. | 1 | 20 | ||||||
Summit Hotel Properties, Inc. REIT | 2 | 19 | ||||||
Enova International, Inc.* | 1 | 20 | ||||||
First Community Corp. | 1 | 19 | ||||||
Third Point Reinsurance Ltd.* | 2 | 19 | ||||||
Hannon Armstrong Sustainable Infrastructure Capital, Inc. REIT | 1 | 19 | ||||||
PennyMac Mortgage Investment Trust REIT | 1 | 19 | ||||||
CareTrust REIT, Inc. | 1 | 18 | ||||||
Independence Realty Trust, Inc. REIT | 2 | 18 | ||||||
iStar, Inc. REIT | 2 | 18 | ||||||
MBIA, Inc.* | 2 | 18 | ||||||
Chatham Lodging Trust REIT | 1 | 18 | ||||||
Global Net Lease, Inc. REIT | 1 | 18 | ||||||
Aircastle Ltd. | 1 | 17 | ||||||
Ambac Financial Group, Inc.* | 1 | 17 | ||||||
Xenia Hotels & Resorts, Inc. REIT | 1 | 17 | ||||||
Cadence BanCorp | 1 | 17 | ||||||
OFG Bancorp | 1 | 16 | ||||||
First United Corp. | 1 | 16 | ||||||
LendingClub Corp.* | 6 | 16 | ||||||
Horizon Bancorp, Inc. | 1 | 16 | ||||||
Easterly Government Properties, Inc. REIT | 1 | 16 | ||||||
Columbia Financial, Inc.* | 1 | 15 | ||||||
Redwood Trust, Inc. REIT | 1 | 15 | ||||||
BankFinancial Corp. | 1 | 15 | ||||||
Lakeland Bancorp, Inc. | 1 | 15 | ||||||
Live Oak Bancshares, Inc. | 1 | 15 | ||||||
Oritani Financial Corp. | 1 | 15 | ||||||
United Financial Bancorp, Inc. | 1 | 15 | ||||||
Washington Prime Group, Inc. REIT | 3 | 15 | ||||||
NorthStar Realty Europe Corp. REIT | 1 | 15 | ||||||
Cushman & Wakefield plc* | 1 | 15 | ||||||
Redfin Corp.* | 1 | 14 | ||||||
Meridian Bancorp, Inc. | 1 | 14 | ||||||
CatchMark Timber Trust, Inc. — Class A REIT | 2 | 14 | ||||||
Armada Hoffler Properties, Inc. REIT | 1 | 14 | ||||||
Preferred Apartment Communities, Inc. — Class A REIT | 1 | 14 | ||||||
Government Properties Income Trust REIT*,1 | 2 | 14 | ||||||
TrustCo Bank Corp. NY | 2 | 14 | ||||||
Northfield Bancorp, Inc. | 1 | 14 | ||||||
Capstead Mortgage Corp. REIT | 2 | 13 | ||||||
Banc of California, Inc. | 1 | 13 | ||||||
WisdomTree Investments, Inc. | 2 | 13 | ||||||
Southern National Bancorp of Virginia, Inc. | 1 | 13 | ||||||
Orchid Island Capital, Inc. REIT | 2 | 13 |
88| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 2x STRATEGY FUND |
| Shares | Value | ||||||
Farmers National Banc Corp. | 1 | $ | 13 | |||||
Monmouth Real Estate Investment Corp. REIT | 1 | 12 | ||||||
Whitestone REIT — Class B | 1 | 12 | ||||||
CorePoint Lodging, Inc. REIT | 1 | 12 | ||||||
RPT Realty REIT | 1 | 12 | ||||||
New York Mortgage Trust, Inc. REIT | 2 | 12 | ||||||
Heritage Commerce Corp. | 1 | 11 | ||||||
BrightSphere Investment Group plc | 1 | 11 | ||||||
Boston Private Financial Holdings, Inc. | 1 | 11 | ||||||
City Office REIT, Inc. | 1 | 10 | ||||||
Arbor Realty Trust, Inc. REIT | 1 | 10 | ||||||
Western New England Bancorp, Inc. | 1 | 10 | ||||||
United Community Financial Corp. | 1 | 9 | ||||||
Front Yard Residential Corp. REIT | 1 | 9 | ||||||
Greenlight Capital Re Ltd. — Class A* | 1 | 9 | ||||||
Western Asset Mortgage Capital Corp. REIT | 1 | 8 | ||||||
New Senior Investment Group, Inc. REIT | 2 | 8 | ||||||
Ashford Hospitality Trust, Inc. REIT | 2 | 8 | ||||||
Bancorp, Inc.* | 1 | 8 | ||||||
Citizens, Inc.* | 1 | 8 | ||||||
Select Income REIT | 1 | 7 | ||||||
Spirit MTA REIT | 1 | 7 | ||||||
Franklin Street Properties Corp. REIT | 1 | 6 | ||||||
Republic First Bancorp, Inc.* | 1 | 6 | ||||||
Pennsylvania Real Estate Investment Trust | 1 | 6 | ||||||
On Deck Capital, Inc.* | 1 | 6 | ||||||
CBL & Associates Properties, Inc. REIT | 3 | 6 | ||||||
Dynex Capital, Inc. REIT | 1 | 6 | ||||||
Ladenburg Thalmann Financial Services, Inc. | 2 | 5 | ||||||
Anworth Mortgage Asset Corp. REIT | 1 | 4 | ||||||
Maiden Holdings Ltd. | 2 | 3 | ||||||
Cedar Realty Trust, Inc. REIT | 1 | 3 | ||||||
Ocwen Financial Corp.* | 2 | 3 | ||||||
Total Financial | 8,467 | |||||||
Consumer, Non-cyclical - 0.4% | ||||||||
Lancaster Colony Corp. | 2 | 198 | ||||||
Brink’s Co. | 2 | 129 | ||||||
Merit Medical Systems, Inc.* | 2 | 112 | ||||||
ASGN, Inc.* | 2 | 109 | ||||||
Cimpress N.V.* | 1 | 103 | ||||||
Intercept Pharmaceuticals, Inc.* | 1 | 101 | ||||||
Haemonetics Corp.* | 1 | 100 | ||||||
Sanderson Farms, Inc. | 1 | 99 | ||||||
Adtalem Global Education, Inc.* | 2 | 95 | ||||||
LHC Group, Inc.* | 1 | 94 | ||||||
Insperity, Inc. | 1 | 93 | ||||||
FibroGen, Inc.* | 2 | 92 | ||||||
LivaNova plc* | 1 | 91 | ||||||
Globus Medical, Inc. — Class A* | 2 | 87 | ||||||
Heska Corp.* | 1 | 86 | ||||||
Aaron’s, Inc. | 2 | 84 | ||||||
Global Blood Therapeutics, Inc.* | 2 | 82 | ||||||
Wright Medical Group N.V.*,1 | 3 | 82 | ||||||
Healthcare Services Group, Inc. | 2 | 80 | ||||||
Green Dot Corp. — Class A* | 1 | 80 | ||||||
Ensign Group, Inc. | 2 | 78 | ||||||
Xencor, Inc.* | 2 | 72 | ||||||
Array BioPharma, Inc.* | 5 | 71 | ||||||
Nathan’s Famous, Inc. | 1 | 66 | ||||||
ICF International, Inc. | 1 | 65 | ||||||
Performance Food Group Co.* | 2 | 65 | ||||||
ABM Industries, Inc. | 2 | 64 | ||||||
Paylocity Holding Corp.* | 1 | 60 | ||||||
Providence Service Corp.* | 1 | 60 | ||||||
HealthEquity, Inc.* | 1 | 60 | ||||||
Emergent BioSolutions, Inc.* | 1 | 59 | ||||||
Horizon Pharma plc* | 3 | 59 | ||||||
B&G Foods, Inc. | 2 | 58 | ||||||
Darling Ingredients, Inc.* | 3 | 58 | ||||||
NxStage Medical, Inc.* | 2 | 57 | ||||||
Neogen Corp.* | 1 | 57 | ||||||
AMN Healthcare Services, Inc.* | 1 | 57 | ||||||
HMS Holdings Corp.* | 2 | 56 | ||||||
Glaukos Corp.* | 1 | 56 | ||||||
Blueprint Medicines Corp.* | 1 | 54 | ||||||
Medpace Holdings, Inc.* | 1 | 53 | ||||||
Huron Consulting Group, Inc.* | 1 | 51 | ||||||
Teladoc Health, Inc.* | 1 | 49 | ||||||
NuVasive, Inc.* | 1 | 50 | ||||||
Aimmune Therapeutics, Inc.* | 2 | 48 | ||||||
Travelport Worldwide Ltd. | 3 | 47 | ||||||
Esperion Therapeutics, Inc.* | 1 | 46 | ||||||
Editas Medicine, Inc.* | 2 | 45 | ||||||
Avis Budget Group, Inc.* | 2 | 45 | ||||||
Avanos Medical, Inc.* | 1 | 45 | ||||||
Halozyme Therapeutics, Inc.* | 3 | 44 | ||||||
Acceleron Pharma, Inc.* | 1 | 43 | ||||||
Ultragenyx Pharmaceutical, Inc.* | 1 | 43 | ||||||
Pacira Pharmaceuticals, Inc.* | 1 | 43 | ||||||
Immunomedics, Inc.* | 3 | 43 | ||||||
Cal-Maine Foods, Inc. | 1 | 42 | ||||||
TriNet Group, Inc.* | 1 | 42 | ||||||
Matthews International Corp. — Class A | 1 | 41 | ||||||
Sotheby’s* | 1 | 40 | ||||||
Korn/Ferry International | 1 | 40 | ||||||
Syneos Health, Inc.* | 1 | 39 | ||||||
Patterson Companies, Inc. | 2 | 39 | ||||||
Spark Therapeutics, Inc.* | 1 | 39 | ||||||
Portola Pharmaceuticals, Inc.* | 2 | 39 | ||||||
Arena Pharmaceuticals, Inc.* | 1 | 39 | ||||||
LiveRamp Holdings, Inc.* | 1 | 39 | ||||||
Weight Watchers International, Inc.* | 1 | 39 | ||||||
Deluxe Corp. | 1 | 38 | ||||||
Medicines Co.* | 2 | 38 | ||||||
Tandem Diabetes Care, Inc.* | 1 | 38 | ||||||
Edgewell Personal Care Co.* | 1 | 37 | ||||||
Endo International plc* | 5 | 37 | ||||||
Zogenix, Inc.* | 1 | 37 | ||||||
Clovis Oncology, Inc.* | 2 | 36 | ||||||
Innoviva, Inc.* | 2 | 35 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 89 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 2x STRATEGY FUND |
| Shares | Value | ||||||
Atara Biotherapeutics, Inc.* | 1 | $ | 35 | |||||
PTC Therapeutics, Inc.* | 1 | 34 | ||||||
Tenet Healthcare Corp.* | 2 | 34 | ||||||
Novocure Ltd.* | 1 | 33 | ||||||
Supernus Pharmaceuticals, Inc.* | 1 | 33 | ||||||
ACADIA Pharmaceuticals, Inc.* | 2 | 32 | ||||||
Phibro Animal Health Corp. — Class A | 1 | 32 | ||||||
Chefs’ Warehouse, Inc.* | 1 | 32 | ||||||
STAAR Surgical Co.* | 1 | 32 | ||||||
Mallinckrodt plc* | 2 | 32 | ||||||
Central Garden & Pet Co. — Class A* | 1 | 31 | ||||||
Ironwood Pharmaceuticals, Inc. — Class A* | 3 | 31 | ||||||
Kforce, Inc. | 1 | 31 | ||||||
Prestige Consumer Healthcare, Inc.* | 1 | 31 | ||||||
Select Medical Holdings Corp.* | 2 | 31 | ||||||
AtriCure, Inc.* | 1 | 31 | ||||||
SP Plus Corp.* | 1 | 30 | ||||||
Myriad Genetics, Inc.* | 1 | 29 | ||||||
Amicus Therapeutics, Inc.* | 3 | 29 | ||||||
EVERTEC, Inc. | 1 | 29 | ||||||
Chegg, Inc.* | 1 | 28 | ||||||
Kiniksa Pharmaceuticals Ltd. — Class A* | 1 | 28 | ||||||
Amneal Pharmaceuticals, Inc.* | 2 | 27 | ||||||
Corcept Therapeutics, Inc.* | 2 | 27 | ||||||
Insmed, Inc.* | 2 | 26 | ||||||
Vanda Pharmaceuticals, Inc.* | 1 | 26 | ||||||
Cardtronics plc — Class A* | 1 | 26 | ||||||
Herc Holdings, Inc.* | 1 | 26 | ||||||
Heron Therapeutics, Inc.* | 1 | 26 | ||||||
Theravance Biopharma, Inc.* | 1 | 26 | ||||||
Arrowhead Pharmaceuticals, Inc.* | 2 | 25 | ||||||
Tivity Health, Inc.* | 1 | 25 | ||||||
K12, Inc.* | 1 | 25 | ||||||
Navigant Consulting, Inc. | 1 | 24 | ||||||
Varex Imaging Corp.* | 1 | 24 | ||||||
OraSure Technologies, Inc.* | 2 | 23 | ||||||
PDL BioPharma, Inc.* | 8 | 23 | ||||||
Luminex Corp. | 1 | 23 | ||||||
Sangamo Therapeutics, Inc.* | 2 | 23 | ||||||
Retrophin, Inc.* | 1 | 23 | ||||||
Omeros Corp.* | 2 | 22 | ||||||
TrueBlue, Inc.* | 1 | 22 | ||||||
Pacific Biosciences of California, Inc.* | 3 | 22 | ||||||
Momenta Pharmaceuticals, Inc.* | 2 | 22 | ||||||
Hostess Brands, Inc.* | 2 | 22 | ||||||
United Natural Foods, Inc.* | 2 | 21 | ||||||
Denali Therapeutics, Inc.* | 1 | 21 | ||||||
Alder Biopharmaceuticals, Inc.* | 2 | 20 | ||||||
Brookdale Senior Living, Inc. — Class A* | 3 | 20 | ||||||
Amphastar Pharmaceuticals, Inc.* | 1 | 20 | ||||||
CBIZ, Inc.* | 1 | 20 | ||||||
Simply Good Foods Co.* | 1 | 19 | ||||||
Karyopharm Therapeutics, Inc.* | 2 | 19 | ||||||
OPKO Health, Inc.* | 6 | 18 | ||||||
Iovance Biotherapeutics, Inc.* | 2 | 18 | ||||||
Vericel Corp.* | 1 | 17 | ||||||
Triple-S Management Corp. — Class B* | 1 | 17 | ||||||
Meridian Bioscience, Inc. | 1 | 17 | ||||||
Avrobio, Inc.* | 1 | 17 | ||||||
Tejon Ranch Co.* | 1 | 16 | ||||||
Radius Health, Inc.* | 1 | 16 | ||||||
Nuvectra Corp.* | 1 | 16 | ||||||
Rent-A-Center, Inc.* | 1 | 16 | ||||||
SIGA Technologies, Inc.* | 2 | 16 | ||||||
Cymabay Therapeutics, Inc.* | 2 | 16 | ||||||
Lantheus Holdings, Inc.* | 1 | 16 | ||||||
Acorda Therapeutics, Inc.* | 1 | 16 | ||||||
Laureate Education, Inc. — Class A* | 1 | 15 | ||||||
CytomX Therapeutics, Inc.* | 1 | 15 | ||||||
Rocket Pharmaceuticals, Inc.* | 1 | 15 | ||||||
Hertz Global Holdings, Inc.* | 1 | 14 | ||||||
Intellia Therapeutics, Inc.* | 1 | 14 | ||||||
ACCO Brands Corp. | 2 | 14 | ||||||
Diplomat Pharmacy, Inc.* | 1 | 14 | ||||||
Apellis Pharmaceuticals, Inc.* | 1 | 13 | ||||||
Novavax, Inc.* | 7 | 13 | ||||||
Fate Therapeutics, Inc.* | 1 | 13 | ||||||
Sientra, Inc.* | 1 | 13 | ||||||
MacroGenics, Inc.* | 1 | 13 | ||||||
Athenex, Inc.* | 1 | 13 | ||||||
NeoGenomics, Inc.* | 1 | 13 | ||||||
Emerald Expositions Events, Inc. | 1 | 12 | ||||||
Epizyme, Inc.* | 2 | 12 | ||||||
Career Education Corp.* | 1 | 11 | ||||||
Intra-Cellular Therapies, Inc.* | 1 | 11 | ||||||
Akebia Therapeutics, Inc.* | 2 | 11 | ||||||
Invitae Corp.* | 1 | 11 | ||||||
Dicerna Pharmaceuticals, Inc.* | 1 | 11 | ||||||
Prothena Corporation plc* | 1 | 10 | ||||||
Cerus Corp.* | 2 | 10 | ||||||
Surgery Partners, Inc.* | 1 | 10 | ||||||
Vector Group Ltd. | 1 | 10 | ||||||
ImmunoGen, Inc.* | 2 | 10 | ||||||
La Jolla Pharmaceutical Co.* | 1 | 9 | ||||||
Dynavax Technologies Corp.* | 1 | 9 | ||||||
Coherus Biosciences, Inc.* | 1 | 9 | ||||||
Spectrum Pharmaceuticals, Inc.* | 1 | 9 | ||||||
Adamas Pharmaceuticals, Inc.* | 1 | 9 | ||||||
Tocagen, Inc.* | 1 | 8 | ||||||
Avid Bioservices, Inc.* | 2 | 8 | ||||||
MediciNova, Inc.* | 1 | 8 | ||||||
BioCryst Pharmaceuticals, Inc.* | 1 | 8 | ||||||
CASI Pharmaceuticals, Inc.* | 2 | 8 | ||||||
R1 RCM, Inc.* | 1 | 8 | ||||||
Viking Therapeutics, Inc.* | 1 | 8 | ||||||
TherapeuticsMD, Inc.* | 2 | 8 | ||||||
Dean Foods Co. | 2 | 8 | ||||||
Tyme Technologies, Inc.* | 2 | 7 | ||||||
Dermira, Inc.* | 1 | 7 | ||||||
BioScrip, Inc.* | 2 | 7 | ||||||
LSC Communications, Inc. | 1 | 7 |
90| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 2x STRATEGY FUND |
| Shares | Value | ||||||
Lexicon Pharmaceuticals, Inc.* | 1 | $ | 7 | |||||
Intrexon Corp.* | 1 | 6 | ||||||
Owens & Minor, Inc. | 1 | 6 | ||||||
Cytokinetics, Inc.* | 1 | 6 | ||||||
Aratana Therapeutics, Inc.* | 1 | 6 | ||||||
ViewRay, Inc.* | 1 | 6 | ||||||
Acacia Research Corp.* | 2 | 6 | ||||||
Corbus Pharmaceuticals Holdings, Inc.* | 1 | 6 | ||||||
Community Health Systems, Inc.* | 2 | 6 | ||||||
Antares Pharma, Inc.* | 2 | 5 | ||||||
Pieris Pharmaceuticals, Inc.* | 2 | 5 | ||||||
Everi Holdings, Inc.* | 1 | 5 | ||||||
Paratek Pharmaceuticals, Inc.* | 1 | 5 | ||||||
PFSweb, Inc.* | 1 | 5 | ||||||
22nd Century Group, Inc.* | 2 | 5 | ||||||
GenMark Diagnostics, Inc.* | 1 | 5 | ||||||
Achillion Pharmaceuticals, Inc.* | 3 | 5 | ||||||
Cue Biopharma, Inc.* | 1 | 5 | ||||||
Rigel Pharmaceuticals, Inc.* | 2 | 5 | ||||||
TransEnterix, Inc.* | 2 | 5 | ||||||
Progenics Pharmaceuticals, Inc.* | 1 | 4 | ||||||
TG Therapeutics, Inc.* | 1 | 4 | ||||||
Inovio Pharmaceuticals, Inc.* | 1 | 4 | ||||||
RR Donnelley & Sons Co. | 1 | 4 | ||||||
Arbutus Biopharma Corp.* | 1 | 4 | ||||||
ZIOPHARM Oncology, Inc.* | 2 | 4 | ||||||
RTI Surgical, Inc.* | 1 | 4 | ||||||
Assertio Therapeutics, Inc.* | 1 | 4 | ||||||
Celsius Holdings, Inc.* | 1 | 4 | ||||||
Accuray, Inc.* | 1 | 3 | ||||||
Akorn, Inc.* | 1 | 3 | ||||||
Verastem, Inc.* | 1 | 3 | ||||||
MannKind Corp.* | 3 | 3 | ||||||
Adverum Biotechnologies, Inc.* | 1 | 3 | ||||||
Mustang Bio, Inc.* | 1 | 3 | ||||||
Bellicum Pharmaceuticals, Inc.* | 1 | 3 | ||||||
Marinus Pharmaceuticals, Inc.* | 1 | 3 | ||||||
Enzo Biochem, Inc.* | 1 | 3 | ||||||
ArQule, Inc.* | 1 | 3 | ||||||
Aduro Biotech, Inc.* | 1 | 3 | ||||||
Senseonics Holdings, Inc.* | 1 | 3 | ||||||
Chimerix, Inc.* | 1 | 3 | ||||||
Sorrento Therapeutics, Inc.* | 1 | 2 | ||||||
Agenus, Inc.* | 1 | 2 | ||||||
Sienna Biopharmaceuticals, Inc.* | 1 | 2 | ||||||
Innovate Biopharmaceuticals, Inc.* | 1 | 2 | ||||||
Rockwell Medical, Inc.* | 1 | 2 | ||||||
Palatin Technologies, Inc.* | 3 | 2 | ||||||
Kadmon Holdings, Inc.* | 1 | 2 | ||||||
Geron Corp.* | 2 | 2 | ||||||
Catalyst Pharmaceuticals, Inc.* | 1 | 2 | ||||||
Ardelyx, Inc.* | 1 | 2 | ||||||
AVEO Pharmaceuticals, Inc.* | 1 | 2 | ||||||
Athersys, Inc.* | 1 | 1 | ||||||
Teligent, Inc.* | 1 | 1 | ||||||
Achaogen, Inc.* | 1 | 1 | ||||||
Zomedica Pharmaceuticals Corp.* | 1 | 1 | ||||||
Genesis Healthcare, Inc.* | 1 | 1 | ||||||
Tetraphase Pharmaceuticals, Inc.* | 1 | 1 | ||||||
ServiceSource International, Inc.* | 1 | 1 | ||||||
Durect Corp.* | 2 | 1 | ||||||
Organovo Holdings, Inc.* | 1 | 1 | ||||||
BioTime, Inc.* | 1 | 1 | ||||||
CTI BioPharma Corp.* | 1 | 1 | ||||||
Endologix, Inc.* | 1 | 1 | ||||||
Synergy Pharmaceuticals, Inc.* | 4 | 1 | ||||||
Ampio Pharmaceuticals, Inc.* | 1 | — | ||||||
Total Consumer, Non-cyclical | 7,022 | |||||||
Consumer, Cyclical - 0.3% | ||||||||
Cracker Barrel Old Country Store, Inc. | 1 | 160 | ||||||
Winmark Corp. | 1 | 159 | ||||||
Texas Roadhouse, Inc. — Class A | 2 | 119 | ||||||
Planet Fitness, Inc. — Class A* | 2 | 107 | ||||||
Five Below, Inc.* | 1 | 102 | ||||||
SkyWest, Inc. | 2 | 89 | ||||||
Brinker International, Inc. | 2 | 88 | ||||||
iRobot Corp.* | 1 | 84 | ||||||
Lithia Motors, Inc. — Class A | 1 | 76 | ||||||
Eldorado Resorts, Inc.* | 2 | 72 | ||||||
FirstCash, Inc. | 1 | 72 | ||||||
Marriott Vacations Worldwide Corp. | 1 | 70 | ||||||
Ollie’s Bargain Outlet Holdings, Inc.* | 1 | 67 | ||||||
Cooper Tire & Rubber Co. | 2 | 65 | ||||||
Wolverine World Wide, Inc. | 2 | 64 | ||||||
Signet Jewelers Ltd. | 2 | 64 | ||||||
Beacon Roofing Supply, Inc.* | 2 | 63 | ||||||
Triton International Ltd. | 2 | 62 | ||||||
Cooper-Standard Holdings, Inc.* | 1 | 62 | ||||||
PriceSmart, Inc. | 1 | 59 | ||||||
Fox Factory Holding Corp.* | 1 | 59 | ||||||
American Eagle Outfitters, Inc. | 3 | 58 | ||||||
Spirit Airlines, Inc.* | 1 | 58 | ||||||
La-Z-Boy, Inc. | 2 | 55 | ||||||
SiteOne Landscape Supply, Inc.* | 1 | 55 | ||||||
Tenneco, Inc. — Class A | 2 | 55 | ||||||
Anixter International, Inc.* | 1 | 54 | ||||||
Hawaiian Holdings, Inc. | 2 | 53 | ||||||
Crocs, Inc.* | 2 | 52 | ||||||
Sally Beauty Holdings, Inc.* | 3 | 51 | ||||||
Altra Industrial Motion Corp. | 2 | 50 | ||||||
Belmond Ltd. — Class A* | 2 | 50 | ||||||
DSW, Inc. — Class A | 2 | 49 | ||||||
Standard Motor Products, Inc. | 1 | 48 | ||||||
Core-Mark Holding Company, Inc. | 2 | 47 | ||||||
Dave & Buster’s Entertainment, Inc. | 1 | 45 | ||||||
SeaWorld Entertainment, Inc.* | 2 | 44 | ||||||
Cheesecake Factory, Inc. | 1 | 44 | ||||||
World Fuel Services Corp. | 2 | 43 | ||||||
Boyd Gaming Corp. | 2 | 42 | ||||||
Guess?, Inc. | 2 | 42 | ||||||
Dana, Inc. | 3 | 41 | ||||||
Abercrombie & Fitch Co. — Class A | 2 | 40 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 91 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 2x STRATEGY FUND |
| Shares | Value | ||||||
Papa John’s International, Inc. | 1 | $ | 40 | |||||
Penn National Gaming, Inc.* | 2 | 38 | ||||||
Meritage Homes Corp.* | 1 | 37 | ||||||
Douglas Dynamics, Inc. | 1 | 36 | ||||||
HNI Corp. | 1 | 35 | ||||||
Malibu Boats, Inc. — Class A* | 1 | 35 | ||||||
Bed Bath & Beyond, Inc. | 3 | 34 | ||||||
Meritor, Inc.* | 2 | 34 | ||||||
Installed Building Products, Inc.* | 1 | 33 | ||||||
Knoll, Inc. | 2 | 33 | ||||||
TRI Pointe Group, Inc.* | 3 | 33 | ||||||
Denny’s Corp.* | 2 | 32 | ||||||
Taylor Morrison Home Corp. — Class A* | 2 | 32 | ||||||
Liberty TripAdvisor Holdings, Inc. — Class A* | 2 | 32 | ||||||
Mobile Mini, Inc. | 1 | 32 | ||||||
Tupperware Brands Corp. | 1 | 32 | ||||||
BMC Stock Holdings, Inc.* | 2 | 31 | ||||||
Roku, Inc.* | 1 | 31 | ||||||
Steven Madden Ltd. | 1 | 30 | ||||||
Herman Miller, Inc. | 1 | 30 | ||||||
Steelcase, Inc. — Class A | 2 | 30 | ||||||
Big Lots, Inc. | 1 | 29 | ||||||
National Vision Holdings, Inc.* | 1 | 28 | ||||||
MDC Holdings, Inc. | 1 | 28 | ||||||
G-III Apparel Group Ltd.* | 1 | 28 | ||||||
Caleres, Inc. | 1 | 28 | ||||||
Tailored Brands, Inc. | 2 | 27 | ||||||
Wabash National Corp. | 2 | 26 | ||||||
Rocky Brands, Inc. | 1 | 26 | ||||||
Navistar International Corp.* | 1 | 26 | ||||||
Office Depot, Inc. | 10 | 26 | ||||||
Universal Electronics, Inc.* | 1 | 25 | ||||||
GameStop Corp. — Class A | 2 | 25 | ||||||
AMC Entertainment Holdings, Inc. — Class A | 2 | 25 | ||||||
Winnebago Industries, Inc. | 1 | 24 | ||||||
Methode Electronics, Inc. | 1 | 23 | ||||||
PetMed Express, Inc. | 1 | 23 | ||||||
Ruth’s Hospitality Group, Inc. | 1 | 23 | ||||||
American Axle & Manufacturing Holdings, Inc.* | 2 | 22 | ||||||
BJ’s Wholesale Club Holdings, Inc.* | 1 | 22 | ||||||
Red Rock Resorts, Inc. — Class A | 1 | 20 | ||||||
KB Home | 1 | 19 | ||||||
IMAX Corp.* | 1 | 19 | ||||||
Haverty Furniture Companies, Inc. | 1 | 19 | ||||||
At Home Group, Inc.* | 1 | 19 | ||||||
Blue Bird Corp.* | 1 | 18 | ||||||
Bloomin’ Brands, Inc. | 1 | 18 | ||||||
Scientific Games Corp. — Class A* | 1 | 18 | ||||||
Ethan Allen Interiors, Inc. | 1 | 17 | ||||||
Hudson Ltd. — Class A* | 1 | 17 | ||||||
Cannae Holdings, Inc.* | 1 | 17 | ||||||
Marine Products Corp. | 1 | 17 | ||||||
Chico’s FAS, Inc. | 3 | 17 | ||||||
Golden Entertainment, Inc.* | 1 | 16 | ||||||
Fossil Group, Inc.* | 1 | 16 | ||||||
Fiesta Restaurant Group, Inc.* | 1 | 16 | ||||||
Callaway Golf Co. | 1 | 15 | ||||||
Hibbett Sports, Inc.* | 1 | 14 | ||||||
Interface, Inc. — Class A | 1 | 14 | ||||||
Rite Aid Corp.* | 19 | 13 | ||||||
St. Joe Co.* | 1 | 13 | ||||||
National CineMedia, Inc. | 2 | 13 | ||||||
BBX Capital Corp. | 2 | 11 | ||||||
Vista Outdoor, Inc.* | 1 | 11 | ||||||
Modine Manufacturing Co.* | 1 | 11 | ||||||
Express, Inc.* | 2 | 10 | ||||||
Empire Resorts, Inc.* | 1 | 10 | ||||||
Del Taco Restaurants, Inc.* | 1 | 10 | ||||||
Party City Holdco, Inc.* | 1 | 10 | ||||||
EZCORP, Inc. — Class A* | 1 | 8 | ||||||
Ascena Retail Group, Inc.* | 3 | 8 | ||||||
Barnes & Noble, Inc. | 1 | 7 | ||||||
Town Sports International Holdings, Inc.* | 1 | 7 | ||||||
J.C. Penney Company, Inc.*,1 | 6 | 6 | ||||||
Tile Shop Holdings, Inc. | 1 | 6 | ||||||
Titan International, Inc. | 1 | 5 | ||||||
Drive Shack, Inc.* | 1 | 4 | ||||||
RTW RetailWinds, Inc.* | 1 | 3 | ||||||
Big 5 Sporting Goods Corp. | 1 | 3 | ||||||
GNC Holdings, Inc. — Class A* | 1 | 2 | ||||||
Hovnanian Enterprises, Inc. — Class A* | 3 | 2 | ||||||
Francesca’s Holdings Corp.* | 1 | 1 | ||||||
Castle Brands, Inc.* | 1 | 1 | ||||||
Pier 1 Imports, Inc. | 1 | — | ||||||
Total Consumer, Cyclical | 4,524 | |||||||
Industrial - 0.2% | ||||||||
Woodward, Inc. | 2 | 149 | ||||||
Brady Corp. — Class A | 2 | 87 | ||||||
Franklin Electric Company, Inc. | 2 | 86 | ||||||
MasTec, Inc.* | 2 | 81 | ||||||
SYNNEX Corp. | 1 | 81 | ||||||
EnerSys | 1 | 77 | ||||||
Hillenbrand, Inc. | 2 | 76 | ||||||
John Bean Technologies Corp. | 1 | 72 | ||||||
GATX Corp. | 1 | 71 | ||||||
Louisiana-Pacific Corp. | 3 | 67 | ||||||
Kennametal, Inc. | 2 | 66 | ||||||
II-VI, Inc.* | 2 | 65 | ||||||
Novanta, Inc.* | 1 | 63 | ||||||
Albany International Corp. — Class A | 1 | 63 | ||||||
EMCOR Group, Inc. | 1 | 60 | ||||||
Trex Company, Inc.* | 1 | 59 | ||||||
American Woodmark Corp.* | 1 | 56 | ||||||
Simpson Manufacturing Company, Inc. | 1 | 54 | ||||||
Dycom Industries, Inc.* | 1 | 54 | ||||||
Vishay Intertechnology, Inc. | 3 | 54 | ||||||
Applied Industrial Technologies, Inc. | 1 | 54 | ||||||
Barnes Group, Inc. | 1 | 54 | ||||||
Alarm.com Holdings, Inc.* | 1 | 52 |
92| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 2x STRATEGY FUND |
| Shares | Value | ||||||
Tetra Tech, Inc. | 1 | $ | 52 | |||||
Fabrinet* | 1 | 51 | ||||||
Exponent, Inc. | 1 | 51 | ||||||
Generac Holdings, Inc.* | 1 | 50 | ||||||
Badger Meter, Inc. | 1 | 49 | ||||||
Sanmina Corp.* | 2 | 48 | ||||||
Advanced Disposal Services, Inc.* | 2 | 48 | ||||||
Rexnord Corp.* | 2 | 46 | ||||||
Trinseo S.A. | 1 | 46 | ||||||
KBR, Inc. | 3 | 45 | ||||||
TopBuild Corp.* | 1 | 45 | ||||||
Masonite International Corp.* | 1 | 45 | ||||||
Allied Motion Technologies, Inc. | 1 | 45 | ||||||
Axon Enterprise, Inc.* | 1 | 44 | ||||||
Comfort Systems USA, Inc. | 1 | 44 | ||||||
Golar LNG Ltd. | 2 | 43 | ||||||
Atlas Air Worldwide Holdings, Inc.* | 1 | 42 | ||||||
Actuant Corp. — Class A | 2 | 42 | ||||||
Belden, Inc. | 1 | 42 | ||||||
Granite Construction, Inc. | 1 | 40 | ||||||
Federal Signal Corp. | 2 | 40 | ||||||
Harsco Corp.* | 2 | 40 | ||||||
Greenbrier Companies, Inc. | 1 | 39 | ||||||
PAM Transportation Services, Inc.* | 1 | 39 | ||||||
Primoris Services Corp. | 2 | 38 | ||||||
Greif, Inc. — Class A | 1 | 37 | ||||||
Hub Group, Inc. — Class A* | 1 | 37 | ||||||
Heartland Express, Inc. | 2 | 37 | ||||||
Raven Industries, Inc. | 1 | 36 | ||||||
Aerojet Rocketdyne Holdings, Inc.* | 1 | 35 | ||||||
AAON, Inc. | 1 | 35 | ||||||
Ambarella, Inc.* | 1 | 35 | ||||||
Worthington Industries, Inc. | 1 | 35 | ||||||
ArcBest Corp. | 1 | 34 | ||||||
Matson, Inc. | 1 | 32 | ||||||
AVX Corp. | 2 | 30 | ||||||
SPX FLOW, Inc.* | 1 | 30 | ||||||
Astec Industries, Inc. | 1 | 30 | ||||||
Werner Enterprises, Inc. | 1 | 29 | ||||||
Casella Waste Systems, Inc. — Class A* | 1 | 28 | ||||||
JELD-WEN Holding, Inc.* | 2 | 28 | ||||||
SPX Corp.* | 1 | 28 | ||||||
DXP Enterprises, Inc.* | 1 | 28 | ||||||
Mueller Water Products, Inc. — Class A | 3 | 27 | ||||||
TriMas Corp.* | 1 | 27 | ||||||
Covanta Holding Corp. | 2 | 27 | ||||||
Universal Forest Products, Inc. | 1 | 26 | ||||||
Global Brass & Copper Holdings, Inc. | 1 | 25 | ||||||
Summit Materials, Inc. — Class A* | 2 | 25 | ||||||
Boise Cascade Co. | 1 | 24 | ||||||
Milacron Holdings Corp.* | 2 | 24 | ||||||
Mueller Industries, Inc. | 1 | 23 | ||||||
Air Transport Services Group, Inc.* | 1 | 23 | ||||||
Builders FirstSource, Inc.* | 2 | 22 | ||||||
Benchmark Electronics, Inc. | 1 | 21 | ||||||
Ship Finance International Ltd. | 2 | 21 | ||||||
Lydall, Inc.* | 1 | 20 | ||||||
Atkore International Group, Inc.* | 1 | 20 | ||||||
Evoqua Water Technologies Corp.* | 2 | 19 | ||||||
KEMET Corp. | 1 | 18 | ||||||
International Seaways, Inc.* | 1 | 17 | ||||||
GasLog Ltd. | 1 | 16 | ||||||
Ichor Holdings Ltd.* | 1 | 16 | ||||||
PGT Innovations, Inc.* | 1 | 16 | ||||||
Applied Optoelectronics, Inc.* | 1 | 15 | ||||||
Fitbit, Inc. — Class A* | 3 | 15 | ||||||
Manitowoc Company, Inc.* | 1 | 15 | ||||||
Kratos Defense & Security Solutions, Inc.* | 1 | 14 | ||||||
Caesarstone Ltd. | 1 | 13 | ||||||
Knowles Corp.* | 1 | 13 | ||||||
Briggs & Stratton Corp. | 1 | 13 | ||||||
American Outdoor Brands Corp.* | 1 | 13 | ||||||
Armstrong Flooring, Inc.* | 1 | 12 | ||||||
Triumph Group, Inc. | 1 | 11 | ||||||
Scorpio Bulkers, Inc. | 2 | 11 | ||||||
Scorpio Tankers, Inc. | 6 | 11 | ||||||
TTM Technologies, Inc.* | 1 | 10 | ||||||
Costamare, Inc. | 2 | 9 | ||||||
TimkenSteel Corp.* | 1 | 9 | ||||||
Wesco Aircraft Holdings, Inc.* | 1 | 8 | ||||||
NCI Building Systems, Inc.* | 1 | 7 | ||||||
Teekay Corp. | 2 | 7 | ||||||
Great Lakes Dredge & Dock Corp.* | 1 | 7 | ||||||
Nordic American Tankers Ltd. | 3 | 6 | ||||||
Manitex International, Inc.* | 1 | 6 | ||||||
Frontline Ltd.* | 1 | 5 | ||||||
SunPower Corp. — Class A* | 1 | 5 | ||||||
Eagle Bulk Shipping, Inc.* | 1 | 5 | ||||||
GoPro, Inc. — Class A* | 1 | 4 | ||||||
DHT Holdings, Inc. | 1 | 4 | ||||||
Daseke, Inc.* | 1 | 4 | ||||||
Teekay Tankers Ltd. — Class A | 2 | 2 | ||||||
Safe Bulkers, Inc.* | 1 | 2 | ||||||
Overseas Shipholding Group, Inc. — Class A* | 1 | 2 | ||||||
Babcock & Wilcox Enterprises, Inc.* | 1 | 1 | ||||||
Total Industrial | 4,015 | |||||||
Technology - 0.2% | ||||||||
Silicon Laboratories, Inc.* | 2 | 158 | ||||||
MAXIMUS, Inc. | 2 | 130 | ||||||
Science Applications International Corp. | 2 | 127 | ||||||
Blackbaud, Inc. | 2 | 126 | ||||||
HubSpot, Inc.* | 1 | 126 | ||||||
Coupa Software, Inc.* | 2 | 126 | ||||||
Integrated Device Technology, Inc.* | 2 | 97 | ||||||
Mercury Systems, Inc.* | 2 | 94 | ||||||
Lumentum Holdings, Inc.* | 2 | 92 | ||||||
Semtech Corp.* | 2 | 92 | ||||||
Cree, Inc.* | 2 | 86 | ||||||
Verint Systems, Inc.* | 2 | �� | 85 | |||||
New Relic, Inc.* | 1 | 81 | ||||||
Qualys, Inc.* | 1 | 75 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 93 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 2x STRATEGY FUND |
| Shares | Value | ||||||
Progress Software Corp. | 2 | $ | 71 | |||||
j2 Global, Inc. | 1 | 69 | ||||||
Medidata Solutions, Inc.* | 1 | 67 | ||||||
Cirrus Logic, Inc.* | 2 | 66 | ||||||
Power Integrations, Inc. | 1 | 61 | ||||||
CommVault Systems, Inc.* | 1 | 59 | ||||||
Cabot Microelectronics Corp. | 1 | 57 | ||||||
Entegris, Inc. | 2 | 56 | ||||||
ACI Worldwide, Inc.* | 2 | 55 | ||||||
ExlService Holdings, Inc.* | 1 | 53 | ||||||
Perspecta, Inc. | 3 | 52 | ||||||
Cornerstone OnDemand, Inc.* | 1 | 50 | ||||||
Envestnet, Inc.* | 1 | 49 | ||||||
Bottomline Technologies DE, Inc.* | 1 | 48 | ||||||
NetScout Systems, Inc.* | 2 | 47 | ||||||
Five9, Inc.* | 1 | 44 | ||||||
MINDBODY, Inc. — Class A* | 1 | 36 | ||||||
Box, Inc. — Class A* | 2 | 34 | ||||||
Diodes, Inc.* | 1 | 32 | ||||||
Inphi Corp.* | 1 | 32 | ||||||
CSG Systems International, Inc. | 1 | 32 | ||||||
NextGen Healthcare, Inc.* | 2 | 30 | ||||||
Yext, Inc.* | 2 | 30 | ||||||
Avaya Holdings Corp.* | 2 | 29 | ||||||
Allscripts Healthcare Solutions, Inc.* | 3 | 29 | ||||||
TTEC Holdings, Inc. | 1 | 28 | ||||||
TiVo Corp. | 3 | 28 | ||||||
Upland Software, Inc.* | 1 | 27 | ||||||
Brooks Automation, Inc. | 1 | 26 | ||||||
CTS Corp. | 1 | 26 | ||||||
Electronics for Imaging, Inc.* | 1 | 25 | ||||||
SailPoint Technologies Holding, Inc.* | 1 | 24 | ||||||
Cloudera, Inc.* | 2 | 22 | ||||||
CEVA, Inc.* | 1 | 22 | ||||||
Cray, Inc.* | 1 | 22 | ||||||
3D Systems Corp.* | 2 | 20 | ||||||
Evolent Health, Inc. — Class A* | 1 | 20 | ||||||
Photronics, Inc.* | 2 | 19 | ||||||
LivePerson, Inc.* | 1 | 19 | ||||||
Xperi Corp. | 1 | 18 | ||||||
Stratasys Ltd.* | 1 | 18 | ||||||
Axcelis Technologies, Inc.* | 1 | 18 | ||||||
Pitney Bowes, Inc. | 3 | 18 | ||||||
MaxLinear, Inc. — Class A* | 1 | 18 | ||||||
Monotype Imaging Holdings, Inc. | 1 | 16 | ||||||
Rambus, Inc.* | 2 | 15 | ||||||
MACOM Technology Solutions Holdings, Inc.* | 1 | 15 | ||||||
Hortonworks, Inc.* | 1 | 14 | ||||||
Inovalon Holdings, Inc. — Class A* | 1 | 14 | ||||||
FormFactor, Inc.* | 1 | 14 | ||||||
Lattice Semiconductor Corp.* | 2 | 14 | ||||||
Amkor Technology, Inc.* | 2 | 13 | ||||||
Cision Ltd.* | 1 | 12 | ||||||
Unisys Corp.* | 1 | 12 | ||||||
Immersion Corp.* | 1 | 9 | ||||||
Ultra Clean Holdings, Inc.* | 1 | 9 | ||||||
Glu Mobile, Inc.* | 1 | 8 | ||||||
Exela Technologies, Inc.* | 2 | 8 | ||||||
InnerWorkings, Inc.* | 2 | 7 | ||||||
Veeco Instruments, Inc.* | 1 | 7 | ||||||
KeyW Holding Corp.* | 1 | 7 | ||||||
Avid Technology, Inc.* | 1 | 5 | ||||||
MobileIron, Inc.* | 1 | 5 | ||||||
USA Technologies, Inc.* | 1 | 4 | ||||||
Diebold Nixdorf, Inc. | 1 | 2 | ||||||
Castlight Health, Inc. — Class B* | 1 | 2 | ||||||
Maxwell Technologies, Inc.* | 1 | 2 | ||||||
Remark Holdings, Inc.* | 1 | 1 | ||||||
Kopin Corp.* | 1 | 1 | ||||||
Total Technology | 3,317 | |||||||
Communications - 0.1% | ||||||||
Etsy, Inc.* | 3 | 143 | ||||||
ViaSat, Inc.* | 2 | 118 | ||||||
Ciena Corp.* | 3 | 102 | ||||||
Cogent Communications Holdings, Inc. | 2 | 90 | ||||||
Shenandoah Telecommunications Co. | 2 | 88 | ||||||
Nexstar Media Group, Inc. — Class A | 1 | 78 | ||||||
World Wrestling Entertainment, Inc. — Class A | 1 | 75 | ||||||
Yelp, Inc. — Class A* | 2 | 70 | ||||||
New York Times Co. — Class A | 3 | 67 | ||||||
InterDigital, Inc. | 1 | 66 | ||||||
Tucows, Inc. — Class A* | 1 | 60 | ||||||
Imperva, Inc.* | 1 | 56 | ||||||
TEGNA, Inc. | 5 | 54 | ||||||
Preformed Line Products Co. | 1 | 54 | ||||||
Sinclair Broadcast Group, Inc. — Class A | 2 | 53 | ||||||
Viavi Solutions, Inc.* | 5 | 50 | ||||||
MSG Networks, Inc. — Class A* | 2 | 47 | ||||||
Vonage Holdings Corp.* | 5 | 44 | ||||||
Pandora Media, Inc.* | 5 | 40 | ||||||
Shutterfly, Inc.* | 1 | 40 | ||||||
Liberty Expedia Holdings, Inc. — Class A* | 1 | 39 | ||||||
Iridium Communications, Inc.* | 2 | 37 | ||||||
Cargurus, Inc.* | 1 | 34 | ||||||
Liberty Latin America Ltd. — Class C* | 2 | 29 | ||||||
Liberty Latin America Ltd. — Class A* | 2 | 29 | ||||||
Groupon, Inc. — Class A* | 9 | 29 | ||||||
NIC, Inc. | 2 | 25 | ||||||
Liberty Media Corporation-Liberty Braves — Class C* | 1 | 25 | ||||||
GTT Communications, Inc.* | 1 | 24 | ||||||
Finisar Corp.* | 1 | 22 | ||||||
Cars.com, Inc.* | 1 | 22 | ||||||
ADTRAN, Inc. | 2 | 21 | ||||||
Intelsat S.A.* | 1 | 21 | ||||||
Quotient Technology, Inc.* | 2 | 21 | ||||||
Boingo Wireless, Inc.* | 1 | 21 | ||||||
TrueCar, Inc.* | 2 | 18 | ||||||
8x8, Inc.* | 1 | 18 | ||||||
Gannett Company, Inc. | 2 | 17 |
94| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 2x STRATEGY FUND |
| Shares | Value | ||||||
ORBCOMM, Inc.* | 2 | $ | 17 | |||||
EW Scripps Co. — Class A | 1 | 16 | ||||||
Gray Television, Inc.* | 1 | 15 | ||||||
Endurance International Group Holdings, Inc.* | 2 | 13 | ||||||
Spok Holdings, Inc. | 1 | 13 | ||||||
CalAmp Corp.* | 1 | 13 | ||||||
Extreme Networks, Inc.* | 2 | 12 | ||||||
Hemisphere Media Group, Inc.* | 1 | 12 | ||||||
Maxar Technologies Ltd. | 1 | 12 | ||||||
New Media Investment Group, Inc. | 1 | 12 | ||||||
Entercom Communications Corp. — Class A | 2 | 11 | ||||||
Consolidated Communications Holdings, Inc. | 1 | 10 | ||||||
Travelzoo* | 1 | 10 | ||||||
Calix, Inc.* | 1 | 10 | ||||||
Houghton Mifflin Harcourt Co.* | 1 | 9 | ||||||
NII Holdings, Inc.* | 2 | 9 | ||||||
Infinera Corp.* | 2 | 8 | ||||||
Cincinnati Bell, Inc.* | 1 | 8 | ||||||
WideOpenWest, Inc.* | 1 | 7 | ||||||
A10 Networks, Inc.* | 1 | 6 | ||||||
Liquidity Services, Inc.* | 1 | 6 | ||||||
Zix Corp.* | 1 | 6 | ||||||
Telaria, Inc.* | 2 | 5 | ||||||
Ribbon Communications, Inc.* | 1 | 5 | ||||||
Harmonic, Inc.* | 1 | 5 | ||||||
Meet Group, Inc.* | 1 | 5 | ||||||
Internap Corp.* | 1 | 4 | ||||||
Gogo, Inc.* | 1 | 3 | ||||||
Entravision Communications Corp. — Class A | 1 | 3 | ||||||
Central European Media Enterprises Ltd. — Class A* | 1 | 3 | ||||||
HC2 Holdings, Inc.* | 1 | 3 | ||||||
MDC Partners, Inc. — Class A* | 1 | 3 | ||||||
VirnetX Holding Corp.* | 1 | 2 | ||||||
Frontier Communications Corp.* | 1 | 2 | ||||||
Limelight Networks, Inc.* | 1 | 2 | ||||||
Windstream Holdings, Inc.* | 1 | 2 | ||||||
Total Communications | 2,129 | |||||||
Utilities - 0.1% | ||||||||
ALLETE, Inc. | 2 | 152 | ||||||
Spire, Inc. | 2 | 148 | ||||||
Black Hills Corp. | 2 | 126 | ||||||
El Paso Electric Co. | 2 | 100 | ||||||
IDACORP, Inc. | 1 | 93 | ||||||
Portland General Electric Co. | 2 | 92 | ||||||
New Jersey Resources Corp. | 2 | 91 | ||||||
Avista Corp. | 2 | 85 | ||||||
PNM Resources, Inc. | 2 | 82 | ||||||
ONE Gas, Inc. | 1 | 80 | ||||||
Southwest Gas Holdings, Inc. | 1 | 76 | ||||||
MGE Energy, Inc. | 1 | 60 | ||||||
NorthWestern Corp. | 1 | 60 | ||||||
South Jersey Industries, Inc. | 2 | 56 | ||||||
Ormat Technologies, Inc. | 1 | 52 | ||||||
Unitil Corp. | 1 | 51 | ||||||
California Water Service Group | 1 | 48 | ||||||
Clearway Energy, Inc. — Class C | 1 | 17 | ||||||
PICO Holdings, Inc.* | 1 | 9 | ||||||
Atlantic Power Corp.* | 2 | 4 | ||||||
Total Utilities | 1,482 | |||||||
Energy - 0.1% | ||||||||
Delek US Holdings, Inc. | 2 | 65 | ||||||
PDC Energy, Inc.* | 2 | 60 | ||||||
Pattern Energy Group, Inc. — Class A | 2 | 37 | ||||||
Southwestern Energy Co.* | 10 | 34 | ||||||
California Resources Corp.* | 2 | 34 | ||||||
Matador Resources Co.* | 2 | 31 | ||||||
Peabody Energy Corp. | 1 | 30 | ||||||
Dril-Quip, Inc.* | 1 | 30 | ||||||
Resolute Energy Corp.* | 1 | 29 | ||||||
Unit Corp.* | 2 | 29 | ||||||
Oasis Petroleum, Inc.* | 5 | 28 | ||||||
SemGroup Corp. — Class A | 2 | 28 | ||||||
Callon Petroleum Co.* | 4 | 26 | ||||||
Renewable Energy Group, Inc.* | 1 | 26 | ||||||
Rowan Companies plc — Class A* | 3 | 25 | ||||||
TPI Composites, Inc.* | 1 | 25 | ||||||
MRC Global, Inc.* | 2 | 25 | ||||||
Oceaneering International, Inc.* | 2 | 24 | ||||||
Warrior Met Coal, Inc. | 1 | 24 | ||||||
SRC Energy, Inc.* | 5 | 24 | ||||||
KLX Energy Services Holdings, Inc.* | 1 | 24 | ||||||
NOW, Inc.* | 2 | 23 | ||||||
Archrock, Inc. | 3 | 23 | ||||||
TerraForm Power, Inc. — Class A | 2 | 22 | ||||||
Bonanza Creek Energy, Inc.* | 1 | 21 | ||||||
US Silica Holdings, Inc. | 2 | 20 | ||||||
Gulfport Energy Corp.* | 3 | 20 | ||||||
McDermott International, Inc.* | 3 | 20 | ||||||
Jagged Peak Energy, Inc.* | 2 | 18 | ||||||
SunCoke Energy, Inc.* | 2 | 17 | ||||||
Keane Group, Inc.* | 2 | 16 | ||||||
Helix Energy Solutions Group, Inc.* | 3 | 16 | ||||||
Oil States International, Inc.* | 1 | 14 | ||||||
C&J Energy Services, Inc.* | 1 | 14 | ||||||
Green Plains, Inc. | 1 | 13 | ||||||
Noble Corporation plc* | 5 | 13 | ||||||
Liberty Oilfield Services, Inc. — Class A | 1 | 13 | ||||||
ProPetro Holding Corp.* | 1 | 12 | ||||||
Solaris Oilfield Infrastructure, Inc. — Class A | 1 | 12 | ||||||
Denbury Resources, Inc.* | 7 | 12 | ||||||
Carrizo Oil & Gas, Inc.* | 1 | 11 | ||||||
Sunrun, Inc.* | 1 | 11 | ||||||
Laredo Petroleum, Inc.* | 3 | 11 | ||||||
Advanced Emissions Solutions, Inc. | 1 | 11 | ||||||
Frank’s International N.V.* | 2 | 11 | ||||||
Superior Energy Services, Inc.* | 3 | 10 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 95 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 2x STRATEGY FUND |
| Shares | Value | ||||||
Enphase Energy, Inc.*,1 | 2 | $ | 10 | |||||
Diamond Offshore Drilling, Inc.* | 1 | 9 | ||||||
SandRidge Energy, Inc.* | 1 | 8 | ||||||
Tellurian, Inc.* | 1 | 7 | ||||||
Newpark Resources, Inc.* | 1 | 7 | ||||||
Select Energy Services, Inc. — Class A* | 1 | 6 | ||||||
Plug Power, Inc.* | 5 | 6 | ||||||
Ring Energy, Inc.* | 1 | 5 | ||||||
HighPoint Resources Corp.* | 2 | 5 | ||||||
Ramaco Resources, Inc.* | 1 | 5 | ||||||
Northern Oil and Gas, Inc.* | 2 | 5 | ||||||
Forum Energy Technologies, Inc.* | 1 | 4 | ||||||
W&T Offshore, Inc.* | 1 | 4 | ||||||
Clean Energy Fuels Corp.* | 2 | 3 | ||||||
Halcon Resources Corp.* | 2 | 3 | ||||||
Dawson Geophysical Co.* | 1 | 3 | ||||||
TETRA Technologies, Inc.* | 2 | 3 | ||||||
Ultra Petroleum Corp.* | 3 | 2 | ||||||
Abraxas Petroleum Corp.* | 2 | 2 | ||||||
Lilis Energy, Inc.* | 1 | 1 | ||||||
Pioneer Energy Services Corp.* | 1 | 1 | ||||||
Flotek Industries, Inc.* | 1 | 1 | ||||||
Eclipse Resources Corp.* | 1 | 1 | ||||||
Alta Mesa Resources, Inc. — Class A* | 1 | 1 | ||||||
Approach Resources, Inc.* | 1 | 1 | ||||||
EP Energy Corp. — Class A* | 1 | 1 | ||||||
FuelCell Energy, Inc.* | 1 | 1 | ||||||
Zion Oil & Gas, Inc.* | 1 | — | ||||||
Cloud Peak Energy, Inc.* | 1 | — | ||||||
Sanchez Energy Corp.* | 1 | — | ||||||
Total Energy | 1,147 | |||||||
Basic Materials - 0.1% | ||||||||
Rogers Corp.* | 1 | 99 | ||||||
Ingevity Corp.* | 1 | 84 | ||||||
Stepan Co. | 1 | 74 | ||||||
Carpenter Technology Corp. | 2 | 71 | ||||||
Allegheny Technologies, Inc.* | 3 | 65 | ||||||
PolyOne Corp. | 2 | 57 | ||||||
Sensient Technologies Corp. | 1 | 56 | ||||||
Cleveland-Cliffs, Inc. | 6 | 46 | ||||||
Materion Corp. | 1 | 45 | ||||||
HB Fuller Co. | 1 | 43 | ||||||
Compass Minerals International, Inc. | 1 | 42 | ||||||
Codexis, Inc.* | 2 | 33 | ||||||
Commercial Metals Co. | 2 | 32 | ||||||
GCP Applied Technologies, Inc.* | 1 | 24 | ||||||
Innophos Holdings, Inc. | 1 | 24 | ||||||
Verso Corp. — Class A* | 1 | 22 | ||||||
Tahoe Resources, Inc.* | 6 | 22 | ||||||
Kraton Corp.* | 1 | 22 | ||||||
Rayonier Advanced Materials, Inc. | 2 | 21 | ||||||
Hecla Mining Co. | 8 | 19 | ||||||
Ferro Corp.* | 1 | 16 | ||||||
Tronox Ltd. — Class A | 2 | 16 | ||||||
PQ Group Holdings, Inc.* | 1 | 15 | ||||||
Century Aluminum Co.* | 2 | 15 | ||||||
AK Steel Holding Corp.* | 6 | 14 | ||||||
PH Glatfelter Co. | 1 | 10 | ||||||
Coeur Mining, Inc.* | 2 | 9 | ||||||
OMNOVA Solutions, Inc.* | 1 | 7 | ||||||
Gold Resource Corp. | 1 | 4 | ||||||
Marrone Bio Innovations, Inc.* | 2 | 3 | ||||||
Energy Fuels, Inc.* | 1 | 3 | ||||||
Intrepid Potash, Inc.* | 1 | 3 | ||||||
Uranium Energy Corp.* | 2 | 2 | ||||||
Total Basic Materials | 1,018 | |||||||
Total Common Stocks | ||||||||
(Cost $26,076) | 33,121 | |||||||
WARRANTS†† - 0.0% | ||||||||
Imperial Holdings, Inc.* | ||||||||
$10.75, 10/06/19 | 1 | — | ||||||
Total Warrants | ||||||||
(Cost $—) | — | |||||||
RIGHTS††† - 0.0% | ||||||||
Tobira Therapeutics, Inc.*,2 | 7 | — | ||||||
Omthera Pharmaceuticals, Inc.*,2 | 10 | — | ||||||
Nexstar Media Group, Inc.*,2 | 207 | — | ||||||
A Schulman, Inc.*,2 | 20 | — | ||||||
Total Rights | ||||||||
(Cost $—) | — | |||||||
MUTUAL FUNDS† - 53.7% | ||||||||
Guggenheim Ultra Short Duration Fund3,10 | 46,162 | 459,770 | ||||||
Guggenheim Strategy Fund II3 | 18,075 | 448,611 | ||||||
Total Mutual Funds | ||||||||
(Cost $910,269) | 908,381 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 9.1% | ||||||||
U.S. Treasury Bills | ||||||||
2.35% due 03/14/194,5 | $ | 133,000 | 132,374 | |||||
2.21% due 01/08/195,6 | 22,000 | 21,992 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $154,358) | 154,366 |
96| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 2x STRATEGY FUND |
| Face | Value | ||||||
REPURCHASE AGREEMENTS††,7 - 28.2% | ||||||||
JPMorgan Chase & Co. | $ | 281,129 | $ | 281,129 | ||||
Barclays Capital | 116,914 | 116,914 | ||||||
Bank of America Merrill Lynch | 77,942 | 77,942 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $475,985) | 475,985 | |||||||
| Shares |
| ||||||
SECURITIES LENDING COLLATERAL†,8 - 0.0% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 2.32%9 | 62 | 62 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $62) | 62 | |||||||
Total Investments - 93.0% | ||||||||
(Cost $1,566,750) | $ | 1,571,915 | ||||||
Other Assets & Liabilities, net - 7.0% | 118,564 | |||||||
Total Net Assets - 100.0% | $ | 1,690,479 |
Futures Contracts | |||||||||||||
Description | Number of | Expiration | Notional | Value and | |||||||||
Equity Futures Contracts Purchased† | |||||||||||||
Russell 2000 Index Mini Futures Contracts | 2 | Mar 2019 | $ | 134,960 | $ | (11,010 | ) |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||
Goldman Sachs International | Russell 2000 Index | 2.27 | % | At Maturity | 01/28/19 | 1,547 | $ | 2,086,472 | $ | 24,902 | |||||||||
BNP Paribas | Russell 2000 Index | 2.52 | % | At Maturity | 01/29/19 | 577 | 777,611 | 9,654 | |||||||||||
Barclays Bank plc | Russell 2000 Index | 2.42 | % | At Maturity | 01/31/19 | 257 | 346,340 | 4,300 | |||||||||||
$ | 3,210,423 | $ | 38,856 |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | 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 a portion of this security is on loan at December 31, 2018 — See Note 7. |
2 | Security was fair valued by the Valuation Committee at December 31, 2018. The total market value of fair valued securities amounts to $0, (cost $0) or less than 0.1% of total net assets. |
3 | Affiliated issuer. |
4 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2018. |
5 | Rate indicated is the effective yield at the time of purchase. |
6 | All or a portion of this security is pledged as futures collateral at December 31, 2018. |
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, 2018. |
10 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
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| 97 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 2x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 33,121 | $ | — | $ | — | $ | 33,121 | ||||||||
Warrants | — | — | * | — | — | |||||||||||
Rights | — | — | — | * | — | |||||||||||
Mutual Funds | 908,381 | — | — | 908,381 | ||||||||||||
U.S. Treasury Bills | — | 154,366 | — | 154,366 | ||||||||||||
Repurchase Agreements | — | 475,985 | — | 475,985 | ||||||||||||
Securities Lending Collateral | 62 | — | — | 62 | ||||||||||||
Equity Index Swap Agreements** | — | 38,856 | — | 38,856 | ||||||||||||
Total Assets | $ | 941,564 | $ | 669,207 | $ | — | $ | 1,610,771 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Futures Contracts** | $ | 11,010 | $ | — | $ | — | $ | 11,010 |
* | Includes securities with a market value of $0. |
** | This derivative is reported as unrealized appreciation/depreciation 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, 2018, there were no transfers between levels.
98| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
RUSSELL 2000® 2x STRATEGY FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Cash Management Funds”), each of which are 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, 2018, 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/1601445/000089180418000513/gug75569-ncsr.htm.
Transactions during the year ended December 31, 2018, in which the company is an “affiliated person”, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | Capital | |||||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||||||
Guggenheim Ultra Short Duration Fund1 | $ | 1,630,101 | $ | 9,630,738 | $ | (10,800,000 | ) | $ | (10 | ) | $ | (1,059 | ) | $ | 459,770 | 46,162 | $ | 30,724 | $ | 43 | ||||||||||||||||
Guggenheim Strategy Fund II | 1,117,448 | 5,095,678 | (5,760,000 | ) | (1,057 | ) | (3,458 | ) | 448,611 | 18,075 | 35,414 | 240 | ||||||||||||||||||||||||
$ | 2,747,549 | $ | 14,726,416 | $ | (16,560,000 | ) | $ | (1,067 | ) | $ | (4,517 | ) | $ | 908,381 | $ | 66,138 | $ | 283 |
1 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 99 |
RUSSELL 2000® 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $70 of securities loaned (cost $180,496) | $ | 187,549 | ||
Investments in affiliated issuers, at value (cost $910,269) | 908,381 | |||
Repurchase agreements, at value (cost $475,985) | 475,985 | |||
Segregated cash with broker | 799 | |||
Unrealized appreciation on swap agreements | 38,856 | |||
Receivables: | ||||
Fund shares sold | 99,613 | |||
Swap settlement | 1,109 | |||
Dividends | 995 | |||
Variation margin on futures contracts | 870 | |||
Securities sold | 67 | |||
Interest | 39 | |||
Total assets | 1,714,263 | |||
Liabilities: | ||||
Overdraft due to custodian bank | 11 | |||
Payable for: | ||||
Professional fees | 7,471 | |||
Licensing fees | 3,014 | |||
Management fees | 1,383 | |||
Securities purchased | 1,049 | |||
Transfer agent and administrative fees | 388 | |||
Investor service fees | 388 | |||
Trustees’ fees* | 170 | |||
Portfolio accounting fees | 155 | |||
Return of securities lending collateral | 72 | |||
Fund shares redeemed | 1 | |||
Miscellaneous | 9,682 | |||
Total liabilities | 23,784 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 1,690,479 | ||
Net assets consist of: | ||||
Paid in capital | $ | 2,429,666 | ||
Total distributable earnings (loss) | (739,187 | ) | ||
Net assets | $ | 1,690,479 | ||
Capital shares outstanding | 10,535 | |||
Net asset value per share | $ | 160.46 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $4) | $ | 12,366 | ||
Dividends from securities of affiliated issuers | 66,138 | |||
Interest | 47,473 | |||
Income from securities lending, net | 538 | |||
Total investment income | 126,515 | |||
Expenses: | ||||
Management fees | 54,318 | |||
Investor service fees | 15,088 | |||
Transfer agent and administrative fees | 15,088 | |||
Professional fees | 7,679 | |||
Portfolio accounting fees | 6,035 | |||
Trustees’ fees* | 2,402 | |||
Custodian fees | 974 | |||
Line of credit fees | 54 | |||
Miscellaneous | 7,977 | |||
Total expenses | 109,615 | |||
Less: | ||||
Expenses waived by Adviser | (11 | ) | ||
Net expenses | 109,604 | |||
Net investment income | 16,911 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 203,758 | |||
Investments in affiliated issuers | (1,067 | ) | ||
Distributions received from affiliated investment company shares | 283 | |||
Swap agreements | (899,869 | ) | ||
Futures contracts | 73,056 | |||
Net realized loss | (623,839 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (186,451 | ) | ||
Investments in affiliated issuers | (4,517 | ) | ||
Swap agreements | 99,948 | |||
Futures contracts | (8,805 | ) | ||
Net change in unrealized appreciation (depreciation) | (99,825 | ) | ||
Net realized and unrealized loss | (723,664 | ) | ||
Net decrease in net assets resulting from operations | $ | (706,753 | ) |
* | 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. |
RUSSELL 2000® 2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | 16,911 | $ | (23,005 | ) | |||
Net realized gain (loss) on investments | (623,839 | ) | 1,273,038 | |||||
Net change in unrealized appreciation (depreciation) on investments | (99,825 | ) | (254,109 | ) | ||||
Net increase (decrease) in net assets resulting from operations | (706,753 | ) | 995,924 | |||||
Distributions to shareholders | (567,824 | ) | (219,611 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 138,484,712 | 87,748,901 | ||||||
Distributions reinvested | 567,824 | 219,611 | ||||||
Cost of shares redeemed | (143,127,280 | ) | (87,451,791 | ) | ||||
Net increase (decrease) from capital share transactions | (4,074,744 | ) | 516,721 | |||||
Net increase (decrease) in net assets | (5,349,321 | ) | 1,293,034 | |||||
Net assets: | ||||||||
Beginning of year | 7,039,800 | 5,746,766 | ||||||
End of year | $ | 1,690,479 | $ | 7,039,800 | ||||
Capital share activity: | ||||||||
Shares sold | 548,261 | 443,643 | ||||||
Shares issued from reinvestment of distributions | 2,192 | 1,079 | ||||||
Shares redeemed | (569,919 | ) | (444,510 | ) | ||||
Net increase (decrease) in shares | (19,466 | ) | 212 |
1 | For the year ended December 31, 2017, the total distributions to shareholders were all from net realized gains (see Note 11). |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 101 |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 234.65 | $ | 192.92 | $ | 139.69 | $ | 180.03 | $ | 262.78 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .70 | (.79 | ) | (1.11 | ) | (1.73 | ) | (2.53 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | (54.40 | ) | 50.24 | 54.34 | (17.40 | ) | 11.64 | |||||||||||||
Total from investment operations | (53.70 | ) | 49.45 | 53.23 | (19.13 | ) | 9.11 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (20.49 | ) | (7.72 | ) | — | (21.21 | ) | (91.86 | ) | |||||||||||
Total distributions | (20.49 | ) | (7.72 | ) | — | (21.21 | ) | (91.86 | ) | |||||||||||
Net asset value, end of period | $ | 160.46 | $ | 234.65 | $ | 192.92 | $ | 139.69 | $ | 180.03 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (26.21 | %) | 26.26 | % | 38.11 | % | (13.15 | %) | 5.17 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 1,690 | $ | 7,040 | $ | 5,747 | $ | 2,770 | $ | 5,528 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.28 | % | (0.38 | %) | (0.74 | %) | (1.00 | %) | (1.07 | %) | ||||||||||
Total expensesc | 1.82 | % | 1.80 | % | 1.77 | % | 1.70 | % | 1.77 | % | ||||||||||
Net expensesd | 1.82 | % | 1.80 | % | 1.77 | % | 1.70 | % | 1.77 | % | ||||||||||
Portfolio turnover rate | 625 | % | 525 | % | 1,125 | % | 327 | % | 360 | % |
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 reimbursements, as applicable. |
102| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, 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 -19.57%, while the Russell 2000 Index returned -11.01% over the same time period.
Among sectors, the only performance contributor to the underlying index during the period was Information Technology. Utilities detracted the least. The leading detractors from return were Industrials and Financials.
Sarepta Therapeutics, Inc., AveXis, Inc., and GrubHub, Inc. were the largest contributors to performance of the underlying index for the year. Dana, Inc., McDermott International, Inc., and Clovis Oncology, Inc. 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. Derivatives performed as expected.
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 | 103 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. 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.
Cumulative Fund Performance*,†
Inception Date: October 1, 2001 |
Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 30.9% |
Guggenheim Ultra Short Duration Fund | 29.2% |
Total | 60.1% |
“Largest Holdings” excludes any temporary cash or derivative investments.
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Russell 2000® 1.5x Strategy Fund | (19.57%) | 3.60% | 14.07% |
Russell 2000 Index | (11.01%) | 7.64% | 15.22% |
* | 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. |
104 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2018 |
RUSSELL 2000® 1.5x STRATEGY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 2.1% | ||||||||
Financial - 0.5% | ||||||||
PotlatchDeltic Corp. REIT | 11 | $ | 348 | |||||
Healthcare Realty Trust, Inc. REIT | 12 | 341 | ||||||
Enstar Group Ltd.* | 2 | 335 | ||||||
Selective Insurance Group, Inc. | 5 | 305 | ||||||
Primerica, Inc. | 3 | 293 | ||||||
First Industrial Realty Trust, Inc. REIT | 10 | 289 | ||||||
First Financial Bankshares, Inc. | 5 | 288 | ||||||
Cousins Properties, Inc. REIT | 36 | 284 | ||||||
Pebblebrook Hotel Trust REIT | 10 | 283 | ||||||
United Bankshares, Inc. | 9 | 280 | ||||||
Radian Group, Inc. | 17 | 278 | ||||||
RLI Corp. | 4 | 276 | ||||||
Essent Group Ltd.* | 8 | 273 | ||||||
Physicians Realty Trust REIT | 17 | 273 | ||||||
Kemper Corp. | 4 | 265 | ||||||
MGIC Investment Corp.* | 25 | 261 | ||||||
IBERIABANK Corp. | 4 | 257 | ||||||
American Equity Investment Life Holding Co. | 9 | 251 | ||||||
Stifel Financial Corp. | 6 | 249 | ||||||
Sabra Health Care REIT, Inc. | 15 | 247 | ||||||
Hancock Whitney Corp. | 7 | 243 | ||||||
Valley National Bancorp | 27 | 240 | ||||||
CNO Financial Group, Inc. | 16 | 238 | ||||||
Glacier Bancorp, Inc. | 6 | 238 | ||||||
Cathay General Bancorp | 7 | 235 | ||||||
Sunstone Hotel Investors, Inc. REIT | 18 | 234 | ||||||
RLJ Lodging Trust REIT | 14 | 230 | ||||||
National Health Investors, Inc. REIT | 3 | 227 | ||||||
Blackstone Mortgage Trust, Inc. — Class A REIT | 7 | 223 | ||||||
Chemical Financial Corp. | 6 | 220 | ||||||
LendingTree, Inc.* | 1 | 220 | ||||||
Columbia Banking System, Inc. | 6 | 218 | ||||||
Fulton Financial Corp. | 14 | 217 | ||||||
Home BancShares, Inc. | 13 | 212 | ||||||
Federated Investors, Inc. — Class B | 8 | 212 | ||||||
BancorpSouth Bank | 8 | 209 | ||||||
Investors Bancorp, Inc. | 20 | 208 | ||||||
Argo Group International Holdings Ltd. | 3 | 202 | ||||||
Ryman Hospitality Properties, Inc. REIT | 3 | 200 | ||||||
Kennedy-Wilson Holdings, Inc. | 11 | 200 | ||||||
STAG Industrial, Inc. REIT | 8 | 199 | ||||||
MB Financial, Inc. | 5 | 198 | ||||||
CoreCivic, Inc. REIT | 11 | 196 | ||||||
Simmons First National Corp. — Class A | 8 | 193 | ||||||
First Financial Bancorp | 8 | 190 | ||||||
Ellie Mae, Inc.* | 3 | 189 | ||||||
Genworth Financial, Inc. — Class A* | 40 | 186 | ||||||
Old National Bancorp | 12 | 185 | ||||||
EastGroup Properties, Inc. REIT | 2 | 183 | ||||||
UMB Financial Corp. | 3 | 183 | ||||||
CVB Financial Corp. | 9 | 182 | ||||||
South State Corp. | 3 | 180 | ||||||
Agree Realty Corp. REIT | 3 | 177 | ||||||
GEO Group, Inc. REIT | 9 | 177 | ||||||
Rexford Industrial Realty, Inc. REIT | 6 | 177 | ||||||
Community Bank System, Inc. | 3 | 175 | ||||||
Trustmark Corp. | 6 | 171 | ||||||
Piedmont Office Realty Trust, Inc. — Class A REIT | 10 | 170 | ||||||
CenterState Bank Corp. | 8 | 168 | ||||||
LTC Properties, Inc. REIT | 4 | 167 | ||||||
Apollo Commercial Real Estate Finance, Inc. REIT | 10 | 167 | ||||||
Acadia Realty Trust REIT | 7 | 166 | ||||||
Urban Edge Properties REIT | 10 | 166 | ||||||
Safety Insurance Group, Inc. | 2 | 164 | ||||||
ProAssurance Corp. | 4 | 162 | ||||||
Tanger Factory Outlet Centers, Inc. REIT | 8 | 162 | ||||||
American Assets Trust, Inc. REIT | 4 | 161 | ||||||
Banner Corp. | 3 | 160 | ||||||
Washington Federal, Inc. | 6 | 160 | ||||||
Invesco Mortgage Capital, Inc. REIT | 11 | 159 | ||||||
First Midwest Bancorp, Inc. | 8 | 158 | ||||||
McGrath RentCorp | 3 | 155 | ||||||
Americold Realty Trust REIT | 6 | 153 | ||||||
QTS Realty Trust, Inc. — Class A REIT | 4 | 148 | ||||||
Lexington Realty Trust REIT | 18 | 148 | ||||||
First BanCorp | 17 | 146 | ||||||
Eagle Bancorp, Inc.* | 3 | 146 | ||||||
Retail Opportunity Investments Corp. REIT | 9 | 143 | ||||||
Union Bankshares Corp. | 5 | 141 | ||||||
Terreno Realty Corp. REIT | 4 | 141 | ||||||
Independent Bank Corp. | 2 | 141 | ||||||
Capitol Federal Financial, Inc. | 11 | 140 | ||||||
Washington Real Estate Investment Trust | 6 | 138 | ||||||
International Bancshares Corp. | 4 | 138 | ||||||
Mack-Cali Realty Corp. REIT | 7 | 137 | ||||||
First Merchants Corp. | 4 | 137 | ||||||
City Holding Co. | 2 | 135 | ||||||
Piper Jaffray Cos. | 2 | 132 | ||||||
FBL Financial Group, Inc. — Class A | 2 | 131 | ||||||
Four Corners Property Trust, Inc. REIT | 5 | 131 | ||||||
PS Business Parks, Inc. REIT | 1 | 131 | ||||||
United Community Banks, Inc. | 6 | 129 | ||||||
DiamondRock Hospitality Co. REIT | 14 | 127 | ||||||
Waddell & Reed Financial, Inc. — Class A | 7 | 127 | ||||||
Axos Financial, Inc.* | 5 | 126 | ||||||
Bank of NT Butterfield & Son Ltd. | 4 | 125 | ||||||
Great Western Bancorp, Inc. | 4 | 125 | ||||||
Hilltop Holdings, Inc. | 7 | 125 | ||||||
Provident Financial Services, Inc. | 5 | 121 | ||||||
Xenia Hotels & Resorts, Inc. REIT | 7 | 120 | ||||||
TowneBank | 5 | 120 | ||||||
Northwest Bancshares, Inc. | 7 | 119 | ||||||
WSFS Financial Corp. | 3 | 114 | ||||||
S&T Bancorp, Inc. | 3 | 114 | ||||||
AMERISAFE, Inc. | 2 | 113 | ||||||
Horace Mann Educators Corp. | 3 | 112 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 105 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 1.5x STRATEGY FUND |
| Shares | Value | ||||||
Westamerica Bancorporation | 2 | $ | 111 | |||||
United Fire Group, Inc. | 2 | 111 | ||||||
WesBanco, Inc. | 3 | 110 | ||||||
James River Group Holdings Ltd. | 3 | 110 | ||||||
Ladder Capital Corp. — Class A REIT | 7 | 108 | ||||||
National Storage Affiliates Trust REIT | 4 | 106 | ||||||
Nelnet, Inc. — Class A | 2 | 105 | ||||||
Seacoast Banking Corporation of Florida* | 4 | 104 | ||||||
NBT Bancorp, Inc. | 3 | 104 | ||||||
Moelis & Co. — Class A | 3 | 103 | ||||||
World Acceptance Corp.* | 1 | 102 | ||||||
Pacific Premier Bancorp, Inc.* | 4 | 102 | ||||||
BancFirst Corp. | 2 | 100 | ||||||
Kite Realty Group Trust REIT | 7 | 99 | ||||||
Chesapeake Lodging Trust REIT | 4 | 97 | ||||||
National General Holdings Corp. | 4 | 97 | ||||||
LegacyTexas Financial Group, Inc. | 3 | 96 | ||||||
Newmark Group, Inc. — Class A | 12 | 96 | ||||||
ServisFirst Bancshares, Inc. | 3 | 96 | ||||||
Southside Bancshares, Inc. | 3 | 95 | ||||||
Washington Trust Bancorp, Inc. | 2 | 95 | ||||||
Ameris Bancorp | 3 | 95 | ||||||
Hope Bancorp, Inc. | 8 | 95 | ||||||
Colony Credit Real Estate, Inc. REIT | 6 | 95 | ||||||
First Community Bankshares, Inc. | 3 | 94 | ||||||
Sandy Spring Bancorp, Inc. | 3 | 94 | ||||||
PennyMac Mortgage Investment Trust REIT | 5 | 93 | ||||||
CareTrust REIT, Inc. | 5 | 92 | ||||||
Alexander & Baldwin, Inc. REIT* | 5 | 92 | ||||||
Independent Bank Group, Inc. | 2 | 92 | ||||||
Renasant Corp. | 3 | 91 | ||||||
OceanFirst Financial Corp. | 4 | 90 | ||||||
Kearny Financial Corp. | 7 | 90 | ||||||
NMI Holdings, Inc. — Class A* | 5 | 89 | ||||||
Global Net Lease, Inc. REIT | 5 | 88 | ||||||
Heartland Financial USA, Inc. | 2 | 88 | ||||||
Preferred Bank/Los Angeles CA | 2 | 87 | ||||||
Walker & Dunlop, Inc. | 2 | 87 | ||||||
Park National Corp. | 1 | 85 | ||||||
First Commonwealth Financial Corp. | 7 | 85 | ||||||
Employers Holdings, Inc. | 2 | 84 | ||||||
Cadence BanCorp | 5 | 84 | ||||||
Cambridge Bancorp | 1 | 83 | ||||||
Brookline Bancorp, Inc. | 6 | 83 | ||||||
Stewart Information Services Corp. | 2 | 83 | ||||||
Washington Prime Group, Inc. REIT | 17 | 83 | ||||||
WageWorks, Inc.* | 3 | 81 | ||||||
Berkshire Hills Bancorp, Inc. | 3 | 81 | ||||||
Lakeland Financial Corp. | 2 | 80 | ||||||
Blucora, Inc.* | 3 | 80 | ||||||
FGL Holdings* | 12 | 80 | ||||||
Flagstar Bancorp, Inc.* | 3 | 79 | ||||||
Industrial Logistics Properties Trust REIT | 4 | 79 | ||||||
PJT Partners, Inc. — Class A | 2 | 78 | ||||||
eHealth, Inc.* | 2 | 77 | ||||||
Universal Insurance Holdings, Inc. | 2 | 76 | ||||||
Redwood Trust, Inc. REIT | 5 | 75 | ||||||
Enterprise Financial Services Corp. | 2 | 75 | ||||||
Tompkins Financial Corp. | 1 | 75 | ||||||
First Busey Corp. | 3 | 74 | ||||||
Houlihan Lokey, Inc. | 2 | 74 | ||||||
First Interstate BancSystem, Inc. — Class A | 2 | 73 | ||||||
PRA Group, Inc.* | 3 | 73 | ||||||
Granite Point Mortgage Trust, Inc. REIT | 4 | 72 | ||||||
Redfin Corp.*,1 | 5 | 72 | ||||||
Camden National Corp. | 2 | 72 | ||||||
RPT Realty REIT | 6 | 72 | ||||||
Beneficial Bancorp, Inc. | 5 | 71 | ||||||
LendingClub Corp.* | 27 | 71 | ||||||
Chatham Lodging Trust REIT | 4 | 71 | ||||||
Navigators Group, Inc. | 1 | 69 | ||||||
Aircastle Ltd. | 4 | 69 | ||||||
Bryn Mawr Bank Corp. | 2 | 69 | ||||||
Summit Hotel Properties, Inc. REIT | 7 | 68 | ||||||
Century Bancorp, Inc. — Class A | 1 | 68 | ||||||
TriCo Bancshares | 2 | 68 | ||||||
Midland States Bancorp, Inc. | 3 | 67 | ||||||
Artisan Partners Asset Management, Inc. — Class A | 3 | 66 | ||||||
HFF, Inc. — Class A | 2 | 66 | ||||||
First Bancorp | 2 | 65 | ||||||
State Bank Financial Corp. | 3 | 65 | ||||||
Seritage Growth Properties REIT | 2 | 65 | ||||||
Independence Realty Trust, Inc. REIT | 7 | 64 | ||||||
Fidelity D&D Bancorp, Inc. | 1 | 64 | ||||||
BrightSphere Investment Group plc | 6 | 64 | ||||||
Blue Hills Bancorp, Inc. | 3 | 64 | ||||||
Boston Private Financial Holdings, Inc. | 6 | 63 | ||||||
InfraREIT, Inc. | 3 | 63 | ||||||
Easterly Government Properties, Inc. REIT | 4 | 63 | ||||||
MBIA, Inc.* | 7 | 62 | ||||||
Guaranty Bancorp | 3 | 62 | ||||||
Monmouth Real Estate Investment Corp. REIT | 5 | 62 | ||||||
Tier REIT, Inc. | 3 | 62 | ||||||
National Bank Holdings Corp. — Class A | 2 | 62 | ||||||
ARMOUR Residential REIT, Inc. | 3 | 61 | ||||||
RE/MAX Holdings, Inc. — Class A | 2 | 62 | ||||||
Universal Health Realty Income Trust REIT | 1 | 61 | ||||||
Columbia Financial, Inc.* | 4 | 61 | ||||||
Investment Technology Group, Inc. | 2 | 60 | ||||||
Federal Agricultural Mortgage Corp. — Class C | 1 | 60 | ||||||
People’s Utah Bancorp | 2 | 60 | ||||||
WisdomTree Investments, Inc. | 9 | 60 | ||||||
Guaranty Bancshares, Inc. | 2 | 60 | ||||||
Heritage Financial Corp. | 2 | 59 | ||||||
Triumph Bancorp, Inc.* | 2 | 59 | ||||||
Getty Realty Corp. REIT | 2 | 59 | ||||||
United Financial Bancorp, Inc. | 4 | 59 | ||||||
CBTX, Inc. | 2 | 59 | ||||||
Third Point Reinsurance Ltd.* | 6 | 58 |
106| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 1.5x STRATEGY FUND |
| Shares | Value | ||||||
Hannon Armstrong Sustainable Infrastructure Capital, Inc. REIT | 3 | $ | 57 | |||||
Kinsale Capital Group, Inc. | 1 | 56 | ||||||
iStar, Inc. REIT | 6 | 55 | ||||||
TrustCo Bank Corp. NY | 8 | 55 | ||||||
RMR Group, Inc. — Class A | 1 | 53 | ||||||
New York Mortgage Trust, Inc. REIT | 9 | 53 | ||||||
Hersha Hospitality Trust REIT | 3 | 53 | ||||||
Ambac Financial Group, Inc.* | 3 | 52 | ||||||
Trupanion, Inc.* | 2 | 51 | ||||||
OFG Bancorp | 3 | 49 | ||||||
Nicolet Bankshares, Inc.* | 1 | 49 | ||||||
Central Pacific Financial Corp. | 2 | 49 | ||||||
One Liberty Properties, Inc. REIT | 2 | 48 | ||||||
Government Properties Income Trust REIT*,1 | 7 | 48 | ||||||
Sierra Bancorp | 2 | 48 | ||||||
Horizon Bancorp, Inc. | 3 | 47 | ||||||
Saul Centers, Inc. REIT | 1 | 47 | ||||||
Encore Capital Group, Inc.* | 2 | 47 | ||||||
Great Southern Bancorp, Inc. | 1 | 46 | ||||||
FRP Holdings, Inc.* | 1 | 46 | ||||||
CNB Financial Corp. | 2 | 46 | ||||||
Innovative Industrial Properties, Inc. REIT | 1 | 45 | ||||||
Orchid Island Capital, Inc. REIT | 7 | 45 | ||||||
Lakeland Bancorp, Inc. | 3 | 44 | ||||||
Live Oak Bancshares, Inc. | 3 | 44 | ||||||
Oritani Financial Corp. | 3 | 44 | ||||||
Select Income REIT | 6 | 44 | ||||||
NorthStar Realty Europe Corp. REIT | 3 | 44 | ||||||
Franklin Street Properties Corp. REIT | 7 | 44 | ||||||
Cushman & Wakefield plc* | 3 | 43 | ||||||
Univest Financial Corp. | 2 | 43 | ||||||
Flushing Financial Corp. | 2 | 43 | ||||||
Meridian Bancorp, Inc. | 3 | 43 | ||||||
Veritex Holdings, Inc.* | 2 | 43 | ||||||
PennyMac Financial Services, Inc. | 2 | 43 | ||||||
HomeStreet, Inc.* | 2 | 42 | ||||||
Middlefield Banc Corp. | 1 | 42 | ||||||
Preferred Apartment Communities, Inc. — Class A REIT | 3 | 42 | ||||||
Armada Hoffler Properties, Inc. REIT | 3 | 42 | ||||||
Northfield Bancorp, Inc. | 3 | 41 | ||||||
1st Source Corp. | 1 | 40 | ||||||
Arbor Realty Trust, Inc. REIT | 4 | 40 | ||||||
Penns Woods Bancorp, Inc. | 1 | 40 | ||||||
First Financial Corp. | 1 | 40 | ||||||
Capstead Mortgage Corp. REIT | 6 | 40 | ||||||
Banc of California, Inc. | 3 | 40 | ||||||
First of Long Island Corp. | 2 | 40 | ||||||
Community Trust Bancorp, Inc. | 1 | 40 | ||||||
Hanmi Financial Corp. | 2 | 39 | ||||||
PCSB Financial Corp. | 2 | 39 | ||||||
Enova International, Inc.* | 2 | 39 | ||||||
TriState Capital Holdings, Inc.* | 2 | 39 | ||||||
First Community Corp. | 2 | 39 | ||||||
Meta Financial Group, Inc. | 2 | 39 | ||||||
Republic Bancorp, Inc. — Class A | 1 | 39 | ||||||
Farmers & Merchants Bancorp Incorporated/Archbold OH | 1 | 39 | ||||||
Urstadt Biddle Properties, Inc. — Class A REIT | 2 | 38 | ||||||
Hamilton Lane, Inc. — Class A | 1 | 37 | ||||||
ConnectOne Bancorp, Inc. | 2 | 37 | ||||||
Whitestone REIT — Class B | 3 | 37 | ||||||
CorePoint Lodging, Inc. REIT | 3 | 37 | ||||||
INTL FCStone, Inc.* | 1 | 37 | ||||||
TPG RE Finance Trust, Inc. REIT | 2 | 37 | ||||||
SmartFinancial, Inc.* | 2 | 37 | ||||||
Customers Bancorp, Inc.* | 2 | 36 | ||||||
Global Indemnity Ltd | 1 | 36 | ||||||
National Commerce Corp.* | 1 | 36 | ||||||
Gladstone Commercial Corp. REIT | 2 | 36 | ||||||
CatchMark Timber Trust, Inc. — Class A REIT | 5 | 36 | ||||||
Home Bancorp, Inc. | 1 | 35 | ||||||
Equity Bancshares, Inc. — Class A* | 1 | 35 | ||||||
NexPoint Residential Trust, Inc. REIT | 1 | 35 | ||||||
FB Financial Corp. | 1 | 35 | ||||||
Marcus & Millichap, Inc.* | 1 | 34 | ||||||
Cohen & Steers, Inc. | 1 | 34 | ||||||
Green Bancorp, Inc. | 2 | 34 | ||||||
Origin Bancorp, Inc. | 1 | 34 | ||||||
State Auto Financial Corp. | 1 | 34 | ||||||
Heritage Commerce Corp. | 3 | 34 | ||||||
Westwood Holdings Group, Inc. | 1 | 34 | ||||||
Dime Community Bancshares, Inc. | 2 | 34 | ||||||
Southern Missouri Bancorp, Inc. | 1 | 34 | ||||||
Waterstone Financial, Inc. | 2 | 33 | ||||||
CorEnergy Infrastructure Trust, Inc. REIT | 1 | 33 | ||||||
Stock Yards Bancorp, Inc. | 1 | 33 | ||||||
Atlantic Capital Bancshares, Inc.* | 2 | 33 | ||||||
Allegiance Bancshares, Inc.* | 1 | 32 | ||||||
Enterprise Bancorp, Inc. | 1 | 32 | ||||||
QCR Holdings, Inc. | 1 | 32 | ||||||
Arrow Financial Corp. | 1 | 32 | ||||||
First Mid-Illinois Bancshares, Inc. | 1 | 32 | ||||||
AG Mortgage Investment Trust, Inc. REIT | 2 | 32 | ||||||
EMC Insurance Group, Inc. | 1 | 32 | ||||||
Greene County Bancorp, Inc. | 1 | 31 | ||||||
Metropolitan Bank Holding Corp.* | 1 | 31 | ||||||
First Bancshares, Inc. | 1 | 30 | ||||||
Western New England Bancorp, Inc. | 3 | 30 | ||||||
Peoples Bancorp, Inc. | 1 | 30 | ||||||
Pennsylvania Real Estate Investment Trust | 5 | 30 | ||||||
First Northwest Bancorp | 2 | 30 | ||||||
Carolina Financial Corp. | 1 | 30 | ||||||
Heritage Insurance Holdings, Inc. | 2 | 29 | ||||||
American National Bankshares, Inc. | 1 | 29 | ||||||
New Senior Investment Group, Inc. REIT | 7 | 29 | ||||||
Community Healthcare Trust, Inc. REIT | 1 | 29 | ||||||
Mercantile Bank Corp. | 1 | 28 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 107 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 1.5x STRATEGY FUND |
| Shares | Value | ||||||
BSB Bancorp, Inc.* | 1 | $ | 28 | |||||
Ashford Hospitality Trust, Inc. REIT | 7 | 28 | ||||||
German American Bancorp, Inc. | 1 | 28 | ||||||
Essential Properties Realty Trust, Inc. REIT | 2 | 28 | ||||||
Health Insurance Innovations, Inc. — Class A* | 1 | 27 | ||||||
Cowen, Inc. — Class A* | 2 | 27 | ||||||
United Community Financial Corp. | 3 | 27 | ||||||
Southern National Bancorp of Virginia, Inc. | 2 | 26 | ||||||
Citizens & Northern Corp. | 1 | 26 | ||||||
Franklin Financial Network, Inc.* | 1 | 26 | ||||||
Focus Financial Partners, Inc. — Class A* | 1 | 26 | ||||||
Old Line Bancshares, Inc. | 1 | 26 | ||||||
First Bancorp, Inc. | 1 | 26 | ||||||
Goosehead Insurance, Inc. — Class A* | 1 | 26 | ||||||
Front Yard Residential Corp. REIT | 3 | 26 | ||||||
HomeTrust Bancshares, Inc. | 1 | 26 | ||||||
Ares Commercial Real Estate Corp. REIT | 2 | 26 | ||||||
Fidelity Southern Corp. | 1 | 26 | ||||||
Old Second Bancorp, Inc. | 2 | 26 | ||||||
Territorial Bancorp, Inc. | 1 | 26 | ||||||
Greenlight Capital Re Ltd. — Class A* | 3 | 26 | ||||||
First Foundation, Inc.* | 2 | 26 | ||||||
Financial Institutions, Inc. | 1 | 26 | ||||||
Oppenheimer Holdings, Inc. — Class A | 1 | 26 | ||||||
Bridge Bancorp, Inc. | 1 | 26 | ||||||
Farmers National Banc Corp. | 2 | 25 | ||||||
Ames National Corp. | 1 | 25 | ||||||
Peapack Gladstone Financial Corp. | 1 | 25 | ||||||
Western Asset Mortgage Capital Corp. REIT | 3 | 25 | ||||||
CBL & Associates Properties, Inc. REIT | 13 | 25 | ||||||
MidWestOne Financial Group, Inc. | 1 | 25 | ||||||
Investar Holding Corp. | 1 | 25 | ||||||
First Defiance Financial Corp. | 1 | 24 | ||||||
Greenhill & Company, Inc. | 1 | 24 | ||||||
Anworth Mortgage Asset Corp. REIT | 6 | 24 | ||||||
Business First Bancshares, Inc. | 1 | 24 | ||||||
Regional Management Corp.* | 1 | 24 | ||||||
Bancorp, Inc.* | 3 | 24 | ||||||
UMH Properties, Inc. REIT | 2 | 24 | ||||||
Mr Cooper Group, Inc.* | 2 | 23 | ||||||
Capital City Bank Group, Inc. | 1 | 23 | ||||||
Baycom Corp.* | 1 | 23 | ||||||
Reliant Bancorp, Inc. | 1 | 23 | ||||||
Mid Penn Bancorp, Inc. | 1 | 23 | ||||||
Dynex Capital, Inc. REIT | 4 | 23 | ||||||
First Choice Bancorp | 1 | 23 | ||||||
Citizens, Inc.* | 3 | 23 | ||||||
Altisource Portfolio Solutions S.A.* | 1 | 22 | ||||||
Bar Harbor Bankshares | 1 | 22 | ||||||
Marlin Business Services Corp. | 1 | 22 | ||||||
Timberland Bancorp, Inc. | 1 | 22 | ||||||
Esquire Financial Holdings, Inc.* | 1 | 22 | ||||||
Spirit MTA REIT | 3 | 21 | ||||||
Access National Corp. | 1 | 21 | ||||||
Codorus Valley Bancorp, Inc. | 1 | 21 | ||||||
Independent Bank Corp. | 1 | 21 | ||||||
Unity Bancorp, Inc. | 1 | 21 | ||||||
Entegra Financial Corp.* | 1 | 21 | ||||||
City Office REIT, Inc. | 2 | 21 | ||||||
First Internet Bancorp | 1 | 20 | ||||||
Exantas Capital Corp. REIT | 2 | 20 | ||||||
Merchants Bancorp | 1 | 20 | ||||||
FedNat Holding Co. | 1 | 20 | ||||||
Jernigan Capital, Inc. REIT | 1 | 20 | ||||||
Opus Bank | 1 | 20 | ||||||
First Business Financial Services, Inc. | 1 | 20 | ||||||
Amalgamated Bank — Class A | 1 | 20 | ||||||
Summit Financial Group, Inc. | 1 | 19 | ||||||
Macatawa Bank Corp. | 2 | 19 | ||||||
KKR Real Estate Finance Trust, Inc. REIT | 1 | 19 | ||||||
West Bancorporation, Inc. | 1 | 19 | ||||||
Central Valley Community Bancorp | 1 | 19 | ||||||
Cedar Realty Trust, Inc. REIT | 6 | 19 | ||||||
Safety Income & Growth, Inc. REIT | 1 | 19 | ||||||
Ladenburg Thalmann Financial Services, Inc. | 8 | 19 | ||||||
GAIN Capital Holdings, Inc. | 3 | 18 | ||||||
MVB Financial Corp. | 1 | 18 | ||||||
Bluerock Residential Growth REIT, Inc. | 2 | 18 | ||||||
Republic First Bancorp, Inc.* | 3 | 18 | ||||||
Braemar Hotels & Resorts, Inc. REIT | 2 | 18 | ||||||
On Deck Capital, Inc.* | 3 | 18 | ||||||
Kingstone Companies, Inc. | 1 | 18 | ||||||
Prudential Bancorp, Inc. | 1 | 18 | ||||||
RBB Bancorp | 1 | 18 | ||||||
Cherry Hill Mortgage Investment Corp. REIT | 1 | 18 | ||||||
Civista Bancshares, Inc. | 1 | 17 | ||||||
Safeguard Scientifics, Inc.* | 2 | 17 | ||||||
Byline Bancorp, Inc.* | 1 | 17 | ||||||
Protective Insurance Corp. — Class B | 1 | 17 | ||||||
United Insurance Holdings Corp. | 1 | 17 | ||||||
HarborOne Bancorp, Inc.* | 1 | 16 | ||||||
NI Holdings, Inc.* | 1 | 16 | ||||||
Pacific City Financial Corp. | 1 | 16 | ||||||
ESSA Bancorp, Inc. | 1 | 16 | ||||||
First Financial Northwest, Inc. | 1 | 15 | ||||||
LCNB Corp. | 1 | 15 | ||||||
BankFinancial Corp. | 1 | 15 | ||||||
Premier Financial Bancorp, Inc. | 1 | 15 | ||||||
Capstar Financial Holdings, Inc. | 1 | 15 | ||||||
Riverview Bancorp, Inc. | 2 | 15 | ||||||
Shore Bancshares, Inc. | 1 | 15 | ||||||
Arlington Asset Investment Corp. — Class A | 2 | 14 | ||||||
Howard Bancorp, Inc.* | 1 | 14 | ||||||
B. Riley Financial, Inc. | 1 | 14 | ||||||
Forestar Group, Inc.* | 1 | 14 | ||||||
Ready Capital Corp. REIT | 1 | 14 | ||||||
MedEquities Realty Trust, Inc. REIT | 2 | 14 | ||||||
Donegal Group, Inc. — Class A | 1 | 14 |
108| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 1.5x STRATEGY FUND |
| Shares | Value | ||||||
Ocwen Financial Corp.* | 10 | $ | 13 | |||||
Silvercrest Asset Management Group, Inc. — Class A | 1 | 13 | ||||||
Clipper Realty, Inc. REIT | 1 | 13 | ||||||
PDL Community Bancorp* | 1 | 13 | ||||||
SI Financial Group, Inc. | 1 | 13 | ||||||
Select Bancorp, Inc.* | 1 | 12 | ||||||
First Bank/Hamilton NJ | 1 | 12 | ||||||
Great Ajax Corp. REIT | 1 | 12 | ||||||
Gladstone Land Corp. REIT | 1 | 11 | ||||||
BRT Apartments Corp. REIT | 1 | 11 | ||||||
Tiptree, Inc. — Class A | 2 | 11 | ||||||
Bank of Commerce Holdings | 1 | 11 | ||||||
Hallmark Financial Services, Inc.* | 1 | 11 | ||||||
MidSouth Bancorp, Inc. | 1 | 11 | ||||||
BCB Bancorp, Inc. | 1 | 10 | ||||||
Maiden Holdings Ltd. | 6 | 10 | ||||||
United Security Bancshares | 1 | 10 | ||||||
Curo Group Holdings Corp.* | 1 | 10 | ||||||
MBT Financial Corp. | 1 | 9 | ||||||
Farmland Partners, Inc. REIT | 2 | 9 | ||||||
Luther Burbank Corp. | 1 | 9 | ||||||
Crawford & Co. — Class B | 1 | 9 | ||||||
Global Medical REIT, Inc. | 1 | 9 | ||||||
OP Bancorp* | 1 | 9 | ||||||
Trinity Place Holdings, Inc.* | 2 | 9 | ||||||
Pzena Investment Management, Inc. — Class A | 1 | 9 | ||||||
Community Bankers Trust Corp.* | 1 | 7 | ||||||
Pacific Mercantile Bancorp* | 1 | 7 | ||||||
Sterling Bancorp, Inc. | 1 | 7 | ||||||
Elevate Credit, Inc.* | 1 | 4 | ||||||
Impac Mortgage Holdings, Inc.* | 1 | 4 | ||||||
Total Financial | 35,570 | |||||||
Consumer, Non-cyclical - 0.5% | ||||||||
Helen of Troy Ltd.* | 3 | 394 | ||||||
Amedisys, Inc.* | 3 | 351 | ||||||
Haemonetics Corp.* | 3 | 300 | ||||||
Performance Food Group Co.* | 9 | 290 | ||||||
Loxo Oncology, Inc.* | 2 | 280 | ||||||
Insperity, Inc. | 3 | 280 | ||||||
FibroGen, Inc.* | 6 | 278 | ||||||
LivaNova plc* | 3 | 274 | ||||||
Wright Medical Group N.V.*,1 | 10 | 272 | ||||||
Darling Ingredients, Inc.* | 14 | 269 | ||||||
Brink’s Co. | 4 | 259 | ||||||
Array BioPharma, Inc.* | 18 | 256 | ||||||
Horizon Pharma plc* | 13 | 254 | ||||||
Aaron’s, Inc. | 6 | 252 | ||||||
Inogen, Inc.* | 2 | 248 | ||||||
Teladoc Health, Inc.* | 5 | 248 | ||||||
Healthcare Services Group, Inc. | 6 | 241 | ||||||
Boston Beer Company, Inc. — Class A* | 1 | 241 | ||||||
HealthEquity, Inc.* | 4 | 239 | ||||||
Green Dot Corp. — Class A* | 3 | 239 | ||||||
Emergent BioSolutions, Inc.* | 4 | 237 | ||||||
Adtalem Global Education, Inc.* | 5 | 237 | ||||||
USANA Health Sciences, Inc.* | 2 | 235 | ||||||
LiveRamp Holdings, Inc.* | 6 | 232 | ||||||
Integer Holdings Corp.* | 3 | 229 | ||||||
Neogen Corp.* | 4 | 228 | ||||||
AMN Healthcare Services, Inc.* | 4 | 227 | ||||||
Globus Medical, Inc. — Class A* | 5 | 216 | ||||||
Blueprint Medicines Corp.* | 4 | 216 | ||||||
Repligen Corp.* | 4 | 211 | ||||||
Cimpress N.V.* | 2 | 207 | ||||||
Monro, Inc. | 3 | 206 | ||||||
Intercept Pharmaceuticals, Inc.* | 2 | 202 | ||||||
FTI Consulting, Inc.* | 3 | 200 | ||||||
Chegg, Inc.* | 7 | 199 | ||||||
NuVasive, Inc.* | 4 | 198 | ||||||
Korn/Ferry International | 5 | 198 | ||||||
Syneos Health, Inc.* | 5 | 197 | ||||||
Ensign Group, Inc. | 5 | 194 | ||||||
LHC Group, Inc.* | 2 | 188 | ||||||
WD-40 Co. | 1 | 183 | ||||||
Paylocity Holding Corp.* | 3 | 181 | ||||||
Avanos Medical, Inc.* | 4 | 179 | ||||||
Lancaster Colony Corp. | 1 | 177 | ||||||
Acceleron Pharma, Inc.* | 4 | 174 | ||||||
Ultragenyx Pharmaceutical, Inc.* | 4 | 174 | ||||||
B&G Foods, Inc.1 | 6 | 173 | ||||||
Pacira Pharmaceuticals, Inc.* | 4 | 172 | ||||||
Travelport Worldwide Ltd. | 11 | 172 | ||||||
NxStage Medical, Inc.* | 6 | 172 | ||||||
Glaukos Corp.* | 3 | 169 | ||||||
TriNet Group, Inc.* | 4 | 168 | ||||||
Merit Medical Systems, Inc.* | 3 | 167 | ||||||
Novocure Ltd.* | 5 | 167 | ||||||
Global Blood Therapeutics, Inc.* | 4 | 164 | ||||||
ASGN, Inc.* | 3 | 163 | ||||||
Amicus Therapeutics, Inc.* | 17 | 163 | ||||||
ABM Industries, Inc. | 5 | 160 | ||||||
Patterson Companies, Inc. | 8 | 157 | ||||||
National Healthcare Corp. | 2 | 157 | ||||||
Arena Pharmaceuticals, Inc.* | 4 | 156 | ||||||
Edgewell Personal Care Co.* | 4 | 149 | ||||||
MyoKardia, Inc.* | 3 | 147 | ||||||
Myriad Genetics, Inc.* | 5 | 145 | ||||||
Xencor, Inc.* | 4 | 145 | ||||||
J&J Snack Foods Corp. | 1 | 145 | ||||||
Immunomedics, Inc.* | 10 | 143 | ||||||
HMS Holdings Corp.* | 5 | 141 | ||||||
iRhythm Technologies, Inc.* | 2 | 139 | ||||||
Endo International plc* | 19 | 139 | ||||||
Select Medical Holdings Corp.* | 9 | 138 | ||||||
Esperion Therapeutics, Inc.* | 3 | 138 | ||||||
PTC Therapeutics, Inc.* | 4 | 137 | ||||||
Ligand Pharmaceuticals, Inc. — Class B* | 1 | 136 | ||||||
Halozyme Therapeutics, Inc.* | 9 | 132 | ||||||
NutriSystem, Inc. | 3 | 132 | ||||||
Inter Parfums, Inc. | 2 | 131 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 109 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 1.5x STRATEGY FUND |
| Shares | Value | ||||||
ICF International, Inc. | 2 | $ | 130 | |||||
ACADIA Pharmaceuticals, Inc.* | 8 | 129 | ||||||
CONMED Corp. | 2 | 128 | ||||||
Cal-Maine Foods, Inc. | 3 | 127 | ||||||
Medifast, Inc. | 1 | 125 | ||||||
AtriCure, Inc.* | 4 | 122 | ||||||
Matthews International Corp. — Class A | 3 | 122 | ||||||
Tenet Healthcare Corp.* | 7 | 120 | ||||||
BioTelemetry, Inc.* | 2 | 119 | ||||||
Spark Therapeutics, Inc.* | 3 | 117 | ||||||
Portola Pharmaceuticals, Inc.* | 6 | 117 | ||||||
Weight Watchers International, Inc.* | 3 | 116 | ||||||
Deluxe Corp. | 3 | 115 | ||||||
Medicines Co.* | 6 | 115 | ||||||
EVERTEC, Inc. | 4 | 115 | ||||||
Tandem Diabetes Care, Inc.* | 3 | 114 | ||||||
Brookdale Senior Living, Inc. — Class A* | 17 | 114 | ||||||
Magellan Health, Inc.* | 2 | 114 | ||||||
Strategic Education, Inc. | 1 | 113 | ||||||
Cambrex Corp.* | 3 | 113 | ||||||
Avis Budget Group, Inc.* | 5 | 112 | ||||||
Zogenix, Inc.* | 3 | 109 | ||||||
Aerie Pharmaceuticals, Inc.* | 3 | 108 | ||||||
Universal Corp. | 2 | 108 | ||||||
Corcept Therapeutics, Inc.* | 8 | 107 | ||||||
Vanda Pharmaceuticals, Inc.* | 4 | 105 | ||||||
Atara Biotherapeutics, Inc.* | 3 | 104 | ||||||
Heron Therapeutics, Inc.* | 4 | 104 | ||||||
Ironwood Pharmaceuticals, Inc. — Class A* | 10 | 104 | ||||||
Sangamo Therapeutics, Inc.* | 9 | 103 | ||||||
US Physical Therapy, Inc. | 1 | 102 | ||||||
Supernus Pharmaceuticals, Inc.* | 3 | 100 | ||||||
Sanderson Farms, Inc. | 1 | 99 | ||||||
Tivity Health, Inc.* | 4 | 99 | ||||||
Quidel Corp.* | 2 | 98 | ||||||
Navigant Consulting, Inc. | 4 | 96 | ||||||
STAAR Surgical Co.* | 3 | 96 | ||||||
Aimmune Therapeutics, Inc.* | 4 | 96 | ||||||
Mallinckrodt plc* | 6 | 95 | ||||||
Amneal Pharmaceuticals, Inc.* | 7 | 95 | ||||||
Central Garden & Pet Co. — Class A* | 3 | 94 | ||||||
Prestige Consumer Healthcare, Inc.* | 3 | 93 | ||||||
Editas Medicine, Inc.* | 4 | 91 | ||||||
TrueBlue, Inc.* | 4 | 89 | ||||||
Innoviva, Inc.* | 5 | 87 | ||||||
Arrowhead Pharmaceuticals, Inc.* | 7 | 87 | ||||||
Heska Corp.* | 1 | 86 | ||||||
CryoLife, Inc.* | 3 | 85 | ||||||
Fresh Del Monte Produce, Inc. | 3 | 85 | ||||||
OPKO Health, Inc.* | 28 | 84 | ||||||
REGENXBIO, Inc.* | 2 | 84 | ||||||
Sotheby’s* | 2 | 79 | ||||||
Insmed, Inc.* | 6 | 79 | ||||||
PDL BioPharma, Inc.* | 27 | 78 | ||||||
Cardtronics plc — Class A* | 3 | 78 | ||||||
Vector Group Ltd. | 8 | 78 | ||||||
Nevro Corp.* | 2 | 78 | ||||||
Theravance Biopharma, Inc.* | 3 | 77 | ||||||
Hostess Brands, Inc.* | 7 | 77 | ||||||
Laureate Education, Inc. — Class A* | 5 | 76 | ||||||
Simply Good Foods Co.* | 4 | 76 | ||||||
Biohaven Pharmaceutical Holding Company Ltd.* | 2 | 74 | ||||||
Calavo Growers, Inc. | 1 | 73 | ||||||
Clovis Oncology, Inc.* | 4 | 72 | ||||||
National Beverage Corp. | 1 | 72 | ||||||
Varex Imaging Corp.* | 3 | 71 | ||||||
Enanta Pharmaceuticals, Inc.* | 1 | 71 | ||||||
Luminex Corp. | 3 | 69 | ||||||
Central Garden & Pet Co.* | 2 | 69 | ||||||
Natus Medical, Inc.* | 2 | 68 | ||||||
Retrophin, Inc.* | 3 | 68 | ||||||
Addus HomeCare Corp.* | 1 | 68 | ||||||
Momenta Pharmaceuticals, Inc.* | 6 | 66 | ||||||
Radius Health, Inc.* | 4 | 66 | ||||||
Genomic Health, Inc.* | 1 | 64 | ||||||
Phibro Animal Health Corp. — Class A | 2 | 64 | ||||||
Chefs’ Warehouse, Inc.* | 2 | 64 | ||||||
AnaptysBio, Inc.* | 1 | 64 | ||||||
Denali Therapeutics, Inc.* | 3 | 62 | ||||||
Iovance Biotherapeutics, Inc.* | 7 | 62 | ||||||
Kforce, Inc. | 2 | 62 | ||||||
CorVel Corp.* | 1 | 62 | ||||||
Kelly Services, Inc. — Class A | 3 | 61 | ||||||
Spectrum Pharmaceuticals, Inc.* | 7 | 61 | ||||||
Revance Therapeutics, Inc.* | 3 | 60 | ||||||
Providence Service Corp.* | 1 | 60 | ||||||
Andersons, Inc. | 2 | 60 | ||||||
Amphastar Pharmaceuticals, Inc.* | 3 | 60 | ||||||
Pacific Biosciences of California, Inc.* | 8 | 59 | ||||||
CBIZ, Inc.* | 3 | 59 | ||||||
Novavax, Inc.* | 32 | 59 | ||||||
Barrett Business Services, Inc. | 1 | 57 | ||||||
MGP Ingredients, Inc. | 1 | 57 | ||||||
Cardiovascular Systems, Inc.* | 2 | 57 | ||||||
American Public Education, Inc.* | 2 | 57 | ||||||
BioCryst Pharmaceuticals, Inc.* | 7 | 57 | ||||||
Intersect ENT, Inc.* | 2 | 56 | ||||||
Reata Pharmaceuticals, Inc. — Class A* | 1 | 56 | ||||||
John B Sanfilippo & Son, Inc. | 1 | 56 | ||||||
R1 RCM, Inc.* | 7 | 56 | ||||||
Hertz Global Holdings, Inc.* | 4 | 55 | ||||||
Ingles Markets, Inc. — Class A | 2 | 54 | ||||||
ACCO Brands Corp. | 8 | 54 | ||||||
Diplomat Pharmacy, Inc.* | 4 | 54 | ||||||
Medpace Holdings, Inc.* | 1 | 53 | ||||||
Cass Information Systems, Inc. | 1 | 53 | ||||||
Orthofix Medical, Inc.* | 1 | 53 | ||||||
Allakos, Inc.* | 1 | 52 | ||||||
Vericel Corp.* | 3 | 52 | ||||||
Triple-S Management Corp. — Class B* | 3 | 52 |
110| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 1.5x STRATEGY FUND |
| Shares | Value | ||||||
Meridian Bioscience, Inc. | 3 | $ | 52 | |||||
Herc Holdings, Inc.* | 2 | 52 | ||||||
Collegium Pharmaceutical, Inc.* | 3 | 51 | ||||||
Huron Consulting Group, Inc.* | 1 | 51 | ||||||
NeoGenomics, Inc.* | 4 | 50 | ||||||
CareDx, Inc.* | 2 | 50 | ||||||
Viad Corp. | 1 | 50 | ||||||
K12, Inc.* | 2 | 50 | ||||||
Rent-A-Center, Inc.* | 3 | 49 | ||||||
Weis Markets, Inc. | 1 | 48 | ||||||
Surmodics, Inc.* | 1 | 47 | ||||||
Karyopharm Therapeutics, Inc.* | 5 | 47 | ||||||
Acorda Therapeutics, Inc.* | 3 | 47 | ||||||
OraSure Technologies, Inc.* | 4 | 47 | ||||||
TherapeuticsMD, Inc.* | 12 | 46 | ||||||
Career Education Corp.* | 4 | 46 | ||||||
Cerus Corp.* | 9 | 46 | ||||||
Tactile Systems Technology, Inc.* | 1 | 46 | ||||||
CytomX Therapeutics, Inc.* | 3 | 45 | ||||||
ANI Pharmaceuticals, Inc.* | 1 | 45 | ||||||
Forrester Research, Inc. | 1 | 45 | ||||||
Invitae Corp.* | 4 | 44 | ||||||
ImmunoGen, Inc.* | 9 | 43 | ||||||
Audentes Therapeutics, Inc.* | 2 | 43 | ||||||
CRA International, Inc. | 1 | 42 | ||||||
Mirati Therapeutics, Inc.* | 1 | 42 | ||||||
United Natural Foods, Inc.* | 4 | 42 | ||||||
Inspire Medical Systems, Inc.* | 1 | 42 | ||||||
WaVe Life Sciences Ltd.* | 1 | 42 | ||||||
Alder Biopharmaceuticals, Inc.* | 4 | 41 | ||||||
Intellia Therapeutics, Inc.* | 3 | 41 | ||||||
AxoGen, Inc.* | 2 | 41 | ||||||
Puma Biotechnology, Inc.* | 2 | 41 | ||||||
Eagle Pharmaceuticals, Inc.* | 1 | 40 | ||||||
AngioDynamics, Inc.* | 2 | 40 | ||||||
Cymabay Therapeutics, Inc.* | 5 | 39 | ||||||
Ennis, Inc. | 2 | 38 | ||||||
Fate Therapeutics, Inc.* | 3 | 39 | ||||||
National Research Corp. — Class A | 1 | 38 | ||||||
MacroGenics, Inc.* | 3 | 38 | ||||||
Athenex, Inc.* | 3 | 38 | ||||||
Quad/Graphics, Inc. | 3 | 37 | ||||||
Dynavax Technologies Corp.* | 4 | 37 | ||||||
Civitas Solutions, Inc.* | 2 | 35 | ||||||
Willdan Group, Inc.* | 1 | 35 | ||||||
Accelerate Diagnostics, Inc.* | 3 | 35 | ||||||
SpartanNash Co. | 2 | 34 | ||||||
Intra-Cellular Therapies, Inc.* | 3 | 34 | ||||||
Flexion Therapeutics, Inc.* | 3 | 34 | ||||||
Anika Therapeutics, Inc.* | 1 | 34 | ||||||
Omeros Corp.* | 3 | 33 | ||||||
Tootsie Roll Industries, Inc. | 1 | 33 | ||||||
Akebia Therapeutics, Inc.* | 6 | 33 | ||||||
Tejon Ranch Co.* | 2 | 33 | ||||||
Intrexon Corp.* | 5 | 33 | ||||||
Nuvectra Corp.* | 2 | 33 | ||||||
Dicerna Pharmaceuticals, Inc.* | 3 | 32 | ||||||
Hackett Group, Inc. | 2 | 32 | ||||||
Lantheus Holdings, Inc.* | 2 | 31 | ||||||
Heidrick & Struggles International, Inc. | 1 | 31 | ||||||
Avalara, Inc.* | 1 | 31 | ||||||
Prothena Corporation plc* | 3 | 31 | ||||||
RadNet, Inc.* | 3 | 30 | ||||||
AMAG Pharmaceuticals, Inc.* | 2 | 30 | ||||||
Akcea Therapeutics, Inc.* | 1 | 30 | ||||||
NanoString Technologies, Inc.* | 2 | 30 | ||||||
SP Plus Corp.* | 1 | 29 | ||||||
Team, Inc.* | 2 | 29 | ||||||
BioScrip, Inc.* | 8 | 29 | ||||||
Resources Connection, Inc. | 2 | 28 | ||||||
Kura Oncology, Inc.* | 2 | 28 | ||||||
Primo Water Corp.* | 2 | 28 | ||||||
Natera, Inc.* | 2 | 28 | ||||||
Turning Point Brands, Inc. | 1 | 27 | ||||||
Quanex Building Products Corp. | 2 | 27 | ||||||
Coherus Biosciences, Inc.* | 3 | 27 | ||||||
Rhythm Pharmaceuticals, Inc.* | 1 | 27 | ||||||
Solid Biosciences, Inc.* | 1 | 27 | ||||||
Village Super Market, Inc. — Class A | 1 | 27 | ||||||
Dean Foods Co. | 7 | 27 | ||||||
Apellis Pharmaceuticals, Inc.* | 2 | 26 | ||||||
Cara Therapeutics, Inc.* | 2 | 26 | ||||||
Oxford Immunotec Global plc* | 2 | 26 | ||||||
Sientra, Inc.* | 2 | 25 | ||||||
Owens & Minor, Inc. | 4 | 25 | ||||||
Rigel Pharmaceuticals, Inc.* | 11 | 25 | ||||||
Revlon, Inc. — Class A* | 1 | 25 | ||||||
Veracyte, Inc.* | 2 | 25 | ||||||
22nd Century Group, Inc.* | 10 | 25 | ||||||
Emerald Expositions Events, Inc. | 2 | 25 | ||||||
Evo Payments, Inc. — Class A* | 1 | 25 | ||||||
Epizyme, Inc.* | 4 | 25 | ||||||
Albireo Pharma, Inc.* | 1 | 25 | ||||||
MediciNova, Inc.* | 3 | 24 | ||||||
Antares Pharma, Inc.* | 9 | 24 | ||||||
iRadimed Corp.* | 1 | 25 | ||||||
ViewRay, Inc.*,1 | 4 | 24 | ||||||
I3 Verticals, Inc. — Class A* | 1 | 24 | ||||||
Akorn, Inc.* | 7 | 24 | ||||||
SIGA Technologies, Inc.* | 3 | 24 | ||||||
LeMaitre Vascular, Inc. | 1 | 24 | ||||||
Tricida, Inc.* | 1 | 24 | ||||||
Farmer Brothers Co.* | 1 | 23 | ||||||
CAI International, Inc.* | 1 | 23 | ||||||
Viking Therapeutics, Inc.*,1 | 3 | 23 | ||||||
Assembly Biosciences, Inc.* | 1 | 23 | ||||||
TransEnterix, Inc.* | 10 | 23 | ||||||
Community Health Systems, Inc.* | 8 | 23 | ||||||
Homology Medicines, Inc.* | 1 | 22 | ||||||
Franklin Covey Co.* | 1 | 22 | ||||||
Kindred Biosciences, Inc.* | 2 | 22 | ||||||
Vectrus, Inc.* | 1 | 22 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 111 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 1.5x STRATEGY FUND |
| Shares | Value | ||||||
Dermira, Inc.* | 3 | $ | 22 | |||||
Progenics Pharmaceuticals, Inc.* | 5 | 21 | ||||||
LSC Communications, Inc. | 3 | 21 | ||||||
Deciphera Pharmaceuticals, Inc.* | 1 | 21 | ||||||
BG Staffing, Inc. | 1 | 21 | ||||||
Everi Holdings, Inc.* | 4 | 21 | ||||||
BrightView Holdings, Inc.* | 2 | 20 | ||||||
FONAR Corp.* | 1 | 20 | ||||||
Inovio Pharmaceuticals, Inc.* | 5 | 20 | ||||||
Lexicon Pharmaceuticals, Inc.* | 3 | 20 | ||||||
Textainer Group Holdings Ltd.* | 2 | 20 | ||||||
RR Donnelley & Sons Co. | 5 | 20 | ||||||
Surgery Partners, Inc.* | 2 | 20 | ||||||
Limoneira Co. | 1 | 20 | ||||||
ArQule, Inc.* | 7 | 19 | ||||||
Care.com, Inc.* | 1 | 19 | ||||||
G1 Therapeutics, Inc.* | 1 | 19 | ||||||
Stemline Therapeutics, Inc.* | 2 | 19 | ||||||
Cytokinetics, Inc.* | 3 | 19 | ||||||
GlycoMimetics, Inc.* | 2 | 19 | ||||||
La Jolla Pharmaceutical Co.* | 2 | 19 | ||||||
Voyager Therapeutics, Inc.* | 2 | 19 | ||||||
Five Prime Therapeutics, Inc.* | 2 | 19 | ||||||
Natural Health Trends Corp. | 1 | 18 | ||||||
Aratana Therapeutics, Inc.* | 3 | 18 | ||||||
Quanterix Corp.* | 1 | 18 | ||||||
SeaSpine Holdings Corp.* | 1 | 18 | ||||||
Ra Pharmaceuticals, Inc.* | 1 | 18 | ||||||
Cellular Biomedicine Group, Inc.* | 1 | 18 | ||||||
Corbus Pharmaceuticals Holdings, Inc.* | 3 | 18 | ||||||
Adamas Pharmaceuticals, Inc.* | 2 | 17 | ||||||
Accuray, Inc.* | 5 | 17 | ||||||
Cutera, Inc.* | 1 | 17 | ||||||
ZIOPHARM Oncology, Inc.* | 9 | 17 | ||||||
Sorrento Therapeutics, Inc.* | 7 | 17 | ||||||
Aptinyx, Inc.* | 1 | 17 | ||||||
Rosetta Stone, Inc.* | 1 | 16 | ||||||
TG Therapeutics, Inc.* | 4 | 16 | ||||||
CytoSorbents Corp.* | 2 | 16 | ||||||
CASI Pharmaceuticals, Inc.* | 4 | 16 | ||||||
Rubius Therapeutics, Inc.* | 1 | 16 | ||||||
Achillion Pharmaceuticals, Inc.* | 10 | 16 | ||||||
Forty Seven, Inc.* | 1 | 16 | ||||||
Senseonics Holdings, Inc.* | 6 | 16 | ||||||
Carriage Services, Inc. — Class A | 1 | 15 | ||||||
Paratek Pharmaceuticals, Inc.* | 3 | 15 | ||||||
Natural Grocers by Vitamin Cottage, Inc.* | 1 | 15 | ||||||
Savara, Inc.* | 2 | 15 | ||||||
Rocket Pharmaceuticals, Inc.* | 1 | 15 | ||||||
RTI Surgical, Inc.* | 4 | 15 | ||||||
Aclaris Therapeutics, Inc.* | 2 | 15 | ||||||
Cross Country Healthcare, Inc.* | 2 | 15 | ||||||
GenMark Diagnostics, Inc.* | 3 | 15 | ||||||
Kadmon Holdings, Inc.* | 7 | 15 | ||||||
Assertio Therapeutics, Inc.* | 4 | 14 | ||||||
Craft Brew Alliance, Inc.* | 1 | 14 | ||||||
Agenus, Inc.* | 6 | 14 | ||||||
Abeona Therapeutics, Inc.* | 2 | 14 | ||||||
Synlogic, Inc.* | 2 | 14 | ||||||
ChromaDex Corp.* | 4 | 14 | ||||||
Capital Senior Living Corp.* | 2 | 14 | ||||||
PolarityTE, Inc.* | 1 | 14 | ||||||
Minerva Neurosciences, Inc.* | 2 | 13 | ||||||
Verastem, Inc.* | 4 | 13 | ||||||
Aduro Biotech, Inc.* | 5 | 13 | ||||||
MannKind Corp.* | 12 | 13 | ||||||
Adverum Biotechnologies, Inc.* | 4 | 13 | ||||||
Concert Pharmaceuticals, Inc.* | 1 | 13 | ||||||
Avid Bioservices, Inc.* | 3 | 12 | ||||||
Eloxx Pharmaceuticals, Inc.* | 1 | 12 | ||||||
Acacia Research Corp.* | 4 | 12 | ||||||
Evolus, Inc.* | 1 | 12 | ||||||
Pyxus International, Inc.* | 1 | 12 | ||||||
SEACOR Marine Holdings, Inc.* | 1 | 12 | ||||||
American Renal Associates Holdings, Inc.* | 1 | 11 | ||||||
Catalyst Pharmaceuticals, Inc.* | 6 | 12 | ||||||
Arbutus Biopharma Corp.* | 3 | 12 | ||||||
Pulse Biosciences, Inc.* | 1 | 12 | ||||||
AVEO Pharmaceuticals, Inc.* | 7 | 11 | ||||||
Syros Pharmaceuticals, Inc.* | 2 | 11 | ||||||
Tyme Technologies, Inc.* | 3 | 11 | ||||||
Geron Corp.* | 11 | 11 | ||||||
ChemoCentryx, Inc.* | 1 | 11 | ||||||
Arcus Biosciences, Inc.* | 1 | 11 | ||||||
Spring Bank Pharmaceuticals, Inc.* | 1 | 10 | ||||||
Cadiz, Inc.* | 1 | 10 | ||||||
Athersys, Inc.* | 7 | 10 | ||||||
Arlo Technologies, Inc.* | 1 | 10 | ||||||
Lannett Company, Inc.*,1 | 2 | 10 | ||||||
Zafgen, Inc.* | 2 | 10 | ||||||
Smart & Final Stores, Inc.* | 2 | 10 | ||||||
PRGX Global, Inc.* | 1 | 9 | ||||||
Palatin Technologies, Inc.* | 13 | 9 | ||||||
Helius Medical Technologies, Inc.* | 1 | 9 | ||||||
Syndax Pharmaceuticals, Inc.* | 2 | 9 | ||||||
Mustang Bio, Inc.* | 3 | 9 | ||||||
Bellicum Pharmaceuticals, Inc.* | 3 | 9 | ||||||
elf Beauty, Inc.* | 1 | 9 | ||||||
resTORbio, Inc.* | 1 | 9 | ||||||
Marinus Pharmaceuticals, Inc.* | 3 | 9 | ||||||
Invacare Corp. | 2 | 9 | ||||||
Enzo Biochem, Inc.* | 3 | 8 | ||||||
Aldeyra Therapeutics, Inc.* | 1 | 8 | ||||||
Tocagen, Inc.* | 1 | 8 | ||||||
Nature’s Sunshine Products, Inc.* | 1 | 8 | ||||||
Calithera Biosciences, Inc.* | 2 | 8 | ||||||
Pieris Pharmaceuticals, Inc.* | 3 | 8 | ||||||
Ocular Therapeutix, Inc.* | 2 | 8 | ||||||
Catalyst Biosciences, Inc.* | 1 | 8 | ||||||
Chimerix, Inc.* | 3 | 8 | ||||||
Dova Pharmaceuticals, Inc.* | 1 | 8 | ||||||
Aeglea BioTherapeutics, Inc.* | 1 | 7 |
112| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 1.5x STRATEGY FUND |
| Shares | Value | ||||||
Recro Pharma, Inc.* | 1 | $ | 7 | |||||
Insys Therapeutics, Inc.*,1 | 2 | 7 | ||||||
Celsius Holdings, Inc.* | 2 | 7 | ||||||
Rockwell Medical, Inc.* | 3 | 7 | ||||||
Organovo Holdings, Inc.* | 7 | 7 | ||||||
Proteostasis Therapeutics, Inc.* | 2 | 6 | ||||||
Pfenex, Inc.* | 2 | 6 | ||||||
Fennec Pharmaceuticals, Inc.* | 1 | 6 | ||||||
Harvard Bioscience, Inc.* | 2 | 6 | ||||||
Cohbar, Inc.* | 2 | 6 | ||||||
Optinose, Inc.* | 1 | 6 | ||||||
Spero Therapeutics, Inc.* | 1 | 6 | ||||||
Miragen Therapeutics, Inc.* | 2 | 6 | ||||||
T2 Biosystems, Inc.* | 2 | 6 | ||||||
Quorum Health Corp.* | 2 | 6 | ||||||
BioTime, Inc.* | 6 | 5 | ||||||
Allena Pharmaceuticals, Inc.* | 1 | 5 | ||||||
ServiceSource International, Inc.* | 5 | 5 | ||||||
Ardelyx, Inc.* | 3 | 5 | ||||||
PFSweb, Inc.* | 1 | 5 | ||||||
Kala Pharmaceuticals, Inc.* | 1 | 5 | ||||||
Durect Corp.* | 10 | 5 | ||||||
Genesis Healthcare, Inc.* | 4 | 5 | ||||||
Cue Biopharma, Inc.* | 1 | 5 | ||||||
Seres Therapeutics, Inc.* | 1 | 4 | ||||||
Menlo Therapeutics, Inc.* | 1 | 4 | ||||||
Teligent, Inc.* | 3 | 4 | ||||||
Mersana Therapeutics, Inc.* | 1 | 4 | ||||||
Molecular Templates, Inc.* | 1 | 4 | ||||||
MoneyGram International, Inc.* | 2 | 4 | ||||||
Achaogen, Inc.* | 3 | 4 | ||||||
Zomedica Pharmaceuticals Corp.* | 3 | 4 | ||||||
Corvus Pharmaceuticals, Inc.* | 1 | 4 | ||||||
Endologix, Inc.* | 5 | 4 | ||||||
Tetraphase Pharmaceuticals, Inc.* | 3 | 3 | ||||||
Jounce Therapeutics, Inc.* | 1 | 3 | ||||||
Neos Therapeutics, Inc.* | 2 | 3 | ||||||
NewLink Genetics Corp.* | 2 | 3 | ||||||
Idera Pharmaceuticals, Inc.* | 1 | 3 | ||||||
Selecta Biosciences, Inc.* | 1 | 3 | ||||||
Nymox Pharmaceutical Corp.* | 2 | 3 | ||||||
Immune Design Corp.* | 2 | 3 | ||||||
Ovid therapeutics, Inc.* | 1 | 2 | ||||||
ADMA Biologics, Inc.* | 1 | 2 | ||||||
Ampio Pharmaceuticals, Inc.* | 6 | 2 | ||||||
NantKwest, Inc.* | 2 | 2 | ||||||
Sienna Biopharmaceuticals, Inc.* | 1 | 2 | ||||||
Innovate Biopharmaceuticals, Inc.* | 1 | 2 | ||||||
CTI BioPharma Corp.* | 3 | 2 | ||||||
Clearside Biomedical, Inc.* | 2 | 2 | ||||||
Synergy Pharmaceuticals, Inc.* | 16 | 2 | ||||||
Fortress Biotech, Inc.* | 2 | 2 | ||||||
Melinta Therapeutics, Inc.* | 2 | 2 | ||||||
AAC Holdings, Inc.* | 1 | 1 | ||||||
Vital Therapies, Inc.* | 3 | 1 | ||||||
Total Consumer, Non-cyclical | 30,282 | |||||||
Industrial - 0.3% | ||||||||
Esterline Technologies Corp.* | 3 | 364 | ||||||
EMCOR Group, Inc. | 5 | 298 | ||||||
Woodward, Inc. | 4 | 297 | ||||||
Trex Company, Inc.* | 5 | 297 | ||||||
MSA Safety, Inc. | 3 | 283 | ||||||
RBC Bearings, Inc.* | 2 | 262 | ||||||
Tetra Tech, Inc. | 5 | 259 | ||||||
Generac Holdings, Inc.* | 5 | 248 | ||||||
Tech Data Corp.* | 3 | 245 | ||||||
SYNNEX Corp. | 3 | 243 | ||||||
Kennametal, Inc. | 7 | 233 | ||||||
EnerSys | 3 | 233 | ||||||
Moog, Inc. — Class A | 3 | 232 | ||||||
Proto Labs, Inc.* | 2 | 226 | ||||||
Louisiana-Pacific Corp. | 10 | 222 | ||||||
Simpson Manufacturing Company, Inc. | 4 | 216 | ||||||
GATX Corp. | 3 | 212 | ||||||
Rexnord Corp.* | 9 | 207 | ||||||
Exponent, Inc. | 4 | 203 | ||||||
MasTec, Inc.* | 5 | 203 | ||||||
Chart Industries, Inc.* | 3 | 195 | ||||||
Watts Water Technologies, Inc. — Class A | 3 | 194 | ||||||
Hillenbrand, Inc. | 5 | 190 | ||||||
Novanta, Inc.* | 3 | 189 | ||||||
Trinseo S.A. | 4 | 183 | ||||||
KBR, Inc. | 12 | 182 | ||||||
Vishay Intertechnology, Inc. | 10 | 180 | ||||||
Aerojet Rocketdyne Holdings, Inc.* | 5 | 176 | ||||||
Axon Enterprise, Inc.* | 4 | 175 | ||||||
Golar LNG Ltd. | 8 | 174 | ||||||
Brady Corp. — Class A | 4 | 174 | ||||||
Forward Air Corp. | 3 | 165 | ||||||
II-VI, Inc.* | 5 | 162 | ||||||
Applied Industrial Technologies, Inc. | 3 | 162 | ||||||
Barnes Group, Inc. | 3 | 161 | ||||||
Alarm.com Holdings, Inc.* | 3 | 156 | ||||||
Fabrinet* | 3 | 154 | ||||||
Plexus Corp.* | 3 | 153 | ||||||
Badger Meter, Inc. | 3 | 148 | ||||||
Covanta Holding Corp. | 11 | 148 | ||||||
OSI Systems, Inc.* | 2 | 147 | ||||||
Raven Industries, Inc. | 4 | 145 | ||||||
Advanced Disposal Services, Inc.* | 6 | 144 | ||||||
John Bean Technologies Corp. | 2 | 144 | ||||||
Itron, Inc.* | 3 | 142 | ||||||
Worthington Industries, Inc. | 4 | 139 | ||||||
Aerovironment, Inc.* | 2 | 136 | ||||||
TopBuild Corp.* | 3 | 135 | ||||||
ESCO Technologies, Inc. | 2 | 132 | ||||||
Advanced Energy Industries, Inc.* | 3 | 129 | ||||||
Franklin Electric Company, Inc. | 3 | 129 | ||||||
US Ecology, Inc. | 2 | 126 | ||||||
Belden, Inc. | 3 | 125 | ||||||
Albany International Corp. — Class A | 2 | 125 | ||||||
Granite Construction, Inc. | 3 | 121 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 113 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 1.5x STRATEGY FUND |
| Shares | Value | ||||||
Sanmina Corp.* | 5 | $ | 120 | |||||
Boise Cascade Co. | 5 | 119 | ||||||
Harsco Corp.* | 6 | 119 | ||||||
Werner Enterprises, Inc. | 4 | 118 | ||||||
Kaman Corp. | 2 | 112 | ||||||
SPX Corp.* | 4 | 112 | ||||||
AAR Corp. | 3 | 112 | ||||||
Saia, Inc.* | 2 | 112 | ||||||
Summit Materials, Inc. — Class A* | 9 | 112 | ||||||
American Woodmark Corp.* | 2 | 111 | ||||||
Greif, Inc. — Class A | 3 | 111 | ||||||
Builders FirstSource, Inc.* | 10 | 109 | ||||||
Dycom Industries, Inc.* | 2 | 108 | ||||||
AAON, Inc. | 3 | 105 | ||||||
Tennant Co. | 2 | 104 | ||||||
Universal Forest Products, Inc. | 4 | 104 | ||||||
Mueller Water Products, Inc. — Class A | 11 | 100 | ||||||
Sun Hydraulics Corp. | 3 | 100 | ||||||
Federal Signal Corp. | 5 | 99 | ||||||
Atkore International Group, Inc.* | 5 | 99 | ||||||
CSW Industrials, Inc.* | 2 | 97 | ||||||
Lindsay Corp. | 1 | 96 | ||||||
Matson, Inc. | 3 | 96 | ||||||
Mueller Industries, Inc. | 4 | 93 | ||||||
Knowles Corp.* | 7 | 93 | ||||||
SPX FLOW, Inc.* | 3 | 91 | ||||||
Air Transport Services Group, Inc.* | 4 | 91 | ||||||
Masonite International Corp.* | 2 | 90 | ||||||
Patrick Industries, Inc.* | 3 | 89 | ||||||
Comfort Systems USA, Inc. | 2 | 87 | ||||||
Casella Waste Systems, Inc. — Class A* | 3 | 85 | ||||||
JELD-WEN Holding, Inc.* | 6 | 85 | ||||||
Benchmark Electronics, Inc. | 4 | 85 | ||||||
Kratos Defense & Security Solutions, Inc.* | 6 | 85 | ||||||
Atlas Air Worldwide Holdings, Inc.* | 2 | 84 | ||||||
Actuant Corp. — Class A | 4 | 84 | ||||||
TriMas Corp.* | 3 | 82 | ||||||
Ichor Holdings Ltd.* | 5 | 82 | ||||||
Kadant, Inc. | 1 | 82 | ||||||
FARO Technologies, Inc.* | 2 | 81 | ||||||
AZZ, Inc. | 2 | 81 | ||||||
Greenbrier Companies, Inc. | 2 | 79 | ||||||
Alamo Group, Inc. | 1 | 77 | ||||||
Primoris Services Corp. | 4 | 77 | ||||||
Continental Building Products, Inc.* | 3 | 76 | ||||||
Global Brass & Copper Holdings, Inc. | 3 | 75 | ||||||
Hub Group, Inc. — Class A* | 2 | 74 | ||||||
Ship Finance International Ltd. | 7 | 74 | ||||||
Milacron Holdings Corp.* | 6 | 71 | ||||||
Gibraltar Industries, Inc.* | 2 | 71 | ||||||
US Concrete, Inc.* | 2 | 71 | ||||||
Multi-Color Corp. | 2 | 70 | ||||||
KEMET Corp. | 4 | 70 | ||||||
Ambarella, Inc.* | 2 | 70 | ||||||
Fitbit, Inc. — Class A* | 14 | 70 | ||||||
ArcBest Corp. | 2 | 69 | ||||||
TTM Technologies, Inc.* | 7 | 68 | ||||||
Standex International Corp. | 1 | 67 | ||||||
Gorman-Rupp Co. | 2 | 65 | ||||||
Hyster-Yale Materials Handling, Inc. | 1 | 62 | ||||||
Echo Global Logistics, Inc.* | 3 | 61 | ||||||
Astronics Corp.* | 2 | 61 | ||||||
NV5 Global, Inc.* | 1 | 61 | ||||||
Astec Industries, Inc. | 2 | 60 | ||||||
EnPro Industries, Inc. | 1 | 60 | ||||||
Electro Scientific Industries, Inc.* | 2 | 60 | ||||||
Apogee Enterprises, Inc. | 2 | 60 | ||||||
Evoqua Water Technologies Corp.* | 6 | 58 | ||||||
MYR Group, Inc.* | 2 | 56 | ||||||
DXP Enterprises, Inc.* | 2 | 56 | ||||||
Heartland Express, Inc. | 3 | 55 | ||||||
Cactus, Inc. — Class A* | 2 | 55 | ||||||
Omega Flex, Inc. | 1 | 54 | ||||||
Sturm Ruger & Company, Inc. | 1 | 53 | ||||||
American Outdoor Brands Corp.* | 4 | 51 | ||||||
International Seaways, Inc.* | 3 | 50 | ||||||
Encore Wire Corp. | 1 | 50 | ||||||
GasLog Ltd. | 3 | 49 | ||||||
Stoneridge, Inc.* | 2 | 49 | ||||||
Comtech Telecommunications Corp. | 2 | 49 | ||||||
Marten Transport Ltd. | 3 | 49 | ||||||
Advanced Drainage Systems, Inc. | 2 | 49 | ||||||
PGT Innovations, Inc.* | 3 | 47 | ||||||
AVX Corp. | 3 | 46 | ||||||
Manitowoc Company, Inc.* | 3 | 44 | ||||||
Scorpio Tankers, Inc. | 25 | 44 | ||||||
CIRCOR International, Inc.* | 2 | 43 | ||||||
Wesco Aircraft Holdings, Inc.* | 5 | 40 | ||||||
PAM Transportation Services, Inc.* | 1 | 39 | ||||||
Briggs & Stratton Corp. | 3 | 39 | ||||||
Tidewater, Inc.* | 2 | 38 | ||||||
Argan, Inc. | 1 | 38 | ||||||
Vicor Corp.* | 1 | 38 | ||||||
AquaVenture Holdings Ltd.* | 2 | 38 | �� | |||||
Ducommun, Inc.* | 1 | 36 | ||||||
Control4 Corp.* | 2 | 35 | ||||||
Willis Lease Finance Corp.* | 1 | 35 | ||||||
Triumph Group, Inc. | 3 | 34 | ||||||
Scorpio Bulkers, Inc. | 6 | 33 | ||||||
Aegion Corp. — Class A* | 2 | 33 | ||||||
Tutor Perini Corp.* | 2 | 32 | ||||||
Tredegar Corp. | 2 | 32 | ||||||
Kimball Electronics, Inc.* | 2 | 31 | ||||||
Park-Ohio Holdings Corp. | 1 | 31 | ||||||
Vishay Precision Group, Inc.* | 1 | 30 | ||||||
Myers Industries, Inc. | 2 | 30 | ||||||
Columbus McKinnon Corp. | 1 | 30 | ||||||
VSE Corp. | 1 | 30 | ||||||
GoPro, Inc. — Class A*,1 | 7 | 30 | ||||||
Frontline Ltd.* | 5 | 28 | ||||||
Great Lakes Dredge & Dock Corp.* | 4 | 26 | ||||||
Haynes International, Inc. | 1 | 26 |
114| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 1.5x STRATEGY FUND |
| Shares | Value | ||||||
TimkenSteel Corp.* | 3 | $ | 26 | |||||
Fluidigm Corp.* | 3 | 26 | ||||||
Powell Industries, Inc. | 1 | 25 | ||||||
Insteel Industries, Inc. | 1 | 24 | ||||||
Armstrong Flooring, Inc.* | 2 | 24 | ||||||
DHT Holdings, Inc. | 6 | 23 | ||||||
Northwest Pipe Co.* | 1 | 23 | ||||||
Heritage-Crystal Clean, Inc.* | 1 | 23 | ||||||
Graham Corp. | 1 | 23 | ||||||
CryoPort, Inc.*,1 | 2 | 22 | ||||||
Sterling Construction Company, Inc.* | 2 | 22 | ||||||
NCI Building Systems, Inc.* | 3 | 22 | ||||||
Griffon Corp. | 2 | 21 | ||||||
Lydall, Inc.* | 1 | 20 | ||||||
Nordic American Tankers Ltd. | 10 | 20 | ||||||
SunPower Corp. — Class A*,1 | 4 | 20 | ||||||
ZAGG, Inc.* | 2 | 20 | ||||||
Covenant Transportation Group, Inc. — Class A* | 1 | 19 | ||||||
Willscot Corp.* | 2 | 19 | ||||||
Bel Fuse, Inc. — Class B | 1 | 18 | ||||||
Sparton Corp.* | 1 | 18 | ||||||
Universal Logistics Holdings, Inc. | 1 | 18 | ||||||
Park Electrochemical Corp. | 1 | 18 | ||||||
Costamare, Inc. | 4 | 18 | ||||||
Teekay Corp. | 5 | 17 | ||||||
Synalloy Corp. | 1 | 17 | ||||||
Infrastructure and Energy Alternatives, Inc.* | 2 | 16 | ||||||
LB Foster Co. — Class A* | 1 | 16 | ||||||
Napco Security Technologies, Inc.* | 1 | 16 | ||||||
IES Holdings, Inc.* | 1 | 16 | ||||||
Applied Optoelectronics, Inc.* | 1 | 15 | ||||||
USA Truck, Inc.* | 1 | 15 | ||||||
Twin Disc, Inc.* | 1 | 15 | ||||||
Digimarc Corp.* | 1 | 14 | ||||||
Mistras Group, Inc.* | 1 | 14 | ||||||
Turtle Beach Corp.* | 1 | 14 | ||||||
Olympic Steel, Inc. | 1 | 14 | ||||||
Eagle Bulk Shipping, Inc.* | 3 | 14 | ||||||
Caesarstone Ltd. | 1 | 14 | ||||||
CECO Environmental Corp.* | 2 | 13 | ||||||
Energy Recovery, Inc.* | 2 | 13 | ||||||
NN, Inc. | 2 | 13 | ||||||
Radiant Logistics, Inc.* | 3 | 13 | ||||||
GP Strategies Corp.* | 1 | 13 | ||||||
Dorian LPG Ltd.* | 2 | 12 | ||||||
Energous Corp.* | 2 | 12 | ||||||
Manitex International, Inc.* | 2 | 11 | ||||||
Teekay Tankers Ltd. — Class A | 12 | 11 | ||||||
Daseke, Inc.* | 3 | 11 | ||||||
Gencor Industries, Inc.* | 1 | 11 | ||||||
General Finance Corp.* | 1 | 10 | ||||||
Pure Cycle Corp.* | 1 | 10 | ||||||
Ardmore Shipping Corp.* | 2 | 9 | ||||||
Orion Group Holdings, Inc.* | 2 | 9 | ||||||
Genco Shipping & Trading Ltd.* | 1 | 8 | ||||||
Iteris, Inc.* | 2 | 7 | ||||||
FreightCar America, Inc.* | 1 | 7 | ||||||
Overseas Shipholding Group, Inc. — Class A* | 4 | 7 | ||||||
YRC Worldwide, Inc.* | 2 | 6 | ||||||
US Xpress Enterprises, Inc. — Class A* | 1 | 6 | ||||||
LSB Industries, Inc.* | 1 | 6 | ||||||
Safe Bulkers, Inc.* | 3 | 5 | ||||||
Forterra, Inc.* | 1 | 4 | ||||||
NL Industries, Inc.* | 1 | 3 | ||||||
Eastman Kodak Co.* | 1 | 3 | ||||||
Babcock & Wilcox Enterprises, Inc.* | 3 | 1 | ||||||
Total Industrial | 19,039 | |||||||
Consumer, Cyclical - 0.3% | ||||||||
Five Below, Inc.* | 5 | 512 | ||||||
Planet Fitness, Inc. — Class A* | 7 | 375 | ||||||
Texas Roadhouse, Inc. — Class A | 5 | 298 | ||||||
Spirit Airlines, Inc.* | 5 | 290 | ||||||
Dorman Products, Inc.* | 3 | 270 | ||||||
Deckers Outdoor Corp.* | 2 | 256 | ||||||
American Eagle Outfitters, Inc. | 13 | 251 | ||||||
Churchill Downs, Inc. | 1 | 244 | ||||||
RH* | 2 | 240 | ||||||
SkyWest, Inc. | 5 | 222 | ||||||
FirstCash, Inc. | 3 | 217 | ||||||
Steven Madden Ltd. | 7 | 212 | ||||||
Marriott Vacations Worldwide Corp. | 3 | 212 | ||||||
Taylor Morrison Home Corp. — Class A* | 13 | 207 | ||||||
LCI Industries | 3 | 200 | ||||||
Ollie’s Bargain Outlet Holdings, Inc.* | 3 | 199 | ||||||
Wingstop, Inc. | 3 | 193 | ||||||
Wolverine World Wide, Inc. | 6 | 191 | ||||||
Eldorado Resorts, Inc.* | 5 | 181 | ||||||
Belmond Ltd. — Class A* | 7 | 175 | ||||||
Sally Beauty Holdings, Inc.* | 10 | 170 | ||||||
iRobot Corp.* | 2 | 168 | ||||||
SiteOne Landscape Supply, Inc.* | 3 | 166 | ||||||
Dana, Inc. | 12 | 163 | ||||||
Anixter International, Inc.* | 3 | 163 | ||||||
Cracker Barrel Old Country Store, Inc. | 1 | 160 | ||||||
Beacon Roofing Supply, Inc.* | 5 | 159 | ||||||
Jack in the Box, Inc. | 2 | 155 | ||||||
TRI Pointe Group, Inc.* | 14 | 153 | ||||||
Lithia Motors, Inc. — Class A | 2 | 153 | ||||||
Meritor, Inc.* | 9 | 152 | ||||||
Meritage Homes Corp.* | 4 | 147 | ||||||
UniFirst Corp. | 1 | 143 | ||||||
HNI Corp. | 4 | 142 | ||||||
Dine Brands Global, Inc. | 2 | 135 | ||||||
KB Home | 7 | 134 | ||||||
Dave & Buster’s Entertainment, Inc. | 3 | 134 | ||||||
Brinker International, Inc. | 3 | 132 | ||||||
Penn National Gaming, Inc.* | 7 | 132 | ||||||
International Speedway Corp. — Class A | 3 | 132 | ||||||
Cheesecake Factory, Inc. | 3 | 131 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 115 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 1.5x STRATEGY FUND |
| Shares | Value | ||||||
Cavco Industries, Inc.* | 1 | $ | 130 | |||||
Cooper Tire & Rubber Co. | 4 | 129 | ||||||
Signet Jewelers Ltd. | 4 | 127 | ||||||
Tupperware Brands Corp. | 4 | 126 | ||||||
Boyd Gaming Corp. | 6 | 125 | ||||||
Triton International Ltd. | 4 | 124 | ||||||
Office Depot, Inc. | 48 | 124 | ||||||
DSW, Inc. — Class A | 5 | 123 | ||||||
Herman Miller, Inc. | 4 | 121 | ||||||
Dillard’s, Inc. — Class A1 | 2 | 121 | ||||||
Gentherm, Inc.* | 3 | 120 | ||||||
PriceSmart, Inc. | 2 | 118 | ||||||
Fox Factory Holding Corp.* | 2 | 118 | ||||||
GameStop Corp. — Class A | 9 | 114 | ||||||
Bed Bath & Beyond, Inc. | 10 | 113 | ||||||
National Vision Holdings, Inc.* | 4 | 113 | ||||||
La-Z-Boy, Inc. | 4 | 111 | ||||||
BJ’s Wholesale Club Holdings, Inc.* | 5 | 111 | ||||||
Tenneco, Inc. — Class A | 4 | 110 | ||||||
Bloomin’ Brands, Inc. | 6 | 107 | ||||||
Rite Aid Corp.* | 91 | 107 | ||||||
Callaway Golf Co. | 7 | 107 | ||||||
Hawaiian Holdings, Inc. | 4 | 106 | ||||||
Crocs, Inc.* | 4 | 104 | ||||||
Guess?, Inc. | 5 | 104 | ||||||
Steelcase, Inc. — Class A | 7 | 104 | ||||||
Navistar International Corp.* | 4 | 104 | ||||||
Rush Enterprises, Inc. — Class A | 3 | 103 | ||||||
Red Rock Resorts, Inc. — Class A | 5 | 102 | ||||||
Altra Industrial Motion Corp. | 4 | 101 | ||||||
Abercrombie & Fitch Co. — Class A | 5 | 100 | ||||||
Allegiant Travel Co. — Class A | 1 | 100 | ||||||
American Axle & Manufacturing Holdings, Inc.* | 9 | 100 | ||||||
Mobile Mini, Inc. | 3 | 95 | ||||||
Sleep Number Corp.* | 3 | 95 | ||||||
BMC Stock Holdings, Inc.* | 6 | 93 | ||||||
Roku, Inc.* | 3 | 92 | ||||||
Shake Shack, Inc. — Class A* | 2 | 91 | ||||||
LGI Homes, Inc.*,1 | 2 | 90 | ||||||
Children’s Place, Inc. | 1 | 90 | ||||||
SeaWorld Entertainment, Inc.* | 4 | 88 | ||||||
Big Lots, Inc. | 3 | 87 | ||||||
World Fuel Services Corp. | 4 | 86 | ||||||
MDC Holdings, Inc. | 3 | 84 | ||||||
G-III Apparel Group Ltd.* | 3 | 84 | ||||||
Caleres, Inc. | 3 | 83 | ||||||
Papa John’s International, Inc. | 2 | 80 | ||||||
Liberty TripAdvisor Holdings, Inc. — Class A* | 5 | 79 | ||||||
IMAX Corp.* | 4 | 75 | ||||||
Winnebago Industries, Inc. | 3 | 73 | ||||||
Scientific Games Corp. — Class A* | 4 | 71 | ||||||
Oxford Industries, Inc. | 1 | 71 | ||||||
Methode Electronics, Inc. | 3 | 70 | ||||||
Core-Mark Holding Company, Inc. | 3 | 70 | ||||||
Malibu Boats, Inc. — Class A* | 2 | 70 | ||||||
ScanSource, Inc.* | 2 | 69 | ||||||
Cannae Holdings, Inc.* | 4 | 68 | ||||||
Installed Building Products, Inc.* | 2 | 67 | ||||||
Asbury Automotive Group, Inc.* | 1 | 67 | ||||||
Knoll, Inc. | 4 | 66 | ||||||
Carvana Co.*,1 | 2 | 65 | ||||||
Wabash National Corp. | 5 | 65 | ||||||
Denny’s Corp.* | 4 | 65 | ||||||
Freshpet, Inc.* | 2 | 64 | ||||||
Acushnet Holdings Corp. | 3 | 63 | ||||||
Fossil Group, Inc.* | 4 | 63 | ||||||
Cooper-Standard Holdings, Inc.* | 1 | 62 | ||||||
Chico’s FAS, Inc. | 11 | 62 | ||||||
Interface, Inc. — Class A | 4 | 57 | ||||||
At Home Group, Inc.* | 3 | 56 | ||||||
Ethan Allen Interiors, Inc. | 3 | 53 | ||||||
Group 1 Automotive, Inc. | 1 | 53 | ||||||
Hudson Ltd. — Class A* | 3 | 51 | ||||||
Express, Inc.* | 10 | 51 | ||||||
BJ’s Restaurants, Inc. | 1 | 51 | ||||||
BlueLinx Holdings, Inc.* | 2 | 49 | ||||||
Standard Motor Products, Inc. | 1 | 48 | ||||||
PetMed Express, Inc. | 2 | 46 | ||||||
Ruth’s Hospitality Group, Inc. | 2 | 45 | ||||||
Vista Outdoor, Inc.* | 4 | 45 | ||||||
National CineMedia, Inc. | 7 | 45 | ||||||
Genesco, Inc.* | 1 | 44 | ||||||
Kimball International, Inc. — Class B | 3 | 42 | ||||||
M/I Homes, Inc.* | 2 | 42 | ||||||
Sonic Automotive, Inc. — Class A | 3 | 41 | ||||||
Tailored Brands, Inc. | 3 | 41 | ||||||
H&E Equipment Services, Inc. | 2 | 41 | ||||||
Party City Holdco, Inc.* | 4 | 40 | ||||||
St. Joe Co.* | 3 | 40 | ||||||
Marcus Corp. | 1 | 39 | ||||||
Buckle, Inc.1 | 2 | 39 | ||||||
Monarch Casino & Resort, Inc.* | 1 | 38 | ||||||
AMC Entertainment Holdings, Inc. — Class A | 3 | 37 | ||||||
MarineMax, Inc.* | 2 | 37 | ||||||
Douglas Dynamics, Inc. | 1 | 36 | ||||||
Century Communities, Inc.* | 2 | 35 | ||||||
BBX Capital Corp. | 6 | 34 | ||||||
Boot Barn Holdings, Inc.* | 2 | 34 | ||||||
Regis Corp.* | 2 | 34 | ||||||
Shoe Carnival, Inc. | 1 | 33 | ||||||
Nautilus, Inc.* | 3 | 33 | ||||||
Modine Manufacturing Co.* | 3 | 32 | ||||||
Movado Group, Inc. | 1 | 32 | ||||||
Fiesta Restaurant Group, Inc.* | 2 | 31 | ||||||
Ascena Retail Group, Inc.* | 12 | 30 | ||||||
Del Taco Restaurants, Inc.* | 3 | 30 | ||||||
PC Connection, Inc. | 1 | 30 | ||||||
GMS, Inc.* | 2 | 30 | ||||||
Skyline Champion Corp. | 2 | 29 |
116| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 1.5x STRATEGY FUND |
| Shares | Value | ||||||
Weyco Group, Inc. | 1 | $ | 29 | |||||
Hibbett Sports, Inc.* | 2 | 29 | ||||||
Lumber Liquidators Holdings, Inc.* | 3 | 29 | ||||||
Barnes & Noble, Inc. | 4 | 28 | ||||||
Miller Industries, Inc. | 1 | 27 | ||||||
Red Robin Gourmet Burgers, Inc.* | 1 | 27 | ||||||
Hooker Furniture Corp. | 1 | 26 | ||||||
Universal Electronics, Inc.* | 1 | 25 | ||||||
Duluth Holdings, Inc. — Class B* | 1 | 25 | ||||||
Essendant, Inc. | 2 | 25 | ||||||
Veritiv Corp.* | 1 | 25 | ||||||
J.C. Penney Company, Inc.*,1 | 23 | 24 | ||||||
Systemax, Inc. | 1 | 24 | ||||||
Tower International, Inc. | 1 | 24 | ||||||
PetIQ, Inc.* | 1 | 23 | ||||||
EZCORP, Inc. — Class A* | 3 | 23 | ||||||
Camping World Holdings, Inc. — Class A | 2 | 23 | ||||||
Unifi, Inc.* | 1 | 23 | ||||||
REV Group, Inc. | 3 | 23 | ||||||
RCI Hospitality Holdings, Inc. | 1 | 22 | ||||||
Tilly’s, Inc. — Class A | 2 | 22 | ||||||
William Lyon Homes — Class A* | 2 | 21 | ||||||
Citi Trends, Inc. | 1 | 20 | ||||||
Bassett Furniture Industries, Inc. | 1 | 20 | ||||||
Carrols Restaurant Group, Inc.* | 2 | 20 | ||||||
Zumiez, Inc.* | 1 | 19 | ||||||
Beazer Homes USA, Inc.* | 2 | 19 | ||||||
Culp, Inc. | 1 | 19 | ||||||
Conn’s, Inc.* | 1 | 19 | ||||||
Haverty Furniture Companies, Inc. | 1 | 19 | ||||||
MasterCraft Boat Holdings, Inc.* | 1 | 19 | ||||||
Titan International, Inc. | 4 | 19 | ||||||
Blue Bird Corp.* | 1 | 18 | ||||||
Chuy’s Holdings, Inc.* | 1 | 18 | ||||||
Superior Group of Companies, Inc. | 1 | 18 | ||||||
Nexeo Solutions, Inc.* | 2 | 17 | ||||||
Motorcar Parts of America, Inc.* | 1 | 17 | ||||||
Eros International plc* | 2 | 17 | ||||||
Tile Shop Holdings, Inc. | 3 | 16 | ||||||
Red Lion Hotels Corp.* | 2 | 16 | ||||||
Speedway Motorsports, Inc. | 1 | 16 | ||||||
Bojangles’, Inc.* | 1 | 16 | ||||||
Golden Entertainment, Inc.* | 1 | 16 | ||||||
Drive Shack, Inc.* | 4 | 16 | ||||||
El Pollo Loco Holdings, Inc.* | 1 | 15 | ||||||
Daktronics, Inc. | 2 | 15 | ||||||
Century Casinos, Inc.* | 2 | 15 | ||||||
Reading International, Inc. — Class A* | 1 | 15 | ||||||
Green Brick Partners, Inc.* | 2 | 15 | ||||||
Spartan Motors, Inc. | 2 | 14 | ||||||
Del Frisco’s Restaurant Group, Inc.* | 2 | 14 | ||||||
Cato Corp. — Class A | 1 | 14 | ||||||
Lindblad Expeditions Holdings, Inc.* | 1 | 14 | ||||||
Funko, Inc. — Class A* | 1 | 13 | ||||||
Titan Machinery, Inc.* | 1 | 13 | ||||||
Town Sports International Holdings, Inc.* | 2 | 13 | ||||||
Barnes & Noble Education, Inc.* | 3 | 12 | ||||||
GNC Holdings, Inc. — Class A* | 5 | 12 | ||||||
Escalade, Inc. | 1 | 11 | ||||||
Commercial Vehicle Group, Inc.* | 2 | 11 | ||||||
Habit Restaurants, Inc. — Class A* | 1 | 10 | ||||||
Gaia, Inc.* | 1 | 10 | ||||||
Clarus Corp. | 1 | 10 | ||||||
Lifetime Brands, Inc. | 1 | 10 | ||||||
Sonos, Inc.* | 1 | 10 | ||||||
Superior Industries International, Inc. | 2 | 10 | ||||||
Kirkland’s, Inc.* | 1 | 10 | ||||||
Sportsman’s Warehouse Holdings, Inc.* | 2 | 9 | ||||||
Vera Bradley, Inc.* | 1 | 9 | ||||||
RTW RetailWinds, Inc.* | 3 | 8 | ||||||
Foundation Building Materials, Inc.* | 1 | 8 | ||||||
J Alexander’s Holdings, Inc.* | 1 | 8 | ||||||
Potbelly Corp.* | 1 | 8 | ||||||
Mesa Air Group, Inc.* | 1 | 8 | ||||||
Hovnanian Enterprises, Inc. — Class A* | 11 | 8 | ||||||
Noodles & Co.* | 1 | 7 | ||||||
J. Jill, Inc.* | 1 | 5 | ||||||
New Home Company, Inc.* | 1 | 5 | ||||||
Castle Brands, Inc.* | 6 | 5 | ||||||
Container Store Group, Inc.* | 1 | 5 | ||||||
Big 5 Sporting Goods Corp. | 1 | 3 | ||||||
Francesca’s Holdings Corp.* | 2 | 2 | ||||||
Pier 1 Imports, Inc. | 5 | 2 | ||||||
Total Consumer, Cyclical | 17,440 | |||||||
Technology - 0.2% | ||||||||
Integrated Device Technology, Inc.* | 9 | 436 | ||||||
Cree, Inc.* | 8 | 342 | ||||||
Medidata Solutions, Inc.* | 5 | 337 | ||||||
MAXIMUS, Inc. | 5 | 325 | ||||||
CACI International, Inc. — Class A* | 2 | 288 | ||||||
Entegris, Inc. | 10 | 279 | ||||||
j2 Global, Inc. | 4 | 278 | ||||||
Semtech Corp.* | 6 | 275 | ||||||
Cabot Microelectronics Corp. | 3 | 267 | ||||||
HubSpot, Inc.* | 2 | 251 | ||||||
Coupa Software, Inc.* | 4 | 251 | ||||||
ACI Worldwide, Inc.* | 9 | 249 | ||||||
Lumentum Holdings, Inc.* | 6 | 245 | ||||||
New Relic, Inc.* | 3 | 243 | ||||||
Silicon Laboratories, Inc.* | 3 | 236 | ||||||
Qualys, Inc.* | 3 | 224 | ||||||
Five9, Inc.* | 5 | 219 | ||||||
Verint Systems, Inc.* | 5 | 212 | ||||||
ExlService Holdings, Inc.* | 4 | 211 | ||||||
Perspecta, Inc. | 12 | 207 | ||||||
Cornerstone OnDemand, Inc.* | 4 | 202 | ||||||
Envestnet, Inc.* | 4 | 197 | ||||||
Science Applications International Corp. | 3 | 191 | ||||||
Blackbaud, Inc. | 3 | 189 | ||||||
Omnicell, Inc.* | 3 | 184 | ||||||
CommVault Systems, Inc.* | 3 | 177 | ||||||
Cirrus Logic, Inc.* | 5 | 166 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 117 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 1.5x STRATEGY FUND |
| Shares | Value | ||||||
SPS Commerce, Inc.* | 2 | $ | 165 | |||||
Brooks Automation, Inc. | 6 | 157 | ||||||
ManTech International Corp. — Class A | 3 | 157 | ||||||
Bottomline Technologies DE, Inc.* | 3 | 144 | ||||||
Mercury Systems, Inc.* | 3 | 142 | ||||||
NetScout Systems, Inc.* | 6 | 142 | ||||||
Box, Inc. — Class A* | 8 | 135 | ||||||
Allscripts Healthcare Solutions, Inc.* | 14 | 135 | ||||||
MicroStrategy, Inc. — Class A* | 1 | 128 | ||||||
Ebix, Inc. | 3 | 128 | ||||||
Insight Enterprises, Inc.* | 3 | 122 | ||||||
Power Integrations, Inc. | 2 | 122 | ||||||
Alteryx, Inc. — Class A* | 2 | 119 | ||||||
Appfolio, Inc. — Class A* | 2 | 118 | ||||||
Avaya Holdings Corp.* | 8 | 116 | ||||||
Everbridge, Inc.* | 2 | 114 | ||||||
MINDBODY, Inc. — Class A* | 3 | 109 | ||||||
Cubic Corp. | 2 | 108 | ||||||
Progress Software Corp. | 3 | 106 | ||||||
Varonis Systems, Inc.* | 2 | 106 | ||||||
Yext, Inc.* | 7 | 104 | ||||||
Diodes, Inc.* | 3 | 97 | ||||||
Inphi Corp.* | 3 | 97 | ||||||
CSG Systems International, Inc. | 3 | 95 | ||||||
Pitney Bowes, Inc. | 16 | 94 | ||||||
Cloudera, Inc.* | 8 | 88 | ||||||
SendGrid, Inc.* | 2 | 86 | ||||||
Virtusa Corp.* | 2 | 85 | ||||||
TiVo Corp. | 9 | 85 | ||||||
Blackline, Inc.* | 2 | 82 | ||||||
3D Systems Corp.* | 8 | 81 | ||||||
Evolent Health, Inc. — Class A* | 4 | 80 | ||||||
Vocera Communications, Inc.* | 2 | 79 | ||||||
CTS Corp. | 3 | 78 | ||||||
Lattice Semiconductor Corp.* | 11 | 76 | ||||||
Apptio, Inc. — Class A* | 2 | 76 | ||||||
NextGen Healthcare, Inc.* | 5 | 76 | ||||||
LivePerson, Inc.* | 4 | 75 | ||||||
Instructure, Inc.* | 2 | 75 | ||||||
Synaptics, Inc.* | 2 | 74 | ||||||
Electronics for Imaging, Inc.* | 3 | 74 | ||||||
Sykes Enterprises, Inc.* | 3 | 74 | ||||||
Hortonworks, Inc.* | 5 | 72 | ||||||
Workiva, Inc.* | 2 | 72 | ||||||
Inovalon Holdings, Inc. — Class A* | 5 | 71 | ||||||
SailPoint Technologies Holding, Inc.* | 3 | 70 | ||||||
FormFactor, Inc.* | 5 | 71 | ||||||
MaxLinear, Inc. — Class A* | 4 | 70 | ||||||
Rambus, Inc.* | 9 | 69 | ||||||
Cray, Inc.* | 3 | 65 | ||||||
Tabula Rasa HealthCare, Inc.* | 1 | 64 | ||||||
PROS Holdings, Inc.* | 2 | 63 | ||||||
Rapid7, Inc.* | 2 | 62 | ||||||
MACOM Technology Solutions Holdings, Inc.* | 4 | 58 | ||||||
Glu Mobile, Inc.* | 7 | 56 | ||||||
Xperi Corp. | 3 | 55 | ||||||
Altair Engineering, Inc. — Class A* | 2 | 55 | ||||||
Stratasys Ltd.* | 3 | 54 | ||||||
Axcelis Technologies, Inc.* | 3 | 53 | ||||||
Amkor Technology, Inc.* | 8 | 53 | ||||||
ForeScout Technologies, Inc.* | 2 | 52 | ||||||
Carbonite, Inc.* | 2 | 51 | ||||||
Cohu, Inc. | 3 | 48 | ||||||
Cision Ltd.* | 4 | 47 | ||||||
Monotype Imaging Holdings, Inc. | 3 | 47 | ||||||
Benefitfocus, Inc.* | 1 | 46 | ||||||
CEVA, Inc.* | 2 | 44 | ||||||
Rudolph Technologies, Inc.* | 2 | 41 | ||||||
MTS Systems Corp. | 1 | 40 | ||||||
QAD, Inc. — Class A | 1 | 39 | ||||||
Photronics, Inc.* | 4 | 39 | ||||||
Unisys Corp.* | 3 | 35 | ||||||
SMART Global Holdings, Inc.* | 1 | 30 | ||||||
TTEC Holdings, Inc. | 1 | 29 | ||||||
Engility Holdings, Inc.* | 1 | 28 | ||||||
Donnelley Financial Solutions, Inc.* | 2 | 28 | ||||||
Nanometrics, Inc.* | 1 | 27 | ||||||
Upland Software, Inc.* | 1 | 27 | ||||||
Immersion Corp.* | 3 | 27 | ||||||
Model N, Inc.* | 2 | 26 | ||||||
Presidio, Inc. | 2 | 26 | ||||||
OneSpan, Inc.* | 2 | 26 | ||||||
Ultra Clean Holdings, Inc.* | 3 | 25 | ||||||
Computer Programs & Systems, Inc. | 1 | 25 | ||||||
ConvergeOne Holdings, Inc. | 2 | 25 | ||||||
PlayAGS, Inc.* | 1 | 23 | ||||||
MobileIron, Inc.* | 5 | 23 | ||||||
InnerWorkings, Inc.* | 6 | 22 | ||||||
Veeco Instruments, Inc.* | 3 | 22 | ||||||
Tenable Holdings, Inc.* | 1 | 22 | ||||||
PAR Technology Corp.* | 1 | 22 | ||||||
Mitek Systems, Inc.* | 2 | 22 | ||||||
American Software, Inc. — Class A | 2 | 21 | ||||||
Digi International, Inc.* | 2 | 20 | ||||||
KeyW Holding Corp.* | 3 | 20 | ||||||
Simulations Plus, Inc. | 1 | 20 | ||||||
Domo, Inc. — Class B* | 1 | 20 | ||||||
SecureWorks Corp. — Class A* | 1 | 17 | ||||||
PDF Solutions, Inc.* | 2 | 17 | ||||||
Amber Road, Inc.* | 2 | 16 | ||||||
USA Technologies, Inc.* | 4 | 16 | ||||||
Impinj, Inc.* | 1 | 15 | ||||||
Vuzix Corp.* | 3 | 14 | ||||||
Agilysys, Inc.* | 1 | 14 | ||||||
Brightcove, Inc.* | 2 | 14 | ||||||
Carbon Black, Inc.* | 1 | 13 | ||||||
Diebold Nixdorf, Inc. | 5 | 12 | ||||||
Exela Technologies, Inc.* | 3 | 12 | ||||||
ACM Research, Inc. — Class A* | 1 | 11 | ||||||
Castlight Health, Inc. — Class B* | 5 | 11 | ||||||
Alpha & Omega Semiconductor Ltd.* | 1 | 10 |
118| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 1.5x STRATEGY FUND |
| Shares | Value | ||||||
Avid Technology, Inc.* | 2 | $ | 9 | |||||
Adesto Technologies Corp.* | 2 | 9 | ||||||
Aquantia Corp.* | 1 | 9 | ||||||
AXT, Inc.* | 2 | 9 | ||||||
Information Services Group, Inc.* | 2 | 9 | ||||||
Telenav, Inc.* | 2 | �� | 8 | |||||
Remark Holdings, Inc.* | 6 | 7 | ||||||
eGain Corp.* | 1 | 7 | ||||||
Maxwell Technologies, Inc.* | 3 | 6 | ||||||
Park City Group, Inc.* | 1 | 6 | ||||||
Rimini Street, Inc.* | 1 | 5 | ||||||
Asure Software, Inc.* | 1 | 5 | ||||||
Kopin Corp.* | 4 | 4 | ||||||
Veritone, Inc.* | 1 | 4 | ||||||
NantHealth, Inc.* | 1 | 1 | ||||||
Total Technology | 13,643 | |||||||
Communications - 0.1% | ||||||||
Ciena Corp.* | 12 | 407 | ||||||
Etsy, Inc.* | 8 | 381 | ||||||
Nexstar Media Group, Inc. — Class A | 4 | 315 | ||||||
New York Times Co. — Class A | 11 | 245 | ||||||
Yelp, Inc. — Class A* | 7 | 245 | ||||||
ViaSat, Inc.* | 4 | 236 | ||||||
Trade Desk, Inc. — Class A* | 2 | 232 | ||||||
World Wrestling Entertainment, Inc. — Class A | 3 | 224 | ||||||
Meredith Corp. | 4 | 208 | ||||||
InterDigital, Inc. | 3 | 199 | ||||||
TEGNA, Inc. | 17 | 185 | ||||||
Viavi Solutions, Inc.* | 18 | 181 | ||||||
Cogent Communications Holdings, Inc. | 4 | 181 | ||||||
Shenandoah Telecommunications Co. | 4 | 177 | ||||||
Finisar Corp.* | 8 | 173 | ||||||
Pandora Media, Inc.* | 21 | 170 | ||||||
Imperva, Inc.* | 3 | 167 | ||||||
Liberty Latin America Ltd. — Class C* | 11 | 160 | ||||||
Sinclair Broadcast Group, Inc. — Class A | 6 | 158 | ||||||
Vonage Holdings Corp.* | 18 | 157 | ||||||
Liberty Expedia Holdings, Inc. — Class A* | 4 | 156 | ||||||
NETGEAR, Inc.* | 3 | 156 | ||||||
Stamps.com, Inc.* | 1 | 156 | ||||||
Q2 Holdings, Inc.* | 3 | 149 | ||||||
Iridium Communications, Inc.* | 8 | 148 | ||||||
Cars.com, Inc.* | 6 | 129 | ||||||
Shutterfly, Inc.* | 3 | 121 | ||||||
Groupon, Inc. — Class A* | 37 | 118 | ||||||
MSG Networks, Inc. — Class A* | 5 | 118 | ||||||
Acacia Communications, Inc.* | 3 | 114 | ||||||
8x8, Inc.* | 6 | 108 | ||||||
Cargurus, Inc.* | 3 | 101 | ||||||
Gray Television, Inc.* | 6 | 88 | ||||||
Scholastic Corp. | 2 | 80 | ||||||
Zscaler, Inc.* | 2 | 78 | ||||||
Liberty Media Corporation-Liberty Braves — Class C* | 3 | 75 | ||||||
Shutterstock, Inc. | 2 | 72 | ||||||
ATN International, Inc. | 1 | 72 | ||||||
ePlus, Inc.* | 1 | 71 | ||||||
GTT Communications, Inc.* | 3 | 71 | ||||||
Gannett Company, Inc. | 8 | 68 | ||||||
Plantronics, Inc. | 2 | 66 | ||||||
Intelsat S.A.* | 3 | 64 | ||||||
Quotient Technology, Inc.* | 6 | 64 | ||||||
TrueCar, Inc.* | 7 | 63 | ||||||
EW Scripps Co. — Class A | 4 | 63 | ||||||
Houghton Mifflin Harcourt Co.* | 7 | 62 | ||||||
Boingo Wireless, Inc.* | 3 | 62 | ||||||
Tucows, Inc. — Class A* | 1 | 60 | ||||||
Maxar Technologies Ltd. | 5 | 60 | ||||||
Consolidated Communications Holdings, Inc. | 6 | 59 | ||||||
Liberty Latin America Ltd. — Class A* | 4 | 58 | ||||||
New Media Investment Group, Inc. | 5 | 58 | ||||||
ORBCOMM, Inc.* | 7 | 58 | ||||||
Extreme Networks, Inc.* | 9 | 55 | ||||||
CalAmp Corp.* | 4 | 52 | ||||||
Entercom Communications Corp. — Class A | 9 | 51 | ||||||
NIC, Inc. | 4 | 50 | ||||||
HealthStream, Inc. | 2 | 48 | ||||||
Perficient, Inc.* | 2 | 45 | ||||||
Infinera Corp.* | 10 | 40 | ||||||
Spok Holdings, Inc. | 3 | 40 | ||||||
pdvWireless, Inc.* | 1 | 37 | ||||||
Loral Space & Communications, Inc.* | 1 | 37 | ||||||
WideOpenWest, Inc.* | 5 | 36 | ||||||
Endurance International Group Holdings, Inc.* | 5 | 33 | ||||||
QuinStreet, Inc.* | 2 | 33 | ||||||
ADTRAN, Inc. | 3 | 32 | ||||||
NII Holdings, Inc.* | 7 | 31 | ||||||
Calix, Inc.* | 3 | 29 | ||||||
Quantenna Communications, Inc.* | 2 | 29 | ||||||
Casa Systems, Inc.* | 2 | 26 | ||||||
Liberty Media Corporation-Liberty Braves — Class A* | 1 | 25 | ||||||
1-800-Flowers.com, Inc. — Class A* | 2 | 24 | ||||||
Harmonic, Inc.* | 5 | 24 | ||||||
Cincinnati Bell, Inc.* | 3 | 23 | ||||||
Meet Group, Inc.* | 5 | 23 | ||||||
ChannelAdvisor Corp.* | 2 | 23 | ||||||
A10 Networks, Inc.* | 3 | 19 | ||||||
Zix Corp.* | 3 | 17 | ||||||
Central European Media Enterprises Ltd. — Class A* | 6 | 17 | ||||||
Frontier Communications Corp.*,1 | 7 | 17 | ||||||
Limelight Networks, Inc.* | 7 | 16 | ||||||
Entravision Communications Corp. — Class A | 5 | 15 | ||||||
Ribbon Communications, Inc.* | 3 | 14 | ||||||
Lands’ End, Inc.* | 1 | 14 | ||||||
Ooma, Inc.* | 1 | 14 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 119 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 1.5x STRATEGY FUND |
| Shares | Value | ||||||
Overstock.com, Inc.* | 1 | $ | 14 | |||||
NeoPhotonics Corp.* | 2 | 13 | ||||||
RigNet, Inc.* | 1 | 13 | ||||||
Liquidity Services, Inc.* | 2 | 12 | ||||||
TechTarget, Inc.* | 1 | 12 | ||||||
Hemisphere Media Group, Inc.* | 1 | 12 | ||||||
Gogo, Inc.* | 4 | 12 | ||||||
Tribune Publishing Co.* | 1 | 11 | ||||||
MDC Partners, Inc. — Class A* | 4 | 11 | ||||||
Clear Channel Outdoor Holdings, Inc. — Class A* | 2 | 10 | ||||||
KVH Industries, Inc.* | 1 | 10 | ||||||
Clearfield, Inc.* | 1 | 10 | ||||||
VirnetX Holding Corp.* | 4 | 10 | ||||||
Telaria, Inc.* | 3 | 8 | ||||||
HC2 Holdings, Inc.* | 3 | 8 | ||||||
Fluent, Inc.* | 2 | 7 | ||||||
Leaf Group Ltd.* | 1 | 7 | ||||||
Aerohive Networks, Inc.* | 2 | 6 | ||||||
Windstream Holdings, Inc.* | 3 | 6 | ||||||
Internap Corp.* | 1 | 4 | ||||||
Beasley Broadcast Group, Inc. — Class A | 1 | 4 | ||||||
Fusion Connect, Inc.* | 1 | 2 | ||||||
Total Communications | 8,638 | |||||||
Energy - 0.1% | ||||||||
Delek US Holdings, Inc. | 8 | 228 | ||||||
PDC Energy, Inc.* | 6 | 179 | ||||||
Southwestern Energy Co.* | 51 | 174 | ||||||
Arch Coal, Inc. — Class A | 2 | 166 | ||||||
Murphy USA, Inc.* | 2 | 153 | ||||||
Peabody Energy Corp. | 5 | 152 | ||||||
Oasis Petroleum, Inc.* | 24 | 133 | ||||||
Dril-Quip, Inc.* | 4 | 120 | ||||||
Pattern Energy Group, Inc. — Class A | 6 | 112 | ||||||
Matador Resources Co.* | 7 | 109 | ||||||
Gulfport Energy Corp.* | 16 | 105 | ||||||
McDermott International, Inc.* | 16 | 105 | ||||||
Callon Petroleum Co.* | 15 | 97 | ||||||
Oceaneering International, Inc.* | 8 | 97 | ||||||
CONSOL Energy, Inc.* | 3 | 95 | ||||||
SRC Energy, Inc.* | 20 | 94 | ||||||
NOW, Inc.* | 8 | 93 | ||||||
MRC Global, Inc.* | 7 | 86 | ||||||
Rowan Companies plc — Class A* | 10 | 84 | ||||||
SemGroup Corp. — Class A | 6 | 83 | ||||||
Renewable Energy Group, Inc.* | 3 | 77 | ||||||
Archrock, Inc. | 10 | 75 | ||||||
SEACOR Holdings, Inc.* | 2 | 74 | ||||||
ProPetro Holding Corp.* | 6 | 74 | ||||||
Keane Group, Inc.* | 9 | 74 | ||||||
Warrior Met Coal, Inc. | 3 | 72 | ||||||
Oil States International, Inc.* | 5 | 71 | ||||||
US Silica Holdings, Inc. | 7 | 71 | ||||||
DMC Global, Inc. | 2 | 70 | ||||||
California Resources Corp.* | 4 | 68 | ||||||
Carrizo Oil & Gas, Inc.* | 6 | 68 | ||||||
TerraForm Power, Inc. — Class A | 6 | 67 | ||||||
Sunrun, Inc.* | 6 | 65 | ||||||
Helix Energy Solutions Group, Inc.* | 12 | 65 | ||||||
Resolute Energy Corp.* | 2 | 58 | ||||||
Unit Corp.* | 4 | 57 | ||||||
Penn Virginia Corp.* | 1 | 54 | ||||||
C&J Energy Services, Inc.* | 4 | 54 | ||||||
Green Plains, Inc. | 4 | 52 | ||||||
Denbury Resources, Inc.* | 30 | 51 | ||||||
Laredo Petroleum, Inc.* | 14 | 51 | ||||||
TPI Composites, Inc.* | 2 | 49 | ||||||
Diamond Offshore Drilling, Inc.* | 5 | 47 | ||||||
Noble Corporation plc* | 18 | 47 | ||||||
KLX Energy Services Holdings, Inc.* | 2 | 47 | ||||||
SunCoke Energy, Inc.* | 5 | 43 | ||||||
Par Pacific Holdings, Inc.* | 3 | 43 | ||||||
WildHorse Resource Development Corp.* | 3 | 42 | ||||||
Tellurian, Inc.* | 6 | 42 | ||||||
Bonanza Creek Energy, Inc.* | 2 | 41 | ||||||
Newpark Resources, Inc.* | 6 | 41 | ||||||
Thermon Group Holdings, Inc.* | 2 | 41 | ||||||
Superior Energy Services, Inc.* | 12 | 40 | ||||||
Liberty Oilfield Services, Inc. — Class A | 3 | 39 | ||||||
Adams Resources & Energy, Inc. | 1 | 39 | ||||||
Jagged Peak Energy, Inc.* | 4 | 36 | ||||||
Solaris Oilfield Infrastructure, Inc. — Class A | 3 | 36 | ||||||
Matrix Service Co.* | 2 | 36 | ||||||
Exterran Corp.* | 2 | 35 | ||||||
CVR Energy, Inc. | 1 | 34 | ||||||
Enphase Energy, Inc.*,1 | 7 | 33 | ||||||
FutureFuel Corp. | 2 | 32 | ||||||
Advanced Emissions Solutions, Inc. | 3 | 32 | ||||||
Frank’s International N.V.* | 6 | 31 | ||||||
Northern Oil and Gas, Inc.* | 13 | 29 | ||||||
W&T Offshore, Inc.* | 7 | 29 | ||||||
Ring Energy, Inc.* | 5 | 25 | ||||||
HighPoint Resources Corp.* | 10 | 25 | ||||||
Forum Energy Technologies, Inc.* | 6 | 25 | ||||||
Nine Energy Service, Inc.* | 1 | 23 | ||||||
Plug Power, Inc.* | 17 | 21 | ||||||
Select Energy Services, Inc. — Class A* | 3 | 19 | ||||||
Mammoth Energy Services, Inc. | 1 | 18 | ||||||
Natural Gas Services Group, Inc.* | 1 | 17 | ||||||
Talos Energy, Inc.* | 1 | 16 | ||||||
Panhandle Oil and Gas, Inc. — Class A | 1 | 16 | ||||||
Clean Energy Fuels Corp.* | 9 | 16 | ||||||
Halcon Resources Corp.* | 9 | 15 | ||||||
SandRidge Energy, Inc.* | 2 | 15 | ||||||
FTS International, Inc.* | 2 | 14 | ||||||
Evolution Petroleum Corp. | 2 | 14 | ||||||
Goodrich Petroleum Corp.* | 1 | 13 | ||||||
TETRA Technologies, Inc.* | 8 | 13 | ||||||
Abraxas Petroleum Corp.* | 10 | 11 | ||||||
Dawson Geophysical Co.* | 3 | 10 | ||||||
Ultra Petroleum Corp.* | 13 | 10 |
120| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 1.5x STRATEGY FUND |
| Shares | Value | ||||||
Earthstone Energy, Inc. — Class A* | 2 | $ | 9 | |||||
Berry Petroleum Corp. | 1 | 9 | ||||||
Era Group, Inc.* | 1 | 9 | ||||||
Trecora Resources* | 1 | 8 | ||||||
Vivint Solar, Inc.* | 2 | 8 | ||||||
Midstates Petroleum Company, Inc.* | 1 | 8 | ||||||
Alta Mesa Resources, Inc. — Class A* | 7 | 7 | ||||||
Amyris, Inc.*,1 | 2 | 7 | ||||||
Eclipse Resources Corp.* | 6 | 6 | ||||||
Independence Contract Drilling, Inc.* | 2 | 6 | ||||||
Pioneer Energy Services Corp.* | 5 | 6 | ||||||
NextDecade Corp.* | 1 | 5 | ||||||
ION Geophysical Corp.* | 1 | 5 | ||||||
NCS Multistage Holdings, Inc.* | 1 | 5 | ||||||
Hallador Energy Co. | 1 | 5 | ||||||
Bristow Group, Inc.*,1 | 2 | 5 | ||||||
Flotek Industries, Inc.* | 4 | 4 | ||||||
Lilis Energy, Inc.* | 3 | 4 | ||||||
Basic Energy Services, Inc.* | 1 | 4 | ||||||
CARBO Ceramics, Inc.* | 1 | 4 | ||||||
FuelCell Energy, Inc.* | 6 | 3 | ||||||
Profire Energy, Inc.* | 2 | 3 | ||||||
Approach Resources, Inc.* | 3 | 3 | ||||||
Rosehill Resources, Inc.* | 1 | 2 | ||||||
Smart Sand, Inc.* | 1 | 2 | ||||||
EP Energy Corp. — Class A* | 3 | 2 | ||||||
Key Energy Services, Inc.* | 1 | 2 | ||||||
PHI, Inc.* | 1 | 2 | ||||||
Cloud Peak Energy, Inc.* | 5 | 2 | ||||||
Zion Oil & Gas, Inc.* | 4 | 2 | ||||||
Sanchez Energy Corp.* | 5 | 1 | ||||||
Total Energy | 5,281 | |||||||
Utilities - 0.1% | ||||||||
IDACORP, Inc. | 4 | 372 | ||||||
New Jersey Resources Corp. | 8 | 365 | ||||||
Portland General Electric Co. | 7 | 321 | ||||||
ONE Gas, Inc. | 4 | 319 | ||||||
Spire, Inc. | 4 | 296 | ||||||
Avista Corp. | 6 | 255 | ||||||
Black Hills Corp. | 4 | 251 | ||||||
PNM Resources, Inc. | 6 | 247 | ||||||
NorthWestern Corp. | 4 | 238 | ||||||
Southwest Gas Holdings, Inc. | 3 | 230 | ||||||
ALLETE, Inc. | 3 | 229 | ||||||
American States Water Co. | 3 | 201 | ||||||
South Jersey Industries, Inc. | 7 | 195 | ||||||
California Water Service Group | 4 | 191 | ||||||
Northwest Natural Holding Co. | 3 | 181 | ||||||
Ormat Technologies, Inc. | 3 | 157 | ||||||
El Paso Electric Co. | 3 | 150 | ||||||
Otter Tail Corp. | 3 | 149 | ||||||
Connecticut Water Service, Inc. | 2 | 134 | ||||||
MGE Energy, Inc. | 2 | 120 | ||||||
Clearway Energy, Inc. — Class C | 5 | 86 | ||||||
Chesapeake Utilities Corp. | 1 | 81 | ||||||
SJW Group | 1 | 55 | ||||||
Middlesex Water Co. | 1 | 53 | ||||||
Unitil Corp. | 1 | 51 | ||||||
Artesian Resources Corp. — Class A | 1 | 35 | ||||||
Clearway Energy, Inc. — Class A | 2 | 34 | ||||||
York Water Co. | 1 | 32 | ||||||
Atlantic Power Corp.* | 13 | 28 | ||||||
PICO Holdings, Inc.* | 2 | 18 | ||||||
Ameresco, Inc. — Class A* | 1 | 14 | ||||||
Consolidated Water Company Ltd. | 1 | 12 | ||||||
Global Water Resources, Inc. | 1 | 10 | ||||||
Spark Energy, Inc. — Class A | 1 | 7 | ||||||
Total Utilities | 5,117 | |||||||
Basic Materials - 0.0% | ||||||||
Ingevity Corp.* | 4 | 335 | ||||||
Balchem Corp. | 3 | 235 | ||||||
Allegheny Technologies, Inc.* | 9 | 196 | ||||||
Kaiser Aluminum Corp. | 2 | 179 | ||||||
Quaker Chemical Corp. | 1 | 178 | ||||||
Cleveland-Cliffs, Inc. | 23 | 177 | ||||||
PolyOne Corp. | 6 | 172 | ||||||
HB Fuller Co. | 4 | 171 | ||||||
Sensient Technologies Corp. | 3 | 167 | ||||||
Commercial Metals Co. | 10 | 160 | ||||||
Minerals Technologies, Inc. | 3 | 154 | ||||||
GCP Applied Technologies, Inc.* | 6 | 147 | ||||||
Innospec, Inc. | 2 | 123 | ||||||
Carpenter Technology Corp. | 3 | 107 | ||||||
Rogers Corp.* | 1 | 99 | ||||||
Tahoe Resources, Inc.* | 25 | 91 | ||||||
Materion Corp. | 2 | 90 | ||||||
Hecla Mining Co. | 36 | 85 | ||||||
Compass Minerals International, Inc. | 2 | 83 | ||||||
Ferro Corp.* | 5 | 78 | ||||||
Stepan Co. | 1 | 74 | ||||||
AdvanSix, Inc.* | 3 | 73 | ||||||
Tronox Ltd. — Class A | 9 | 70 | ||||||
Codexis, Inc.* | 4 | 67 | ||||||
Schnitzer Steel Industries, Inc. — Class A | 3 | 65 | ||||||
Neenah, Inc. | 1 | 59 | ||||||
Coeur Mining, Inc.* | 13 | 58 | ||||||
AK Steel Holding Corp.* | 24 | 54 | ||||||
Rayonier Advanced Materials, Inc. | 5 | 53 | ||||||
Schweitzer-Mauduit International, Inc. | 2 | 50 | ||||||
Verso Corp. — Class A* | 2 | 45 | ||||||
Kraton Corp.* | 2 | 44 | ||||||
Hawkins, Inc. | 1 | 41 | ||||||
American Vanguard Corp. | 2 | 30 | ||||||
PQ Group Holdings, Inc.* | 2 | 30 | ||||||
PH Glatfelter Co. | 3 | 29 | ||||||
Innophos Holdings, Inc. | 1 | 24 | ||||||
Clearwater Paper Corp.* | 1 | 24 | ||||||
Landec Corp.* | 2 | 24 | ||||||
OMNOVA Solutions, Inc.* | 3 | 22 | ||||||
Century Aluminum Co.* | 3 | 22 | ||||||
Koppers Holdings, Inc.* | 1 | 17 | ||||||
Universal Stainless & Alloy Products, Inc.* | 1 | 16 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 121 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 1.5x STRATEGY FUND |
| Shares | Value | ||||||
Intrepid Potash, Inc.* | 6 | $ | 16 | |||||
Energy Fuels, Inc.* | 5 | 14 | ||||||
Uranium Energy Corp.* | 10 | 13 | ||||||
Gold Resource Corp. | 3 | 12 | ||||||
Kronos Worldwide, Inc. | 1 | 11 | ||||||
AgroFresh Solutions, Inc.* | 2 | 8 | ||||||
Covia Holdings Corp.* | 2 | 7 | ||||||
Ryerson Holding Corp.* | 1 | 6 | ||||||
Marrone Bio Innovations, Inc.* | 4 | 6 | ||||||
Shiloh Industries, Inc.* | 1 | 6 | ||||||
Valhi, Inc. | 2 | 4 | ||||||
Total Basic Materials | 4,121 | |||||||
Government - 0.0% | ||||||||
Banco Latinoamericano de Comercio Exterior S.A. — Class E | 2 | 35 | ||||||
Total Common Stocks | ||||||||
(Cost $104,030) | 139,166 | |||||||
WARRANT†† - 0.0% | ||||||||
Imperial Holdings, Inc.* | ||||||||
$10.75, 10/06/19 | 2 | — | ||||||
Total Warrant | ||||||||
(Cost $—) | — | |||||||
RIGHTS††† - 0.0% | ||||||||
A Schulman, Inc.*,2 | 18 | — | ||||||
Tobira Therapeutics, Inc.*,2 | 8 | — | ||||||
Omthera Pharmaceuticals, Inc.*,2 | 37 | — | ||||||
Nexstar Media Group, Inc.*,2 | 132 | — | ||||||
Total Rights | ||||||||
(Cost $—) | — | |||||||
MUTUAL FUNDS† - 60.1% | ||||||||
Guggenheim Strategy Fund II3 | 80,533 | 1,998,839 | ||||||
Guggenheim Ultra Short Duration Fund3,10 | 190,114 | 1,893,534 | ||||||
Total Mutual Funds | ||||||||
(Cost $3,906,155) | 3,892,373 | |||||||
| Face |
| ||||||
U.S. TREASURY BILLS†† - 13.5% | ||||||||
U.S. Treasury Bills | ||||||||
2.35% due 03/14/194,5 | $ | 576,000 | 573,292 | |||||
2.31% due 03/14/194,5 | 270,000 | 268,731 | ||||||
2.21% due 01/08/195,6 | 29,000 | 28,989 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $870,986) | 871,012 | |||||||
REPURCHASE AGREEMENTS††,7 - 32.1% | ||||||||
JPMorgan Chase & Co. | 1,225,294 | 1,225,294 | ||||||
Barclays Capital | 509,564 | 509,564 | ||||||
Bank of America Merrill Lynch | 339,710 | 339,710 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $2,074,568) | 2,074,568 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,8 - 0.0% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 2.32%9 | 608 | 608 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $608) | 608 | |||||||
Total Investments - 107.8% | ||||||||
(Cost $6,956,347) | $ | 6,977,727 | ||||||
Other Assets & Liabilities, net - (7.8)% | (504,934 | ) | ||||||
Total Net Assets - 100.0% | $ | 6,472,793 |
Futures Contracts | |||||||||||||
Description | Number of | Expiration | Notional | Value and | |||||||||
Equity Futures Contracts Purchased† | |||||||||||||
Russell 2000 Index Mini Futures Contracts | 8 | Mar 2019 | $ | 539,840 | $ | (44,040 | ) |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||
Barclays Bank plc | Russell 2000 Index | 2.42 | % | At Maturity | 01/31/19 | 3,128 | $ | 4,217,958 | $ | 52,365 | |||||||||
Goldman Sachs International | Russell 2000 Index | 2.27 | % | At Maturity | 01/28/19 | 2,678 | 3,611,238 | 50,207 | |||||||||||
BNP Paribas | Russell 2000 Index | 2.52 | % | At Maturity | 01/29/19 | 922 | 1,243,369 | 15,437 | |||||||||||
$ | 9,072,565 | $ | 118,009 |
122| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
RUSSELL 2000® 1.5x STRATEGY FUND |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | 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 a portion of this security is on loan at December 31, 2018 — See Note 7. |
2 | Security was fair valued by the Valuation Committee at December 31, 2018. The total market value of fair valued securities amounts to $0, (cost $0) or less than 0.1% of total net assets. |
3 | Affiliated issuer. |
4 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2018. |
5 | Rate indicated is the effective yield at the time of purchase. |
6 | All or a portion of this security is pledged as futures collateral at December 31, 2018. |
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, 2018. |
10 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
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, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 139,166 | $ | — | $ | — | $ | 139,166 | ||||||||
Warrant | — | — | * | — | — | |||||||||||
Rights | — | — | — | * | — | |||||||||||
Mutual Funds | 3,892,373 | — | — | 3,892,373 | ||||||||||||
U.S. Treasury Bills | — | 871,012 | — | 871,012 | ||||||||||||
Repurchase Agreements | — | 2,074,568 | — | 2,074,568 | ||||||||||||
Securities Lending Collateral | 608 | — | — | 608 | ||||||||||||
Equity Index Swap Agreements** | — | 118,009 | — | 118,009 | ||||||||||||
Total Assets | $ | 4,032,147 | $ | 3,063,589 | $ | — | $ | 7,095,736 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Futures Contracts** | $ | 44,040 | $ | — | $ | — | $ | 44,040 |
* | Includes securities with a market value of $0. |
** | This derivative is reported as unrealized appreciation/depreciation 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, 2018, there were no transfers between levels.
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 123 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
RUSSELL 2000® 1.5x STRATEGY FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer of such fund, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Cash Management Funds”), each of which are 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, 2018, 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/1601445/000089180418000513/gug75569-ncsr.htm.
Transactions during the year ended December 31, 2018, in which the company is an “affiliated person”, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | Capital | |||||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 2,536,218 | $ | 1,782,674 | $ | (2,300,000 | ) | $ | (4,584 | ) | $ | (15,469 | ) | $ | 1,998,839 | 80,533 | $ | 81,190 | $ | 1,445 | ||||||||||||||||
Guggenheim Ultra Short Duration Fund1 | 2,584,967 | 5,721,796 | (6,400,000 | ) | (8,258 | ) | (4,971 | ) | 1,893,534 | 190,114 | 69,787 | 1,956 | ||||||||||||||||||||||||
$ | 5,121,185 | $ | 7,504,470 | $ | (8,700,000 | ) | $ | (12,842 | ) | $ | (20,440 | ) | $ | 3,892,373 | $ | 150,977 | $ | 3,401 |
1 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
124| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RUSSELL 2000® 1.5x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $689 of securities loaned (cost $975,624) | $ | 1,010,786 | ||
Investments in affiliated issuers, at value (cost $3,906,155) | 3,892,373 | |||
Repurchase agreements, at value (cost $2,074,568) | 2,074,568 | |||
Cash | 103 | |||
Unrealized appreciation on swap agreements | 118,009 | |||
Receivables: | ||||
Swap settlement | 13,193 | |||
Dividends | 8,605 | |||
Variation margin on futures contracts | 3,480 | |||
Interest | 169 | |||
Securities sold | 134 | |||
Securities lending income | 3 | |||
Total assets | 7,121,423 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 600,928 | |||
Securities purchased | 8,846 | |||
Management fees | 4,906 | |||
Transfer agent and administrative fees | 1,495 | |||
Investor service fees | 1,495 | |||
Return of securities lending collateral | 711 | |||
Portfolio accounting fees | 598 | |||
Trustees’ fees* | 225 | |||
Miscellaneous | 29,426 | |||
Total liabilities | 648,630 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 6,472,793 | ||
Net assets consist of: | ||||
Paid in capital | $ | 8,155,362 | ||
Total distributable earnings (loss) | (1,682,569 | ) | ||
Net assets | $ | 6,472,793 | ||
Capital shares outstanding | 112,422 | |||
Net asset value per share | $ | 57.58 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $8) | $ | 22,019 | ||
Dividends from securities of affiliated issuers | 150,977 | |||
Interest | 46,787 | |||
Income from securities lending, net | 1,162 | |||
Total investment income | 220,945 | |||
Expenses: | ||||
Management fees | 88,046 | |||
Investor service fees | 24,458 | |||
Transfer agent and administrative fees | 24,458 | |||
Portfolio accounting fees | 9,783 | |||
Professional fees | 14,272 | |||
Trustees' fees* | 2,954 | |||
Custodian fees | 1,488 | |||
Line of credit fees | 39 | |||
Miscellaneous | 12,355 | |||
Total expenses | 177,853 | |||
Less: | ||||
Expenses waived by Adviser | (476 | ) | ||
Net expenses | 177,377 | |||
Net investment income | 43,568 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 25,436 | |||
Investments in affiliated issuers | (12,842 | ) | ||
Distributions received from affiliated investment company shares | 3,401 | |||
Swap agreements | (1,857,980 | ) | ||
Futures contracts | 67,005 | |||
Net realized loss | (1,774,980 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (329,798 | ) | ||
Investments in affiliated issuers | (20,440 | ) | ||
Swap agreements | 169,124 | |||
Futures contracts | (42,128 | ) | ||
Net change in unrealized appreciation (depreciation) | (223,242 | ) | ||
Net realized and unrealized loss | (1,998,222 | ) | ||
Net decrease in net assets resulting from operations | $ | (1,954,654 | ) |
* | 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| 125 |
RUSSELL 2000® 1.5x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | 43,568 | $ | (19,459 | ) | |||
Net realized gain (loss) on investments | (1,774,980 | ) | 1,115,012 | |||||
Net change in unrealized appreciation (depreciation) on investments | (223,242 | ) | (76,931 | ) | ||||
Net increase (decrease) in net assets resulting from operations | (1,954,654 | ) | 1,018,622 | |||||
Distributions to shareholders | (457,521 | ) | (283,182 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 44,616,756 | 64,226,025 | ||||||
Distributions reinvested | 457,521 | 283,182 | ||||||
Cost of shares redeemed | (45,258,875 | ) | (65,934,245 | ) | ||||
Net decrease from capital share transactions | (184,598 | ) | (1,425,038 | ) | ||||
Net decrease in net assets | (2,596,773 | ) | (689,598 | ) | ||||
Net assets: | ||||||||
Beginning of year | 9,069,566 | 9,759,164 | ||||||
End of year | $ | 6,472,793 | $ | 9,069,566 | ||||
Capital share activity: | ||||||||
Shares sold | 589,674 | 947,877 | ||||||
Shares issued from reinvestment of distributions | 5,585 | 4,237 | ||||||
Shares redeemed | (604,439 | ) | (982,925 | ) | ||||
Net decrease in shares | (9,180 | ) | (30,811 | ) |
1 | For the year ended December 31, 2017, the total distributions to shareholders were all from net realized gains (See Note 11). |
126| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 74.58 | $ | 64.03 | $ | 49.10 | $ | 53.99 | $ | 51.77 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .34 | (.14 | ) | (.38 | ) | (.46 | ) | (.48 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | (13.90 | ) | 12.71 | 15.31 | (4.43 | ) | 2.70 | |||||||||||||
Total from investment operations | (13.56 | ) | 12.57 | 14.93 | (4.89 | ) | 2.22 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (3.44 | ) | (2.02 | ) | — | — | — | |||||||||||||
Total distributions | (3.44 | ) | (2.02 | ) | — | — | — | |||||||||||||
Net asset value, end of period | $ | 57.58 | $ | 74.58 | $ | 64.03 | $ | 49.10 | $ | 53.99 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (19.57 | %) | 20.01 | % | 30.41 | % | (9.08 | %) | 4.29 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 6,473 | $ | 9,070 | $ | 9,759 | $ | 6,342 | $ | 11,085 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.45 | % | (0.21 | %) | (0.74 | %) | (0.84 | %) | (0.94 | %) | ||||||||||
Total expensesc | 1.82 | % | 1.80 | % | 1.77 | % | 1.70 | % | 1.76 | % | ||||||||||
Net expensesd | 1.81 | % | 1.80 | % | 1.77 | % | 1.70 | % | 1.76 | % | ||||||||||
Portfolio turnover rate | 268 | % | 234 | % | 1,198 | % | 406 | % | 624 | % |
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 reimbursements, as applicable. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 127 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, 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 11.13% while the Russell 2000 Index returned -11.01% over the same time period.
Among sectors, the only performance contributor to the underlying index during the period was Information Technology. Utilities detracted the least. The leading detractors from return were Industrials and Financials.
Sarepta Therapeutics, Inc., AveXis, Inc., and GrubHub, Inc. were the largest contributors to performance of the underlying index for the year. Dana, Inc., McDermott International, Inc., and Clovis Oncology, Inc. 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. Derivatives performed as expected.
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.
128 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. 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.
Cumulative Fund Performance*,†
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 | 32.0% |
Guggenheim Ultra Short Duration Fund | 28.0% |
Total | 60.0% |
“Largest Holdings” excludes any temporary cash or derivative investments.
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Inverse Russell 2000® Strategy Fund | 11.13% | (6.90%) | (15.87%) |
Russell 2000 Index | (11.01%) | 7.64% | 15.22% |
* | 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. |
THE RYDEX FUNDS ANNUAL REPORT | 129 |
SCHEDULE OF INVESTMENTS | December 31, 2018 |
INVERSE RUSSELL 2000® STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 60.0% | ||||||||
Guggenheim Strategy Fund II1 | 48,717 | $ | 1,209,164 | |||||
Guggenheim Ultra Short Duration Fund1,9 | 106,449 | 1,060,232 | ||||||
Total Mutual Funds | ||||||||
(Cost $2,272,785) | 2,269,396 | |||||||
Face | ||||||||
FEDERAL AGENCY NOTES†† - 2.2% | ||||||||
Federal Farm Credit Bank | ||||||||
2.45% (1 Month USD LIBOR - 0.05%, Rate Floor: 0.00%) due 01/23/192,3 | $ | 50,000 | 49,999 | |||||
Freddie Mac | ||||||||
1.75% due 05/30/194 | 35,000 | 34,889 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $84,904) | 84,888 | |||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 1.1% | ||||||||
Freddie Mac | ||||||||
2.25% due 01/03/194,5 | 40,000 | 39,997 | ||||||
Total Federal Agency Discount Notes | ||||||||
(Cost $39,995) | 39,997 | |||||||
U.S. TREASURY BILLS†† - 0.1% | ||||||||
U.S. Treasury Bills | ||||||||
2.21% due 01/08/195,6 | 4,000 | 3,999 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $3,998) | 3,999 | |||||||
REPURCHASE AGREEMENTS††,7 - 40.5% | ||||||||
JPMorgan Chase & Co. | 904,093 | 904,093 | ||||||
Barclays Capital | 375,986 | 375,986 | ||||||
Bank of America Merrill Lynch | 250,657 | 250,657 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $1,530,736) | 1,530,736 | |||||||
Total Investments - 103.9% | ||||||||
(Cost $3,932,418) | $ | 3,929,016 | ||||||
Other Assets & Liabilities, net - (3.9)% | (146,985 | ) | ||||||
Total Net Assets - 100.0% | $ | 3,782,031 |
Futures Contracts | |||||||||||||
Description | Number of | Expiration | Notional | Value and | |||||||||
Equity Futures Contracts Sold Short† | |||||||||||||
Russell 2000 Index Mini Futures Contracts | 1 | Mar 2019 | $ | 67,480 | $ | 5,496 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements Sold Short†† | |||||||||||||||||||
BNP Paribas | Russell 2000 Index | (2.02 | %) | At Maturity | 01/29/19 | 151 | $ | 203,708 | $ | (2,530 | ) | ||||||||
Barclays Bank plc | Russell 2000 Index | (1.92 | %) | At Maturity | 01/31/19 | 256 | 344,815 | (4,280 | ) | ||||||||||
Goldman Sachs International | Russell 2000 Index | (1.97 | %) | At Maturity | 01/28/19 | 2,394 | 3,227,982 | (44,878 | ) | ||||||||||
$ | 3,776,505 | $ | (51,688 | ) |
130| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
INVERSE RUSSELL 2000® STRATEGY FUND |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | 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. Rate indicated is the rate effective at December 31, 2018. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. 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 | All or a portion of this security is pledged as futures collateral at December 31, 2018. |
7 | Repurchase Agreements — See Note 6. |
8 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2018. |
9 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
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, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 2,269,396 | $ | — | $ | — | $ | 2,269,396 | ||||||||
Federal Agency Notes | — | 84,888 | — | 84,888 | ||||||||||||
Federal Agency Discount Notes | — | 39,997 | — | 39,997 | ||||||||||||
U.S. Treasury Bills | — | 3,999 | — | 3,999 | ||||||||||||
Repurchase Agreements | — | 1,530,736 | — | 1,530,736 | ||||||||||||
Equity Futures Contracts** | 5,496 | — | — | 5,496 | ||||||||||||
Total Assets | $ | 2,274,892 | $ | 1,659,620 | $ | — | $ | 3,934,512 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Index Swap Agreements** | $ | — | $ | 51,688 | $ | — | $ | 51,688 |
** | This derivative is reported as unrealized appreciation/depreciation 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, 2018, there were no transfers between levels.
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 131 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
INVERSE RUSSELL 2000® STRATEGY FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Cash Management Funds”), each of which are 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, 2018, 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/1601445/000089180418000513/gug75569-ncsr.htm.
Transactions during the year ended December 31, 2018, in which the company is an “affiliated person”, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | Capital | |||||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 305,436 | $ | 1,436,151 | $ | (527,000 | ) | $ | 417 | $ | (5,840 | ) | $ | 1,209,164 | 48,717 | $ | 10,583 | $ | 433 | |||||||||||||||||
Guggenheim Ultra Short Duration Fund1 | 204,695 | 2,452,888 | (1,595,000 | ) | (1,045 | ) | (1,306 | ) | 1,060,232 | 106,449 | 7,484 | 298 | ||||||||||||||||||||||||
$ | 510,131 | $ | 3,889,039 | $ | (2,122,000 | ) | $ | (628 | ) | $ | (7,146 | ) | $ | 2,269,396 | $ | 18,067 | $ | 731 |
1 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
132| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE RUSSELL 2000® STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $128,897) | $ | 128,884 | ||
Investments in affiliated issuers, at value (cost $2,272,785) | 2,269,396 | |||
Repurchase agreements, at value (cost $1,530,736) | 1,530,736 | |||
Receivables: | ||||
Dividends | 2,199 | |||
Interest | 210 | |||
Total assets | 3,931,425 | |||
Liabilities: | ||||
Unrealized depreciation on swap agreements | 51,688 | |||
Payable for: | ||||
Fund shares redeemed | 82,594 | |||
Swap settlement | 5,458 | |||
Securities purchased | 2,460 | |||
Management fees | 2,389 | |||
Transfer agent and administrative fees | 685 | |||
Investor service fees | 685 | |||
Variation margin on futures contracts | 435 | |||
Portfolio accounting fees | 274 | |||
Trustees’ fees* | 9 | |||
Miscellaneous | 2,717 | |||
Total liabilities | 149,394 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 3,782,031 | ||
Net assets consist of: | ||||
Paid in capital | $ | 10,170,147 | ||
Total distributable earnings (loss) | (6,388,116 | ) | ||
Net assets | $ | 3,782,031 | ||
Capital shares outstanding | 55,387 | |||
Net asset value per share | $ | 68.28 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 18,067 | ||
Interest | 14,708 | |||
Total investment income | 32,775 | |||
Expenses: | ||||
Management fees | 12,650 | |||
Investor service fees | 3,514 | |||
Transfer agent and administrative fees | 3,514 | |||
Professional fees | 2,011 | |||
Portfolio accounting fees | 1,405 | |||
Trustees’ fees* | 237 | |||
Custodian fees | 190 | |||
Line of credit fees | 3 | |||
Miscellaneous | 2,165 | |||
Total expenses | 25,689 | |||
Less: | ||||
Expenses waived by Adviser | (79 | ) | ||
Net expenses | 25,610 | |||
Net investment income | 7,165 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in affiliated issuers | (628 | ) | ||
Distributions received from affiliated investment company shares | 731 | |||
Swap agreements | 262,967 | |||
Futures contracts | (1,729 | ) | ||
Net realized gain | 261,341 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (13 | ) | ||
Investments in affiliated issuers | (7,146 | ) | ||
Swap agreements | (58,373 | ) | ||
Futures contracts | 6,162 | |||
Net change in unrealized appreciation (depreciation) | (59,370 | ) | ||
Net realized and unrealized gain | 201,971 | |||
Net increase in net assets resulting from operations | $ | 209,136 |
* | 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| 133 |
INVERSE RUSSELL 2000® STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | 7,165 | $ | (26,976 | ) | |||
Net realized gain (loss) on investments | 261,341 | (714,962 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | (59,370 | ) | (107,182 | ) | ||||
Net increase (decrease) in net assets resulting from operations | 209,136 | (849,120 | ) | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 22,485,357 | 59,108,576 | ||||||
Cost of shares redeemed | (19,835,857 | ) | (69,646,127 | ) | ||||
Net increase (decrease) from capital share transactions | 2,649,500 | (10,537,551 | ) | |||||
Net increase (decrease) in net assets | 2,858,636 | (11,386,671 | ) | |||||
Net assets: | ||||||||
Beginning of year | 923,395 | 12,310,066 | ||||||
End of year | $ | 3,782,031 | $ | 923,395 | ||||
Capital share activity: | ||||||||
Shares sold | 376,275 | 864,931 | ||||||
Shares redeemed | (335,916 | ) | (1,023,191 | ) | ||||
Net increase (decrease) in shares | 40,359 | (158,260 | ) |
134| 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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 61.44 | $ | 71.04 | $ | 89.12 | $ | 89.01 | $ | 97.61 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .31 | (.51 | ) | (.35 | ) | (1.20 | ) | (1.44 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | 6.53 | (9.09 | ) | (17.73 | ) | 1.31 | (7.16 | ) | ||||||||||||
Total from investment operations | 6.84 | (9.60 | ) | (18.08 | ) | .11 | (8.60 | ) | ||||||||||||
Net asset value, end of period | $ | 68.28 | $ | 61.44 | $ | 71.04 | $ | 89.12 | $ | 89.01 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 11.13 | % | (13.49 | %) | (20.28 | %) | 0.10 | % | (8.85 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 3,782 | $ | 923 | $ | 12,310 | $ | 6,949 | $ | 1,592 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.51 | % | (0.74 | %) | (1.14 | %) | (1.39 | %) | (1.50 | %) | ||||||||||
Total expensesc | 1.83 | % | 1.80 | % | 1.75 | % | 1.71 | % | 1.76 | % | ||||||||||
Net expensesd | 1.82 | % | 1.80 | % | 1.75 | % | 1.71 | % | 1.76 | % | ||||||||||
Portfolio turnover rate | 287 | % | 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 | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | 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. |
f | Reverse share split — Per share amounts for December 31, 2014, have been stated to reflect a 1:3 reverse share split effective January 24, 2014. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 135 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, 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 returned -14.23% while the Dow Jones Industrial Average Index returned -3.48% over the same time period.
The Health Care and Consumer Discretionary sectors contributed the most to performance of the underlying index during the year. The Financials and Industrials sectors detracted the most from performance for the year.
Boeing Co., United Health Group, Inc., and Merck & Co., 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 Goldman Sachs Group, Inc., 3M Co., and International Business Machines 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. Derivatives performed as expected.
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.
136 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. 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.
Cumulative Fund Performance*,†
Inception Date: May 3, 2004 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 29.2% |
Guggenheim Ultra Short Duration Fund | 16.0% |
Boeing Co. | 1.9% |
UnitedHealth Group, Inc. | 1.5% |
3M Co. | 1.1% |
McDonald's Corp. | 1.1% |
Home Depot, Inc. | 1.0% |
Goldman Sachs Group, Inc. | 1.0% |
Apple, Inc. | 0.9% |
Visa, Inc. — Class A | 0.8% |
Top Ten Total | 54.5% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments.
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Dow 2x Strategy Fund | (14.23%) | 14.74% | 21.57% |
Dow Jones Industrial Average Index | (3.48%) | 9.70% | 13.16% |
* | 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 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 | 137 |
SCHEDULE OF INVESTMENTS | December 31, 2018 |
DOW 2x STRATEGY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 20.5% | ||||||||
Industrial - 4.4% | ||||||||
Boeing Co. | 846 | $ | 272,835 | |||||
3M Co. | 846 | 161,197 | ||||||
Caterpillar, Inc. | 846 | 107,501 | ||||||
United Technologies Corp. | 846 | 90,082 | ||||||
Total Industrial | 631,615 | |||||||
Consumer, Non-cyclical - 3.8% | ||||||||
UnitedHealth Group, Inc. | 846 | 210,756 | ||||||
Johnson & Johnson | 846 | 109,176 | ||||||
Procter & Gamble Co. | 846 | 77,764 | ||||||
Merck & Company, Inc. | 846 | 64,643 | ||||||
Coca-Cola Co. | 846 | 40,058 | ||||||
Pfizer, Inc. | 846 | 36,928 | ||||||
Total Consumer, Non-cyclical | 539,325 | |||||||
Financial - 3.6% | ||||||||
Goldman Sachs Group, Inc. | 846 | 141,324 | ||||||
Visa, Inc. — Class A | 846 | 111,621 | ||||||
Travelers Companies, Inc. | 846 | 101,308 | ||||||
JPMorgan Chase & Co. | 846 | 82,587 | ||||||
American Express Co. | 846 | 80,641 | ||||||
Total Financial | 517,481 | |||||||
Consumer, Cyclical - 3.5% | ||||||||
McDonald’s Corp. | 846 | 150,224 | ||||||
Home Depot, Inc. | 846 | 145,360 | ||||||
Walmart, Inc. | 846 | 78,805 | ||||||
NIKE, Inc. — Class B | 846 | 62,723 | ||||||
Walgreens Boots Alliance, Inc. | 846 | 57,807 | ||||||
Total Consumer, Cyclical | 494,919 | |||||||
Technology - 2.5% | ||||||||
Apple, Inc. | 846 | 133,448 | ||||||
International Business Machines Corp. | 846 | 96,165 | ||||||
Microsoft Corp. | 846 | 85,928 | ||||||
Intel Corp. | 846 | 39,703 | ||||||
Total Technology | 355,244 | |||||||
Communications - 1.3% | ||||||||
Walt Disney Co. | 846 | 92,764 | ||||||
Verizon Communications, Inc. | 846 | 47,562 | ||||||
Cisco Systems, Inc. | 846 | 36,657 | ||||||
Total Communications | 176,983 | |||||||
Energy - 1.1% | ||||||||
Chevron Corp. | 846 | 92,036 | ||||||
Exxon Mobil Corp. | 846 | 57,689 | ||||||
Total Energy | 149,725 | |||||||
Basic Materials - 0.3% | ||||||||
DowDuPont, Inc. | 846 | 45,244 | ||||||
Total Common Stocks | ||||||||
(Cost $2,763,636) | 2,910,536 | |||||||
MUTUAL FUNDS† - 45.2% | ||||||||
Guggenheim Strategy Fund II1 | 167,275 | 4,151,762 | ||||||
Guggenheim Ultra Short Duration Fund1,6 | 228,453 | 2,275,396 | ||||||
Total Mutual Funds | ||||||||
(Cost $6,445,662) | 6,427,158 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 10.0% | ||||||||
U.S. Treasury Bills | ||||||||
2.35% due 03/14/192,3 | $ | 930,000 | 925,628 | |||||
2.31% due 03/14/193 | 300,000 | 298,589 | ||||||
2.21% due 01/08/193,4 | 203,000 | 202,924 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $1,427,086) | 1,427,141 | |||||||
REPURCHASE AGREEMENTS††,5 - 20.6% | ||||||||
JPMorgan Chase & Co. | 1,727,000 | 1,727,000 | ||||||
Barclays Capital | 718,210 | 718,210 | ||||||
Bank of America Merrill Lynch | 478,806 | 478,806 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $2,924,016) | 2,924,016 | |||||||
Total Investments - 96.3% | ||||||||
(Cost $13,560,400) | $ | 13,688,851 | ||||||
Other Assets & Liabilities, net - 3.7% | 520,599 | |||||||
Total Net Assets - 100.0% | $ | 14,209,450 |
138| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
DOW 2x STRATEGY FUND |
Futures Contracts | |||||||||||||
Description | Number of | Expiration | Notional | Value and | |||||||||
Equity Futures Contracts Purchased† | |||||||||||||
Dow Jones Industrial Average Index Mini Futures Contracts | 32 | Mar 2019 | $ | 3,729,600 | $ | (77,954 | ) |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||
BNP Paribas | Dow Jones Industrial Average Index | 3.02 | % | At Maturity | 01/29/19 | 625 | $ | 14,568,330 | $ | 122,768 | |||||||||
Barclays Bank plc | Dow Jones Industrial Average Index | 2.92 | % | At Maturity | 01/31/19 | 325 | 7,570,136 | 61,212 | |||||||||||
$ | 22,138,466 | $ | 183,980 |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | 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, 2018. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | All or a portion of this security is pledged as futures collateral at December 31, 2018. |
5 | Repurchase Agreements — See Note 6. |
6 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
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, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 2,910,536 | $ | — | $ | — | $ | 2,910,536 | ||||||||
Mutual Funds | 6,427,158 | — | — | 6,427,158 | ||||||||||||
U.S. Treasury Bills | — | 1,427,141 | — | 1,427,141 | ||||||||||||
Repurchase Agreements | — | 2,924,016 | — | 2,924,016 | ||||||||||||
Equity Index Swap Agreements** | — | 183,980 | — | 183,980 | ||||||||||||
Total Assets | $ | 9,337,694 | $ | 4,535,137 | $ | — | $ | 13,872,831 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Futures Contracts** | $ | 77,954 | $ | — | $ | — | $ | 77,954 |
** | This derivative is reported as unrealized appreciation/depreciation 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, 2018, there were no transfers between levels.
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 139 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
DOW 2x STRATEGY FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Cash Management Funds”), each of which are 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, 2018, 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/1601445/000089180418000513/gug75569-ncsr.htm.
Transactions during the year ended December 31, 2018, in which the company is an “affiliated person”, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | Capital | |||||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 6,953,642 | $ | 3,760,124 | $ | (6,530,000 | ) | $ | (7,464 | ) | $ | (24,540 | ) | $ | 4,151,762 | 167,275 | $ | 152,745 | $ | 2,222 | ||||||||||||||||
Guggenheim Ultra Short Duration Fund1 | 6,839,170 | 11,899,588 | (16,450,000 | ) | (134 | ) | (13,228 | ) | 2,275,396 | 228,453 | 82,657 | 2,015 | ||||||||||||||||||||||||
$ | 13,792,812 | $ | 15,659,712 | $ | (22,980,000 | ) | $ | (7,598 | ) | $ | (37,768 | ) | $ | 6,427,158 | $ | 235,402 | $ | 4,237 |
1 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
140| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
DOW 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $4,190,722) | $ | 4,337,677 | ||
Investments in affiliated issuers, at value (cost $6,445,662) | 6,427,158 | |||
Repurchase agreements, at value (cost $2,924,016) | 2,924,016 | |||
Unrealized appreciation on swap agreements | 183,980 | |||
Receivables: | ||||
Fund shares sold | 378,269 | |||
Variation margin on futures contracts | 28,227 | |||
Dividends | 13,193 | |||
Interest | 239 | |||
Total assets | 14,292,759 | |||
Liabilities: | ||||
Payable for: | ||||
Professional fees | 21,274 | |||
Securities purchased | 11,992 | |||
Fund shares redeemed | 9,121 | |||
Management fees | 9,041 | |||
Swap settlement | 6,537 | |||
Licensing fees | 6,410 | |||
Transfer agent and administrative fees | 2,643 | |||
Investor service fees | 2,643 | |||
Portfolio accounting fees | 1,057 | |||
Trustees’ fees* | 296 | |||
Miscellaneous | 12,295 | |||
Total liabilities | 83,309 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 14,209,450 | ||
Net assets consist of: | ||||
Paid in capital | $ | 16,650,089 | ||
Total distributable earnings (loss) | (2,440,639 | ) | ||
Net assets | $ | 14,209,450 | ||
Capital shares outstanding | 127,440 | |||
Net asset value per share | $ | 111.50 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 114,473 | ||
Dividends from securities of affiliated issuers | 235,402 | |||
Interest | 70,841 | |||
Total investment income | 420,716 | |||
Expenses: | ||||
Management fees | 154,664 | |||
Investor service fees | 42,962 | |||
Transfer agent and administrative fees | 42,962 | |||
Professional fees | 26,202 | |||
Portfolio accounting fees | 17,185 | |||
Trustees’ fees* | 5,293 | |||
Custodian fees | 2,594 | |||
Line of credit fees | 407 | |||
Miscellaneous | 17,733 | |||
Total expenses | 310,002 | |||
Less: | ||||
Expenses waived by Adviser | (474 | ) | ||
Net expenses | 309,528 | |||
Net investment income | 111,188 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | (330,363 | ) | ||
Investments in affiliated issuers | (7,598 | ) | ||
Distributions received from affiliated investment company shares | 4,237 | |||
Swap agreements | (2,334,538 | ) | ||
Futures contracts | 48,671 | |||
Net realized loss | (2,619,591 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (476,510 | ) | ||
Investments in affiliated issuers | (37,768 | ) | ||
Swap agreements | 353,878 | |||
Futures contracts | (128,675 | ) | ||
Net change in unrealized appreciation (depreciation) | (289,075 | ) | ||
Net realized and unrealized loss | (2,908,666 | ) | ||
Net decrease in net assets resulting from operations | $ | (2,797,478 | ) |
* | 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| 141 |
DOW 2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 111,188 | $ | 31,658 | ||||
Net realized gain (loss) on investments | (2,619,591 | ) | 8,121,706 | |||||
Net change in unrealized appreciation (depreciation) on investments | (289,075 | ) | (420,249 | ) | ||||
Net increase (decrease) in net assets resulting from operations | (2,797,478 | ) | 7,733,115 | |||||
Distributions to shareholders | (3,676,566 | ) | (312,256 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 97,491,839 | 101,953,788 | ||||||
Distributions reinvested | 3,676,566 | 312,256 | ||||||
Cost of shares redeemed | (103,803,896 | ) | (102,877,419 | ) | ||||
Net decrease from capital share transactions | (2,635,491 | ) | (611,375 | ) | ||||
Net increase (decrease) in net assets | (9,109,535 | ) | 6,809,484 | |||||
Net assets: | ||||||||
Beginning of year | 23,318,985 | 16,509,501 | ||||||
End of year | $ | 14,209,450 | $ | 23,318,985 | ||||
Capital share activity: | ||||||||
Shares sold | 642,512 | 783,548 | ||||||
Shares issued from reinvestment of distributions | 27,641 | 2,407 | ||||||
Shares redeemed | (678,730 | ) | (799,910 | ) | ||||
Net decrease in shares | (8,577 | ) | (13,955 | ) |
1 | For the year ended December 31, 2017, the distributions from net investment income and net realized gains were as follows (See Note 11): |
Net investment income | $ | (8,701 | ) | ||
Net realized gains | (303,555 | ) |
142| 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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 171.44 | $ | 110.08 | $ | 84.22 | $ | 112.60 | $ | 169.97 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | 1.01 | .25 | .06 | (.06 | ) | (.40 | ) | |||||||||||||
Net gain (loss) on investments (realized and unrealized) | (18.55 | ) | 63.43 | 25.80 | (2.89 | ) | 27.20 | |||||||||||||
Total from investment operations | (17.54 | ) | 63.68 | 25.86 | (2.95 | ) | 26.80 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.36 | ) | (.06 | ) | — | — | — | |||||||||||||
Net realized gains | (42.04 | ) | (2.26 | ) | — | (25.43 | ) | (84.17 | ) | |||||||||||
Total distributions | (42.40 | ) | (2.32 | ) | — | (25.43 | ) | (84.17 | ) | |||||||||||
Net asset value, end of period | $ | 111.50 | $ | 171.44 | $ | 110.08 | $ | 84.22 | $ | 112.60 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (14.23 | %) | 58.51 | % | 30.72 | % | (4.22 | %) | 16.80 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 14,209 | $ | 23,319 | $ | 16,510 | $ | 21,905 | $ | 19,978 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.65 | % | 0.18 | % | 0.07 | % | (0.06 | %) | (0.25 | %) | ||||||||||
Total expensesc | 1.80 | % | 1.81 | % | 1.77 | % | 1.72 | % | 1.76 | % | ||||||||||
Net expensesd | 1.80 | % | 1.81 | % | 1.77 | % | 1.72 | % | 1.76 | % | ||||||||||
Portfolio turnover rate | 362 | % | 256 | % | 361 | % | 212 | % | 227 | % |
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 reimbursements, as applicable. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 143 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, 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 1.43% while the Dow Jones Industrial Average Index returned -3.48% over the same time period.
The Health Care and Consumer Discretionary sectors contributed the most to performance of the underlying index during the year. The Financials and Industrials sectors detracted the most from performance for the year.
Boeing Co., United Health Group, Inc., and Merck & Co., 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 Goldman Sachs Group, Inc., 3M Co., and International Business Machines 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. Derivatives performed as expected.
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.
144 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. 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.
Cumulative Fund Performance*,†
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 | 30.6% |
Guggenheim Ultra Short Duration Fund | 21.1% |
Total | 51.7% |
“Largest Holdings” excludes any temporary cash or derivative investments.
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Inverse Dow 2x Strategy Fund | 1.43% | (20.71%) | (27.82%) |
Dow Jones Industrial Average Index | (3.48%) | 9.70% | 13.16% |
* | Fund positions at December 31, 2018 did not represent the Fund’s daily target of -200% exposure to the underlying index. |
* | 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 | 145 |
SCHEDULE OF INVESTMENTS | December 31, 2018 |
INVERSE DOW 2x STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 51.7% | ||||||||
Guggenheim Strategy Fund II1 | 26,164 | $ | 649,397 | |||||
Guggenheim Ultra Short Duration Fund1,6 | 44,895 | 447,159 | ||||||
Total Mutual Funds | ||||||||
(Cost $1,101,452) | 1,096,556 | |||||||
Face | ||||||||
FEDERAL AGENCY NOTES†† - 7.0% | ||||||||
Farmer Mac | ||||||||
1.55% due 07/03/192 | $ | 100,000 | 99,444 | |||||
Freddie Mac | ||||||||
1.75% due 05/30/195 | 50,000 | 49,841 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $149,322) | 149,285 | |||||||
U.S. TREASURY BILLS†† - 1.9% | ||||||||
U.S. Treasury Bills | ||||||||
2.21% due 01/08/193 | 40,000 | 39,985 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $39,982) | 39,985 | |||||||
REPURCHASE AGREEMENTS††,4 - 40.2% | ||||||||
JPMorgan Chase & Co. | 504,143 | 504,143 | ||||||
Barclays Capital | 209,659 | 209,659 | ||||||
Bank of America Merrill Lynch | 139,772 | 139,772 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $853,574) | 853,574 | |||||||
Total Investments - 100.8% | ||||||||
(Cost $2,144,330) | $ | 2,139,400 | ||||||
Other Assets & Liabilities, net - (0.8)% | (17,602 | ) | ||||||
Total Net Assets - 100.0% | $ | 2,121,798 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements Sold Short†† | |||||||||||||||||||
Barclays Bank plc | Dow Jones Industrial Average Index | 2.67 | % | At Maturity | 01/31/19 | 11 | $ | 252,779 | $ | (2,044 | ) | ||||||||
BNP Paribas | Dow Jones Industrial Average Index | 2.52 | % | At Maturity | 01/29/19 | 153 | 3,580,021 | (28,946 | ) | ||||||||||
$ | 3,832,800 | $ | (30,990 | ) |
† | 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 | Repurchase Agreements — See Note 6. |
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 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
See Sector Classification in Other Information section. |
146| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
INVERSE DOW 2x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 1,096,556 | $ | — | $ | — | $ | 1,096,556 | ||||||||
Federal Agency Notes | — | 149,285 | — | 149,285 | ||||||||||||
U.S. Treasury Bills | — | 39,985 | — | 39,985 | ||||||||||||
Repurchase Agreements | — | 853,574 | — | 853,574 | ||||||||||||
Total Assets | $ | 1,096,556 | $ | 1,042,844 | $ | — | $ | 2,139,400 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Index Swap Agreements** | $ | — | $ | 30,990 | $ | — | $ | 30,990 |
** | This derivative is reported as unrealized appreciation/depreciation 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, 2018, 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 certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Cash Management Funds”), each of which are 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, 2018, 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/1601445/000089180418000513/gug75569-ncsr.htm.
Transactions during the year ended December 31, 2018, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | Capital | |||||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 992,937 | $ | 3,925,680 | $ | (4,260,000 | ) | $ | (5,950 | ) | $ | (3,270 | ) | $ | 649,397 | 26,164 | $ | 29,809 | $ | 829 | ||||||||||||||||
Guggenheim Ultra Short Duration Fund1 | 892,337 | 5,071,797 | (5,510,000 | ) | (5,631 | ) | (1,344 | ) | 447,159 | 44,895 | 25,668 | 1,124 | ||||||||||||||||||||||||
$ | 1,885,274 | $ | 8,997,477 | $ | (9,770,000 | ) | $ | (11,581 | ) | $ | (4,614 | ) | $ | 1,096,556 | $ | 55,477 | $ | 1,953 |
1 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 147 |
INVERSE DOW 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $189,304) | $ | 189,270 | ||
Investments in affiliated issuers, at value (cost $1,101,452) | 1,096,556 | |||
Repurchase agreements, at value (cost $853,574) | 853,574 | |||
Receivables: | ||||
Fund shares sold | 220,209 | |||
Securities sold | 100,000 | |||
Dividends | 3,560 | |||
Interest | 914 | |||
Total assets | 2,464,083 | |||
Liabilities: | ||||
Unrealized depreciation on swap agreements | 30,990 | |||
Payable for: | ||||
Fund shares redeemed | 288,728 | |||
Swap settlement | 4,206 | |||
Securities purchased | 3,700 | |||
Management fees | 2,741 | |||
Transfer agent and administrative fees | 810 | |||
Investor service fees | 810 | |||
Portfolio accounting fees | 323 | |||
Variation margin on futures contracts | 239 | |||
Trustees’ fees* | 51 | |||
Miscellaneous | 9,687 | |||
Total liabilities | 342,285 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 2,121,798 | ||
Net assets consist of: | ||||
Paid in capital | $ | 19,659,623 | ||
Total distributable earnings (loss) | (17,537,825 | ) | ||
Net assets | $ | 2,121,798 | ||
Capital shares outstanding | 51,759 | |||
Net asset value per share | $ | 40.99 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 55,477 | ||
Interest | 28,937 | |||
Total investment income | 84,414 | |||
Expenses: | ||||
Management fees | 30,637 | |||
Investor service fees | 8,510 | |||
Transfer agent and administrative fees | 8,510 | |||
Professional fees | 4,781 | |||
Portfolio accounting fees | 3,404 | |||
Custodian fees | 680 | |||
Trustees’ fees* | 526 | |||
Line of credit fees | 13 | |||
Miscellaneous | 4,549 | |||
Total expenses | 61,610 | |||
Less: | ||||
Expenses waived by Adviser | (173 | ) | ||
Net expenses | 61,437 | |||
Net investment income | 22,977 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in affiliated issuers | (11,581 | ) | ||
Distributions received from affiliated investment company shares | 1,953 | |||
Swap agreements | 1,095,740 | |||
Futures contracts | (41,788 | ) | ||
Net realized gain | 1,044,324 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (34 | ) | ||
Investments in affiliated issuers | (4,614 | ) | ||
Swap agreements | (48,735 | ) | ||
Net change in unrealized appreciation (depreciation) | (53,383 | ) | ||
Net realized and unrealized gain | 990,941 | |||
Net increase in net assets resulting from operations | $ | 1,013,918 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
148| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE DOW 2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | 22,977 | $ | (22,925 | ) | |||
Net realized gain (loss) on investments | 1,044,324 | (1,964,989 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | (53,383 | ) | (32,320 | ) | ||||
Net increase (decrease) in net assets resulting from operations | 1,013,918 | (2,020,234 | ) | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 56,638,059 | 88,085,116 | ||||||
Cost of shares redeemed | (59,229,156 | ) | (85,769,402 | ) | ||||
Net increase (decrease) from capital share transactions | (2,591,097 | ) | 2,315,714 | |||||
Net increase (decrease) in net assets | (1,577,179 | ) | 295,480 | |||||
Net assets: | ||||||||
Beginning of year | 3,698,977 | 3,403,497 | ||||||
End of year | $ | 2,121,798 | $ | 3,698,977 | ||||
Capital share activity: | ||||||||
Shares sold | 1,570,062 | 1,601,378 | ||||||
Shares redeemed | (1,609,825 | ) | (1,561,252 | ) | ||||
Net increase (decrease) in shares | (39,763 | ) | 40,126 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 149 |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 40.42 | $ | 66.22 | $ | 94.11 | $ | 102.38 | $ | 130.67 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .25 | (.32 | ) | (.25 | ) | (1.50 | ) | (1.80 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | .32 | (25.48 | ) | (27.64 | ) | (6.77 | ) | (26.49 | ) | |||||||||||
Total from investment operations | .57 | (25.80 | ) | (27.89 | ) | (8.27 | ) | (28.29 | ) | |||||||||||
Net asset value, end of period | $ | 40.99 | $ | 40.42 | $ | 66.22 | $ | 94.11 | $ | 102.38 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 1.43 | % | (38.95 | %) | (29.65 | %) | (8.03 | %) | (21.77 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 2,122 | $ | 3,699 | $ | 3,403 | $ | 5,057 | $ | 2,305 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.67 | % | (0.58 | %) | (0.84 | %) | (1.52 | %) | (1.51 | %) | ||||||||||
Total expensesc | 1.81 | % | 1.81 | % | 1.77 | % | 1.72 | % | 1.77 | % | ||||||||||
Net expensesd | 1.80 | % | 1.81 | % | 1.77 | % | 1.72 | % | 1.77 | % | ||||||||||
Portfolio turnover rate | 524 | % | 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 | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | 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. |
f | 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. |
150| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, the Government Long Bond 1.2x Strategy Fund returned -5.32%.
The price movement of the Long Treasury Bond was -5.58% for 2018.
The return of a comparison index, the Bloomberg Barclays U.S. Long Treasury Index, was -1.84%.
As prices of long-term Treasury bonds fell over 2018, their yields rose, from 2.74% to 3.02%. The yield curve flattened over the period, as the Fed hiked the short-term fed funds rate by a quarter point on four occasions in 2018 in the face of low inflation. U.S. economic growth improved over the year, a result of tax cuts and strong fiscal spending. The quarter-point cut in the Fed funds rate in December was controversial, given signs of slowing growth domestically and even weaker growth abroad. Inflation has been contained, as commodity prices fell, especially oil.
There were two periods of rising yields in the period, the first in late January/early February, driven by the first equity-market correction in two years amid strong corporate earnings, synchronous global economic growth, and the discounted benefits of U.S. tax reform. The second occurred in October, when Treasury yields peaked at a four-year high, then fell sharply through the end of the year as equities slumped into negative territory and credit spreads widened significantly.
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 amounts 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 | 151 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. 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.
Cumulative Fund Performance*,†
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 | 39.8% |
Guggenheim Strategy Fund II | 23.2% |
Guggenheim Ultra Short Duration Fund | 11.8% |
Total | 74.8% |
“Largest Holdings” excludes any temporary cash or derivative investments.
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Government Long Bond 1.2x Strategy Fund | (5.32%) | 5.75% | 1.74% |
Price Movement of Long Treasury Bond** | (5.58%) | 3.13% | (1.05%) |
Bloomberg Barclays U.S. Long Treasury Index | (1.84%) | 5.93% | 4.09% |
* | 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. Long Treasury Index and the 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. |
152 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2018 |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 35.0% | ||||||||
Guggenheim Strategy Fund II1 | 125,359 | $ | 3,111,413 | |||||
Guggenheim Ultra Short Duration Fund1,6 | 159,713 | 1,590,738 | ||||||
Total Mutual Funds | ||||||||
(Cost $4,723,846) | 4,702,151 | |||||||
Face | ||||||||
U.S. GOVERNMENT SECURITIES†† - 39.8% | ||||||||
U.S. Treasury Bonds | ||||||||
3.38% due 11/15/48 | $ | 5,000,000 | 5,348,437 | |||||
Total U.S. Government Securities | ||||||||
(Cost $5,001,559) | 5,348,437 | |||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 2.2% | ||||||||
Freddie Mac | ||||||||
2.25% due 01/03/193,5 | 300,000 | 299,980 | ||||||
Total Federal Agency Discount Notes | ||||||||
(Cost $299,963) | 299,980 | |||||||
U.S. TREASURY BILLS†† - 1.7% | ||||||||
U.S. Treasury Bills | ||||||||
2.21% due 01/08/192,3 | 225,000 | 224,916 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $224,900) | 224,916 | |||||||
REPURCHASE AGREEMENTS††,4 - 22.5% | ||||||||
JPMorgan Chase & Co. | 1,785,616 | 1,785,616 | ||||||
Barclays Capital | 742,586 | 742,586 | ||||||
Bank of America Merrill Lynch | 495,058 | 495,058 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $3,023,260) | 3,023,260 | |||||||
Total Investments - 101.2% | ||||||||
(Cost $13,273,528) | $ | 13,598,744 | ||||||
Other Assets & Liabilities, net - (1.2)% | (162,314 | ) | ||||||
Total Net Assets - 100.0% | $ | 13,436,430 |
Futures Contracts | |||||||||||||
Description | Number of | Expiration | Notional | Value and | |||||||||
Interest Rate Futures Contracts Purchased† | |||||||||||||
U.S. Treasury Ultra Long Bond Futures Contracts | 74 | Mar 2019 | $ | 11,883,938 | $ | 502,146 |
** | Includes cumulative appreciation. Variation margin is reported within the Statement of Assets and Liabilities. |
† | 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 futures collateral at December 31, 2018. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | Repurchase Agreements — See Note 6. |
5 | On September 7, 2008, the issuer was placed in conservatorship by the Federal Housing Finance Agency (FHFA). As conservator, the FHFA has full power to control the assets and operations of the firm. |
6 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 153 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 4,702,151 | $ | — | $ | — | $ | 4,702,151 | ||||||||
U.S. Government Securities | — | 5,348,437 | — | 5,348,437 | ||||||||||||
Federal Agency Discount Notes | — | 299,980 | — | 299,980 | ||||||||||||
U.S. Treasury Bills | — | 224,916 | — | 224,916 | ||||||||||||
Repurchase Agreements | — | 3,023,260 | — | 3,023,260 | ||||||||||||
Interest Rate Futures Contracts** | 502,146 | — | — | 502,146 | ||||||||||||
Total Assets | $ | 5,204,297 | $ | 8,896,593 | $ | — | $ | 14,100,890 |
** | This derivative is reported as unrealized appreciation/depreciation 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, 2018, there were no transfers between levels.
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Cash Management Funds”), each of which are 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, 2018, 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/1601445/000089180418000513/gug75569-ncsr.htm.
Transactions during the year ended December 31, 2018, in which the company is an “affiliated person”, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | Capital | |||||||||||||||||||||||||||
Mutual Funds | �� | |||||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 2,512,682 | $ | 8,918,467 | $ | (8,300,000 | ) | $ | 7,902 | $ | (27,638 | ) | $ | 3,111,413 | 125,359 | $ | 46,283 | $ | 1,666 | |||||||||||||||||
Guggenheim Ultra Short Duration Fund1 | 1,606,986 | 9,343,785 | (9,350,000 | ) | (3,811 | ) | (6,222 | ) | 1,590,738 | 159,713 | 42,243 | 1,300 | ||||||||||||||||||||||||
$ | 4,119,668 | $ | 18,262,252 | $ | (17,650,000 | ) | $ | 4,091 | $ | (33,860 | ) | $ | 4,702,151 | $ | 88,526 | $ | 2,966 |
1 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
154| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $5,526,422) | $ | 5,873,333 | ||
Investments in affiliated issuers, at value (cost $4,723,846) | 4,702,151 | |||
Repurchase agreements, at value (cost $3,023,260) | 3,023,260 | |||
Segregated cash with broker | 57,285 | |||
Receivables: | ||||
Variation margin on futures contracts | 41,661 | |||
Interest | 22,158 | |||
Fund shares sold | 10,664 | |||
Dividends | 8,243 | |||
Total assets | 13,738,755 | |||
Liabilities: | ||||
Overdraft due to custodian bank | 28 | |||
Payable for: | ||||
Fund shares redeemed | 258,078 | |||
Securities purchased | 8,796 | |||
Management fees | 5,100 | |||
Investor service fees | 2,712 | |||
Transfer agent and administrative fees | 2,170 | |||
Portfolio accounting fees | 1,085 | |||
Trustees’ fees* | 199 | |||
Miscellaneous | 24,157 | |||
Total liabilities | 302,325 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 13,436,430 | ||
Net assets consist of: | ||||
Paid in capital | $ | 25,055,028 | ||
Total distributable earnings (loss) | (11,618,598 | ) | ||
Net assets | $ | 13,436,430 | ||
Capital shares outstanding | 453,914 | |||
Net asset value per share | $ | 29.60 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 88,526 | ||
Interest | 277,205 | |||
Total investment income | 365,731 | |||
Expenses: | ||||
Management fees | 63,187 | |||
Investor service fees | 31,593 | |||
Transfer agent and administrative fees | 25,275 | |||
Professional fees | 13,258 | |||
Portfolio accounting fees | 12,637 | |||
Trustees’ fees* | 3,295 | |||
Custodian fees | 1,793 | |||
Line of credit fees | 680 | |||
Miscellaneous | 15,077 | |||
Total expenses | 166,795 | |||
Less: | ||||
Expenses waived by Adviser | (325 | ) | ||
Net expenses | 166,470 | |||
Net investment income | 199,261 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | (764,706 | ) | ||
Investments in affiliated issuers | 4,091 | |||
Distributions received from affiliated investment company shares | 2,966 | |||
Futures contracts | (450,830 | ) | ||
Net realized loss | (1,208,479 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 294,395 | |||
Investments in affiliated issuers | (33,860 | ) | ||
Futures contracts | 396,654 | |||
Net change in unrealized appreciation (depreciation) | 657,189 | |||
Net realized and unrealized loss | (551,290 | ) | ||
Net decrease in net assets resulting from operations | $ | (352,029 | ) |
* | 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| 155 |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 199,261 | $ | 190,590 | ||||
Net realized gain (loss) on investments | (1,208,479 | ) | 997,554 | |||||
Net change in unrealized appreciation (depreciation) on investments | 657,189 | (231,937 | ) | |||||
Net increase (decrease) in net assets resulting from operations | (352,029 | ) | 956,207 | |||||
Distributions to shareholders | (219,788 | ) | (190,445 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 246,354,128 | 305,778,361 | ||||||
Distributions reinvested | 219,788 | 190,445 | ||||||
Cost of shares redeemed | (244,183,035 | ) | (312,241,675 | ) | ||||
Net increase (decrease) from capital share transactions | 2,390,881 | (6,272,869 | ) | |||||
Net increase (decrease) in net assets | 1,819,064 | (5,507,107 | ) | |||||
Net assets: | ||||||||
Beginning of year | 11,617,366 | 17,124,473 | ||||||
End of year | $ | 13,436,430 | $ | 11,617,366 | ||||
Capital share activity: | ||||||||
Shares sold | 8,395,631 | 9,987,452 | ||||||
Shares issued from reinvestment of distributions | 7,557 | 6,217 | ||||||
Shares redeemed | (8,314,762 | ) | (10,211,356 | ) | ||||
Net increase (decrease) in shares | 88,426 | (217,687 | ) |
1 | For the year ended December 31, 2017, the total distributions to shareholders were all from net investment income (see Note 11). |
156| 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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 31.79 | $ | 29.36 | $ | 29.73 | $ | 45.27 | $ | 33.88 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .46 | .38 | .31 | .32 | .29 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | (2.16 | ) | 2.43 | (.38 | ) | (3.29 | ) | 11.38 | ||||||||||||
Total from investment operations | (1.70 | ) | 2.81 | (.07 | ) | (2.97 | ) | 11.67 | ||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.46 | ) | (.38 | ) | (.30 | ) | (.31 | ) | (.28 | ) | ||||||||||
Net realized gains | (.03 | ) | — | — | (12.26 | ) | — | |||||||||||||
Total distributions | (.49 | ) | (.38 | ) | (.30 | ) | (12.57 | ) | (.28 | ) | ||||||||||
Net asset value, end of period | $ | 29.60 | $ | 31.79 | $ | 29.36 | $ | 29.73 | $ | 45.27 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (5.32 | %) | 9.64 | % | (0.33 | %) | (5.09 | %) | 34.67 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 13,436 | $ | 11,617 | $ | 17,124 | $ | 17,372 | $ | 28,003 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.58 | % | 1.24 | % | 0.93 | % | 0.86 | % | 0.72 | % | ||||||||||
Total expensesc | 1.32 | % | 1.30 | % | 1.25 | % | 1.21 | % | 1.26 | % | ||||||||||
Net expensesd | 1.32 | % | 1.30 | % | 1.25 | % | 1.21 | % | 1.26 | % | ||||||||||
Portfolio turnover rate | 2,292 | % | 2,055 | % | 1,386 | % | 1,800 | % | 1,763 | % |
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 reimbursements, as applicable. |
e | 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| 157 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, the Inverse Government Long Bond Strategy Fund returned 3.79%.
The price movement of the Long Treasury Bond was -5.58% for 2018.
The return of a comparison index, the Bloomberg Barclays U.S. Long Treasury Index, was -1.84%.
As prices of long-term Treasury bonds fell over 2018, their yields rose, from 2.74% to 3.02%. The yield curve flattened over the period, as the Fed hiked the short-term fed funds rate by a quarter point on four occasions in 2018 in the face of low inflation. U.S. economic growth improved over the year, a result of tax cuts and strong fiscal spending. The quarter-point cut in the Fed funds rate in December was controversial, given signs of slowing growth domestically and even weaker growth abroad. Inflation has been contained, as commodity prices fell, especially oil.
There were two periods of rising yields in the period, the first in late January/early February, driven by the first equity-market correction in two years amid strong corporate earnings, synchronous global economic growth, and the discounted benefits of U.S. tax reform. The second occurred in October, when Treasury yields peaked at a four-year high, then fell sharply through the end of the year as equities slumped into negative territory and credit spreads widened significantly.
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. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amounts 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.
158 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. 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.
Cumulative Fund Performance*,†
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 | 33.2% |
Guggenheim Ultra Short Duration Fund | 32.8% |
Total | 66.0% |
“Largest Holdings” excludes any temporary cash or derivative investments.
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Inverse Government Long Bond Strategy Fund | 3.79% | (7.40%) | (6.10%) |
Price Movement of Long Treasury Bond** | (5.58%) | 3.13% | (1.05%) |
Bloomberg Barclays U.S. Long Treasury Index | (1.84%) | 5.93% | 4.09% |
* | 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. Long Treasury Index and the Price Movement of Long Treasury Bond are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported return. |
** | Does not reflect interest. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
THE RYDEX FUNDS ANNUAL REPORT | 159 |
SCHEDULE OF INVESTMENTS | December 31, 2018 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 66.0% | ||||||||
Guggenheim Strategy Fund II1 | 59,146 | $ | 1,467,994 | |||||
Guggenheim Ultra Short Duration Fund1,8 | 145,836 | 1,452,530 | ||||||
Total Mutual Funds | ||||||||
(Cost $2,927,848) | 2,920,524 | |||||||
Face | ||||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 5.6% | ||||||||
Freddie Mac | ||||||||
2.24% due 01/03/192,3 | $ | 250,000 | 249,983 | |||||
Total Federal Agency Discount Notes | ||||||||
(Cost $249,969) | 249,983 | |||||||
FEDERAL AGENCY NOTES†† - 5.2% | ||||||||
Freddie Mac | ||||||||
1.75% due 05/30/192 | 130,000 | 129,588 | ||||||
Farmer Mac | ||||||||
1.55% due 07/03/194 | 100,000 | 99,444 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $229,096) | 229,032 | |||||||
U.S. TREASURY BILLS†† - 0.6% | ||||||||
U.S. Treasury Bill | ||||||||
2.21% due 01/08/193,5 | 26,000 | 25,990 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $25,988) | 25,990 | |||||||
REPURCHASE AGREEMENTS†† - 100.8% | ||||||||
Individual Repurchase Agreements6 | ||||||||
Barclays Capital | 1,780,750 | 1,780,750 | ||||||
Mizuho Financial Group, Inc. | 1,577,769 | 1,577,769 | ||||||
Joint Repurchase Agreements7 | ||||||||
JPMorgan Chase & Co. | 650,246 | 650,246 | ||||||
Barclays Capital | 270,419 | 270,419 | ||||||
Bank of America Merrill Lynch | 180,279 | 180,279 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $4,459,463) | 4,459,463 | |||||||
Total Investments - 178.2% | ||||||||
(Cost $7,892,364) | $ | 7,884,992 | ||||||
U.S. Government Securities Sold Short†† - (77.4)% | ||||||||
U.S. Treasury Bond | ||||||||
3.38% due 11/15/48 | 3,200,000 | (3,423,000 | ) | |||||
Total U.S. Government Securities Sold Short | ||||||||
(Proceeds $3,269,703) | (3,423,000 | ) | ||||||
Other Assets & Liabilities, net - (0.8)% | (36,067 | ) | ||||||
Total Net Assets - 100.0% | $ | 4,425,925 |
Futures Contracts | |||||||||||||
Description | Number of | Expiration | Notional | Value and | |||||||||
Interest Rate Futures Contracts Sold Short† | |||||||||||||
U.S. Treasury Ultra Long Bond Futures Contracts | 7 | Mar 2019 | $ | 1,124,156 | $ | (58,708 | ) |
160| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | 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 | The issuer operates under a Congressional charter; its securities are neither issued nor guaranteed by the U.S. Government. |
5 | All or a portion of this security is pledged as futures collateral at December 31, 2018. |
6 | All or a portion of this security is pledged as short security collateral at December 31, 2018. |
7 | Repurchase Agreements — See Note 6. |
8 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 2,920,524 | $ | — | $ | — | $ | 2,920,524 | ||||||||
Federal Agency Discount Notes | — | 249,983 | — | 249,983 | ||||||||||||
Federal Agency Notes | — | 229,032 | — | 229,032 | ||||||||||||
U.S. Treasury Bills | — | 25,990 | — | 25,990 | ||||||||||||
Repurchase Agreements | — | 4,459,463 | — | 4,459,463 | ||||||||||||
Total Assets | $ | 2,920,524 | $ | 4,964,468 | $ | — | $ | 7,884,992 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
U.S. Government Securities | $ | — | $ | 3,423,000 | $ | — | $ | 3,423,000 | ||||||||
Interest Rate Futures Contracts** | 58,708 | — | — | 58,708 | ||||||||||||
Total Liabilities | $ | 58,708 | $ | 3,423,000 | $ | — | $ | 3,481,708 |
** | This derivative is reported as unrealized appreciation/depreciation 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, 2018, there were no transfers between levels.
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 161 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Cash Management Funds”), each of which are 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, 2018, 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/1601445/000089180418000513/gug75569-ncsr.htm.
Transactions during the year ended December 31, 2018, in which the company is an “affiliated person”, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | Capital | |||||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 1,538,100 | $ | 2,187,259 | $ | (2,245,000 | ) | $ | (1,880 | ) | $ | (10,485 | ) | $ | 1,467,994 | 59,146 | $ | 41,157 | $ | 840 | ||||||||||||||||
Guggenheim Ultra Short Duration Fund1 | 1,239,073 | 1,417,193 | (1,195,000 | ) | (994 | ) | (7,742 | ) | 1,452,530 | 145,836 | 35,890 | 1,127 | ||||||||||||||||||||||||
$ | 2,777,173 | $ | 3,604,452 | $ | (3,440,000 | ) | $ | (2,874 | ) | $ | (18,227 | ) | $ | 2,920,524 | $ | 77,047 | $ | 1,967 |
1 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
162| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $505,053) | $ | 505,005 | ||
Investments in affiliated issuers, at value (cost $2,927,848) | 2,920,524 | |||
Repurchase agreements, at value (cost $4,459,463) | 4,459,463 | |||
Receivables: | ||||
Fund shares sold | 6,111 | |||
Dividends | 5,124 | |||
Interest | 1,311 | |||
Total assets | 7,897,538 | |||
Liabilities: | ||||
Securities sold short, at value (proceeds $3,269,703) | 3,423,000 | |||
Payable for: | ||||
Fund shares redeemed | 11,197 | |||
Securities purchased | 5,459 | |||
Variation margin on futures contracts | 3,719 | |||
Management fees | 2,862 | |||
Transfer agent and administrative fees | 876 | |||
Investor service fees | 876 | |||
Portfolio accounting fees | 350 | |||
Trustees’ fees* | 78 | |||
Miscellaneous | 23,196 | |||
Total liabilities | 3,471,613 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 4,425,925 | ||
Net assets consist of: | ||||
Paid in capital | $ | 11,538,996 | ||
Total distributable earnings (loss) | (7,113,071 | ) | ||
Net assets | $ | 4,425,925 | ||
Capital shares outstanding | 45,010 | |||
Net asset value per share | $ | 98.33 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 77,047 | ||
Interest | 92,797 | |||
Total investment income | 169,844 | |||
Expenses: | ||||
Short interest expense | 118,068 | |||
Management fees | 41,646 | |||
Investor service fees | 11,568 | |||
Transfer agent and administrative fees | 11,568 | |||
Portfolio accounting fees | 4,627 | |||
Trustees’ fees* | 1,313 | |||
Custodian fees | 663 | |||
Miscellaneous | 10,039 | |||
Total expenses | 199,492 | |||
Less: | ||||
Expenses waived by Adviser | (292 | ) | ||
Net expenses | 199,200 | |||
Net investment loss | (29,356 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 15 | |||
Investments in affiliated issuers | (2,874 | ) | ||
Distributions received from affiliated investment company shares | 1,967 | |||
Futures contracts | 59,274 | |||
Securities sold short | 316,474 | |||
Net realized gain | 374,856 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (47 | ) | ||
Investments in affiliated issuers | (18,227 | ) | ||
Securities sold short | (143,191 | ) | ||
Futures contracts | (51,823 | ) | ||
Net change in unrealized appreciation (depreciation) | (213,288 | ) | ||
Net realized and unrealized gain | 161,568 | |||
Net increase in net assets resulting from operations | $ | 132,212 |
* | 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| 163 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (29,356 | ) | $ | (100,248 | ) | ||
Net realized gain (loss) on investments | 374,856 | (379,988 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | (213,288 | ) | (89,386 | ) | ||||
Net increase (decrease) in net assets resulting from operations | 132,212 | (569,622 | ) | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 42,664,602 | 188,057,984 | ||||||
Cost of shares redeemed | (43,047,030 | ) | (186,633,374 | ) | ||||
Net increase (decrease) from capital share transactions | (382,428 | ) | 1,424,610 | |||||
Net increase (decrease) in net assets | (250,216 | ) | 854,988 | |||||
Net assets: | ||||||||
Beginning of year | 4,676,141 | 3,821,153 | ||||||
End of year | $ | 4,425,925 | $ | 4,676,141 | ||||
Capital share activity: | ||||||||
Shares sold | 424,953 | 1,913,948 | ||||||
Shares redeemed | (429,298 | ) | (1,901,334 | ) | ||||
Net increase (decrease) in shares | (4,345 | ) | 12,614 |
164| 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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 94.75 | $ | 104.00 | $ | 107.17 | $ | 108.46 | $ | 159.80 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.64 | ) | (1.88 | ) | (.87 | ) | (3.63 | ) | (5.40 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 4.22 | (7.37 | ) | (2.30 | ) | 2.34 | (33.58 | ) | ||||||||||||
Total from investment operations | 3.58 | (9.25 | ) | (3.17 | ) | (1.29 | ) | (38.98 | ) | |||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | — | — | — | — | (12.36 | ) | ||||||||||||||
Total distributions | — | — | — | — | (12.36 | ) | ||||||||||||||
Net asset value, end of period | $ | 98.33 | $ | 94.75 | $ | 104.00 | $ | 107.17 | $ | 108.46 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 3.79 | % | (8.89 | %) | (2.94 | %) | (1.22 | %) | (24.91 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 4,426 | $ | 4,676 | $ | 3,821 | $ | 4,740 | $ | 6,595 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.63 | %) | (1.89 | %) | (2.59 | %) | (3.39 | %) | (3.90 | %) | ||||||||||
Total expensesc,d | 4.31 | % | 4.00 | % | 3.65 | % | 3.66 | % | 4.10 | % | ||||||||||
Net expensese,f | 4.30 | % | 4.00 | % | 3.65 | % | 3.66 | % | 4.10 | % | ||||||||||
Portfolio turnover rate | 907 | % | 2,300 | % | 1,384 | % | 1,305 | % | 2,537 | % |
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 | Total expenses may include interest expense related to short sales. |
e | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
f | Excluding interest expense, the net expense ratios for the periods presented would be: |
2018 | 2017 | 2016 | 2015 | 2014 | |
1.75% | 1.75% | 1.72% | 1.65% | 1.71% |
g | Reverse share split — Per share amounts for the period presented through December 31, 2014, have been restated to reflect a 1:5 reverse share split effective January 24, 2014. |
h | 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 NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 165 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
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, 2018, the High Yield Strategy returned -0.87%. For comparison, the Bloomberg Barclays U.S. Corporate High Yield Index returned -2.08% 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.
Until the fourth quarter of 2018, the high-yield sector was poised to deliver positive total returns for the year. In the final weeks of the year, high-yield corporates gave back some or all their year-to-date gains. The severe tightening of financial conditions was comparable to 2015. Spread widening was initially driven by trade and tariff concerns, impacting vulnerable sectors like technology, autos, and capital goods. It was then exacerbated by a bear market in oil. West Texas Intermediate oil prices fell from an October 2018 peak of $76 per barrel to end the year around $45 per barrel, a 41 percent decline in a single quarter. Like the 2014 experience, the decline in oil prices caused a sharp repricing of credit risk in high-yield energy.
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.
166 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2018 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. 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.
Cumulative Fund Performance*,†
Inception Date: October 15, 2014 |
Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 32.8% |
Guggenheim Ultra Short Duration Fund | 24.4% |
Total | 57.2% |
“Largest Holdings” excludes any temporary cash or derivative investments.
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | Since |
High Yield Strategy Fund | (0.87%) | 4.25% |
Bloomberg Barclays U.S. Corporate High Yield Index | (2.08%) | 3.84% |
* | 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 | 167 |
SCHEDULE OF INVESTMENTS | December 31, 2018 |
HIGH YIELD STRATEGY FUND |
| Shares | Value | ||||||
EXCHANGE-TRADED FUNDS† - 0.1% | ||||||||
iShares iBoxx $ High Yield Corporate Bond ETF | 20 | $ | 1,624 | |||||
SPDR Bloomberg Barclays High Yield Bond ETF1 | 47 | 1,581 | ||||||
Total Exchange-Traded Funds | ||||||||
(Cost $3,012) | 3,205 | |||||||
MUTUAL FUNDS† - 57.2% | ||||||||
Guggenheim Strategy Fund II2 | 54,379 | 1,349,675 | ||||||
Guggenheim Ultra Short Duration Fund2,13 | 100,629 | 1,002,262 | ||||||
Total Mutual Funds | ||||||||
(Cost $2,342,114) | 2,351,937 | |||||||
Face | ||||||||
FEDERAL AGENCY NOTES†† - 20.4% | ||||||||
Federal Home Loan Bank | ||||||||
2.28% (1 Month USD LIBOR -0.07%, Rate Floor: 0.00%) due 10/01/193,4 | $ | 290,000 | 289,933 | |||||
Freddie Mac | ||||||||
1.75% due 05/30/195 | 200,000 | 199,366 | ||||||
Farmer Mac | ||||||||
1.55% due 07/03/194 | 200,000 | 198,887 | ||||||
Federal Farm Credit Bank | ||||||||
2.45% (1 Month USD LIBOR -0.05%, Rate Floor: 0.00%) due 01/23/193,4 | 150,000 | 149,998 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $838,405) | 838,184 | |||||||
U.S. TREASURY BILLS†† - 0.8% | ||||||||
U.S. Treasury Bills | ||||||||
2.21% due 01/08/196,7 | 33,000 | 32,988 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $32,985) | 32,988 | |||||||
REPURCHASE AGREEMENTS††,8 - 16.8% | ||||||||
JPMorgan Chase & Co. | 409,131 | 409,131 | ||||||
Barclays Capital | 170,146 | 170,146 | ||||||
Bank of America Merrill Lynch | 113,430 | 113,430 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $692,707) | 692,707 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,10 - 0.0% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 2.32%11 | 1,025 | 1,025 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $1,025) | 1,025 | |||||||
Total Investments - 95.3% | ||||||||
(Cost $3,910,248) | $ | 3,920,046 | ||||||
Other Assets & Liabilities, net - 4.7% | 192,519 | |||||||
Total Net Assets - 100.0% | $ | 4,112,565 |
Futures Contracts | |||||||||||||
Description | Number of | Expiration | Notional | Value and | |||||||||
Interest Rate Futures Contracts Purchased† | |||||||||||||
U.S. Treasury 5 Year Note Futures Contracts | 28 | Mar 2019 | $ | 3,210,813 | $ | 49,559 |
Centrally Cleared Credit Default Swaps†† | |||||||||||||||||||||||||||
Counterparty | Exchange | Index | Protection | Payment | Maturity | Notional | Value | Upfront | Unrealized | ||||||||||||||||||
Barclays Bank plc | ICE | CDX.NA.HY.31 Index | 5.00 | % | At Maturity | 12/20/23 | $ | 3,700,000 | $ | 75,619 | $ | 166,223 | $ | (90,605 | ) |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Credit Index Swap Agreements††,12 | |||||||||||||||||||
Goldman Sachs International | iShares iBoxx High Yield Corporate Bond | 2.01 | % | At Maturity | 01/25/19 | 4,160 | $ | 337,875 | $ | 6,614 |
168| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2018 |
HIGH YIELD STRATEGY FUND |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | 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 on loan at December 31, 2018 — See Note 7. |
2 | Affiliated issuer. |
3 | Variable rate security. Rate indicated is the rate effective at December 31, 2018. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
4 | The issuer operates under a Congressional charter; its securities are neither issued nor guaranteed by the U.S. Government. |
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 | All or a portion of this security is pledged as futures collateral at December 31, 2018. |
7 | Rate indicated is the effective yield at the time of purchase. |
8 | Repurchase Agreements — See Note 6. |
9 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2018. |
10 | Securities lending collateral — See Note 7. |
11 | Rate indicated is the 7-day yield as of December 31, 2018. |
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, 2018. |
13 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
CDX.NA.HY.31 Index — Credit Default Swap North American High Yield Series 31 Index | |
ICE — Intercontinental Exchange | |
LIBOR — London Interbank Offered Rate | |
plc — Public Limited Company | |
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, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Exchange-Traded Funds | $ | 3,205 | $ | — | $ | — | $ | 3,205 | ||||||||
Mutual Funds | 2,351,937 | — | — | 2,351,937 | ||||||||||||
Federal Agency Notes | — | 838,184 | — | 838,184 | ||||||||||||
U.S. Treasury Bills | — | 32,988 | — | 32,988 | ||||||||||||
Repurchase Agreements | — | 692,707 | — | 692,707 | ||||||||||||
Securities Lending Collateral | 1,025 | — | — | 1,025 | ||||||||||||
Interest Rate Futures Contracts** | 49,559 | — | — | 49,559 | ||||||||||||
Credit Index Swap Agreements** | — | 6,614 | — | 6,614 | ||||||||||||
Total Assets | $ | 2,405,726 | $ | 1,570,493 | $ | — | $ | 3,976,219 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Credit Default Swap Agreements** | $ | — | $ | 90,605 | $ | — | $ | 90,605 |
** | This derivative is reported as unrealized appreciation/depreciation 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, 2018, there were no transfers between levels.
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 169 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
HIGH YIELD STRATEGY FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Cash Management Funds”), each of which are 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, 2018, 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/1601445/000089180418000513/gug75569-ncsr.htm.
Transactions during the year ended December 31, 2018, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | Capital | |||||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 2,125,460 | $ | 786,470 | $ | (1,550,000 | ) | $ | 1,083 | $ | (13,338 | ) | $ | 1,349,675 | 54,379 | $ | 45,280 | $ | 910 | |||||||||||||||||
Guggenheim Ultra Short Duration Fund1 | 1,720,466 | 1,690,746 | (2,400,000 | ) | 1,361 | (10,311 | ) | 1,002,262 | 100,629 | 39,429 | 1,236 | |||||||||||||||||||||||||
$ | 3,845,926 | $ | 2,477,216 | $ | (3,950,000 | ) | $ | 2,444 | $ | (23,649 | ) | $ | 2,351,937 | $ | 84,709 | $ | 2,146 |
1 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
170| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
HIGH YIELD STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $1,176 of securities loaned (cost $875,427) | $ | 875,402 | ||
Investments in affiliated issuers, at value (cost $2,342,114) | 2,351,937 | |||
Repurchase agreements, at value (cost $692,707) | 692,707 | |||
Cash | 173 | |||
Segregated cash with broker | 25,530 | |||
Unamortized upfront premiums paid on credit default swap agreements | 166,223 | |||
Unrealized appreciation on swap agreements | 6,614 | |||
Receivables: | ||||
Interest | 8,720 | |||
Variation margin on futures contracts | 6,563 | |||
Dividends | 5,237 | |||
Variation margin on credit default swap agreements | 5,035 | |||
Securities lending income | 2 | |||
Total assets | 4,144,143 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 6,236 | |||
Securities purchased | 5,509 | |||
Professional fees | 4,735 | |||
Management fees | 2,924 | |||
Return of securities lending collateral | 1,198 | |||
Transfer agent and administrative fees | 1,075 | |||
Investor service fees | 1,075 | |||
Portfolio accounting fees | 430 | |||
Trustees’ fees* | 114 | |||
Swap settlement | 92 | |||
Miscellaneous | 8,190 | |||
Total liabilities | 31,578 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 4,112,565 | ||
Net assets consist of: | ||||
Paid in capital | $ | 4,159,697 | ||
Total distributable earnings (loss) | (47,132 | ) | ||
Net assets | $ | 4,112,565 | ||
Capital shares outstanding | 52,757 | |||
Net asset value per share | $ | 77.95 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 9,230 | ||
Dividends from securities of affiliated issuers | 84,709 | |||
Interest | 32,081 | |||
Income from securities lending, net | 1,177 | |||
Total investment income | 127,197 | |||
Expenses: | ||||
Management fees | 38,247 | |||
Investor service fees | 12,749 | |||
Transfer agent and administrative fees | 12,749 | |||
Portfolio accounting fees | 5,100 | |||
Professional fees | 4,810 | |||
Trustees’ fees* | 1,480 | |||
Custodian fees | 744 | |||
Line of credit fees | 5 | |||
Miscellaneous | 6,744 | |||
Total expenses | 82,628 | |||
Less: | ||||
Expenses waived by Adviser | (299 | ) | ||
Net expenses | 82,329 | |||
Net investment income | 44,868 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | (8,451 | ) | ||
Investments in affiliated issuers | 2,444 | |||
Distributions received from affiliated investment company shares | 2,146 | |||
Swap agreements | 95,972 | |||
Futures contracts | (111,846 | ) | ||
Net realized loss | (19,735 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (7,515 | ) | ||
Investments in affiliated issuers | (23,649 | ) | ||
Swap agreements | (151,224 | ) | ||
Futures contracts | 74,643 | |||
Net change in unrealized appreciation (depreciation) | (107,745 | ) | ||
Net realized and unrealized loss | (127,480 | ) | ||
Net decrease in net assets resulting from operations | $ | (82,612 | ) |
* | 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| 171 |
HIGH YIELD STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 44,868 | $ | 27,422 | ||||
Net realized gain (loss) on investments | (19,735 | ) | 663,785 | |||||
Net change in unrealized appreciation (depreciation) on investments | (107,745 | ) | (180,503 | ) | ||||
Net increase (decrease) in net assets resulting from operations | (82,612 | ) | 510,704 | |||||
Total distributions to shareholders | (294,767 | ) | (320,362 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 26,422,176 | 26,835,037 | ||||||
Distributions reinvested | 294,767 | 320,362 | ||||||
Cost of shares redeemed | (28,750,779 | ) | (28,212,332 | ) | ||||
Net decrease from capital share transactions | (2,033,836 | ) | (1,056,933 | ) | ||||
Net decrease in net assets | (2,411,215 | ) | (866,591 | ) | ||||
Net assets: | ||||||||
Beginning of year | 6,523,780 | 7,390,371 | ||||||
End of year | $ | 4,112,565 | $ | 6,523,780 | ||||
Capital share activity: | ||||||||
Shares sold | 327,338 | 322,071 | ||||||
Shares issued from reinvestment of distributions | 3,747 | 3,919 | ||||||
Shares redeemed | (356,416 | ) | (338,582 | ) | ||||
Net decrease in shares | (25,331 | ) | (12,592 | ) |
1 | For the year ended December 31, 2017, the total distributions to shareholders were all from net investment income (see Note 11). |
172| 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 | Year Ended | Year Ended | Year Ended | Period Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 83.54 | $ | 81.50 | $ | 75.17 | $ | 76.12 | $ | 75.00 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)b | .71 | .29 | .14 | (.30 | ) | (.09 | ) | |||||||||||||
Net gain (loss) on investments (realized and unrealized) | (1.39 | ) | 5.23 | 6.99 | (.29 | ) | 1.21 | |||||||||||||
Total from investment operations | (.68 | ) | 5.52 | 7.13 | (.59 | ) | 1.12 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (4.91 | ) | (3.48 | ) | (.80 | ) | — | — | ||||||||||||
Net realized gains | — | — | — | (.36 | ) | — | ||||||||||||||
Total distributions | (4.91 | ) | (3.48 | ) | (.80 | ) | (.36 | ) | — | |||||||||||
Net asset value, end of period | $ | 77.95 | $ | 83.54 | $ | 81.50 | $ | 75.17 | $ | 76.12 | ||||||||||
| ||||||||||||||||||||
Total Returnc | (0.87 | %) | 6.87 | % | 11.62 | % | (0.71 | %) | 1.48 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 4,113 | $ | 6,524 | $ | 7,390 | $ | 6,751 | $ | 4,060 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.88 | % | 0.35 | % | 0.51 | % | (0.39 | %) | (0.51 | %) | ||||||||||
Total expensesd | 1.62 | % | 1.60 | % | 1.56 | % | 1.49 | % | 1.57 | % | ||||||||||
Net expensese | 1.61 | % | 1.60 | % | 1.56 | % | 1.49 | % | 1.57 | % | ||||||||||
Portfolio turnover rate | 116 | % | 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 | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
f | 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 NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 173 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2018 |
U.S. GOVERNMENT MONEY MARKET FUND
OBJECTIVE: Seeks to provide security of principal, high current income, and liquidity.
For the year ended December 31, 2018, U.S. Government Money Market Fund returned 0.58%.
Chair of the Federal Reserve, Jerome Powell took office in February of 2018, replacing Janet Yellen. The Fed stayed the course on higher interest rates during the year and raised interest rates four times in 2018. The Fed’s target rate at the start of the year was in the 1.25% to 1.50% range and ended the year in the 2.25% to 2.50% range. The Fund’s yield increased steadily throughout 2018 in line with the general increase in interest rates.
The U.S. economy remained strong throughout 2018. However, stock market volatility in the fourth quarter, as well as some indicators showing softness in parts of the economy, may cause the Fed to hold off on further interest rate increases or simply slow the rate of increases going forward. The most recent dot plot in December 2018 had the Fed expecting to raise interest rates twice in 2019. The market is expecting that the Fed will pause for an extended period and not raise interest rates at all in 2019.
Performance displayed represents past performance, which is no guarantee of future results.
An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.
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, 2018
| 1 Year | 5 Year | 10 Year |
U.S. Government Money Market Fund | 0.58% | 0.12% | 0.07% |
* | 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. |
† | Returns do not reflect the impact of any additional fees charged by insurance companies. |
174 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2018 |
U.S. GOVERNMENT MONEY MARKET FUND |
| Face | Value | ||||||
FEDERAL AGENCY NOTES†† - 40.8% | ||||||||
Federal Farm Credit Bank1 | ||||||||
2.42% (U.S. Prime Rate - 3.08%, Rate Floor: 0.00%) due 03/12/192 | $ | 5,000,000 | $ | 4,998,668 | ||||
2.44% (U.S. Prime Rate - 3.06%, Rate Floor: 0.00%) due 06/05/192 | 5,000,000 | 4,997,741 | ||||||
2.55% (U.S. Prime Rate - 2.95%, Rate Floor: 0.00%) due 09/25/192 | 4,000,000 | 4,000,571 | ||||||
2.42% (U.S. Prime Rate - 3.08%, Rate Floor: 0.00%) due 10/10/192 | 660,000 | 659,483 | ||||||
1.45% due 03/20/19 | 380,000 | 379,294 | ||||||
1.20% due 02/13/19 | 356,000 | 355,492 | ||||||
5.67% due 05/22/19 | 250,000 | 253,114 | ||||||
1.95% due 02/15/19 | 200,000 | 199,907 | ||||||
1.75% due 03/18/19 | 50,000 | 49,934 | ||||||
4.13% due 03/04/19 | 15,000 | 15,045 | ||||||
Total Federal Farm Credit Bank | 15,909,249 | |||||||
Federal Home Loan Bank1 | ||||||||
1.38% due 03/18/19 | 2,000,000 | 1,995,853 | ||||||
2.47% (3 Month USD LIBOR - 0.31%, Rate Floor: 0.00%) due 03/13/192 | 1,500,000 | 1,499,809 | ||||||
2.24% (1 Month USD LIBOR - 0.11%, Rate Floor: 0.00%) due 01/04/192 | 1,250,000 | 1,249,981 | ||||||
2.48% (3 Month USD LIBOR - 0.31%, Rate Floor: 0.00%) due 03/15/192 | 1,000,000 | 999,871 | ||||||
1.63% due 06/14/19 | 1,000,000 | 995,641 | ||||||
2.46% (3 Month USD LIBOR - 0.33%, Rate Floor: 0.00%) due 03/15/192 | 800,000 | 799,890 | ||||||
2.46% (3 Month USD LIBOR - 0.31%, Rate Floor: 0.00%) due 03/08/192 | 650,000 | 650,013 | ||||||
1.88% due 03/08/19 | 645,000 | 644,251 | ||||||
5.38% due 05/15/19 | 465,000 | 469,838 | ||||||
1.25% due 05/24/19 | 350,000 | 348,366 | ||||||
2.00% due 03/05/19 | 330,000 | 329,723 | ||||||
4.30% due 03/06/19 | 80,000 | 80,270 | ||||||
Total Federal Home Loan Bank | 10,063,506 | |||||||
Freddie Mac3 | ||||||||
3.75% due 03/27/19 | 1,570,000 | 1,574,531 | ||||||
1.75% due 05/30/19 | 612,000 | 610,292 | ||||||
0.95% due 01/30/19 | 375,000 | 374,601 | ||||||
1.10% due 05/24/19 | 300,000 | 298,424 | ||||||
1.35% due 01/25/19 | 250,000 | 249,853 | ||||||
1.13% due 05/24/19 | 250,000 | 248,707 | ||||||
1.10% due 01/25/19 | 225,000 | 224,799 | ||||||
Total Freddie Mac | 3,581,207 | |||||||
Farmer Mac1 | ||||||||
2.54% (U.S. Prime Rate - 2.96%, Rate Floor: 0.00%) due 12/23/192 | 2,000,000 | 2,000,000 | ||||||
1.55% due 07/03/19 | 1,000,000 | 994,619 | ||||||
Total Farmer Mac | 2,994,619 | |||||||
Fannie Mae3 | ||||||||
1.38% due 03/13/19 | 1,325,000 | 1,322,507 | ||||||
1.13% due 01/04/19 | 500,000 | 499,954 | ||||||
2.51% (1 Month USD LIBOR, Rate Floor: 0.00%) due 02/28/192 | 300,000 | 300,000 | ||||||
Total Fannie Mae | 2,122,461 | |||||||
Total Federal Agency Notes | ||||||||
(Cost $34,671,042) | 34,671,042 | |||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 6.5% | ||||||||
Freddie Mac | ||||||||
2.24% due 01/03/193,4 | 5,000,000 | 4,999,377 | ||||||
Federal Home Loan Bank | ||||||||
2.38% due 01/18/191,3 | 500,000 | 499,439 | ||||||
Total Federal Agency Discount Notes | ||||||||
(Cost $5,498,816) | 5,498,816 | |||||||
U.S. TREASURY BILLS†† - 1.6% | ||||||||
U.S. Treasury Bill | ||||||||
2.29% due 03/21/194 | 1,400,000 | 1,392,929 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $1,392,929) | 1,392,929 | |||||||
REPURCHASE AGREEMENTS††,5 - 51.6% | ||||||||
JPMorgan Chase & Co. | 25,895,470 | 25,895,470 | ||||||
Barclays Capital | 10,769,185 | 10,769,185 | ||||||
Bank of America Merrill Lynch | 7,179,457 | 7,179,457 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $43,844,112) | 43,844,112 | |||||||
Total Investments - 100.5% | ||||||||
(Cost $85,406,899) | $ | 85,406,899 | ||||||
Other Assets & Liabilities, net - (0.5)% | (398,581 | ) | ||||||
Total Net Assets - 100.0% | $ | 85,008,318 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 175 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2018 |
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. Rate indicated is the rate effective at December 31, 2018. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. 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 | 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, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Federal Agency Notes | $ | — | $ | 34,671,042 | $ | — | $ | 34,671,042 | ||||||||
Federal Agency Discount Notes | — | 5,498,816 | — | 5,498,816 | ||||||||||||
U.S. Treasury Bills | — | 1,392,929 | — | 1,392,929 | ||||||||||||
Repurchase Agreements | — | 43,844,112 | — | 43,844,112 | ||||||||||||
Total Assets | $ | — | $ | 85,406,899 | $ | — | $ | 85,406,899 |
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, 2018, there were no transfers between levels.
176| THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
U.S. GOVERNMENT MONEY MARKET FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments, at value (cost $41,562,787) | $ | 41,562,787 | ||
Repurchase agreements, at value (cost $43,844,112) | 43,844,112 | |||
Receivables: | ||||
Interest | 94,942 | |||
Total assets | 85,501,841 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 292,625 | |||
Management fees | 27,984 | |||
Investor service fees | 13,992 | |||
Transfer agent and administrative fees | 11,194 | |||
Portfolio accounting fees | 5,597 | |||
Trustees’ fees* | 1,198 | |||
Miscellaneous | 140,933 | |||
Total liabilities | 493,523 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 85,008,318 | ||
Net assets consist of: | ||||
Paid in capital | $ | 85,008,318 | ||
Total distributable earnings (loss) | — | |||
Net assets | $ | 85,008,318 | ||
Capital shares outstanding | 84,995,661 | |||
Net asset value per share | $ | 1.00 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Interest | $ | 1,240,469 | ||
Total investment income | 1,240,469 | |||
Expenses: | ||||
Management fees | 328,670 | |||
Investor service fees | 164,335 | |||
Transfer agent and administrative fees | 131,469 | |||
Professional fees | 81,259 | |||
Portfolio accounting fees | 65,733 | |||
Trustees’ fees* | 18,979 | |||
Custodian fees | 9,446 | |||
Miscellaneous | 67,441 | |||
Total expenses | 867,332 | |||
Net investment income | 373,137 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 2,123 | |||
Net realized gain | 2,123 | |||
Net increase in net assets resulting from operations | $ | 375,260 |
* | 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 |
U.S. GOVERNMENT MONEY MARKET FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 373,137 | $ | 1,135 | ||||
Net realized gain on investments | 2,123 | 1,605 | ||||||
Net increase in net assets resulting from operations | 375,260 | 2,740 | ||||||
Distributions to shareholders | (377,479 | ) | (7,683 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 224,930,817 | 137,795,910 | ||||||
Distributions reinvested | 377,479 | 7,683 | ||||||
Cost of shares redeemed | (218,566,974 | ) | (121,233,340 | ) | ||||
Net increase from capital share transactions | 6,741,322 | 16,570,253 | ||||||
Net increase in net assets | 6,739,103 | 16,565,310 | ||||||
Net assets: | ||||||||
Beginning of year | 78,269,215 | 61,703,905 | ||||||
End of year | $ | 85,008,318 | $ | 78,269,215 | ||||
Capital share activity: | ||||||||
Shares sold | 224,930,817 | 137,794,598 | ||||||
Shares issued from reinvestment of distributions | 377,638 | 7,681 | ||||||
Shares redeemed | (218,566,974 | ) | (121,233,339 | ) | ||||
Net increase in shares | 6,741,481 | 16,568,940 |
1 | For the year ended December 31, 2017, the distributions from the net investment income and net realized gains were as follows (See Note 11). |
Net investment income | $ | (1,312 | ) | ||
Net realized gains | (6,371 | ) |
178| 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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
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 | .01 | — | b | — | b | — | b | — | b | |||||||||||
Net gain (loss) on investments (realized and unrealized) | — | — | b | — | b | — | b | — | b | |||||||||||
Total from investment operations | .01 | — | — | — | — | |||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.01 | ) | (— | )b | (— | )b | (— | )b | (— | )b | ||||||||||
Net realized gains | (— | )b | (— | )b | (— | )b | (— | )b | (— | )b | ||||||||||
Total distributions | (.01 | ) | (— | )b | (— | )b | (— | )b | (— | )b | ||||||||||
Net asset value, end of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||
| ||||||||||||||||||||
Total Returnc | 0.58 | % | 0.01 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 85,008 | $ | 78,269 | $ | 61,704 | $ | 99,178 | $ | 98,358 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.57 | % | — | e | — | e | — | e | — | e | ||||||||||
Total expenses | 1.32 | % | 1.31 | % | 1.25 | % | 1.20 | % | 1.26 | % | ||||||||||
Net expensesd | 1.32 | % | 0.96 | % | 0.40 | % | 0.13 | % | 0.05 | % | ||||||||||
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 ratio after expense waivers, as applicable. |
e | Less than 0.01% |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT| 179 |
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, 2018, 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 the 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 a fund’s securities and other assets, less all liabilities, by the number of outstanding shares of that 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 sale 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 are valued at their NAV as of the close of business, on the valuation date. Exchange-traded funds 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.
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.
180 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
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 their NAV.
Repurchase agreements are valued at amortized cost, provided such amounts approximate market value.
The value of futures contracts is accounted for using the unrealized appreciation or depreciation 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 appreciation or depreciation 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, subject to review and approval by the Valuation Committee, pursuant to methods established or ratified by the Board. Valuations in accordance with these methods are intended to reflect each security’s (or asset’s or liability’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 U.S. Treasury securities, 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 appreciation or depreciation. 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 appreciation or depreciation. Payments received or made as a result of an agreement or termination of an agreement are recognized as realized gains or losses.
OTC and centrally-cleared credit default swap agreements are marked-to-market daily and the change, if any, is recorded as unrealized appreciation or depreciation. Upfront payments received or made by a Fund on credit default swap agreements are amortized over the expected life of the agreement. Periodic
THE RYDEX FUNDS ANNUAL REPORT | 181 |
NOTES TO FINANCIAL STATEMENTS (continued) |
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, 2018, 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 realized gains. The actual amounts of income, return of capital, and realized 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. 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. Normally, all distributions of a Fund will automatically be reinvested without charge in additional shares of the same Fund.
(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 2.40% at December 31, 2018.
(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 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 be used to mitigate certain investment risks, such as foreign
182 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
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 | $ | 6,112,947 | $ | — | ||||
Inverse S&P 500® Strategy Fund | Index exposure, Liquidity | — | 64,384 | ||||||
NASDAQ-100® Fund | Index exposure, Liquidity | 15,843,244 | — | ||||||
Inverse NASDAQ-100® Strategy Fund | Index exposure, Liquidity | — | 31,726 | ||||||
S&P 500® 2x Strategy Fund | Index exposure, Leverage, Liquidity | 5,066,797 | — | ||||||
NASDAQ-100® 2x Strategy Fund | Index exposure, Leverage, Liquidity | 23,237,828 | — | ||||||
Mid-Cap 1.5x Strategy Fund | Index exposure, Leverage, Liquidity | 1,628,115 | — | ||||||
Inverse Mid-Cap Strategy Fund | Index exposure, Liquidity | — | 41,590 | ||||||
Russell 2000® 2x Strategy Fund | Index exposure, Leverage, Liquidity | 152,768 | — | ||||||
Russell 2000® 1.5x Strategy Fund | Index exposure, Leverage, Liquidity | 442,400 | — | ||||||
Inverse Russell 2000® Strategy Fund | Index exposure, Liquidity | — | 94,825 | ||||||
Dow 2x Strategy Fund | Index exposure, Leverage, Liquidity | 3,051,685 | — | ||||||
Inverse Dow 2x Strategy Fund | Index exposure, Leverage, Liquidity | — | 478,815 | ||||||
Government Long Bond 1.2x Strategy Fund | Duration, Index exposure, Leverage, Liquidity | 11,739,461 | — | ||||||
Inverse Government Long Bond Strategy Fund | Duration, Index exposure, Liquidity | — | 792,391 | ||||||
High Yield Strategy Fund | Duration, Index exposure, Liquidity | 3,980,766 | — |
THE RYDEX FUNDS ANNUAL REPORT | 183 |
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 exchange-traded futures contracts. Upon entering into certain centrally-cleared swap transactions, the 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. For a fund utilizing interest rate swaps, the exchange bears the risk of loss. 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.
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:
Average Notional Amount | |||||||||
Fund | Use | Long | Short | ||||||
Nova Fund | Index exposure, Leverage, Liquidity | $ | 41,392,397 | $ | — | ||||
Inverse S&P 500® Strategy Fund | Index exposure, Liquidity | — | 3,160,959 | ||||||
NASDAQ-100® Fund | Index exposure, Liquidity | 26,506,097 | — | ||||||
Inverse NASDAQ-100® Strategy Fund | Index exposure, Liquidity | — | 2,441,995 | ||||||
S&P 500® 2x Strategy Fund | Index exposure, Leverage, Liquidity | 74,425,484 | — | ||||||
NASDAQ-100® 2x Strategy Fund | Index exposure, Leverage, Liquidity | 93,481,906 | — | ||||||
Mid-Cap 1.5x Strategy Fund | Index exposure, Leverage, Liquidity | 7,302,642 | — | ||||||
Inverse Mid-Cap Strategy Fund | Index exposure, Liquidity | — | 181,372 | ||||||
Russell 2000® 2x Strategy Fund | Index exposure, Leverage, Liquidity | 7,585,456 | — | ||||||
Russell 2000® 1.5x Strategy Fund | Index exposure, Leverage, Liquidity | 11,460,397 | — | ||||||
Inverse Russell 2000® Strategy Fund | Index exposure, Liquidity | — | 1,538,783 | ||||||
Dow 2x Strategy Fund | Index exposure, Leverage, Liquidity | 25,170,414 | — | ||||||
Inverse Dow 2x Strategy Fund | Index exposure, Leverage, Liquidity | — | 5,150,059 | ||||||
High Yield Strategy Fund | Duration, Index exposure, Liquidity | 391,981 | — |
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 High Yield Strategy Fund enters 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. The seller of protection receives periodic premium payments from the buyer 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. 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 a fund is selling credit protection, the default of a third party issuer.
184 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
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.
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 | $ | — | $ | 4,100,000 |
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, 2018:
Derivative Investment Type | Asset Derivatives | Liability Derivatives |
Equity/Interest Rate contracts | Variation margin on futures contracts | Variation margin on futures contracts |
Equity/Credit contracts | Unrealized appreciation on swap agreements | Unrealized depreciation on swap agreements |
Credit contracts | Variation margin on credit default swap agreements | |
Unamortized upfront premiums paid on credit default swap agreements |
The following table sets forth the fair value of the Funds’ derivative investments categorized by primary risk exposure at December 31, 2018:
Asset Derivative Investments Value | ||||||||||||||||||||
Fund | Futures | Swaps | Futures | Swaps | Total Value at | |||||||||||||||
Nova Fund | $ | 2,042 | $ | 239,373 | $ | — | $ | — | $ | 241,415 | ||||||||||
NASDAQ-100® Fund | — | 232,546 | — | — | 232,546 | |||||||||||||||
Inverse NASDAQ-100® Strategy Fund | 3,438 | — | — | — | 3,438 | |||||||||||||||
S&P 500® 2x Strategy Fund | 2,042 | 630,358 | — | — | 632,400 | |||||||||||||||
NASDAQ-100® 2x Strategy Fund | — | 639,560 | — | — | 639,560 | |||||||||||||||
Mid-Cap 1.5x Strategy Fund | — | 54,067 | — | — | 54,067 | |||||||||||||||
Russell 2000® 2x Strategy Fund | — | 38,856 | — | — | 38,856 | |||||||||||||||
Russell 2000® 1.5x Strategy Fund | — | 118,009 | — | — | 118,009 | |||||||||||||||
Inverse Russell 2000® Strategy Fund | 5,496 | — | — | — | 5,496 | |||||||||||||||
Dow 2x Strategy Fund | — | 183,980 | — | — | 183,980 | |||||||||||||||
Government Long Bond 1.2x Strategy Fund | — | — | 502,146 | — | 502,146 | |||||||||||||||
High Yield Strategy Fund | — | — | 49,559 | 6,614 | 56,173 |
THE RYDEX FUNDS ANNUAL REPORT | 185 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Liability Derivative Investments Value | ||||||||||||||||||||
Fund | Futures | Swaps | Futures | Swaps | Total Value at | |||||||||||||||
Inverse S&P 500® Strategy Fund | $ | 754 | $ | 43,895 | $ | — | $ | — | $ | 44,649 | ||||||||||
NASDAQ-100® Fund | 681,910 | — | — | — | 681,910 | |||||||||||||||
Inverse NASDAQ-100® Strategy Fund | — | 76,423 | — | — | 76,423 | |||||||||||||||
NASDAQ-100® 2x Strategy Fund | 621,269 | — | — | — | 621,269 | |||||||||||||||
Mid-Cap 1.5x Strategy Fund | 97,352 | — | — | — | 97,352 | |||||||||||||||
Inverse Mid-Cap Strategy Fund | 661 | 2,593 | — | — | 3,254 | |||||||||||||||
Russell 2000® 2x Strategy Fund | 11,010 | — | — | — | 11,010 | |||||||||||||||
Russell 2000® 1.5x Strategy Fund | 44,040 | — | — | — | 44,040 | |||||||||||||||
Inverse Russell 2000® Strategy Fund | — | 51,688 | — | — | 51,688 | |||||||||||||||
Dow 2x Strategy Fund | 77,954 | — | — | — | 77,954 | |||||||||||||||
Inverse Dow 2x Strategy Fund | — | 30,990 | — | — | 30,990 | |||||||||||||||
Inverse Government Long Bond Strategy Fund | — | — | 58,708 | — | 58,708 | |||||||||||||||
High Yield Strategy Fund | — | — | — | 90,605 | 90,605 |
* | Includes cumulative appreciation (depreciation) of futures contracts as reported on the Schedules of Investments. 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, 2018:
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, 2018:
Realized Gain (Loss) on Derivative Investments Recognized on the Statements of Operations | ||||||||||||||||||||
Fund | Futures | Swaps | Futures | Swaps | Total | |||||||||||||||
Nova Fund | $ | 89,987 | $ | (2,860,021 | ) | $ | — | $ | — | $ | (2,770,034 | ) | ||||||||
Inverse S&P 500® Strategy Fund | (58,436 | ) | 209,686 | — | — | 151,250 | ||||||||||||||
NASDAQ-100® Fund | (1,728,621 | ) | 385,956 | — | — | (1,342,665 | ) | |||||||||||||
Inverse NASDAQ-100® Strategy Fund | 5,359 | 176,461 | — | — | 181,820 | |||||||||||||||
S&P 500® 2x Strategy Fund | (382,718 | ) | (9,006,156 | ) | — | — | (9,388,874 | ) | ||||||||||||
NASDAQ-100® 2x Strategy Fund | (1,236,679 | ) | (10,185,330 | ) | — | — | (11,422,009 | ) | ||||||||||||
Mid-Cap 1.5x Strategy Fund | 1,353 | (1,700,077 | ) | — | — | (1,698,724 | ) | |||||||||||||
Inverse Mid-Cap Strategy Fund | 1,057 | (30,206 | ) | — | — | (29,149 | ) | |||||||||||||
Russell 2000® 2x Strategy Fund | 73,056 | (899,869 | ) | — | — | (826,813 | ) | |||||||||||||
Russell 2000® 1.5x Strategy Fund | 67,005 | (1,857,980 | ) | — | — | (1,790,975 | ) | |||||||||||||
Inverse Russell 2000® Strategy Fund | (1,729 | ) | 262,967 | — | — | 261,238 | ||||||||||||||
Dow 2x Strategy Fund | 48,671 | (2,334,538 | ) | — | — | (2,285,867 | ) | |||||||||||||
Inverse Dow 2x Strategy Fund | (41,788 | ) | 1,095,740 | — | — | 1,053,952 | ||||||||||||||
Government Long Bond 1.2x Strategy Fund | — | — | (450,830 | ) | — | (450,830 | ) | |||||||||||||
Inverse Government Long Bond Strategy Fund | — | — | 59,274 | — | 59,274 | |||||||||||||||
High Yield Strategy Fund | — | — | (111,846 | ) | 95,972 | (15,874 | ) |
186 | 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 | Swaps | Futures | Swaps | Total | |||||||||||||||
Nova Fund | $ | (131,993 | ) | $ | 353,158 | $ | — | $ | — | $ | 221,165 | |||||||||
Inverse S&P 500® Strategy Fund | 1,025 | (53,476 | ) | — | — | (52,451 | ) | |||||||||||||
NASDAQ-100® Fund | (764,091 | ) | 298,165 | — | — | (465,926 | ) | |||||||||||||
Inverse NASDAQ-100® Strategy Fund | 3,438 | (81,311 | ) | — | — | (77,873 | ) | |||||||||||||
S&P 500® 2x Strategy Fund | (155,178 | ) | 855,047 | — | — | 699,869 | ||||||||||||||
NASDAQ-100® 2x Strategy Fund | (627,467 | ) | 1,295,096 | — | — | 667,629 | ||||||||||||||
Mid-Cap 1.5x Strategy Fund | (128,295 | ) | 74,186 | — | — | (54,109 | ) | |||||||||||||
Inverse Mid-Cap Strategy Fund | (661 | ) | (3,194 | ) | — | — | (3,855 | ) | ||||||||||||
Russell 2000® 2x Strategy Fund | (8,805 | ) | 99,948 | — | — | 91,143 | ||||||||||||||
Russell 2000® 1.5x Strategy Fund | (42,128 | ) | 169,124 | — | — | 126,996 | ||||||||||||||
Inverse Russell 2000® Strategy Fund | 6,162 | (58,373 | ) | — | — | (52,211 | ) | |||||||||||||
Dow 2x Strategy Fund | (128,675 | ) | 353,878 | — | — | 225,203 | ||||||||||||||
Inverse Dow 2x Strategy Fund | — | (48,735 | ) | — | — | (48,735 | ) | |||||||||||||
Government Long Bond 1.2x Strategy Fund | — | — | 396,654 | — | 396,654 | |||||||||||||||
Inverse Government Long Bond Strategy Fund | — | — | (51,823 | ) | — | (51,823 | ) | |||||||||||||
High Yield Strategy Fund | — | — | 74,643 | (151,224 | ) | (76,581 | ) |
In conjunction with short sales and the use of derivative instruments, the Funds are required to maintain collateral in various forms. Depending on the financial instrument utilized and the broker involved, the Funds use margin deposits at the broker, cash and/or securities segregated at the custodian bank, discount notes or 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. Cash and/or securities pledged or received as collateral by the Funds in connection with an OTC derivative subject to an ISDA Master Agreement generally may not be invested, sold or rehypothecated by the counterparty or the Funds, as applicable, absent an event of default under such agreement, in which case such collateral generally may be applied towards obligations due to and payable by such counterparty or the Funds, as applicable. 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.
THE RYDEX FUNDS ANNUAL REPORT | 187 |
NOTES TO FINANCIAL STATEMENTS (continued) |
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 | |||||||||||||||||||||||||
Fund | Instrument | Gross | Gross | Net Amount | Financial | Cash | Net | ||||||||||||||||||
Nova Fund | Swap equity contracts | $ | 239,373 | $ | — | $ | 239,373 | $ | — | $ | — | $ | 239,373 | ||||||||||||
NASDAQ-100® Fund | Swap equity contracts | 232,546 | — | 232,546 | — | — | 232,546 | ||||||||||||||||||
S&P 500® 2x Strategy Fund | Swap equity contracts | 630,358 | — | 630,358 | — | — | 630,358 | ||||||||||||||||||
NASDAQ-100® 2x Strategy Fund | Swap equity contracts | 639,560 | — | 639,560 | — | — | 639,560 | ||||||||||||||||||
Mid-Cap 1.5x Strategy Fund | Swap equity contracts | 54,067 | — | 54,067 | — | — | 54,067 | ||||||||||||||||||
Russell 2000® 2x Strategy Fund | Swap equity contracts | 38,856 | — | 38,856 | — | — | 38,856 | ||||||||||||||||||
Russell 2000® 1.5x Strategy Fund | Swap equity contracts | 118,009 | — | 118,009 | — | — | 118,009 | ||||||||||||||||||
Dow 2x Strategy Fund | Swap equity contracts | 183,980 | — | 183,980 | — | — | 183,980 | ||||||||||||||||||
High Yield Strategy Fund | Swap equity contracts | 6,614 | — | 6,614 | — | — | 6,614 |
Gross Amounts Not Offset | |||||||||||||||||||||||||
Fund | Instrument | Gross | Gross | Net Amount | Financial | Cash | Net | ||||||||||||||||||
Inverse S&P 500® Strategy Fund | Swap equity contracts | $ | 43,895 | $ | — | $ | 43,895 | $ | (39,878 | ) | $ | — | $ | 4,017 | |||||||||||
Inverse NASDAQ-100® Strategy Fund | Swap equity contracts | 76,423 | — | 76,423 | (72,645 | ) | — | 3,778 | |||||||||||||||||
Inverse Mid-Cap Strategy Fund | Swap equity contracts | 2,593 | — | 2,593 | (1,251 | ) | — | 1,342 | |||||||||||||||||
Inverse Russell 2000® Strategy Fund | Swap equity contracts | 51,688 | — | 51,688 | (44,878 | ) | — | 6,810 | |||||||||||||||||
Inverse Dow 2x Strategy Fund | Swap equity contracts | 30,990 | — | 30,990 | — | — | 30,990 |
1 | Exchange-traded or centrally-cleared derivatives are excluded from these reported amounts. |
188 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
The Funds have the right to offset deposits against any related derivative liabilities outstanding with each counterparty with the exception of exchange traded or centrally cleared derivatives. The following table presents deposits held by others in connection with derivative investments as of December 31, 2018.
Fund | Counterparty | Asset Type | Cash Pledged | Cash Received | ||||||
Inverse NASDAQ-100® Strategy Fund | Goldman Sachs Group | Futures contracts | $ | 22,800 | $ | — | ||||
Mid-Cap 1.5x Strategy Fund | Barclays Bank plc | Total return swap agreements | 271,614 | — | ||||||
Russell 2000® 2x Strategy Fund | Barclays Bank plc | Total return swap agreements | 799 | — | ||||||
Government Long Bond 1.2x Strategy Fund | Goldman Sachs Group | Futures contracts | 57,285 | — | ||||||
High Yield Strategy Fund | Barclays Bank plc | Credit default swap agreements | 25,530 | — |
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.
THE RYDEX FUNDS ANNUAL REPORT | 189 |
NOTES TO FINANCIAL STATEMENTS (continued) |
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 |
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.
If a Fund invests in a fund that is advised by the same adviser or an affiliated adviser, the investing Fund’s adviser has agreed to waive fees at the investing fund level to the extent necessary to offset the proportionate share of any management fee paid by each Fund with respect to its investment in such affiliated fund. 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, 2018, the following Funds waived fees related to investments in affiliated funds:
Fund | Amount Waived: | |||
Nova Fund | $ | 1,606 | ||
Inverse S&P 500 Strategy Fund | 214 | |||
NASDAQ-100® Fund | 2,253 | |||
Inverse NASDAQ-100® Fund | 82 | |||
S&P 500® 2x Strategy Fund | 1,784 | |||
NASDAQ-100® 2x Strategy Fund | 2,510 | |||
Mid-Cap 1.5x Strategy Fund | 582 | |||
Inverse Mid-Cap Strategy Fund | 14 | |||
Russell 2000® 2x Strategy Fund | 11 | |||
Russell 2000® 1.5x Strategy Fund | 476 | |||
Inverse Russell 2000® Strategy Fund | 79 | |||
Dow 2x Strategy Fund | 474 | |||
Inverse Dow 2x Strategy Fund | 173 | |||
Government Long Bond 1.2x Strategy Fund | 325 | |||
Inverse Government Long Bond Strategy Fund | 292 | |||
High Yield Strategy Fund | 299 |
190 | 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/or GFD. The Trust does not compensate its officers or trustees who are officers, directors and/or employees of GI or 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. 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 each Fund’s average daily net assets 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, 2018, the repurchase agreements in the joint account were as follows:
Counterparty and | Face Value | Repurchase Price |
| Collateral | Par Value | Fair Value | ||||||||||||
JPMorgan Chase & Co. | U.S. Treasury Note | |||||||||||||||||
2.95% | 1.13% | |||||||||||||||||
Due 01/02/19 | $ | 54,122,377 | $ | 54,131,247 | 06/30/21 | $ | 57,040,000 | $ | 55,203,996 | |||||||||
U.S. Treasury Bill | ||||||||||||||||||
0.00% | ||||||||||||||||||
01/03/19 | 900 | 900 | ||||||||||||||||
57,040,900 | 55,204,896 | |||||||||||||||||
Barclays Capital | U.S. Treasury Note | |||||||||||||||||
2.93% | 2.50% | |||||||||||||||||
Due 01/02/19 | 22,507,947 | 22,511,611 | 05/15/24 | 22,942,600 | 22,958,127 | |||||||||||||
Bank of America Merrill Lynch | U.S. Treasury Strip | |||||||||||||||||
2.95% | 0.00% | |||||||||||||||||
Due 01/02/19 | 15,005,298 | 15,007,757 | 08/15/31 | 22,092,096 | 15,305,404 |
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
THE RYDEX FUNDS ANNUAL REPORT | 191 |
NOTES TO FINANCIAL STATEMENTS (continued) |
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.
At December 31, 2018, the Funds participated in securities lending transactions, which are subject to enforceable netting arrangements, as follows:
Gross Amounts Not Offset in the | Securities Lending Collateral | ||||||||||||||||||||||||
Fund | Value of | Collateral | Net | Cash | Cash | Total | |||||||||||||||||||
NASDAQ-100® Fund | $ | 52,669 | $ | (52,669 | ) | $ | — | $ | 47,334 | $ | 8,010 | $ | 55,344 | ||||||||||||
S&P 500® 2x Strategy Fund | 223 | (223 | ) | — | 200 | 34 | 234 | ||||||||||||||||||
NASDAQ-100® 2x Strategy Fund | 13,276 | (13,276 | ) | — | 11,931 | 2,019 | 13,950 | ||||||||||||||||||
Mid-Cap 1.5x Strategy Fund | 18,456 | (18,456 | ) | — | 16,262 | 2,752 | 19,014 | ||||||||||||||||||
Russell 2000® 2x Strategy Fund | 70 | (70 | ) | — | 62 | 10 | 72 | ||||||||||||||||||
Russell 2000® 1.5x Strategy Fund | 689 | (689 | ) | — | 608 | 103 | 711 | ||||||||||||||||||
High Yield Strategy Fund | 1,176 | (1,176 | ) | — | 1,025 | 173 | 1,198 |
(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.
192 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
The tax character of distributions paid during the year ended December 31, 2018 was as follows:
Fund | Ordinary | Long-Term | Total | |||||||||
Nova Fund | $ | 2,952,794 | $ | — | $ | 2,952,794 | ||||||
NASDAQ-100® Fund | 3,450,545 | — | 3,450,545 | |||||||||
S&P 500® 2x Strategy Fund | 3,409,316 | — | 3,409,316 | |||||||||
NASDAQ-100® 2x Strategy Fund | 11,852,712 | — | 11,852,712 | |||||||||
Mid-Cap 1.5x Strategy Fund | 1,545,520 | — | 1,545,520 | |||||||||
Russell 2000® 2x Strategy Fund | 567,824 | — | 567,824 | |||||||||
Russell 2000® 1.5x Strategy Fund | 457,521 | — | 457,521 | |||||||||
Dow 2x Strategy Fund | 3,676,566 | — | 3,676,566 | |||||||||
Government Long Bond 1.2x Strategy Fund | 212,506 | 7,282 | 219,788 | |||||||||
High Yield Strategy Fund | 294,767 | — | 294,767 | |||||||||
U.S. Government Money Market Fund | 377,479 | — | 377,479 |
The tax character of distributions paid during the year ended December 31, 2017 was as follows:
Fund | Ordinary | Long-Term | Total | |||||||||
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 |
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, 2018 were as follows:
Fund | Undistributed | Undistributed | Net Unrealized | Accumulated | Total | |||||||||||||||
Nova Fund | $ | 297,044 | $ | — | $ | (928,528 | ) | $ | (1,256,438 | ) | $ | (1,887,922 | ) | |||||||
Inverse S&P 500® Strategy Fund | 23,390 | — | (45,112 | ) | (13,857,704 | ) | (13,879,426 | ) | ||||||||||||
NASDAQ-100® Fund | 660,762 | 1,122,922 | 13,357,651 | — | 15,141,335 | |||||||||||||||
Inverse NASDAQ-100® Strategy Fund | 7,340 | — | (78,625 | ) | (6,009,734 | ) | (6,081,019 | ) | ||||||||||||
S&P 500® 2x Strategy Fund | — | — | 304,191 | (7,937,711 | ) | (7,633,520 | ) | |||||||||||||
NASDAQ-100® 2x Strategy Fund | 152,253 | — | 610,734 | (3,840,816 | ) | (3,077,829 | ) | |||||||||||||
Mid-Cap 1.5x Strategy Fund | 59,249 | — | (8,244 | ) | (1,829,202 | ) | (1,778,197 | ) | ||||||||||||
Inverse Mid-Cap Strategy Fund | 1,261 | — | (3,175 | ) | (1,685,206 | ) | (1,687,120 | ) | ||||||||||||
Russell 2000® 2x Strategy Fund | 17,885 | — | 40,501 | (797,573 | ) | (739,187 | ) | |||||||||||||
Russell 2000® 1.5x Strategy Fund | — | — | 119,517 | (1,802,086 | ) | (1,682,569 | ) | |||||||||||||
Inverse Russell 2000® Strategy Fund | 7,165 | — | (56,098 | ) | (6,339,183 | ) | (6,388,116 | ) | ||||||||||||
Dow 2x Strategy Fund | 111,188 | — | 107,044 | (2,658,871 | ) | (2,440,639 | ) | |||||||||||||
Inverse Dow 2x Strategy Fund | — | — | (40,092 | ) | (17,497,733 | ) | (17,537,825 | ) | ||||||||||||
Government Long Bond 1.2x Strategy Fund | — | — | 308,722 | (11,927,320 | ) | (11,618,598 | ) | |||||||||||||
Inverse Government Long Bond Strategy Fund | — | — | (223,530 | ) | (6,889,541 | ) | (7,113,071 | ) | ||||||||||||
High Yield Strategy Fund | 210,642 | — | (84,068 | ) | (173,706 | ) | (47,132 | ) | ||||||||||||
U.S. Government Money Market Fund | — | — | — | — | — |
THE RYDEX FUNDS ANNUAL REPORT | 193 |
NOTES TO FINANCIAL STATEMENTS (continued) |
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. 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, 2018, capital loss carryforwards for the Funds were as follows:
Unlimited | ||||||||||||
Fund | Short-Term | Long-Term | Total | |||||||||
Nova Fund | $ | (1,256,438 | ) | $ | — | $ | (1,256,438 | ) | ||||
Inverse S&P 500® Strategy Fund | (12,141,590 | ) | (1,716,114 | ) | (13,857,704 | ) | ||||||
Inverse NASDAQ-100® Strategy Fund | (5,160,560 | ) | (849,174 | ) | (6,009,734 | ) | ||||||
S&P 500® 2x Strategy Fund | (7,937,711 | ) | — | (7,937,711 | ) | |||||||
NASDAQ-100® 2x Strategy Fund | (3,840,816 | ) | — | (3,840,816 | ) | |||||||
Mid-Cap 1.5x Strategy Fund | (1,814,012 | ) | (15,190 | ) | (1,829,202 | ) | ||||||
Inverse Mid-Cap Strategy Fund* | (1,578,305 | ) | (106,901 | ) | (1,685,206 | ) | ||||||
Russell 2000® 2x Strategy Fund* | (797,573 | ) | — | (797,573 | ) | |||||||
Russell 2000® 1.5x Strategy Fund | (1,802,086 | ) | — | (1,802,086 | ) | |||||||
Inverse Russell 2000® Strategy Fund | (5,513,790 | ) | (825,393 | ) | (6,339,183 | ) | ||||||
Dow 2x Strategy Fund | (2,658,871 | ) | — | (2,658,871 | ) | |||||||
Inverse Dow 2x Strategy Fund* | (15,335,565 | ) | (2,162,168 | ) | (17,497,733 | ) | ||||||
Government Long Bond 1.2x Strategy Fund | (9,018,629 | ) | (2,908,691 | ) | (11,927,320 | ) | ||||||
Inverse Government Long Bond Strategy Fund | (5,108,681 | ) | (1,780,860 | ) | (6,889,541 | ) | ||||||
High Yield Strategy Fund | (102,319 | ) | (71,387 | ) | (173,706 | ) |
* | 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, 2018, the following capital loss carryforward amounts expired or were utilized:
Fund | Expired | Utilized | Total | |||||||||
Inverse S&P 500® Strategy Fund | $ | — | $ | 149,964 | $ | 149,964 | ||||||
Inverse NASDAQ-100® Strategy Fund | — | 185,835 | 185,835 | |||||||||
Inverse Russell 2000® Strategy Fund | — | 268,232 | 268,232 | |||||||||
Inverse Dow 2x Strategy Fund | — | 528,310 | 528,310 | |||||||||
Inverse Government Long Bond Strategy Fund | — | 301,164 | 301,164 |
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, investments in swaps, the “mark-to-market” of certain derivatives, 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, distribution reclasses, and the expiration of capital loss carryforward amounts. To the extent these differences are permanent and would require a reclassification between Paid in Capital and Total Distributable Earnings (Loss), such reclassifications are made in the period that the differences arise. These reclassifications have no effect on net assets or NAV per share.
194 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
The following adjustments were made on the Statements of Assets and Liabilities as of December 31, 2018 for permanent book/tax differences:
Fund | Paid In | Total | ||||||
Nova Fund | $ | 1,503 | $ | (1,503 | ) | |||
NASDAQ-100® Fund | 5,213,187 | (5,213,187 | ) | |||||
S&P 500® 2x Strategy Fund | (20,997 | ) | 20,997 | |||||
Mid-Cap 1.5x Strategy Fund | 78 | (78 | ) | |||||
Russell 2000® 2x Strategy Fund | 559 | (559 | ) | |||||
Russell 2000® 1.5x Strategy Fund | (31,277 | ) | 31,277 | |||||
Inverse Dow 2x Strategy Fund | 542,900 | (542,900 | ) | |||||
Government Long Bond 1.2x Strategy Fund | (505 | ) | 505 | |||||
Inverse Government Long Bond Strategy Fund | (29,356 | ) | 29,356 | |||||
U.S. Government Money Market Fund | (791 | ) | 791 |
At December 31, 2018, the cost of securities for Federal income tax purposes, the aggregate gross unrealized appreciation for all securities for which there was an excess of value over tax cost and the aggregate gross unrealized depreciation for all securities for which there was an excess of tax cost over value, were as follows:
Fund | Tax | Tax | Tax | Net | ||||||||||||
Nova Fund | $ | 27,598,087 | $ | — | $ | (928,528 | ) | $ | (928,528 | ) | ||||||
Inverse S&P 500® Strategy Fund | 4,227,174 | 309 | (45,421 | ) | (45,112 | ) | ||||||||||
NASDAQ-100® Fund | 47,240,090 | 13,868,615 | (510,964 | ) | 13,357,651 | |||||||||||
Inverse NASDAQ-100® Strategy Fund | 7,954,443 | 3,291 | (81,916 | ) | (78,625 | ) | ||||||||||
S&P 500® 2x Strategy Fund | 32,561,187 | 552,818 | (248,627 | ) | 304,191 | |||||||||||
NASDAQ-100® 2x Strategy Fund | 51,639,770 | 1,153,921 | (543,187 | ) | 610,734 | |||||||||||
Mid-Cap 1.5x Strategy Fund | 8,672,354 | 43,233 | (51,477 | ) | (8,244 | ) | ||||||||||
Inverse Mid-Cap Strategy Fund | 520,944 | 1 | (3,176 | ) | (3,175 | ) | ||||||||||
Russell 2000® 2x Strategy Fund | 1,570,271 | 54,007 | (13,506 | ) | 40,501 | |||||||||||
Russell 2000® 1.5x Strategy Fund | 6,976,219 | 176,089 | (56,572 | ) | 119,517 | |||||||||||
Inverse Russell 2000® Strategy Fund | 3,933,425 | 4,968 | (61,066 | ) | (56,098 | ) | ||||||||||
Dow 2x Strategy Fund | 13,765,786 | 302,792 | (195,748 | ) | 107,044 | |||||||||||
Inverse Dow 2x Strategy Fund | 2,148,502 | — | (40,092 | ) | (40,092 | ) | ||||||||||
Government Long Bond 1.2x Strategy Fund | 13,290,023 | 331,389 | (22,667 | ) | 308,722 | |||||||||||
Inverse Government Long Bond Strategy Fund | 4,685,522 | 10 | (223,540 | ) | (223,530 | ) | ||||||||||
High Yield Strategy Fund | 3,920,122 | 37,564 | (121,632 | ) | (84,068 | ) | ||||||||||
U.S. Government Money Market Fund | 85,406,899 | — | — | — |
THE RYDEX FUNDS ANNUAL REPORT | 195 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 9 – Securities Transactions
For the year ended December 31, 2018, 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 | $ | 205,856,068 | $ | 227,679,764 | ||||
Inverse S&P 500® Strategy Fund | 10,342,470 | 9,430,000 | ||||||
NASDAQ-100® Fund | 63,627,909 | 85,613,350 | ||||||
Inverse NASDAQ-100® Strategy Fund | 4,602,111 | 1,070,000 | ||||||
S&P 500® 2x Strategy Fund | 132,531,831 | 144,691,359 | ||||||
NASDAQ-100® 2x Strategy Fund | 119,252,585 | 149,536,488 | ||||||
Mid-Cap 1.5x Strategy Fund | 25,304,312 | 25,799,481 | ||||||
Inverse Mid-Cap Strategy Fund | 613,997 | 446,000 | ||||||
Russell 2000® 2x Strategy Fund | 21,460,854 | 25,708,058 | ||||||
Russell 2000® 1.5x Strategy Fund | 18,450,574 | 21,441,282 | ||||||
Inverse Russell 2000® Strategy Fund | 3,889,038 | 2,122,000 | ||||||
Dow 2x Strategy Fund | 46,861,165 | 54,386,126 | ||||||
Inverse Dow 2x Strategy Fund | 8,997,477 | 9,770,000 | ||||||
Government Long Bond 1.2x Strategy Fund | 18,262,252 | 17,650,000 | ||||||
Inverse Government Long Bond Strategy Fund | 3,604,451 | 3,440,000 | ||||||
High Yield Strategy Fund | 3,618,710 | 5,449,787 | ||||||
U.S. Government Money Market Fund | — | — |
For the year ended December 31, 2018, the cost of purchases and proceeds from sales of government securities were as follows:
Fund | Purchases | Sales | ||||||
Government Long Bond 1.2x Strategy Fund | $ | 214,331,063 | $ | 212,020,938 | ||||
Inverse Government Long Bond Strategy Fund | 53,926,125 | 53,714,930 |
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. 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, 2018, the Funds engaged in purchases and sales of securities, pursuant to Rule 17a-7 of the 1940 Act, as follows:
Fund | Purchases | Sales | Realized | |||||||||
Nova Fund | $ | 52,918,314 | $ | 93,136,320 | $ | 356,487 | ||||||
NASDAQ-100® Fund | 21,134,691 | 38,497,780 | 5,588,873 | |||||||||
S&P 500® 2x Strategy Fund | 86,137,026 | 86,370,430 | 1,045,587 | |||||||||
NASDAQ-100® 2x Strategy Fund | 56,869,986 | 80,623,025 | 7,101,559 | |||||||||
Mid-Cap 1.5x Strategy Fund | 10,115,133 | 4,993,705 | 151,236 | |||||||||
Russell 2000® 2x Strategy Fund | 6,543,087 | 8,406,407 | 102,370 | |||||||||
Russell 2000® 1.5x Strategy Fund | 10,669,288 | 9,897,533 | 72,042 | |||||||||
Dow 2x Strategy Fund | 12,063,009 | 20,962,389 | 118,916 | |||||||||
U.S. Government Money Market Fund | 8,994,300 | — | — |
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 9, 2019. 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 2.91% for the year ended December 31, 2018. The Funds did not have any borrowings outstanding under this agreement at December 31, 2018.
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NOTES TO FINANCIAL STATEMENTS (continued) |
The average daily balances borrowed for the year ended December 31, 2018, were as follows:
Fund | Average Daily Balance | |||
Nova Fund | $ | 1,101 | ||
Inverse S&P 500® Strategy Fund | 652 | |||
NASDAQ-100® Fund | 10,479 | |||
Inverse NASDAQ-100® Strategy Fund | 22 | |||
S&P 500® 2x Strategy Fund | 6,556 | |||
NASDAQ-100® 2x Strategy Fund | 4,825 | |||
Mid-Cap 1.5x Strategy Fund | 2,323 | |||
Inverse Mid-Cap Strategy Fund | 68 | |||
Russell 2000® 2x Strategy Fund | 1,885 | |||
Russell 2000® 1.5x Strategy Fund | 1,348 | |||
Inverse Russell 2000® Strategy Fund | 115 | |||
Dow 2x Strategy Fund | 14,518 | |||
Inverse Dow 2x Strategy Fund | 430 | |||
Government Long Bond 1.2x Strategy Fund | 24,551 | |||
High Yield Strategy Fund | 173 |
Note 11 – Recent Regulatory Reporting Updates
In August 2018, the U.S. Securities and Exchange Commission adopted amendments to certain disclosure requirements under Regulation S-X to conform to U.S. GAAP, including: (i) an amendment to require presentation of the total, rather than the components, of distributable earnings on the Statements of Assets and Liabilities; and (ii) an amendment to require presentation of the total, rather than the components, of distributions to shareholders, except for tax return of capital distributions, on the Statements of Changes in Net Assets.
As of December 31, 2018, management has implemented the amendments to Regulation S-X, which did not have a material impact on the Funds’ financial statements and related disclosures or impact the Funds’ net assets or results of operations.
Note 12 – Recent Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities (the “2017 ASU”) which amends the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. The 2017 ASU does not require any accounting change for debt securities held at a discount; the discount continues to be amortized to maturity. The 2017 ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. At this time, management is evaluating the implications of these changes on the financial statements.
In August 2018, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (the “2018 ASU”) which adds, modifies and removes disclosure requirements related to certain aspects of fair value measurement. The 2018 ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. At this time, management is evaluating the implications of these changes on the financial statements.
Note 13 – 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
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NOTES TO FINANCIAL STATEMENTS (continued) |
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. On April 3, 2018, Justice Kennedy and Justice Thomas issued a “Statement” related to the petition for certiorari suggesting that the Second Circuit and/or District Court may want to take steps to reexamine the application of the Section 546(e) safe harbor to the previously dismissed state law constructive fraudulent transfer claims based on the Supreme Court’s decision in Merit Management Group LP v. FTI Consulting, Inc. On April 10, 2018, Plaintiffs filed in the Second Circuit a motion for that court to recall its mandate, vacate its prior decision, and remand to the district court for further proceedings consistent with Merit Management. On April 20, 2018, the shareholder defendants filed an opposition to Plaintiffs’ motion to recall the mandate. On May 15, 2018, the Second Circuit issued an order recalling the mandate “in anticipation of further panel review.”
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. On March 8, 2018, the plaintiff renewed his request for leave to file a motion to amend the complaint to assert a constructive fraudulent transfer claim based on the Supreme Court’s ruling in Merit Management Group LP v. FTI Consulting, Inc. The shareholder defendants opposed that request. On June 18, 2018 the District Court ordered that the request would be stayed pending further action by the Second Circuit in the SLCFC actions.
On December 18, 2018, plaintiff filed a letter with the District Court requesting that the stay be dissolved in order to permit briefing on the motion to amend the complaint and indicating plaintiff’s intention to file another motion to amend the complaint to reinstate claims for intentional fraudulent transfer. The shareholder defendants opposed that request. On January 14, 2019, the court held a case management conference, during which the court stated that it would not lift the stay prior to further action from the Second Circuit in the SLCFC actions. The court further stated that it would allow the plaintiff to file a motion to amend to try to reinstate its intentional fraudulent transfer claim. The plaintiff has not yet filed any such motion. On January 23, 2019, the court ordered the parties still facing pending claims to participate in a mediation, to commence on January 28, 2019.
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NOTES TO FINANCIAL STATEMENTS (concluded) |
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.
Note 14 – Subsequent Events
The Funds evaluated subsequent events through the date the financial statements were available for issue and determined there were no additional material events that would require adjustment to or disclosure in the Funds’ financial statements.
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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, 2018, 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, 2018, 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 | Statement of changes | Financial |
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, 2018 | For each of the two years in the period ended December 31, 2018 | For each of the five years in the period ended December 31, 2018 |
High Yield Strategy Fund | For the year ended December 31, 2018 | For each of the two years in the period ended December 31, 2018 | For each of the four years in the period ended December 31, 2018 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.
200 | THE RYDEX FUNDS ANNUAL REPORT |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (concluded) |
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, 2018, by correspondence with the custodian, transfer agent, 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 26, 2019
THE RYDEX FUNDS ANNUAL REPORT | 201 |
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 2019, 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 2018.
The Funds’ investment income (dividend income plus short-term gains, if any) qualifies as follows:
Of the taxable ordinary income distributions paid during the fiscal year ending December 31, 2018, the following funds had the corresponding percentages qualify for the dividends received deduction for corporations.
Fund | Dividend |
Nova Fund | 1.63% |
NASDAQ-100® Fund | 12.40% |
S&P 500® 2x Strategy Fund | 3.27% |
NASDAQ-100® 2x Strategy Fund | 1.79% |
Mid-Cap 1.5x Strategy Fund | 0.97% |
Russell 2000® 2x Strategy Fund | 1.98% |
Russell 2000® 1.5x Strategy Fund | 2.34% |
Dow 2x Strategy Fund | 0.00% |
Government Long Bond 1.2x Strategy Fund | 0.00% |
High Yield Strategy Fund | 0.00% |
U.S. Government Money Market Fund | 0.00% |
With respect to the taxable year ended December 31, 2018, 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 | From | ||||||
NASDAQ-100® Fund | $ | — | $ | 5,213,186 | ||||
Government Long Bond 1.2x Strategy Fund | 7,282 | — |
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.
202 | THE RYDEX FUNDS ANNUAL REPORT |
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.
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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 | Position(s) Held with the | Principal Occupation(s) | Number of | Other |
INDEPENDENT TRUSTEES | ||||
Angela Brock-Kyle (1959)
| Trustee, Member of the Audit Committee; and Member of the Governance and Nominating Committee (2017-present). | Current: Founder and Chief Executive Officer, B.O.A.R.D.S (consulting firm)
Former: Senior Leader, TIAA (financial services firm) (1987-2012). | 109 | None.
|
Corey A. Colehour (1945) | Trustee (1993-present); Member of the Audit Committee (1994-present); Member of the Governance and Nominating Committee (2017-present). | Retired. | 109 | None. |
J. Kenneth Dalton (1941) | Trustee (1995-present); Chairman and Member of the Audit Committee (1997-present); and Member of the Governance and Nominating Committee (2018-present). | Retired. | 109 | Epiphany Funds (2) (2009-present). |
Thomas F. Lydon, Jr. (1960) | Trustee, Member of the Audit Committee (2005-present); Chairman and Member of the Governance and Nominating Committee (2017-present). | Current: President, Global Trends Investments (registered investment adviser) (1996-present).
| 109 | US Global Investors (GROW) (1995-present) and Harvest Volatility Edge Trust (3) (2017-present). |
Sandra G. Sponem (1958)
| Trustee, Chairwoman and Member of the Audit Committee (2016-present); and Member of the Governance and Nominating Committee (2017-present). | Retired.
Former: Senior Vice President and Chief Financial Officer, M.A. Mortenson Companies, Inc. (general contracting firm) (2007-2017). | 109 | SSGA Funds (125) (2018-present). |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) Held with the | Principal Occupation(s) |
OFFICERS |
|
|
Michael P. Byrum (1970)
| Vice President (2000-present) | Current: Senior Vice President, Security Investors, LLC (2010-present); Senior Managing Director, Guggenheim Investments (2010-present); President and Chief Investment Officer, Rydex Holdings, LLC (2008-present) and Director and Chairman, Advisory Research Center, Inc. (2006-present).
Former: Manager, Guggenheim Specialized Products, LLC (2005-2018); 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 (2016-present) | 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 (2016-present) | Current: Treasurer and Assistant Treasurer, certain other funds in the Fund Complex (2010-present); Managing Director, Guggenheim Investments (2015-present).
Former: Chief Financial Officer, Guggenheim Specialized Products, LLC (2016-2018); 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 (2017-present) | Current: Interested Trustee, certain other funds in the Fund Complex (2018-present); President, certain other funds in the Fund Complex (2017-present); Chief Legal Officer, certain other funds in the Fund Complex (2014-present); Vice President, certain other funds in the Fund Complex (2007-present); Senior Managing Director, Guggenheim Investments (2012-present).
Former: Trustee (2018-February 2019); President and Chief Executive Officer, certain other funds in the Fund Complex (2017-2018); and Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004-2012). |
Mark E. Mathiasen (1978) | Secretary (2017-present) | Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present). |
Glenn McWhinnie (1969) | Assistant Treasurer (2016-present) | Current: Vice President, Guggenheim Investments (2009-present); Assistant Treasurer, certain other funds in the Fund Complex (2016-present). |
Michael P. Megaris (1984) | Assistant Secretary (2018-present) | Current: Assistant Secretary, certain other funds in the Fund Complex (2014-present); Director, Guggenheim Investments (2012-present). |
THE RYDEX FUNDS ANNUAL REPORT | 205 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) Held with the | Principal Occupation(s) |
OFFICERS - continued |
|
|
Elisabeth Miller (1968) | Chief Compliance Officer (2012-present) | Current: Chief Compliance Officer, certain other funds in the Fund Complex (2012-present); Managing Director, Guggenheim Investments (2012-present); Vice President, Guggenheim Funds Distributors, LLC (2014-present).
Former: Chief Compliance Officer, Security Investors, LLC (2012-2018); Chief Compliance Officer, Guggenheim Funds Investment Advisors, LLC (2012-2018); Chief Compliance Officer, Guggenheim Distributors, LLC (2009-2014); Senior Manager, Security Investors, LLC (2004-2014); Senior Manager, Guggenheim Distributors, LLC (2004-2014). |
Margaux Misantone (1978)
| AML Officer (2017-present) | Current: Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investment Advisors, LLC (2018-present); AML Officer, Security Investors, LLC and certain other funds in the Fund Complex (2017-present); Managing Director, Guggenheim Investments (2015-present).
Former: Assistant Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investments Advisors, LLC (2015-2018). |
Adam J. Nelson (1979) | Assistant Treasurer (2016-present) | 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). |
William Rehder (1967) | Assistant Vice President (2018-present) | Current: Managing Director, Guggenheim Investments (2002-present). |
Kimberly J. Scott (1974)
| Assistant Treasurer (2016-present) | 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 (2016-present) | Current: Chief Financial Officer, 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 Chief Compliance Officer, 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); Chief Financial Officer and Treasurer, Van Kampen Funds (1996-2004). |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(concluded) |
Name, Address* | Position(s) Held with the | Principal Occupation(s) |
OFFICERS - concluded |
|
|
Jon Szafran (1989) | Assistant Treasurer (2017-Present)
| 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 “Fund Complex” includes all closed-end and open-end funds (including all of their portfolios) advised by the Adviser and any funds that have an investment adviser or servicing agent that is an affiliated person of the Adviser. Information provided is as of the date of this report. |
*** | Certain of the Trustees may serve as directors on the boards of companies not required to be disclosed above, including certain non-profit companies and charitable foundations. |
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GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited) |
Who We Are
This Privacy Notice describes the data protection practices of Guggenheim Investments. Guggenheim Investments as used herein refers to the affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC, Security Investors, LLC, Guggenheim Investment Advisors (Europe) Limited, Guggenheim Real Estate, LLC, GS Gamma Advisors, LLC, Guggenheim Partners India Management, LLC, Guggenheim Partners Europe Limited, as well as the funds in the Guggenheim Funds complex (the “Funds”) (“Guggenheim Investments,” “we,” “us,” or “our”).
Guggenheim Partners Investment Management Holdings, LLC, located at 330 Madison Avenue, New York, New York 10017 is the data controller for your information. The affiliates who are also controllers of certain of your information are: Guggenheim Investment Advisors (Europe) Limited, Guggenheim Partners Europe Limited, 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.
Our Commitment to You
Guggenheim Investments considers your privacy our utmost concern. When you become our client or investor, you entrust us with not only your hard-earned money but also with your personal and financial information. Because we have access to your private information, we hold ourselves to the highest standards in its safekeeping and use. We strictly limit how we share your information with others, whether you are a current or former Guggenheim Investments client or investor.
The Information We Collect About You
We collect certain nonpublic personal information about you from information you provide on applications, other forms, our website, and/or from third parties including investment advisors. This information includes Social Security or other tax identification number, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, bank account information, marital status, family relationships, information that we collect on our website through the use of “cookies,” and other personal information that you or others provide to us. We may also collect such information through your inquiries by mail, e-mail or telephone. We may also collect customer due diligence information, as required by applicable law and regulation, through third party service providers.
How We Handle Your Personal Information
The legal basis for using your information as set out in this Privacy Notice is as follows: (a) use of your personal data is necessary to perform our obligations under any contract with you (such as a contract for us to provide financial services to you); or (b) where use of your personal data is not necessary for performance of a contract, use of your personal data is necessary for our legitimate interests or the legitimate interests of others (for example, to enforce the legal terms governing our services, operate and market our website and other services we offer, ensure safe environments for our personnel and others, make and receive payments, prevent fraud and to know the customer to whom we are providing the services). Some processing is done to comply with applicable law.
In addition to the specific uses described above, we also use your information in the following manner:
● | We use your information in connection with servicing your accounts. |
● | We use information to respond to your requests or questions. For example, we might use your information to respond to your customer feedback. |
● | We use information to improve our products and services. We may use your information to make our website and products better. We may use your information to customize your experience with us. |
● | We use information for security purposes. We may use your information to protect our company and our customers. |
● | We use information to communicate with you. For example, we will communicate with you about your account or our relationship. We may contact you about your feedback. We might also contact you about this Privacy Notice. We may also enroll you in our email newsletter. |
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GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited)(continued) |
● | We use information as otherwise permitted by law, as we may notify you. |
● | Aggregate/Anonymous Data. We may aggregate and/or anonymize any information collected through the website so that such information can no longer be linked to you or your device (“Aggregate/Anonymous Information”). We may use Aggregate/Anonymous Information for any purpose, including without limitation for research and marketing purposes, and may also share such data with any third parties, including advertisers, promotional partners, and sponsors. |
We do not sell information about current or former clients or their accounts to third parties. Nor do we share this information, except when necessary to complete transactions at your request, to make you aware of investment products and services that we or our affiliates offer, or as permitted or required by law.
We provide information about you to companies and individuals not affiliated with Guggenheim Investments to complete certain transactions or account changes, or to perform services for us related to your account. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we must provide certain information about you to that company to complete the transaction. We provide the third party with only the information necessary to carry out its responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. To alert you to other Guggenheim Investments products and services, we share your information within our family of affiliated companies. You may limit our sharing with affiliated companies as set out below. We may also share information with any successor to all or part of our business, or in connection with steps leading up to a merger or acquisition. For example, if part of our business was sold we may give customer information as part of that transaction. We may also share information about you with your consent.
We will release information about you if you direct us to do so, if we are compelled by law to do so, or in other circumstances as permitted by law (for example, to protect your account from fraud).
If you close your account(s) or become an inactive client or investor, we will continue to adhere to the privacy policies and practices described in this notice.
Opt-Out Provisions and Your Data Choices
The law allows you to “opt out” of certain kinds of information sharing with third parties. We do not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.
When you are no longer our client or investor, we continue to share your information as described in this notice, and you may contact us at any time to limit our sharing by sending an email to CorporateDataPrivacy@GuggenheimPartners.com.
European Union Data Subjects and certain others: In addition to the choices set forth above, residents of the European Union and certain other jurisdictions have certain rights to (1) request access to or rectification or deletion of information we collect about them, (2) request a restriction on the processing of their information, (3) object to the processing of their information, or (4) request the portability of certain information. To exercise these or other rights, please contact us using the contact information below. We will consider all requests and provide our response within the time period stated by applicable law. Please note, however, that certain information may be exempt from such requests in some circumstances, which may include if we need to keep processing your information for our legitimate interests or to comply with a legal obligation. We may request you provide us with information necessary to confirm your identity before responding to your request.
Residents of France and certain other jurisdictions may also provide us with instructions regarding the manner in which we may continue to store, erase and share your information after your death, and where applicable, the person you have designated to exercise these rights after your death.
How We Protect Privacy Online
We take steps to protect your privacy when you use our web site – www.guggenheiminvestments.com – by using secure forms of online communication, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These safeguards vary based on the sensitivity of the information that we collect and store. However, we cannot and do not guarantee that these measures will prevent every unauthorized attempt to access, use, or disclose your information since despite our efforts, no Internet and/or other
THE RYDEX FUNDS ANNUAL REPORT | 209 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited)(concluded) |
electronic transmissions can be completely secure. Our web site uses “http cookies”—tiny pieces of information that we ask your browser to store. We use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your e-mail address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.
How We Safeguard Your Personal Information and Data Retention
We restrict access to nonpublic personal information about you to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
We keep your information for no longer than necessary for the purposes for which it is processed. The length of time for which we retain information depends on the purposes for which we collected and use it and/or as required to comply with applicable laws. Information may persist in copies made for backup and business continuity purposes for additional time.
International Visitors
If you are not a resident of the United States, please be aware that your information may be transferred to, stored and processed in the United States where our servers are located and our databases are operated. The data protection and other laws of the United States and other countries might not be as comprehensive as those in your country.
In such cases, we ensure that a legal basis for such a transfer exists and that adequate protection is provided as required by applicable law, for example, by using standard contractual clauses or by transferring your data to a jurisdiction that has obtained an adequacy finding. Individuals whose data may be transferred on the basis of standard contractual clauses may contact us as described below.
We’ll Keep You Informed
If you have any questions or concerns about how we treat your personal data, we encourage you to consult with us first. You may also contact the relevant supervisory authority.
We reserve the right to modify this policy at any time and will inform you promptly of material changes. You may access our privacy policy from our web site at www.guggenheiminvestments.com. Should you have any questions regarding our privacy policy, contact us by email at CorporateDataPrivacy@GuggenheimPartners.com.
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12.31.2018
Rydex Variable Trust 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 Fund |
Japan 2x Strategy Fund |
Specialty Funds |
Strengthening Dollar 2x Strategy Fund |
Weakening Dollar 2x Strategy Fund |
Beginning on January 1, 2021, paper copies of the Funds’ annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from a Fund or from your financial intermediary. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change, and you need not take any action. At any time, you may elect to receive reports and other communications from a Fund electronically by calling 800.820.0888, going toGuggenheimInvestments.com/myaccount, or by contacting your financial intermediary.
You may elect to receive all future shareholder reports in paper free of charge. If you hold shares of a Fund directly, you can inform a Fund that you wish to receive paper copies of reports by calling 800.820.0888. If you hold shares of a Fund through a financial intermediary, please contact the financial intermediary to make this election. Your election to receive reports in paper will apply to all Guggenheim Funds in which you are invested and may apply to all funds held with your financial intermediary.
GuggenheimInvestments.com | RVATB2-ANN-2-1218x1219 |
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 | 77 |
NOTES TO FINANCIAL STATEMENTS | 85 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 100 |
OTHER INFORMATION | 101 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS | 103 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE | 106 |
THE RYDEX FUNDS ANNUAL REPORT | 1 |
| December 31, 2018 |
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, 2018.
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, 2019
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.
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
2 | THE RYDEX FUNDS ANNUAL REPORT |
| December 31, 2018 |
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, 2018 |
U.S. economic data has been broadly strong, but there is already evidence that certain sectors are losing steam. Consumers are becoming less positive on purchases of homes, autos, and appliances, citing rising rates as a major reason. Growth in nonresidential fixed investment is also slowing, reflecting a combination of higher borrowing costs and tariff uncertainty.
With three major pillars of the economy showing signs of weakness, a broad-based slowdown in real U.S. gross domestic product (“GDP”) growth to below 2% year over year by the fourth quarter of 2019 is possible. Global growth momentum has weakened over the last 12 months, and the souring picture for the global economy collided with rising production from U.S. oil producers to drive a 38% decline in oil prices in the fourth quarter. Subsequently, inflation expectations collapsed, and rate hikes priced for 2019 in the fed funds futures market evaporated.
A key bright spot in late 2018 was the U.S. labor market. The unemployment rate remained below 4.0%, near 50-year lows. Non-farm payrolls increased nearly twice as fast as expected, while average hourly earnings increased at 3.3% year over year, the fastest growth in wages since 2009. With above-potential GDP growth likely to cause job gains to run above labor force growth, unemployment could fall further in 2019, leading to an acceleration of wage growth.
With an eye on the labor market, but cognizant of softening inflation, the U.S. Federal Reserve (the “Fed”) proceeded to raise the fed funds target to 2.25–2.50% in December 2018. The Fed added to its December statement that it would monitor global economic and financial developments, but in the press conference, Fed Chair Powell failed to convey flexibility on both interest rate and balance sheet policy should conditions deteriorate further. Markets sold off further in the days following the Fed decision.
Easing inflationary pressures against a very tight labor market present a conundrum to the Fed as policymakers walk a tightrope managing policy around the Fed’s dual mandate of price stability and full employment. Ultimately, the Fed may be forced to pause in early 2019 to monitor economic data in order to avoid inflicting further pain. With real GDP growth running above potential, unemployment below full employment and falling, and core inflation near the 2% target, the 2019 data should be solid enough for the Fed to deliver another hike in the second half of the year.
For the 12 months ended December 31, 2018, the Standard & Poor’s 500® (“S&P 500®”) Index* generated a total return of -4.38%. After two years of strong appreciation in 2016 and 2017, equities were choppy, including a nearly 20% drawdown from early October to December 24th, as markets contended with the ramifications of a trade uncertainty with China, a government shutdown, and the prospects of a new direction in monetary policy.
A pause in monetary policy tightening may grant a short-lived reprieve to debtors at risk of caving under pressure from rising borrowing costs. Credit conditions would appear benign if the Fed seemingly saves the day by staying on hold. We believe any pause would only allow excesses to become more pronounced and afford risk assets one more rally. This rally may be the last opportunity to sell into strength before the Fed resumes raising interest rates, which may push the U.S. into an economic recession in 2020.
For the 12 months ended December 31, 2018, the MSCI Europe-Australasia-Far East (“EAFE”) Index*returned -13.79%. The return of the MSCI Emerging Markets Index*was -14.58%.
In the bond market, the Bloomberg Barclays U.S. Aggregate Bond Index* posted a 0.01% return for the period, while the Bloomberg Barclays U.S. Corporate High Yield Index*returned -2.08%. The return of the ICE Bank of America (“BofA”) Merrill Lynch 3-Month U.S. Treasury Bill Index*was 1.87% 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).
4 | THE RYDEX FUNDS ANNUAL REPORT |
ECONOMIC AND MARKET OVERVIEW(Unaudited)(concluded) | December 31, 2018 |
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).
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 Europe 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 | Index | Fund | Fund | Fund | 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 to ensure that they are 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, 2018 and ending December 31, 2018.
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 | Fund | Beginning | Ending | Expenses |
Table 1. Based on actual Fund return3 | |||||
S&P 500® Pure Growth Fund | 1.66% | (13.37%) | $ 1,000.00 | $ 866.30 | $ 7.81 |
S&P 500® Pure Value Fund | 1.67% | (12.98%) | 1,000.00 | 870.20 | 7.87 |
S&P MidCap 400® Pure Growth Fund | 1.66% | (18.36%) | 1,000.00 | 816.40 | 7.60 |
S&P MidCap 400® Pure Value Fund | 1.66% | (19.56%) | 1,000.00 | 804.40 | 7.55 |
S&P SmallCap 600® Pure Growth Fund | 1.65% | (18.08%) | 1,000.00 | 819.20 | 7.57 |
S&P SmallCap 600® Pure Value Fund | 1.65% | (25.02%) | 1,000.00 | 749.80 | 7.28 |
Europe 1.25x Strategy Fund | 1.83% | (13.21%) | 1,000.00 | 867.90 | 8.62 |
Japan 2x Strategy Fund | 1.64% | (20.79%) | 1,000.00 | 792.10 | 7.41 |
Strengthening Dollar 2x Strategy Fund | 1.86% | 4.97% | 1,000.00 | 1,049.70 | 9.61 |
Weakening Dollar 2x Strategy Fund | 1.86% | (5.07%) | 1,000.00 | 949.30 | 9.14 |
| |||||
Table 2. Based on hypothetical 5% return (before expenses) | |||||
S&P 500® Pure Growth Fund | 1.66% | 5.00% | $ 1,000.00 | $ 1,016.84 | $ 8.44 |
S&P 500® Pure Value Fund | 1.67% | 5.00% | 1,000.00 | 1,016.79 | 8.49 |
S&P MidCap 400® Pure Growth Fund | 1.66% | 5.00% | 1,000.00 | 1,016.84 | 8.44 |
S&P MidCap 400® Pure Value Fund | 1.66% | 5.00% | 1,000.00 | 1,016.84 | 8.44 |
S&P SmallCap 600® Pure Growth Fund | 1.65% | 5.00% | 1,000.00 | 1,016.89 | 8.39 |
S&P SmallCap 600® Pure Value Fund | 1.65% | 5.00% | 1,000.00 | 1,016.89 | 8.39 |
Europe 1.25x Strategy Fund | 1.83% | 5.00% | 1,000.00 | 1,015.98 | 9.30 |
Japan 2x Strategy Fund | 1.64% | 5.00% | 1,000.00 | 1,016.94 | 8.34 |
Strengthening Dollar 2x Strategy Fund | 1.86% | 5.00% | 1,000.00 | 1,015.83 | 9.45 |
Weakening Dollar 2x Strategy Fund | 1.86% | 5.00% | 1,000.00 | 1,015.83 | 9.45 |
1 | Annualized and excludes expenses of the underlying funds in which the Funds invest, if any. |
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, 2018 to December 31, 2018. |
8 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE(Unaudited) | December 31, 2018 |
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, 2018, S&P 500® Pure Growth Fund returned -5.63%, compared with a return of -4.19% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
Information Technology was the sector detracting the most to the return of the underlying index, followed by Consumer Discretionary. Health Care and Energy were was the only sectors that contributed to return.
Stocks contributing the most to return of the underlying index were Red Hat, Inc., Netflix, Inc., and salesforce.com, Inc. IPG Photonics Corp., Arista Networks, Inc., and Applied Materials, 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) | |
Keysight Technologies, Inc. | 1.9% |
Ulta Beauty, Inc. | 1.9% |
CSX Corp. | 1.9% |
salesforce.com, Inc. | 1.8% |
Devon Energy Corp. | 1.8% |
Vertex Pharmaceuticals, Inc. | 1.7% |
Netflix, Inc. | 1.7% |
ConocoPhillips | 1.7% |
Autodesk, Inc. | 1.7% |
Thermo Fisher Scientific, Inc. | 1.7% |
Top Ten Total | 17.8% |
“Ten Largest Holdings” excludes any temporary cash investments. |
THE RYDEX FUNDS ANNUAL REPORT | 9 |
PERFORMANCE REPORT AND FUND PROFILE(Unaudited)(concluded) | December 31, 2018 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
S&P 500® Pure Growth Fund | (5.63%) | 6.47% | 14.84% |
S&P 500 Pure Growth Index | (4.19%) | 8.24% | 16.95% |
* | 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, 2018 |
S&P 500® PURE GROWTH FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.5% | ||||||||
Consumer, Non-cyclical - 29.9% | ||||||||
Vertex Pharmaceuticals, Inc.* | 4,309 | $ | 714,044 | |||||
Thermo Fisher Scientific, Inc. | 3,100 | 693,749 | ||||||
Church & Dwight Company, Inc. | 8,640 | 568,167 | ||||||
Kellogg Co. | 9,210 | 525,062 | ||||||
Hormel Foods Corp. | 11,330 | 483,565 | ||||||
DaVita, Inc.* | 9,370 | 482,180 | ||||||
WellCare Health Plans, Inc.* | 1,980 | 467,458 | ||||||
Eli Lilly & Co. | 3,790 | 438,579 | ||||||
McCormick & Company, Inc. | 3,130 | 435,821 | ||||||
Edwards Lifesciences Corp.* | 2,770 | 424,281 | ||||||
Constellation Brands, Inc. — Class A | 2,621 | 421,509 | ||||||
Cintas Corp. | 2,502 | 420,311 | ||||||
Boston Scientific Corp.* | 11,695 | 413,301 | ||||||
Lamb Weston Holdings, Inc. | 5,520 | 406,051 | ||||||
Humana, Inc. | 1,370 | 392,478 | ||||||
Gartner, Inc.* | 3,022 | 386,332 | ||||||
Abbott Laboratories | 5,240 | 379,009 | ||||||
Monster Beverage Corp.* | 7,681 | 378,059 | ||||||
IHS Markit Ltd.* | 7,640 | 366,491 | ||||||
Intuitive Surgical, Inc.* | 760 | 363,979 | ||||||
Ecolab, Inc. | 2,430 | 358,060 | ||||||
Zimmer Biomet Holdings, Inc. | 3,370 | 349,537 | ||||||
PayPal Holdings, Inc.* | 4,017 | 337,790 | ||||||
Pfizer, Inc. | 7,350 | 320,827 | ||||||
HCA Healthcare, Inc. | 2,480 | 308,636 | ||||||
Global Payments, Inc. | 2,731 | 281,648 | ||||||
Merck & Company, Inc. | 3,410 | 260,558 | ||||||
Medtronic plc | 2,840 | 258,326 | ||||||
Clorox Co. | 1,650 | 254,331 | ||||||
Automatic Data Processing, Inc. | 1,690 | 221,593 | ||||||
Illumina, Inc.* | 680 | 203,953 | ||||||
S&P Global, Inc. | 1,200 | 203,928 | ||||||
Total Consumer, Non-cyclical | 12,519,613 | |||||||
Technology - 15.0% | ||||||||
salesforce.com, Inc.* | 5,483 | 751,006 | ||||||
Autodesk, Inc.* | 5,470 | 703,497 | ||||||
Take-Two Interactive Software, Inc.* | 5,070 | 521,906 | ||||||
Intuit, Inc. | 2,200 | 433,070 | ||||||
Advanced Micro Devices, Inc.* | 23,140 | 427,164 | ||||||
Red Hat, Inc.* | 2,341 | 411,173 | ||||||
Fortinet, Inc.* | 5,650 | 397,930 | ||||||
Adobe, Inc.* | 1,590 | 359,722 | ||||||
ANSYS, Inc.* | 2,290 | 327,333 | ||||||
Fidelity National Information Services, Inc. | 3,190 | 327,134 | ||||||
Xilinx, Inc. | 3,630 | 309,167 | ||||||
Cerner Corp.* | 5,847 | 306,617 | ||||||
Broadcom, Inc. | 1,122 | 285,302 | ||||||
Akamai Technologies, Inc.* | 4,540 | 277,303 | ||||||
Broadridge Financial Solutions, Inc. | 2,360 | 227,150 | ||||||
NetApp, Inc. | 3,369 | 201,028 | ||||||
Total Technology | 6,266,502 | |||||||
Consumer, Cyclical - 11.6% | ||||||||
Ulta Beauty, Inc.* | 3,220 | 788,385 | ||||||
WW Grainger, Inc. | 2,120 | 598,603 | ||||||
O’Reilly Automotive, Inc.* | 1,670 | 575,031 | ||||||
Tractor Supply Co. | 4,870 | 406,353 | ||||||
Yum! Brands, Inc. | 4,250 | 390,660 | ||||||
Dollar General Corp. | 3,410 | 368,553 | ||||||
VF Corp. | 4,720 | 336,725 | ||||||
TJX Companies, Inc. | 7,298 | 326,512 | ||||||
Fastenal Co. | 5,940 | 310,603 | ||||||
Hilton Worldwide Holdings, Inc. | 3,770 | 270,686 | ||||||
Chipotle Mexican Grill, Inc. — Class A* | 570 | 246,120 | ||||||
AutoZone, Inc.* | 270 | 226,352 | ||||||
Total Consumer, Cyclical | 4,844,583 | |||||||
Industrial - 10.5% | ||||||||
Keysight Technologies, Inc.* | 12,930 | 802,694 | ||||||
CSX Corp. | 12,580 | 781,595 | ||||||
Waste Management, Inc. | 6,430 | 572,206 | ||||||
TransDigm Group, Inc.* | 1,370 | 465,882 | ||||||
Ingersoll-Rand plc | 3,440 | 313,831 | ||||||
Expeditors International of Washington, Inc. | 4,230 | 288,021 | ||||||
Union Pacific Corp. | 1,990 | 275,078 | ||||||
Xylem, Inc. | 3,970 | 264,878 | ||||||
Boeing Co. | 680 | 219,300 | ||||||
Roper Technologies, Inc. | 740 | 197,225 | ||||||
AMETEK, Inc. | 2,850 | 192,945 | ||||||
United Technologies Corp. | 1 | 55 | ||||||
Total Industrial | 4,373,710 | |||||||
Energy - 10.2% | ||||||||
Devon Energy Corp. | 33,130 | 746,750 | ||||||
ConocoPhillips | 11,310 | 705,179 | ||||||
Diamondback Energy, Inc. | 6,790 | 629,433 | ||||||
HollyFrontier Corp. | 10,970 | 560,786 | ||||||
Marathon Oil Corp. | 31,420 | 450,563 | ||||||
Occidental Petroleum Corp. | 6,900 | 423,522 | ||||||
Apache Corp. | 15,200 | 399,000 | ||||||
Anadarko Petroleum Corp. | 7,870 | 345,021 | ||||||
Total Energy | 4,260,254 | |||||||
Financial - 8.9% | ||||||||
SVB Financial Group* | 2,880 | 546,970 | ||||||
Intercontinental Exchange, Inc. | 6,969 | 524,975 | ||||||
Welltower, Inc. REIT | 6,960 | 483,094 | ||||||
U.S. Bancorp | 8,500 | 388,450 | ||||||
Cboe Global Markets, Inc. | 3,699 | 361,873 | ||||||
Apartment Investment & Management Co. — Class A REIT | 8,020 | 351,917 | ||||||
First Republic Bank | 3,317 | 288,247 | ||||||
Mastercard, Inc. — Class A | 1,480 | 279,202 | ||||||
Alliance Data Systems Corp. | 1,860 | 279,149 | ||||||
HCP, Inc. REIT | 8,400 | 234,612 | ||||||
Total Financial | 3,738,489 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT|11 |
SCHEDULE OF INVESTMENTS(concluded) | December 31, 2018 |
S&P 500® PURE GROWTH FUND |
| Shares | Value | ||||||
Communications - 8.4% | ||||||||
Netflix, Inc.* | 2,643 | $ | 707,425 | |||||
Motorola Solutions, Inc. | 3,885 | 446,930 | ||||||
Verizon Communications, Inc. | 7,870 | 442,451 | ||||||
Cisco Systems, Inc. | 7,920 | 343,174 | ||||||
Twitter, Inc.* | 11,190 | 321,601 | ||||||
Facebook, Inc. — Class A* | 2,051 | 268,865 | ||||||
Amazon.com, Inc.* | 170 | 255,335 | ||||||
Alphabet, Inc. — Class C* | 240 | 248,546 | ||||||
Alphabet, Inc. — Class A* | 228 | 238,251 | ||||||
VeriSign, Inc.* | 1,599 | 237,116 | ||||||
LogMeIn, Inc. | 1 | 82 | ||||||
Total Communications | 3,509,776 | |||||||
Utilities - 4.0% | ||||||||
NRG Energy, Inc. | 12,780 | 506,088 | ||||||
Ameren Corp. | 7,180 | 468,351 | ||||||
Pinnacle West Capital Corp. | 4,570 | 389,364 | ||||||
NextEra Energy, Inc. | 1,800 | 312,876 | ||||||
Total Utilities | 1,676,679 | |||||||
Basic Materials - 1.0% | ||||||||
Air Products & Chemicals, Inc. | 2,640 | 422,532 | ||||||
Total Common Stocks | ||||||||
(Cost $36,605,384) | 41,612,138 |
| Face |
| ||||||
REPURCHASE AGREEMENTS††,1 - 0.8% | ||||||||
JPMorgan Chase & Co. | $ | 192,145 | 192,145 | |||||
Barclays Capital | 79,907 | 79,907 | ||||||
Bank of America Merrill Lynch | 53,272 | 53,272 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $325,324) | 325,324 | |||||||
Total Investments - 100.3% | ||||||||
(Cost $36,930,708) | $ | 41,937,462 | ||||||
Other Assets & Liabilities, net - (0.3)% | (112,530 | ) | ||||||
Total Net Assets - 100.0% | $ | 41,824,932 |
* | 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, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 41,612,138 | $ | — | $ | — | $ | 41,612,138 | ||||||||
Repurchase Agreements | — | 325,324 | — | 325,324 | ||||||||||||
Total Assets | $ | 41,612,138 | $ | 325,324 | $ | — | $ | 41,937,462 |
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, 2018, 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, 2018 |
Assets: | ||||
Investments, at value (cost $36,605,384) | $ | 41,612,138 | ||
Repurchase agreements, at value (cost $325,324) | 325,324 | |||
Receivables: | ||||
Fund shares sold | 1,019,516 | |||
Dividends | 19,488 | |||
Interest | 27 | |||
Securities lending income | 10 | |||
Total assets | 42,976,503 | |||
Liabilities: | ||||
Payable for: | ||||
Securities purchased | 990,582 | |||
Management fees | 28,354 | |||
Transfer agent and administrative fees | 9,451 | |||
Investor service fees | 9,451 | |||
Portfolio accounting fees | 3,781 | |||
Trustees’ fees* | 929 | |||
Fund shares redeemed | 346 | |||
Miscellaneous | 108,677 | |||
Total liabilities | 1,151,571 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 41,824,932 | ||
Net assets consist of: | ||||
Paid in capital | $ | 36,903,875 | ||
Total distributable earnings (loss) | 4,921,057 | |||
Net assets | $ | 41,824,932 | ||
Capital shares outstanding | 951,112 | |||
Net asset value per share | $ | 43.97 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $3) | $ | 419,648 | ||
Interest | 6,275 | |||
Income from securities lending, net | 211 | |||
Total investment income | 426,134 | |||
Expenses: | ||||
Management fees | 415,150 | |||
Investor service fees | 138,383 | |||
Transfer agent and administrative fees | 138,383 | |||
Professional fees | 75,352 | |||
Portfolio accounting fees | 55,353 | |||
Trustees’ fees* | 14,553 | |||
Custodian fees | 7,948 | |||
Line of credit fees | 147 | |||
Miscellaneous | 53,895 | |||
Total expenses | 899,164 | |||
Net investment loss | (473,030 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 1,832,113 | |||
Net realized gain | 1,832,113 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (4,989,546 | ) | ||
Net change in unrealized appreciation (depreciation) | (4,989,546 | ) | ||
Net realized and unrealized loss | (3,157,433 | ) | ||
Net decrease in net assets resulting from operations | $ | (3,630,463 | ) |
* | 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 | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (473,030 | ) | $ | (380,607 | ) | ||
Net realized gain on investments | 1,832,113 | 6,058,588 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (4,989,546 | ) | 4,261,174 | |||||
Net increase (decrease) in net assets resulting from operations | (3,630,463 | ) | 9,939,155 | |||||
Distributions to shareholders | (4,208,400 | ) | (2,087,780 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 95,984,550 | 135,382,187 | ||||||
Distributions reinvested | 4,208,400 | 2,087,780 | ||||||
Cost of shares redeemed | (105,551,660 | ) | (134,206,512 | ) | ||||
Net increase (decrease) from capital share transactions | (5,358,710 | ) | 3,263,455 | |||||
Net increase (decrease) in net assets | (13,197,573 | ) | 11,114,830 | |||||
Net assets: | ||||||||
Beginning of year | 55,022,505 | 43,907,675 | ||||||
End of year | $ | 41,824,932 | $ | 55,022,505 | ||||
Capital share activity: | ||||||||
Shares sold | 1,846,716 | 2,880,090 | ||||||
Shares issued from reinvestment of distributions | 79,434 | 45,200 | ||||||
Shares redeemed | (2,069,476 | ) | (2,868,566 | ) | ||||
Net increase (decrease) in shares | (143,326 | ) | 56,724 |
1 | For the year ended December 31, 2017, the total distributions to shareholders were all from net realized gains (See Note 11). |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 50.27 | $ | 42.31 | $ | 43.72 | $ | 47.51 | $ | 47.61 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.44 | ) | (.38 | ) | (.23 | ) | (.25 | ) | (.33 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | (1.68 | ) | 10.51 | 1.38 | .91 | 6.19 | ||||||||||||||
Total from investment operations | (2.12 | ) | 10.13 | 1.15 | .66 | 5.86 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (4.18 | ) | (2.17 | ) | (2.56 | ) | (4.45 | ) | (5.96 | ) | ||||||||||
Total distributions | (4.18 | ) | (2.17 | ) | (2.56 | ) | (4.45 | ) | (5.96 | ) | ||||||||||
Net asset value, end of period | $ | 43.97 | $ | 50.27 | $ | 42.31 | $ | 43.72 | $ | 47.51 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (5.63 | %) | 24.39 | % | 2.58 | % | 1.08 | % | 12.42 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 41,825 | $ | 55,023 | $ | 43,908 | $ | 77,644 | $ | 87,942 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.85 | %) | (0.80 | %) | (0.54 | %) | (0.54 | %) | (0.67 | %) | ||||||||||
Total expenses | 1.62 | % | 1.67 | % | 1.56 | % | 1.51 | % | 1.57 | % | ||||||||||
Portfolio turnover rate | 203 | % | 303 | % | 265 | % | 174 | % | 251 | % |
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, 2018 |
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, 2018, S&P 500® Pure Value Fund returned -13.32%, compared with a return of -12.02% 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 detractor from performance of the underlying index for the period, followed by the Consumer Discretionary sector. Utilities and Real Estate were the only sectors that contributed to performance.
The strongest contributors to performance of the underlying index for the year included Envision Healthcare Corp., XL Group Ltd., and Andeavor. The stocks detracting most from performance of the underlying index were TechnipFMC Plc, Ford Motor Co., and Fluor 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) | |
Ford Motor Co. | 2.0% |
Baker Hughes a GE Co. | 1.9% |
Goodyear Tire & Rubber Co. | 1.9% |
Valero Energy Corp. | 1.8% |
MetLife, Inc. | 1.8% |
Prudential Financial, Inc. | 1.8% |
Archer-Daniels-Midland Co. | 1.5% |
Unum Group | 1.5% |
General Motors Co. | 1.5% |
Jefferies Financial Group, Inc. | 1.5% |
Top Ten Total | 17.2% |
“Ten Largest Holdings” excludes any temporary cash investments. |
16 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE(Unaudited)(concluded) | December 31, 2018 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
S&P 500® Pure Value Fund | (13.32%) | 3.46% | 14.01% |
S&P 500 Pure Value Index | (12.02%) | 5.11% | 16.28% |
* | 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 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, 2018 |
S&P 500® PURE VALUE FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.5% | ||||||||
Financial - 33.3% | ||||||||
MetLife, Inc. | 14,718 | $ | 604,321 | |||||
Prudential Financial, Inc. | 7,220 | 588,791 | ||||||
Unum Group | 16,655 | 489,324 | ||||||
Jefferies Financial Group, Inc. | 27,750 | 481,740 | ||||||
Loews Corp. | 10,241 | 466,170 | ||||||
Lincoln National Corp. | 9,042 | 463,945 | ||||||
Brighthouse Financial, Inc.* | 14,470 | 441,046 | ||||||
Assurant, Inc. | 4,583 | 409,904 | ||||||
Invesco Ltd. | 22,539 | 377,303 | ||||||
Principal Financial Group, Inc. | 8,170 | 360,869 | ||||||
Everest Re Group Ltd. | 1,651 | 359,522 | ||||||
Citizens Financial Group, Inc. | 11,784 | 350,338 | ||||||
Allstate Corp. | 4,100 | 338,783 | ||||||
Hartford Financial Services Group, Inc. | 7,549 | 335,553 | ||||||
Capital One Financial Corp. | 4,329 | 327,229 | ||||||
Goldman Sachs Group, Inc. | 1,818 | 303,697 | ||||||
Morgan Stanley | 7,390 | 293,013 | ||||||
American International Group, Inc. | 7,111 | 280,244 | ||||||
Chubb Ltd. | 1,932 | 249,576 | ||||||
People’s United Financial, Inc. | 16,822 | 242,741 | ||||||
Aflac, Inc. | 5,044 | 229,805 | ||||||
Bank of America Corp. | 8,680 | 213,875 | ||||||
Citigroup, Inc. | 4,100 | 213,446 | ||||||
Travelers Companies, Inc. | 1,750 | 209,562 | ||||||
Fifth Third Bancorp | 8,784 | 206,687 | ||||||
State Street Corp. | 3,230 | 203,716 | ||||||
Synchrony Financial | 8,590 | 201,521 | ||||||
Regions Financial Corp. | 13,829 | 185,032 | ||||||
SunTrust Banks, Inc. | 3,554 | 179,264 | ||||||
Bank of New York Mellon Corp. | 3,710 | 174,630 | ||||||
Zions Bancorp North America | 3,847 | 156,727 | ||||||
KeyCorp | 10,214 | 150,963 | ||||||
Affiliated Managers Group, Inc. | 1,540 | 150,058 | ||||||
Wells Fargo & Co. | 3,150 | 145,152 | ||||||
PNC Financial Services Group, Inc. | 1,216 | 142,163 | ||||||
Raymond James Financial, Inc. | 1,860 | 138,403 | ||||||
Kimco Realty Corp. REIT | 8,990 | 131,703 | ||||||
BB&T Corp. | 2,831 | 122,639 | ||||||
Huntington Bancshares, Inc. | 9,724 | 115,910 | ||||||
Total Financial | 11,035,365 | |||||||
Consumer, Cyclical - 20.2% | ||||||||
Ford Motor Co. | 85,932 | 657,380 | ||||||
Goodyear Tire & Rubber Co. | 30,901 | 630,690 | ||||||
General Motors Co. | 14,437 | 482,917 | ||||||
Lennar Corp. — Class A | 12,090 | 473,323 | ||||||
Kohl’s Corp. | 5,028 | 333,557 | ||||||
Mohawk Industries, Inc.* | 2,770 | 323,979 | ||||||
PulteGroup, Inc. | 12,240 | 318,118 | ||||||
DR Horton, Inc. | 8,220 | 284,905 | ||||||
PVH Corp. | 2,919 | 271,321 | ||||||
Target Corp. | 3,967 | 262,179 | ||||||
Best Buy Company, Inc. | 4,416 | 233,871 | ||||||
LKQ Corp.* | 9,370 | 222,350 | ||||||
BorgWarner, Inc. | 6,130 | 212,956 | ||||||
Gap, Inc. | 7,999 | 206,054 | ||||||
United Continental Holdings, Inc.* | 2,327 | 194,840 | ||||||
American Airlines Group, Inc. | 6,000 | 192,660 | ||||||
PACCAR, Inc. | 3,050 | 174,277 | ||||||
Dollar Tree, Inc.* | 1,880 | 169,802 | ||||||
Whirlpool Corp. | 1,545 | 165,114 | ||||||
Walgreens Boots Alliance, Inc. | 2,232 | 152,513 | ||||||
Walmart, Inc. | 1,577 | 146,898 | ||||||
Alaska Air Group, Inc. | 2,303 | 140,138 | ||||||
MGM Resorts International | 5,580 | 135,371 | ||||||
Delta Air Lines, Inc. | 2,148 | 107,185 | ||||||
Norwegian Cruise Line Holdings Ltd.* | 2,470 | 104,703 | ||||||
Carnival Corp. | 2,090 | 103,037 | ||||||
Total Consumer, Cyclical | 6,700,138 | |||||||
Consumer, Non-cyclical - 15.6% | ||||||||
Archer-Daniels-Midland Co. | 12,197 | 499,732 | ||||||
Kroger Co. | 15,373 | 422,757 | ||||||
Quanta Services, Inc. | 13,706 | 412,551 | ||||||
Tyson Foods, Inc. — Class A | 7,143 | 381,436 | ||||||
Coty, Inc. — Class A | 57,362 | 376,295 | ||||||
Cardinal Health, Inc. | 7,649 | 341,145 | ||||||
McKesson Corp. | 3,088 | 341,131 | ||||||
Molson Coors Brewing Co. — Class B | 5,972 | 335,388 | ||||||
AmerisourceBergen Corp. — Class A | 4,400 | 327,360 | ||||||
Kraft Heinz Co. | 7,220 | 310,749 | ||||||
CVS Health Corp. | 4,597 | 301,196 | ||||||
Allergan plc | 2,120 | 283,359 | ||||||
Centene Corp.* | 1,830 | 210,999 | ||||||
JM Smucker Co. | 2,200 | 205,678 | ||||||
Anthem, Inc. | 550 | 144,446 | ||||||
Mylan N.V.* | 5,202 | 142,535 | ||||||
Laboratory Corporation of America Holdings* | 1,110 | 140,260 | ||||||
Total Consumer, Non-cyclical | 5,177,017 | |||||||
Energy - 10.7% | ||||||||
Baker Hughes a GE Co. | 29,569 | 635,733 | ||||||
Valero Energy Corp. | 8,124 | 609,056 | ||||||
Marathon Petroleum Corp. | 7,766 | 458,272 | ||||||
Phillips 66 | 5,256 | 452,804 | ||||||
TechnipFMC plc | 20,946 | 410,123 | ||||||
National Oilwell Varco, Inc. | 11,006 | 282,854 | ||||||
Noble Energy, Inc. | 12,460 | 233,750 | ||||||
Chevron Corp. | 1,629 | 177,219 | ||||||
Kinder Morgan, Inc. | 9,919 | 152,554 | ||||||
Helmerich & Payne, Inc. | 2,300 | 110,262 | ||||||
Total Energy | 3,522,627 | |||||||
Technology - 5.0% | ||||||||
Hewlett Packard Enterprise Co. | 31,900 | 421,399 | ||||||
Western Digital Corp. | 9,521 | 351,991 | ||||||
DXC Technology Co. | 5,730 | 304,664 | ||||||
Xerox Corp. | 12,274 | 242,534 | ||||||
Micron Technology, Inc.* | 6,960 | 220,841 |
18|THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS(continued) | December 31, 2018 |
S&P 500® PURE VALUE FUND |
| Shares | Value | ||||||
HP, Inc. | 5,340 | $ | 109,257 | |||||
Total Technology | 1,650,686 | |||||||
Industrial - 4.8% | ||||||||
Fluor Corp. | 14,135 | 455,147 | ||||||
WestRock Co. | 10,694 | 403,805 | ||||||
Jacobs Engineering Group, Inc. | 4,741 | 277,159 | ||||||
Johnson Controls International plc | 7,224 | 214,192 | ||||||
Arconic, Inc. | 6,560 | 110,602 | ||||||
Textron, Inc. | 2,393 | 110,054 | ||||||
Total Industrial | 1,570,959 | |||||||
Communications - 4.0% | ||||||||
CenturyLink, Inc. | 29,050 | 440,108 | ||||||
AT&T, Inc. | 10,310 | 294,247 | ||||||
Viacom, Inc. — Class B | 8,726 | 224,258 | ||||||
DISH Network Corp. — Class A* | 6,480 | 161,805 | ||||||
News Corp. — Class A | 13,685 | 155,325 | ||||||
News Corp. — Class B | 4,383 | 50,624 | ||||||
Total Communications | 1,326,367 | |||||||
Utilities - 3.8% | ||||||||
PG&E Corp.* | 16,713 | 396,934 | ||||||
Exelon Corp. | 5,008 | 225,861 | ||||||
Edison International | 2,570 | 145,899 | ||||||
CenterPoint Energy, Inc. | 4,650 | 131,269 | ||||||
Consolidated Edison, Inc. | 1,680 | 128,453 | ||||||
Duke Energy Corp. | 1,358 | 117,195 | ||||||
Evergy, Inc. | 1,970 | 111,837 | ||||||
Total Utilities | 1,257,448 | |||||||
Basic Materials - 2.1% | ||||||||
Nucor Corp. | 4,578 | 237,186 | ||||||
International Paper Co. | 4,330 | 174,759 | ||||||
DowDuPont, Inc. | 2,953 | 157,926 | ||||||
LyondellBasell Industries N.V. — Class A | 1,610 | 133,888 | ||||||
Total Basic Materials | 703,759 | |||||||
Total Common Stocks | ||||||||
(Cost $31,389,807) | 32,944,366 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,1 - 0.8% | ||||||||
JPMorgan Chase & Co. | $ | 151,231 | 151,231 | |||||
Barclays Capital | 62,893 | 62,893 | ||||||
Bank of America Merrill Lynch | 41,929 | 41,929 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $256,053) | 256,053 | |||||||
Total Investments - 100.3% | ||||||||
(Cost $31,645,860) | $ | 33,200,419 | ||||||
Other Assets & Liabilities, net - (0.3)% | (89,345 | ) | ||||||
Total Net Assets - 100.0% | $ | 33,111,074 |
* | 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 | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT|19 |
SCHEDULE OF INVESTMENTS(concluded) | December 31, 2018 |
S&P 500® PURE VALUE FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 32,944,366 | $ | — | $ | — | $ | 32,944,366 | ||||||||
Repurchase Agreements | — | 256,053 | — | 256,053 | ||||||||||||
Total Assets | $ | 32,944,366 | $ | 256,053 | $ | — | $ | 33,200,419 |
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, 2018, 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, 2018 |
Assets: | ||||
Investments, at value (cost $31,389,807) | $ | 32,944,366 | ||
Repurchase agreements, at value (cost $256,053) | 256,053 | |||
Receivables: | ||||
Fund shares sold | 542,613 | |||
Securities sold | 134,867 | |||
Dividends | 58,691 | |||
Interest | 21 | |||
Securities lending income | 14 | |||
Total assets | 33,936,625 | |||
Liabilities: | ||||
Payable for: | ||||
Securities purchased | 570,323 | |||
Fund shares redeemed | 124,580 | |||
Management fees | 21,726 | |||
Transfer agent and administrative fees | 7,242 | |||
Investor service fees | 7,242 | |||
Portfolio accounting fees | 2,897 | |||
Trustees’ fees* | 793 | |||
Miscellaneous | 90,748 | |||
Total liabilities | 825,551 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 33,111,074 | ||
Net assets consist of: | ||||
Paid in capital | $ | 35,131,324 | ||
Total distributable earnings (loss) | (2,020,250 | ) | ||
Net assets | $ | 33,111,074 | ||
Capital shares outstanding | 689,529 | |||
Net asset value per share | $ | 48.02 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends | $ | 962,114 | ||
Interest | 4,125 | |||
Income from securities lending, net | 543 | |||
Total investment income | 966,782 | |||
Expenses: | ||||
Management fees | 286,118 | |||
Investor service fees | 95,372 | |||
Transfer agent and administrative fees | 95,372 | |||
Professional fees | 49,102 | |||
Portfolio accounting fees | 38,149 | |||
Trustees’ fees* | 10,743 | |||
Custodian fees | 5,521 | |||
Tax expense | 185 | |||
Line of credit fees | 81 | |||
Miscellaneous | 39,750 | |||
Total expenses | 620,393 | |||
Net investment income | 346,389 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (641,649 | ) | ||
Net realized loss | (641,649 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (5,863,849 | ) | ||
Net change in unrealized appreciation (depreciation) | (5,863,849 | ) | ||
Net realized and unrealized loss | (6,505,498 | ) | ||
Net decrease in net assets resulting from operations | $ | (6,159,109 | ) |
* | 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 | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 346,389 | $ | 254,646 | ||||
Net realized gain (loss) on investments | (641,649 | ) | 4,034,225 | |||||
Net change in unrealized appreciation (depreciation) on investments | (5,863,849 | ) | 1,242,426 | |||||
Net increase (decrease) in net assets resulting from operations | (6,159,109 | ) | 5,531,297 | |||||
Distributions to shareholders | (3,121,849 | ) | (2,231,533 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 70,588,571 | 45,594,001 | ||||||
Distributions reinvested | 3,121,849 | 2,231,533 | ||||||
Cost of shares redeemed | (75,813,932 | ) | (51,478,447 | ) | ||||
Net decrease from capital share transactions | (2,103,512 | ) | (3,652,913 | ) | ||||
Net decrease in net assets | (11,384,470 | ) | (353,149 | ) | ||||
Net assets: | ||||||||
Beginning of year | 44,495,544 | 44,848,693 | ||||||
End of year | $ | 33,111,074 | $ | 44,495,544 | ||||
Capital share activity: | ||||||||
Shares sold | 1,202,731 | 778,343 | ||||||
Shares issued from reinvestment of distributions | 55,490 | 39,764 | ||||||
Shares redeemed | (1,288,384 | ) | (892,928 | ) | ||||
Net decrease in shares | (30,163 | ) | (74,821 | ) |
1 | For the year ended December 31, 2017, the distributions from net investment income and realized gains were as follows (see Note 11): |
Net investment income | $ | (313,901 | ) | |
Net realized gains | (1,917,632 | ) |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 61.83 | $ | 56.45 | $ | 50.08 | $ | 71.22 | $ | 69.60 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .53 | .35 | .83 | .63 | .42 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | (7.82 | ) | 8.28 | 9.87 | (5.87 | ) | 7.10 | |||||||||||||
Total from investment operations | (7.29 | ) | 8.63 | 10.70 | (5.24 | ) | 7.52 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.53 | ) | (.46 | ) | (1.23 | ) | (.82 | ) | (.34 | ) | ||||||||||
Net realized gains | (5.99 | ) | (2.79 | ) | (3.10 | ) | (15.08 | ) | (5.56 | ) | ||||||||||
Total distributions | (6.52 | ) | (3.25 | ) | (4.33 | ) | (15.90 | ) | (5.90 | ) | ||||||||||
Net asset value, end of period | $ | 48.02 | $ | 61.83 | $ | 56.45 | $ | 50.08 | $ | 71.22 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (13.32 | %) | 15.86 | % | 17.40 | % | (9.38 | %) | 10.94 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 33,111 | $ | 44,496 | $ | 44,849 | $ | 32,326 | $ | 63,165 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.91 | % | 0.61 | % | 0.88 | % | 1.02 | % | 0.58 | % | ||||||||||
Total expenses | 1.63 | % | 1.61 | % | 1.56 | % | 1.51 | % | 1.57 | % | ||||||||||
Portfolio turnover rate | 197 | % | 127 | % | 207 | % | 162 | % | 209 | % |
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 NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT|23 |
PERFORMANCE REPORT AND FUND PROFILE(Unaudited) | December 31, 2018 |
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, 2018, S&P MidCap 400® Pure Growth Fund returned -14.83%, compared with a return of -13.47% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
The Consumer Discretionary sector detracted the most from the return of the underlying index for the period, followed by the Financials sector. The Energy sector and the Consumer Staples sector were the only contributors to return.
ABIOMED, Inc., Fortinet, Inc., and Bioverativ, Inc. added the most to return of the underlying index for the year. Akorn, Inc., Coherent, Inc., and Thor Industries, 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) | |
Eldorado Resorts, Inc. | 2.6% |
CNX Resources Corp. | 2.2% |
Allegheny Technologies, Inc. | 2.0% |
Globus Medical, Inc. — Class A | 2.0% |
Mallinckrodt plc | 2.0% |
PRA Health Sciences, Inc. | 1.9% |
Churchill Downs, Inc. | 1.9% |
Primerica, Inc. | 1.9% |
Urban Outfitters, Inc. | 1.9% |
World Wrestling Entertainment, Inc. — Class A | 1.8% |
Top Ten Total | 20.2% |
“Ten Largest Holdings” excludes any temporary cash investments. |
24 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE(Unaudited)(concluded) | December 31, 2018 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
S&P MidCap 400® Pure Growth Fund | (14.83%) | 0.71% | 12.78% |
S&P MidCap 400 Pure Growth Index | (13.47%) | 2.35% | 14.61% |
* | 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, 2018 |
S&P MIDCAP 400® PURE GROWTH FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 98.9% | ||||||||
Consumer, Non-cyclical - 27.7% | ||||||||
Globus Medical, Inc. — Class A* | 6,640 | $ | 287,379 | |||||
Mallinckrodt plc* | 17,950 | 283,610 | ||||||
PRA Health Sciences, Inc.* | 2,960 | 272,202 | ||||||
Avanos Medical, Inc.* | 5,679 | 254,362 | ||||||
Molina Healthcare, Inc.* | 1,730 | 201,061 | ||||||
LiveRamp Holdings, Inc.* | 4,941 | 190,871 | ||||||
Helen of Troy Ltd.* | 1,450 | 190,211 | ||||||
ASGN, Inc.* | 3,160 | 172,220 | ||||||
LivaNova plc* | 1,832 | 167,573 | ||||||
Service Corporation International | 4,002 | 161,120 | ||||||
Encompass Health Corp. | 2,440 | 150,548 | ||||||
Insperity, Inc. | 1,600 | 149,376 | ||||||
Sabre Corp. | 6,720 | 145,421 | ||||||
Post Holdings, Inc.* | 1,611 | 143,588 | ||||||
STERIS plc | 1,280 | 136,768 | ||||||
Integra LifeSciences Holdings Corp.* | 2,640 | 119,064 | ||||||
Bio-Rad Laboratories, Inc. — Class A* | 500 | 116,110 | ||||||
Ligand Pharmaceuticals, Inc. — Class B* | 770 | 104,489 | ||||||
Adtalem Global Education, Inc.* | 2,150 | 101,738 | ||||||
Boston Beer Company, Inc. — Class A* | 410 | 98,744 | ||||||
Chemed Corp. | 330 | 93,482 | ||||||
WEX, Inc.* | 610 | 85,437 | ||||||
Lancaster Colony Corp. | 480 | 84,893 | ||||||
Masimo Corp.* | 770 | 82,675 | ||||||
Haemonetics Corp.* | 820 | 82,041 | ||||||
Weight Watchers International, Inc.* | 1,760 | 67,848 | ||||||
Total Consumer, Non-cyclical | 3,942,831 | |||||||
Consumer, Cyclical - 15.2% | ||||||||
Eldorado Resorts, Inc.* | 10,258 | 371,442 | ||||||
Churchill Downs, Inc. | 1,105 | 269,554 | ||||||
Urban Outfitters, Inc.* | 8,030 | 266,596 | ||||||
Deckers Outdoor Corp.* | 1,860 | 237,987 | ||||||
Scientific Games Corp. — Class A* | 10,421 | 186,327 | ||||||
Domino’s Pizza, Inc. | 699 | 173,345 | ||||||
Brinker International, Inc. | 3,510 | 154,370 | ||||||
Wendy’s Co. | 9,620 | 150,168 | ||||||
Live Nation Entertainment, Inc.* | 2,923 | 143,958 | ||||||
Wyndham Hotels & Resorts, Inc. | 2,447 | 111,021 | ||||||
Pool Corp. | 628 | 93,352 | ||||||
Total Consumer, Cyclical | 2,158,120 | |||||||
Financial - 13.3% | ||||||||
Primerica, Inc. | 2,750 | 268,703 | ||||||
Medical Properties Trust, Inc. REIT | 14,770 | 237,502 | ||||||
American Campus Communities, Inc. REIT | 4,720 | 195,361 | ||||||
UMB Financial Corp. | 2,871 | 175,045 | ||||||
CyrusOne, Inc. REIT | 3,270 | 172,917 | ||||||
Omega Healthcare Investors, Inc. REIT | 4,800 | 168,720 | ||||||
SLM Corp.* | 19,400 | 161,214 | ||||||
LendingTree, Inc.* | 670 | 147,112 | ||||||
National Retail Properties, Inc. REIT | 2,950 | 143,104 | ||||||
Brown & Brown, Inc. | 4,722 | 130,138 | ||||||
Life Storage, Inc. REIT | 1,040 | 96,710 | ||||||
Total Financial | 1,896,526 | |||||||
Technology - 13.1% | ||||||||
Dun & Bradstreet Corp. | 1,800 | 256,932 | ||||||
CommVault Systems, Inc.* | 3,660 | 216,270 | ||||||
MAXIMUS, Inc. | 3,102 | 201,909 | ||||||
j2 Global, Inc. | 2,419 | 167,830 | ||||||
Fair Isaac Corp.* | 815 | 152,405 | ||||||
PTC, Inc.* | 1,780 | 147,562 | ||||||
Zebra Technologies Corp. — Class A* | 826 | 131,524 | ||||||
Cypress Semiconductor Corp. | 10,010 | 127,327 | ||||||
Leidos Holdings, Inc. | 2,100 | 110,712 | ||||||
Integrated Device Technology, Inc.* | 1,909 | 92,453 | ||||||
Ultimate Software Group, Inc.* | 371 | 90,847 | ||||||
ACI Worldwide, Inc.* | 3,000 | 83,010 | ||||||
Silicon Laboratories, Inc.* | 1,042 | 82,120 | ||||||
Total Technology | 1,860,901 | |||||||
Energy - 10.1% | ||||||||
CNX Resources Corp.* | 27,300 | 311,766 | ||||||
Murphy Oil Corp. | 10,880 | 254,483 | ||||||
Equitrans Midstream Corp.* | 12,110 | 242,442 | ||||||
Ensco plc — Class A1 | 60,230 | 214,419 | ||||||
Callon Petroleum Co.* | 32,300 | 209,627 | ||||||
QEP Resources, Inc.* | 36,220 | 203,919 | ||||||
Total Energy | 1,436,656 | |||||||
Communications - 6.3% | ||||||||
World Wrestling Entertainment, Inc. — Class A | 3,473 | 259,503 | ||||||
Ciena Corp.* | 6,420 | 217,702 | ||||||
New York Times Co. — Class A | 7,776 | 173,327 | ||||||
Yelp, Inc. — Class A* | 4,030 | 141,010 | ||||||
FactSet Research Systems, Inc. | 535 | 107,069 | ||||||
Total Communications | 898,611 | |||||||
Industrial - 6.2% | ||||||||
ITT, Inc. | 3,786 | 182,750 | ||||||
Lennox International, Inc. | 570 | 124,750 | ||||||
Kennametal, Inc. | 3,440 | 114,483 | ||||||
Curtiss-Wright Corp. | 1,030 | 105,183 | ||||||
Woodward, Inc. | 1,340 | 99,549 | ||||||
Trimble, Inc.* | 2,600 | 85,566 | ||||||
IDEX Corp. | 650 | 82,069 | ||||||
MSA Safety, Inc. | 840 | 79,187 | ||||||
Total Industrial | 873,537 | |||||||
Basic Materials - 4.4% | ||||||||
Allegheny Technologies, Inc.* | 13,359 | 290,825 | ||||||
Chemours Co. | 6,982 | 197,032 | ||||||
RPM International, Inc. | 2,260 | 132,843 | ||||||
Total Basic Materials | 620,700 | |||||||
Utilities - 2.6% | ||||||||
Black Hills Corp. | 2,350 | 147,533 | ||||||
National Fuel Gas Co. | 2,319 | 118,686 |
26|THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS(concluded) | December 31, 2018 |
S&P MIDCAP 400® PURE GROWTH FUND |
| Shares | Value | ||||||
UGI Corp. | 1,940 | $ | 103,499 | |||||
Total Utilities | 369,718 | |||||||
Total Common Stocks | ||||||||
(Cost $13,384,915) | 14,057,600 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.8% | ||||||||
JPMorgan Chase & Co. | $ | 66,260 | 66,260 | |||||
Barclays Capital | 27,555 | 27,555 | ||||||
Bank of America Merrill Lynch | 18,370 | 18,370 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $112,185) | 112,185 |
| Shares |
| ||||||
SECURITIES LENDING COLLATERAL†,3 - 0.1% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 2.32%4 | 15,915 | 15,915 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $15,915) | 15,915 | |||||||
Total Investments - 99.8% | ||||||||
(Cost $13,513,015) | $ | 14,185,700 | ||||||
Other Assets & Liabilities, net - 0.2% | 24,618 | |||||||
Total Net Assets - 100.0% | $ | 14,210,318 |
* | 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 on loan at December 31, 2018 — 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, 2018. |
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, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 14,057,600 | $ | — | $ | — | $ | 14,057,600 | ||||||||
Repurchase Agreements | — | 112,185 | — | 112,185 | ||||||||||||
Securities Lending Collateral | 15,915 | — | — | 15,915 | ||||||||||||
Total Assets | $ | 14,073,515 | $ | 112,185 | $ | — | $ | 14,185,700 |
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, 2018, 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, 2018 |
Assets: | ||||
Investments, at value - including $16,561 of securities loaned (cost $13,400,830) | $ | 14,073,515 | ||
Repurchase agreements, at value (cost $112,185) | 112,185 | |||
Cash | 2,693 | |||
Receivables: | ||||
Fund shares sold | 88,671 | |||
Dividends | 8,946 | |||
Securities lending income | 36 | |||
Interest | 9 | |||
Total assets | 14,286,055 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 18,608 | |||
Management fees | 8,888 | |||
Transfer agent and administrative fees | 2,962 | |||
Investor service fees | 2,962 | |||
Portfolio accounting fees | 1,185 | |||
Fund shares redeemed | 1,148 | |||
Trustees’ fees* | 349 | |||
Miscellaneous | 39,635 | |||
Total liabilities | 75,737 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 14,210,318 | ||
Net assets consist of: | ||||
Paid in capital | $ | 14,786,555 | ||
Total distributable earnings (loss) | (576,237 | ) | ||
Net assets | $ | 14,210,318 | ||
Capital shares outstanding | 453,394 | |||
Net asset value per share | $ | 31.34 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends | $ | 184,946 | ||
Interest | 2,414 | |||
Income from securities lending, net | 311 | |||
Total investment income | 187,671 | |||
Expenses: | ||||
Management fees | 157,704 | |||
Investor service fees | 52,568 | |||
Transfer agent and administrative fees | 52,568 | |||
Professional fees | 27,952 | |||
Portfolio accounting fees | 21,027 | |||
Trustees’ fees* | 6,110 | |||
Custodian fees | 3,037 | |||
Line of credit fees | 31 | |||
Miscellaneous | 19,110 | |||
Total expenses | 340,107 | |||
Net investment loss | (152,436 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (611,299 | ) | ||
Net realized loss | (611,299 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (1,883,907 | ) | ||
Net change in unrealized appreciation (depreciation) | (1,883,907 | ) | ||
Net realized and unrealized loss | (2,495,206 | ) | ||
Net decrease in net assets resulting from operations | $ | (2,647,642 | ) |
* | 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 | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (152,436 | ) | $ | (144,598 | ) | ||
Net realized gain (loss) on investments | (611,299 | ) | 2,534,052 | |||||
Net change in unrealized appreciation (depreciation) on investments | (1,883,907 | ) | 1,073,528 | |||||
Net increase (decrease) in net assets resulting from operations | (2,647,642 | ) | 3,462,982 | |||||
Distributions to shareholders | (1,549,049 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 25,614,538 | 37,220,117 | ||||||
Distributions reinvested | 1,549,049 | — | ||||||
Cost of shares redeemed | (29,150,899 | ) | (39,349,617 | ) | ||||
Net decrease from capital share transactions | (1,987,312 | ) | (2,129,500 | ) | ||||
Net increase (decrease) in net assets | (6,184,003 | ) | 1,333,482 | |||||
Net assets: | ||||||||
Beginning of year | 20,394,321 | 19,060,839 | ||||||
End of year | $ | 14,210,318 | $ | 20,394,321 | ||||
Capital share activity: | ||||||||
Shares sold | 642,331 | 1,043,953 | ||||||
Shares issued from reinvestment of distributions | 38,862 | — | ||||||
Shares redeemed | (746,632 | ) | (1,100,852 | ) | ||||
Net decrease in shares | (65,439 | ) | (56,899 | ) |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 39.31 | $ | 33.11 | $ | 32.23 | $ | 34.05 | $ | 43.02 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.28 | ) | (.25 | ) | (.22 | ) | (.22 | ) | (.28 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | (4.97 | ) | 6.45 | 1.10 | .88 | (.31 | ) | |||||||||||||
Total from investment operations | (5.25 | ) | 6.20 | .88 | .66 | (.59 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (2.72 | ) | — | — | (2.48 | ) | (8.38 | ) | ||||||||||||
Total distributions | (2.72 | ) | — | — | (2.48 | ) | (8.38 | ) | ||||||||||||
Net asset value, end of period | $ | 31.34 | $ | 39.31 | $ | 33.11 | $ | 32.23 | $ | 34.05 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (14.83 | %) | 18.73 | % | 2.70 | % | 1.32 | % | (1.55 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 14,210 | $ | 20,394 | $ | 19,061 | $ | 34,144 | $ | 29,927 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.72 | %) | (0.70 | %) | (0.71 | %) | (0.64 | %) | (0.67 | %) | ||||||||||
Total expenses | 1.62 | % | 1.61 | % | 1.56 | % | 1.50 | % | 1.57 | % | ||||||||||
Portfolio turnover rate | 183 | % | 233 | % | 296 | % | 269 | % | 380 | % |
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, 2018 |
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, 2018, S&P MidCap 400® Pure Value Fund returned -18.98%, compared with a return of -17.67% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
The Industrials sector and the Energy sector detracted the most from the return of the underlying index for the period. The Communication Services sector was the only contributor to return. The Real Estate sector detracted the least from return.
Genworth Financial, Inc. Class A, LifePoint, Inc., and Esterline Technologies Corp. added the most to return of the underlying index for the year. McDermott International, Inc., Bed Bath & Beyond, Inc., and Diamond Offshore Drilling, 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) | |
Bed Bath & Beyond, Inc. | 2.6% |
McDermott International, Inc. | 2.3% |
AutoNation, Inc. | 2.3% |
Ryder System, Inc. | 2.2% |
KB Home | 2.2% |
Dillard’s, Inc. — Class A | 2.2% |
United States Steel Corp. | 2.2% |
Tech Data Corp. | 2.0% |
Arrow Electronics, Inc. | 2.0% |
SYNNEX Corp. | 2.0% |
Top Ten Total | 22.0% |
“Ten Largest Holdings” excludes any temporary cash investments. |
THE RYDEX FUNDS ANNUAL REPORT | 31 |
PERFORMANCE REPORT AND FUND PROFILE(Unaudited)(concluded) | December 31, 2018 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
S&P MidCap 400® Pure Value Fund | (18.98%) | 2.13% | 11.83% |
S&P MidCap 400 Pure Value Index | (17.67%) | 3.90% | 14.11% |
* | 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, 2018 |
S&P MIDCAP 400® PURE VALUE FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.5% | ||||||||
Industrial - 24.8% | ||||||||
Ryder System, Inc. | 4,161 | $ | 200,352 | |||||
Tech Data Corp.* | 2,192 | 179,328 | ||||||
Arrow Electronics, Inc.* | 2,584 | 178,167 | ||||||
SYNNEX Corp. | 2,187 | 176,797 | ||||||
AECOM* | 5,987 | 158,656 | ||||||
Avnet, Inc. | 4,260 | 153,786 | ||||||
Trinity Industries, Inc. | 6,450 | 132,806 | ||||||
Jabil, Inc. | 5,250 | 130,147 | ||||||
Resideo Technologies, Inc.* | 6,150 | 126,382 | ||||||
AGCO Corp. | 1,772 | 98,647 | ||||||
Knight-Swift Transportation Holdings, Inc. | 3,230 | 80,976 | ||||||
MasTec, Inc.* | 1,990 | 80,714 | ||||||
Owens-Illinois, Inc.* | 4,420 | 76,201 | ||||||
EMCOR Group, Inc. | 1,021 | 60,943 | ||||||
Oshkosh Corp. | 990 | 60,697 | ||||||
Terex Corp. | 2,170 | 59,827 | ||||||
Granite Construction, Inc. | 1,410 | 56,795 | ||||||
Silgan Holdings, Inc. | 1,930 | 45,586 | ||||||
Timken Co. | 1,200 | 44,784 | ||||||
Worthington Industries, Inc. | 1,270 | 44,247 | ||||||
Belden, Inc. | 1,050 | 43,858 | ||||||
Werner Enterprises, Inc. | 1,410 | 41,652 | ||||||
Total Industrial | 2,231,348 | |||||||
Consumer, Cyclical - 24.2% | ||||||||
Bed Bath & Beyond, Inc. | 20,250 | 229,230 | ||||||
AutoNation, Inc.* | 5,716 | 204,061 | ||||||
KB Home | 10,360 | 197,876 | ||||||
Dillard’s, Inc. — Class A1 | 3,230 | 194,801 | ||||||
Dana, Inc. | 12,140 | 165,468 | ||||||
TRI Pointe Group, Inc.* | 14,880 | 162,639 | ||||||
World Fuel Services Corp. | 7,499 | 160,554 | ||||||
Toll Brothers, Inc. | 4,180 | 137,647 | ||||||
Big Lots, Inc. | 4,143 | 119,815 | ||||||
Dick’s Sporting Goods, Inc. | 3,558 | 111,010 | ||||||
Thor Industries, Inc. | 2,020 | 105,040 | ||||||
Delphi Technologies plc | 6,520 | 93,367 | ||||||
JetBlue Airways Corp.* | 5,157 | 82,821 | ||||||
Marriott Vacations Worldwide Corp. | 880 | 62,049 | ||||||
Adient plc | 3,640 | 54,818 | ||||||
Signet Jewelers Ltd. | 1,470 | 46,702 | ||||||
Casey’s General Stores, Inc. | 330 | 42,286 | ||||||
Total Consumer, Cyclical | 2,170,184 | |||||||
Financial - 19.5% | ||||||||
Realogy Holdings Corp. | 11,810 | 173,371 | ||||||
Legg Mason, Inc. | 5,809 | 148,188 | ||||||
Reinsurance Group of America, Inc. — Class A | 875 | 122,701 | ||||||
Janus Henderson Group plc | 4,850 | 100,492 | ||||||
Navient Corp. | 10,508 | 92,575 | ||||||
Alleghany Corp. | 140 | 87,265 | ||||||
New York Community Bancorp, Inc. | 8,893 | 83,683 | ||||||
CNO Financial Group, Inc. | 5,450 | 81,096 | ||||||
Bank OZK | 3,540 | 80,818 | ||||||
Old Republic International Corp. | 3,907 | 80,367 | ||||||
Stifel Financial Corp. | 1,760 | 72,899 | ||||||
First American Financial Corp. | 1,630 | 72,763 | ||||||
Senior Housing Properties Trust REIT | 5,840 | 68,445 | ||||||
Alexander & Baldwin, Inc. REIT* | 3,383 | 62,180 | ||||||
Sabra Health Care REIT, Inc. | 3,544 | 58,405 | ||||||
PacWest Bancorp | 1,740 | 57,907 | ||||||
Associated Banc-Corp. | 2,577 | 50,999 | ||||||
Umpqua Holdings Corp. | 3,188 | 50,689 | ||||||
Jones Lang LaSalle, Inc. | 390 | 49,374 | ||||||
Hancock Whitney Corp. | 1,310 | 45,392 | ||||||
Washington Federal, Inc. | 1,510 | 40,332 | ||||||
First Horizon National Corp. | 3,060 | 40,270 | ||||||
Pinnacle Financial Partners, Inc. | 780 | 35,958 | ||||||
Total Financial | 1,756,169 | |||||||
Basic Materials - 9.6% | ||||||||
United States Steel Corp. | 10,660 | 194,438 | ||||||
Reliance Steel & Aluminum Co. | 1,990 | 141,628 | ||||||
Olin Corp. | 6,820 | 137,150 | ||||||
Commercial Metals Co. | 6,336 | 101,503 | ||||||
Domtar Corp. | 2,587 | 90,881 | ||||||
Carpenter Technology Corp. | 2,060 | 73,357 | ||||||
Minerals Technologies, Inc. | 1,190 | 61,095 | ||||||
Steel Dynamics, Inc. | 1,970 | 59,179 | ||||||
Total Basic Materials | 859,231 | |||||||
Energy - 9.4% | ||||||||
McDermott International, Inc.* | 31,533 | 206,235 | ||||||
Murphy USA, Inc.* | 1,551 | 118,869 | ||||||
Patterson-UTI Energy, Inc. | 8,970 | 92,840 | ||||||
SM Energy Co. | 5,680 | 87,926 | ||||||
Range Resources Corp. | 9,100 | 87,087 | ||||||
Equities Corp. | 3,960 | 74,804 | ||||||
Oceaneering International, Inc.* | 5,307 | 64,215 | ||||||
Oasis Petroleum, Inc.* | 11,610 | 64,203 | ||||||
Diamond Offshore Drilling, Inc.* | 5,270 | 49,749 | ||||||
Total Energy | 845,928 | |||||||
Consumer, Non-cyclical - 8.4% | ||||||||
ManpowerGroup, Inc. | 2,197 | 142,366 | ||||||
Patterson Companies, Inc. | 5,421 | 106,577 | ||||||
Avis Budget Group, Inc.* | 4,422 | 99,406 | ||||||
Graham Holdings Co. — Class B | 126 | 80,713 | ||||||
Acadia Healthcare Company, Inc.* | 3,000 | 77,130 | ||||||
MEDNAX, Inc.* | 2,250 | 74,250 | ||||||
Sanderson Farms, Inc. | 630 | 62,553 | ||||||
TreeHouse Foods, Inc.* | 1,120 | 56,795 | ||||||
Hain Celestial Group, Inc.* | 3,300 | 52,338 | ||||||
Total Consumer, Non-cyclical | 752,128 | |||||||
Technology - 2.1% | ||||||||
Pitney Bowes, Inc. | 11,220 | 66,310 | ||||||
CACI International, Inc. — Class A* | 300 | 43,209 | ||||||
NetScout Systems, Inc.* | 1,735 | 40,998 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT|33 |
SCHEDULE OF INVESTMENTS(concluded) | December 31, 2018 |
S&P MIDCAP 400® PURE VALUE FUND |
| Shares | Value | ||||||
Perspecta, Inc. | 2,170 | $ | 37,368 | |||||
Total Technology | 187,885 | |||||||
Communications - 1.5% | ||||||||
Telephone & Data Systems, Inc. | 4,225 | 137,481 | ||||||
Total Common Stocks | ||||||||
(Cost $8,746,895) | 8,940,354 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.7% | ||||||||
JPMorgan Chase & Co. | $ | 39,139 | 39,139 | |||||
Barclays Capital | 16,277 | 16,277 | ||||||
Bank of America Merrill Lynch | 10,851 | 10,851 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $66,267) | 66,267 |
| Shares |
| ||||||
SECURITIES LENDING COLLATERAL†,3 - 1.4% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 2.32%4 | 125,841 | 125,841 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $125,841) | 125,841 | |||||||
Total Investments - 101.6% | ||||||||
(Cost $8,939,003) | $ | 9,132,462 | ||||||
Other Assets & Liabilities, net - (1.6)% | (147,277 | ) | ||||||
Total Net Assets - 100.0% | $ | 8,985,185 |
* | 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 on loan at December 31, 2018 — 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, 2018. |
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, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 8,940,354 | $ | — | $ | — | $ | 8,940,354 | ||||||||
Repurchase Agreements | — | 66,267 | — | 66,267 | ||||||||||||
Securities Lending Collateral | 125,841 | — | — | 125,841 | ||||||||||||
Total Assets | $ | 9,066,195 | $ | 66,267 | $ | — | $ | 9,132,462 |
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, 2018, 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, 2018 |
Assets: | ||||
Investments, at value - including $146,071 of securities loaned (cost $8,872,736) | $ | 9,066,195 | ||
Repurchase agreements, at value (cost $66,267) | 66,267 | |||
Cash | 21,296 | |||
Receivables: | ||||
Securities sold | 47,272 | |||
Fund shares sold | 11,159 | |||
Dividends | 9,096 | |||
Securities lending income | 117 | |||
Interest | 5 | |||
Total assets | 9,221,407 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 147,137 | |||
Fund shares redeemed | 48,327 | |||
Management fees | 5,643 | |||
Transfer agent and administrative fees | 1,881 | |||
Investor service fees | 1,881 | |||
Portfolio accounting fees | 752 | |||
Trustees’ fees* | 276 | |||
Miscellaneous | 30,325 | |||
Total liabilities | 236,222 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 8,985,185 | ||
Net assets consist of: | ||||
Paid in capital | $ | 9,950,280 | ||
Total distributable earnings (loss) | (965,095 | ) | ||
Net assets | $ | 8,985,185 | ||
Capital shares outstanding | 261,017 | |||
Net asset value per share | $ | 34.42 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $20) | $ | 195,251 | ||
Interest | 1,565 | |||
Income from securities lending, net | 8,809 | |||
Total investment income | 205,625 | |||
Expenses: | ||||
Management fees | 96,954 | |||
Investor service fees | 32,318 | |||
Transfer agent and administrative fees | 32,318 | |||
Professional fees | 14,865 | |||
Portfolio accounting fees | 12,927 | |||
Trustees’ fees* | 3,899 | |||
Custodian fees | 1,892 | |||
Line of credit fees | 9 | |||
Miscellaneous | 14,170 | |||
Total expenses | 209,352 | |||
Net investment loss | (3,727 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (300,173 | ) | ||
Net realized loss | (300,173 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (2,067,546 | ) | ||
Net change in unrealized appreciation (depreciation) | (2,067,546 | ) | ||
Net realized and unrealized loss | (2,367,719 | ) | ||
Net decrease in net assets resulting from operations | $ | (2,371,446 | ) |
* | 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 | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (3,727 | ) | $ | (17,660 | ) | ||
Net realized gain (loss) on investments | (300,173 | ) | 3,203,311 | |||||
Net change in unrealized appreciation (depreciation) on investments | (2,067,546 | ) | (1,434,502 | ) | ||||
Net increase (decrease) in net assets resulting from operations | (2,371,446 | ) | 1,751,149 | |||||
Distributions to shareholders | (1,912,944 | ) | (2,937,929 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 15,203,247 | 20,987,144 | ||||||
Distributions reinvested | 1,912,944 | 2,937,929 | ||||||
Cost of shares redeemed | (21,262,053 | ) | (35,529,984 | ) | ||||
Net decrease from capital share transactions | (4,145,862 | ) | (11,604,911 | ) | ||||
Net decrease in net assets | (8,430,252 | ) | (12,791,691 | ) | ||||
Net assets: | ||||||||
Beginning of year | 17,415,437 | 30,207,128 | ||||||
End of year | $ | 8,985,185 | $ | 17,415,437 | ||||
Capital share activity: | ||||||||
Shares sold | 323,982 | 407,681 | ||||||
Shares issued from reinvestment of distributions | 44,363 | 64,912 | ||||||
Shares redeemed | (457,135 | ) | (678,573 | ) | ||||
Net decrease in shares | (88,790 | ) | (205,980 | ) |
1 | For the year ended December 31, 2017, the total distributions to shareholders were all from net realized gains (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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 49.79 | $ | 54.35 | $ | 42.30 | $ | 53.78 | $ | 58.55 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.01 | ) | (.05 | ) | (.06 | ) | .26 | .05 | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | (7.95 | ) | 6.13 | 12.41 | (5.93 | ) | 3.68 | |||||||||||||
Total from investment operations | (7.96 | ) | 6.08 | 12.35 | (5.67 | ) | 3.73 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | — | — | (.30 | ) | (.08 | ) | (.05 | ) | ||||||||||||
Net realized gains | (7.41 | ) | (10.64 | ) | — | (5.73 | ) | (8.45 | ) | |||||||||||
Total distributions | (7.41 | ) | (10.64 | ) | (.30 | ) | (5.81 | ) | (8.50 | ) | ||||||||||
Net asset value, end of period | $ | 34.42 | $ | 49.79 | $ | 54.35 | $ | 42.30 | $ | 53.78 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (18.98 | %) | 13.15 | % | 28.89 | % | (11.86 | %) | 6.72 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 8,985 | $ | 17,415 | $ | 30,207 | $ | 12,007 | $ | 17,460 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.03 | %) | (0.10 | %) | (0.07 | %) | 0.52 | % | 0.08 | % | ||||||||||
Total expenses | 1.62 | % | 1.61 | % | 1.56 | % | 1.50 | % | 1.57 | % | ||||||||||
Portfolio turnover rate | 145 | % | 144 | % | 282 | % | 280 | % | 353 | % |
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 years presented through December 31, 2016 have been restated to reflect a 2:1 share split effective December 1, 2016. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT|37 |
PERFORMANCE REPORT AND FUND PROFILE(Unaudited) | December 31, 2018 |
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, 2018, S&P SmallCap 600® Pure Growth Fund return was -9.03%, compared with a return of -7.42% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
The Information Technology sector and the Consumer Discretionary sector detracted the most from the return of the underlying index for the period. The Communication Services sector and the Energy sector were the only contributors to return.
The best-performing stocks of the underlying index were World Wrestling Entertainment, Inc. Class A, BioTelemetry, Inc., and Amedisys, Inc. The weakest performers of the underlying index were MiMedx Group, Inc., Applied Optoelectronics, Inc., and Cutera, 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) | |
Renewable Energy Group, Inc. | 1.9% |
Ascena Retail Group, Inc. | 1.5% |
KEMET Corp. | 1.4% |
Medpace Holdings, Inc. | 1.3% |
Investment Technology Group, Inc. | 1.2% |
Penn Virginia Corp. | 1.2% |
Medifast, Inc. | 1.2% |
Tabula Rasa HealthCare, Inc. | 1.2% |
Shake Shack, Inc. — Class A | 1.2% |
Amedisys, Inc. | 1.2% |
Top Ten Total | 13.3% |
“Ten Largest Holdings” excludes any temporary cash investments. |
38 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE(Unaudited)(concluded) | December 31, 2018 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
S&P SmallCap 600® Pure Growth Fund | (9.03%) | 4.54% | 13.00% |
S&P SmallCap 600 Pure Growth Index | (7.42%) | 6.36% | 15.23% |
* | 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 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, 2018 |
S&P SMALLCAP 600® PURE GROWTH FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.1% | ||||||||
Consumer, Non-cyclical - 25.0% | ||||||||
Medpace Holdings, Inc.* | 4,020 | $ | 212,779 | |||||
Medifast, Inc. | 1,621 | 202,657 | ||||||
Amedisys, Inc.* | 1,686 | 197,448 | ||||||
Tactile Systems Technology, Inc.* | 4,070 | 185,388 | ||||||
CONMED Corp. | 2,780 | 178,476 | ||||||
Avon Products, Inc.* | 116,500 | 177,080 | ||||||
Innoviva, Inc.* | 9,996 | 174,430 | ||||||
Supernus Pharmaceuticals, Inc.* | 5,171 | 171,780 | ||||||
Luminex Corp. | 7,190 | 166,161 | ||||||
WD-40 Co. | 810 | 148,441 | ||||||
AngioDynamics, Inc.* | 7,290 | 146,748 | ||||||
Inter Parfums, Inc. | 2,132 | 139,795 | ||||||
Neogen Corp.* | 2,009 | 114,513 | ||||||
Career Education Corp.* | 9,660 | 110,317 | ||||||
Green Dot Corp. — Class A* | 1,350 | 107,352 | ||||||
Integer Holdings Corp.* | 1,382 | 105,391 | ||||||
Heska Corp.* | 1,170 | 100,737 | ||||||
Repligen Corp.* | 1,881 | 99,204 | ||||||
Eagle Pharmaceuticals, Inc.* | 2,406 | 96,938 | ||||||
Cardtronics plc — Class A* | 3,680 | 95,680 | ||||||
Corcept Therapeutics, Inc.* | 6,378 | 85,210 | ||||||
HMS Holdings Corp.* | 2,920 | 82,140 | ||||||
American Public Education, Inc.* | 2,770 | 78,834 | ||||||
Monro, Inc. | 1,140 | 78,375 | ||||||
Endo International plc* | 10,610 | 77,453 | ||||||
Ensign Group, Inc. | 1,910 | 74,089 | ||||||
Vanda Pharmaceuticals, Inc.* | 2,500 | 65,325 | ||||||
CorVel Corp.* | 1,051 | 64,868 | ||||||
AMN Healthcare Services, Inc.* | 1,141 | 64,649 | ||||||
Merit Medical Systems, Inc.* | 1,149 | 64,126 | ||||||
Amphastar Pharmaceuticals, Inc.* | 3,160 | 62,884 | ||||||
Surmodics, Inc.* | 1,258 | 59,453 | ||||||
REGENXBIO, Inc.* | 1,380 | 57,891 | ||||||
Addus HomeCare Corp.* | 840 | 57,019 | ||||||
Strategic Education, Inc. | 480 | 54,442 | ||||||
CryoLife, Inc.* | 1,880 | 53,354 | ||||||
Tivity Health, Inc.* | 2,130 | 52,845 | ||||||
Forrester Research, Inc. | 1,170 | 52,299 | ||||||
Meridian Bioscience, Inc. | 2,980 | 51,733 | ||||||
BioTelemetry, Inc.* | 822 | 49,090 | ||||||
Spectrum Pharmaceuticals, Inc.* | 4,240 | 37,100 | ||||||
Total Consumer, Non-cyclical | 4,254,494 | |||||||
Consumer, Cyclical - 17.5% | ||||||||
Ascena Retail Group, Inc.* | 102,200 | 256,522 | ||||||
Shake Shack, Inc. — Class A* | 4,443 | 201,801 | ||||||
Guess?, Inc. | 8,770 | 182,153 | ||||||
iRobot Corp.* | 2,101 | 175,938 | ||||||
Wingstop, Inc. | 2,614 | 167,793 | ||||||
BJ’s Restaurants, Inc. | 3,310 | 167,387 | ||||||
Shoe Carnival, Inc. | 4,930 | 165,204 | ||||||
Tailored Brands, Inc. | 12,030 | 164,089 | ||||||
Regis Corp.* | 8,060 | 136,617 | ||||||
Marcus Corp. | 3,310 | 130,745 | ||||||
Sleep Number Corp.* | 3,793 | 120,352 | ||||||
Children’s Place, Inc. | 1,190 | 107,207 | ||||||
Dorman Products, Inc.* | 1,180 | 106,224 | ||||||
Ruth’s Hospitality Group, Inc. | 4,282 | 97,330 | ||||||
El Pollo Loco Holdings, Inc.* | 6,230 | 94,509 | ||||||
Cavco Industries, Inc.* | 697 | 90,875 | ||||||
Crocs, Inc.* | 3,390 | 88,072 | ||||||
Mobile Mini, Inc. | 2,640 | 83,820 | ||||||
FirstCash, Inc. | 1,138 | 82,334 | ||||||
Allegiant Travel Co. — Class A | 820 | 82,180 | ||||||
Belmond Ltd. — Class A* | 3,130 | 78,344 | ||||||
UniFirst Corp. | 510 | 72,966 | ||||||
Dave & Buster’s Entertainment, Inc. | 1,625 | 72,410 | ||||||
Dine Brands Global, Inc. | 810 | 54,545 | ||||||
Total Consumer, Cyclical | 2,979,417 | |||||||
Financial - 16.7% | ||||||||
Investment Technology Group, Inc. | 6,790 | 205,330 | ||||||
Agree Realty Corp. REIT | 2,690 | 159,033 | ||||||
Navigators Group, Inc. | 2,230 | 154,963 | ||||||
Four Corners Property Trust, Inc. REIT | 5,636 | 147,663 | ||||||
United Fire Group, Inc. | 2,620 | 145,279 | ||||||
Blucora, Inc.* | 5,260 | 140,126 | ||||||
HCI Group, Inc. | 2,550 | 129,566 | ||||||
Redwood Trust, Inc. REIT | 8,380 | 126,287 | ||||||
RLI Corp. | 1,770 | 122,112 | ||||||
Triumph Bancorp, Inc.* | 3,790 | 112,563 | ||||||
Universal Insurance Holdings, Inc. | 2,910 | 110,347 | ||||||
Old National Bancorp | 7,070 | 108,878 | ||||||
Independent Bank Corp. | 1,430 | 100,543 | ||||||
Armada Hoffler Properties, Inc. REIT | 7,090 | 99,685 | ||||||
Washington Prime Group, Inc. REIT | 18,060 | 87,772 | ||||||
Community Bank System, Inc. | 1,450 | 84,535 | ||||||
Marcus & Millichap, Inc.* | 2,300 | 78,959 | ||||||
LegacyTexas Financial Group, Inc. | 2,454 | 78,749 | ||||||
First Financial Bankshares, Inc. | 1,350 | 77,881 | ||||||
Easterly Government Properties, Inc. REIT | 4,912 | 77,020 | ||||||
eHealth, Inc.* | 1,970 | 75,687 | ||||||
Urstadt Biddle Properties, Inc. — Class A REIT | 3,860 | 74,189 | ||||||
City Holding Co. | 1,030 | 69,618 | ||||||
Seacoast Banking Corporation of Florida* | 2,640 | 68,693 | ||||||
Glacier Bancorp, Inc. | 1,430 | 56,657 | ||||||
National Storage Affiliates Trust REIT | 1,889 | 49,983 | ||||||
Westamerica Bancorporation | 880 | 48,998 | ||||||
Community Healthcare Trust, Inc. REIT | 1,620 | 46,705 | ||||||
Total Financial | 2,837,821 | |||||||
Industrial - 11.6% | ||||||||
KEMET Corp. | 13,484 | 236,510 | ||||||
Vicor Corp.* | 5,034 | 190,235 | ||||||
SPX Corp.* | 4,800 | 134,448 | ||||||
Matson, Inc. | 4,050 | 129,681 | ||||||
DXP Enterprises, Inc.* | 4,570 | 127,229 | ||||||
Axon Enterprise, Inc.* | 2,888 | 126,350 | ||||||
Aerovironment, Inc.* | 1,836 | 124,756 | ||||||
Electro Scientific Industries, Inc.* | 3,843 | 115,136 |
40|THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS(continued) | December 31, 2018 |
S&P SMALLCAP 600® PURE GROWTH FUND |
| Shares | Value | ||||||
Franklin Electric Company, Inc. | 2,620 | $ | 112,346 | |||||
Proto Labs, Inc.* | 943 | 106,361 | ||||||
Harsco Corp.* | 5,199 | 103,252 | ||||||
Exponent, Inc. | 1,550 | 78,601 | ||||||
ESCO Technologies, Inc. | 1,190 | 78,480 | ||||||
National Presto Industries, Inc.1 | 650 | 75,998 | ||||||
Albany International Corp. — Class A | 1,038 | 64,802 | ||||||
Raven Industries, Inc. | 1,715 | 62,066 | ||||||
US Ecology, Inc. | 950 | 59,831 | ||||||
Aerojet Rocketdyne Holdings, Inc.* | 1,462 | 51,506 | ||||||
Total Industrial | 1,977,588 | |||||||
Technology - 10.5% | ||||||||
Tabula Rasa HealthCare, Inc.* | 3,176 | 202,502 | ||||||
Nanometrics, Inc.* | 7,200 | 196,776 | ||||||
Unisys Corp.* | 16,230 | 188,755 | ||||||
Bottomline Technologies DE, Inc.* | 3,450 | 165,600 | ||||||
SPS Commerce, Inc.* | 1,950 | 160,641 | ||||||
Semtech Corp.* | 2,900 | 133,023 | ||||||
Cabot Microelectronics Corp. | 1,126 | 107,364 | ||||||
Engility Holdings, Inc.* | 3,630 | 103,310 | ||||||
Virtusa Corp.* | 2,181 | 92,889 | ||||||
3D Systems Corp.* | 8,440 | 85,835 | ||||||
CTS Corp. | 3,290 | 85,178 | ||||||
Omnicell, Inc.* | 1,355 | 82,980 | ||||||
Brooks Automation, Inc. | 2,640 | 69,115 | ||||||
Agilysys, Inc.* | 4,130 | 59,224 | ||||||
NextGen Healthcare, Inc.* | 3,282 | 49,722 | ||||||
Total Technology | 1,782,914 | |||||||
Energy - 9.4% | ||||||||
Renewable Energy Group, Inc.* | 12,580 | 323,306 | ||||||
Penn Virginia Corp.* | 3,750 | 202,725 | ||||||
KLX Energy Services Holdings, Inc.* | 7,078 | 165,979 | ||||||
SunCoke Energy, Inc.* | 19,400 | 165,870 | ||||||
HighPoint Resources Corp.* | 66,570 | 165,759 | ||||||
Denbury Resources, Inc.* | 95,560 | 163,407 | ||||||
ProPetro Holding Corp.* | 10,840 | 133,549 | ||||||
Pioneer Energy Services Corp.* | 88,610 | 108,990 | ||||||
Archrock, Inc. | 11,840 | 88,682 | ||||||
Carrizo Oil & Gas, Inc.* | 7,420 | 83,772 | ||||||
Total Energy | 1,602,039 | |||||||
Communications - 5.9% | ||||||||
Perficient, Inc.* | 7,920 | 176,299 | ||||||
Iridium Communications, Inc.* | 8,230 | 151,843 | ||||||
Stamps.com, Inc.* | 899 | 139,921 | ||||||
Liquidity Services, Inc.* | 16,070 | 99,152 | ||||||
QuinStreet, Inc.* | 5,500 | 89,265 | ||||||
EW Scripps Co. — Class A | 5,610 | 88,245 | ||||||
ATN International, Inc. | 1,130 | 80,829 | ||||||
Harmonic, Inc.* | 14,190 | 66,977 | ||||||
8x8, Inc.* | 3,610 | 65,124 | ||||||
Viavi Solutions, Inc.* | 5,150 | 51,758 | ||||||
Total Communications | 1,009,413 | |||||||
Basic Materials - 2.5% | ||||||||
Kaiser Aluminum Corp. | 1,850 | 165,187 | ||||||
Hawkins, Inc. | 2,622 | 107,371 | ||||||
Innospec, Inc. | 1,640 | 101,286 | ||||||
Quaker Chemical Corp. | 270 | 47,982 | ||||||
Total Basic Materials | 421,826 | |||||||
Total Common Stocks | ||||||||
(Cost $15,181,587) | 16,865,512 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.7% | ||||||||
JPMorgan Chase & Co. | $ | 67,368 | 67,368 | |||||
Barclays Capital | 28,017 | 28,017 | ||||||
Bank of America Merrill Lynch | 18,678 | 18,678 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $114,063) | 114,063 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 0.3% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 2.32%4 | 50,084 | 50,084 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $50,084) | 50,084 | |||||||
Total Investments - 100.1% | ||||||||
(Cost $15,345,734) | $ | 17,029,659 | ||||||
Other Assets & Liabilities, net - (0.1)% | �� | (24,117 | ) | |||||
Total Net Assets - 100.0% | $ | 17,005,542 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT|41 |
SCHEDULE OF INVESTMENTS(concluded) | December 31, 2018 |
S&P SMALLCAP 600® PURE GROWTH 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 a portion of this security is on loan at December 31, 2018 — 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, 2018. |
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, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 16,865,512 | $ | — | $ | — | $ | 16,865,512 | ||||||||
Repurchase Agreements | — | 114,063 | — | 114,063 | ||||||||||||
Securities Lending Collateral | 50,084 | — | — | 50,084 | ||||||||||||
Total Assets | $ | 16,915,596 | $ | 114,063 | $ | — | $ | 17,029,659 |
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, 2018, 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, 2018 |
Assets: | ||||
Investments, at value - including $56,122 of securities loaned (cost $15,231,671) | $ | 16,915,596 | ||
Repurchase agreements, at value (cost $114,063) | 114,063 | |||
Cash | 8,476 | |||
Receivables: | ||||
Securities sold | 211,238 | |||
Fund shares sold | 111,338 | |||
Dividends | 6,573 | |||
Securities lending income | 68 | |||
Interest | 9 | |||
Total assets | 17,367,361 | |||
Liabilities: | ||||
Payable for: | ||||
Securities purchased | 212,799 | |||
Return of securities lending collateral | 58,560 | |||
Fund shares redeemed | 13,345 | |||
Management fees | 11,747 | |||
Transfer agent and administrative fees | 3,916 | |||
Investor service fees | 3,916 | |||
Portfolio accounting fees | 1,566 | |||
Trustees’ fees* | 490 | |||
Miscellaneous | 55,480 | |||
Total liabilities | 361,819 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 17,005,542 | ||
Net assets consist of: | ||||
Paid in capital | $ | 17,423,326 | ||
Total distributable earnings (loss) | (417,784 | ) | ||
Net assets | $ | 17,005,542 | ||
Capital shares outstanding | 346,560 | |||
Net asset value per share | $ | 49.07 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends | $ | 113,576 | ||
Interest | 3,035 | |||
Income from securities lending, net | 30,220 | |||
Total investment income | 146,831 | |||
Expenses: | ||||
Management fees | 178,271 | |||
Investor service fees | 59,424 | |||
Transfer agent and administrative fees | 59,424 | |||
Professional fees | 28,996 | |||
Portfolio accounting fees | 23,769 | |||
Trustees’ fees* | 5,322 | |||
Custodian fees | 3,408 | |||
Line of credit fees | 80 | |||
Miscellaneous | 29,232 | |||
Total expenses | 387,926 | |||
Net investment loss | (241,095 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (1,539,254 | ) | ||
Net realized loss | (1,539,254 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (1,822,907 | ) | ||
Net change in unrealized appreciation (depreciation) | (1,822,907 | ) | ||
Net realized and unrealized loss | (3,362,161 | ) | ||
Net decrease in net assets resulting from operations | $ | (3,603,256 | ) |
* | 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 | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (241,095 | ) | $ | (173,656 | ) | ||
Net realized gain (loss) on investments | (1,539,254 | ) | 1,913,809 | |||||
Net change in unrealized appreciation (depreciation) on investments | (1,822,907 | ) | 383,097 | |||||
Net increase (decrease) in net assets resulting from operations | (3,603,256 | ) | 2,123,250 | |||||
Distributions to shareholders | (549,379 | ) | (799,644 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 68,349,093 | 48,903,502 | ||||||
Distributions reinvested | 549,379 | 799,644 | ||||||
Cost of shares redeemed | (68,178,483 | ) | (51,432,819 | ) | ||||
Net increase (decrease) from capital share transactions | 719,989 | (1,729,673 | ) | |||||
Net decrease in net assets | (3,432,646 | ) | (406,067 | ) | ||||
Net assets: | ||||||||
Beginning of year | 20,438,188 | 20,844,255 | ||||||
End of year | $ | 17,005,542 | $ | 20,438,188 | ||||
Capital share activity: | ||||||||
Shares sold | 1,133,425 | 940,267 | ||||||
Shares issued from reinvestment of distributions | 8,745 | 15,863 | ||||||
Shares redeemed | (1,167,579 | ) | (1,002,241 | ) | ||||
Net decrease in shares | (25,409 | ) | (46,111 | ) |
1 | For the year ended December 31, 2017, the total distributions to shareholders were all from net realized gains (See Note 11). |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 54.95 | $ | 49.86 | $ | 42.01 | $ | 45.67 | $ | 45.67 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.60 | ) | (.47 | ) | (.14 | ) | (.30 | ) | (.38 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | (4.12 | ) | 8.25 | 7.99 | .62 | .38 | ||||||||||||||
Total from investment operations | (4.72 | ) | 7.78 | 7.85 | .32 | — | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (1.16 | ) | (2.69 | ) | — | (3.98 | ) | — | ||||||||||||
Total distributions | (1.16 | ) | (2.69 | ) | — | (3.98 | ) | — | ||||||||||||
Net asset value, end of period | $ | 49.07 | $ | 54.95 | $ | 49.86 | $ | 42.01 | $ | 45.67 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (9.03 | %) | 16.08 | % | 18.69 | % | (0.37 | %) | 0.00 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 17,006 | $ | 20,438 | $ | 20,844 | $ | 22,156 | $ | 25,379 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (1.01 | %) | (0.90 | %) | (0.32 | %) | (0.64 | %) | (0.85 | %) | ||||||||||
Total expenses | 1.63 | % | 1.61 | % | 1.56 | % | 1.50 | % | 1.57 | % | ||||||||||
Portfolio turnover rate | 313 | % | 280 | % | 475 | % | 282 | % | 268 | % |
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, 2018 |
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, 2018, S&P SmallCap 600® Pure Value Fund returned -20.58%, compared with a return of -19.31% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
The sectors detracting the most from the return of the underlying index for the year were the Consumer Discretionary sector and the Industrials sector. No sector contributed to return. The Financials sector detracted the least from return.
The stocks contributing the most to return of the underlying index were Fossil Group, Inc., Renewable Energy Group, Inc., and OFG Bancorp. Those detracting the most from return of the underlying index were Cloud Peak Energy, Inc., Roadrunner Transportation Systems, Inc., and Superior Industries International, 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) | |
Ultra Clean Holdings, Inc. | 1.3% |
Orion Group Holdings, Inc. | 1.3% |
Group 1 Automotive, Inc. | 1.3% |
Sonic Automotive, Inc. — Class A | 1.3% |
Hibbett Sports, Inc. | 1.3% |
American Axle & Manufacturing Holdings, Inc. | 1.3% |
Kelly Services, Inc. — Class A | 1.3% |
M/I Homes, Inc. | 1.2% |
William Lyon Homes — Class A | 1.2% |
SpartanNash Co. | 1.2% |
Top Ten Total | 12.7% |
“Ten Largest Holdings” excludes any temporary cash investments. |
46 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE(Unaudited)(concluded) | December 31, 2018 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
S&P SmallCap 600® Pure Value Fund | (20.58%) | (1.78%) | 11.19% |
S&P SmallCap 600 Pure Value Index | (19.31%) | (0.16%) | 13.12% |
* | 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. 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, 2018 |
S&P SMALLCAP 600® PURE VALUE FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.5% | ||||||||
Consumer, Cyclical - 36.3% | ||||||||
Group 1 Automotive, Inc. | 2,126 | $ | 112,083 | |||||
Sonic Automotive, Inc. — Class A | 8,114 | 111,649 | ||||||
Hibbett Sports, Inc.* | 7,736 | 110,625 | ||||||
American Axle & Manufacturing Holdings, Inc.* | 9,850 | 109,335 | ||||||
M/I Homes, Inc.* | 4,915 | 103,313 | ||||||
William Lyon Homes — Class A* | 9,580 | 102,410 | ||||||
Genesco, Inc.* | 2,271 | 100,605 | ||||||
Express, Inc.* | 18,886 | 96,508 | ||||||
Chico’s FAS, Inc. | 17,043 | 95,782 | ||||||
Meritage Homes Corp.* | 2,460 | 90,331 | ||||||
Office Depot, Inc. | 34,705 | 89,539 | ||||||
Vista Outdoor, Inc.* | 7,866 | 89,279 | ||||||
Lithia Motors, Inc. — Class A | 1,040 | 79,383 | ||||||
Winnebago Industries, Inc. | 3,270 | 79,167 | ||||||
Veritiv Corp.* | 3,133 | 78,231 | ||||||
ScanSource, Inc.* | 2,258 | 77,630 | ||||||
Cooper-Standard Holdings, Inc.* | 1,151 | 71,500 | ||||||
Abercrombie & Fitch Co. — Class A | 3,525 | 70,676 | ||||||
Cato Corp. — Class A | 4,895 | 69,852 | ||||||
Anixter International, Inc.* | 1,242 | 67,453 | ||||||
Red Robin Gourmet Burgers, Inc.* | 2,410 | 64,395 | ||||||
MDC Holdings, Inc. | 2,270 | 63,810 | ||||||
MarineMax, Inc.* | 3,411 | 62,455 | ||||||
Superior Industries International, Inc. | 12,964 | 62,357 | ||||||
EZCORP, Inc. — Class A* | 7,959 | 61,523 | ||||||
Vitamin Shoppe, Inc.* | 12,960 | 61,430 | ||||||
Kirkland’s, Inc.* | 6,405 | 61,040 | ||||||
Essendant, Inc. | 4,500 | 56,610 | ||||||
Wabash National Corp. | 4,220 | 55,197 | ||||||
Zumiez, Inc.* | 2,785 | 53,388 | ||||||
Lumber Liquidators Holdings, Inc.* | 5,440 | 51,789 | ||||||
Titan International, Inc. | 11,049 | 51,488 | ||||||
J.C. Penney Company, Inc.*,1 | 46,016 | 47,857 | ||||||
Core-Mark Holding Company, Inc. | 2,031 | 47,221 | ||||||
Caleres, Inc. | 1,622 | 45,140 | ||||||
Haverty Furniture Companies, Inc. | 2,232 | 41,917 | ||||||
Francesca’s Holdings Corp.* | 38,772 | 37,640 | ||||||
LGI Homes, Inc.*,1 | 740 | 33,463 | ||||||
Unifi, Inc.* | 1,339 | 30,583 | ||||||
Cooper Tire & Rubber Co. | 926 | 29,938 | ||||||
Ethan Allen Interiors, Inc. | 1,630 | 28,672 | ||||||
Barnes & Noble, Inc. | 3,920 | 27,793 | ||||||
Barnes & Noble Education, Inc.* | 6,642 | 26,634 | ||||||
GameStop Corp. — Class A | 2,074 | 26,174 | ||||||
Fossil Group, Inc.* | 1,582 | 24,885 | ||||||
G-III Apparel Group Ltd.* | 880 | 24,543 | ||||||
Motorcar Parts of America, Inc.* | 1,444 | 24,028 | ||||||
SkyWest, Inc. | 520 | 23,124 | ||||||
Vera Bradley, Inc.* | 2,641 | 22,633 | ||||||
Total Consumer, Cyclical | 3,053,078 | |||||||
Industrial - 20.0% | ||||||||
Orion Group Holdings, Inc.* | 26,392 | 113,222 | ||||||
Griffon Corp. | 8,910 | 93,110 | ||||||
Olympic Steel, Inc. | 6,297 | 89,858 | ||||||
Boise Cascade Co. | 3,424 | 81,662 | ||||||
TTM Technologies, Inc.* | 8,150 | 79,300 | ||||||
TimkenSteel Corp.* | 8,519 | 74,456 | ||||||
Lydall, Inc.* | 3,650 | 74,131 | ||||||
Atlas Air Worldwide Holdings, Inc.* | 1,747 | 73,706 | ||||||
ArcBest Corp. | 2,082 | 71,329 | ||||||
Universal Forest Products, Inc. | 2,490 | 64,640 | ||||||
MYR Group, Inc.* | 2,260 | 63,664 | ||||||
Briggs & Stratton Corp. | 4,569 | 59,763 | ||||||
Benchmark Electronics, Inc. | 2,786 | 59,007 | ||||||
Sanmina Corp.* | 2,403 | 57,816 | ||||||
Echo Global Logistics, Inc.* | 2,803 | 56,985 | ||||||
Multi-Color Corp. | 1,490 | 52,284 | ||||||
Arcosa, Inc.* | 1,860 | 51,503 | ||||||
Greenbrier Companies, Inc. | 1,212 | 47,923 | ||||||
Aegion Corp. — Class A* | 2,524 | 41,192 | ||||||
Patrick Industries, Inc.* | 1,370 | 40,566 | ||||||
Ichor Holdings Ltd.* | 2,300 | 37,490 | ||||||
US Concrete, Inc.* | 1,020 | 35,986 | ||||||
Encore Wire Corp. | 549 | 27,549 | ||||||
Comtech Telecommunications Corp. | 1,087 | 26,458 | ||||||
TopBuild Corp.* | 580 | 26,100 | ||||||
Bel Fuse, Inc. — Class B | 1,415 | 26,064 | ||||||
Astec Industries, Inc. | 860 | 25,963 | ||||||
CIRCOR International, Inc.* | 1,200 | 25,560 | ||||||
Powell Industries, Inc. | 962 | 24,059 | ||||||
Mueller Industries, Inc. | 940 | 21,959 | ||||||
SPX FLOW, Inc.* | 710 | 21,598 | ||||||
Tredegar Corp. | 1,289 | 20,444 | ||||||
Apogee Enterprises, Inc. | 630 | 18,805 | ||||||
Total Industrial | 1,684,152 | |||||||
Consumer, Non-cyclical - 14.9% | ||||||||
Kelly Services, Inc. — Class A | 5,182 | 106,127 | ||||||
SpartanNash Co. | 5,955 | 102,307 | ||||||
Magellan Health, Inc.* | 1,680 | 95,575 | ||||||
United Natural Foods, Inc.* | 8,880 | 94,039 | ||||||
Andersons, Inc. | 2,889 | 86,352 | ||||||
ABM Industries, Inc. | 2,550 | 81,880 | ||||||
Dean Foods Co. | 18,985 | 72,333 | ||||||
Seneca Foods Corp. — Class A* | 2,549 | 71,933 | ||||||
Cross Country Healthcare, Inc.* | 9,014 | 66,073 | ||||||
Diplomat Pharmacy, Inc.* | 4,067 | 54,742 | ||||||
Rent-A-Center, Inc.* | 3,280 | 53,103 | ||||||
TrueBlue, Inc.* | 2,202 | 48,995 | ||||||
Quanex Building Products Corp. | 2,690 | 36,557 | ||||||
Owens & Minor, Inc. | 5,730 | 36,271 | ||||||
Team, Inc.* | 2,459 | 36,024 | ||||||
Universal Corp. | 663 | 35,902 | ||||||
Invacare Corp. | 7,585 | 32,615 | ||||||
Lannett Company, Inc.*,1 | 5,800 | 28,768 | ||||||
Assertio Therapeutics, Inc.* | 7,700 | 27,797 | ||||||
Matthews International Corp. — Class A | 590 | 23,966 |
48|THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS(continued) | December 31, 2018 |
S&P SMALLCAP 600® PURE VALUE FUND |
| Shares | Value | ||||||
LSC Communications, Inc. | 3,353 | $ | 23,471 | |||||
Select Medical Holdings Corp.* | 1,160 | 17,806 | ||||||
Central Garden & Pet Co. — Class A* | 530 | 16,563 | ||||||
Central Garden & Pet Co.* | 140 | 4,823 | ||||||
Total Consumer, Non-cyclical | 1,254,022 | |||||||
Financial - 8.5% | ||||||||
International. FCStone, Inc.* | 1,901 | 69,538 | ||||||
Encore Capital Group, Inc.* | 2,700 | 63,450 | ||||||
Ambac Financial Group, Inc.* | 3,360 | 57,926 | ||||||
iStar, Inc. REIT | 5,280 | 48,418 | ||||||
Customers Bancorp, Inc.* | 2,480 | 45,136 | ||||||
CBL & Associates Properties, Inc. REIT | 22,827 | 43,828 | ||||||
Stewart Information Services Corp. | 1,057 | 43,760 | ||||||
Third Point Reinsurance Ltd.* | 3,580 | 34,511 | ||||||
Opus Bank | 1,555 | 30,463 | ||||||
Invesco Mortgage Capital, Inc. REIT | 1,995 | 28,888 | ||||||
Summit Hotel Properties, Inc. REIT | 2,860 | 27,828 | ||||||
Hersha Hospitality Trust REIT | 1,450 | 25,433 | ||||||
Capstead Mortgage Corp. REIT | 3,709 | 24,739 | ||||||
Horace Mann Educators Corp. | 645 | 24,155 | ||||||
Maiden Holdings Ltd. | 14,273 | 23,551 | ||||||
PennyMac Mortgage Investment Trust REIT | 1,262 | 23,498 | ||||||
PRA Group, Inc.* | 880 | 21,446 | ||||||
Cedar Realty Trust, Inc. REIT | 6,510 | 20,441 | ||||||
Pacific Premier Bancorp, Inc.* | 740 | 18,885 | ||||||
Hope Bancorp, Inc. | 1,590 | 18,857 | ||||||
Apollo Commercial Real Estate Finance, Inc. REIT | 1,030 | 17,160 | ||||||
Total Financial | 711,911 | |||||||
Energy - 8.4% | ||||||||
Green Plains, Inc. | 6,215 | 81,479 | ||||||
US Silica Holdings, Inc. | 5,970 | 60,774 | ||||||
Par Pacific Holdings, Inc.* | 4,106 | 58,223 | ||||||
Superior Energy Services, Inc.* | 16,600 | 55,610 | ||||||
Laredo Petroleum, Inc.* | 12,267 | 44,407 | ||||||
REX American Resources Corp.* | 640 | 43,590 | ||||||
SEACOR Holdings, Inc.* | 1,080 | 39,960 | ||||||
Gulfport Energy Corp.* | 6,020 | 39,431 | ||||||
Cloud Peak Energy, Inc.* | 105,383 | 38,602 | ||||||
C&J Energy Services, Inc.* | 2,750 | 37,125 | ||||||
SRC Energy, Inc.* | 7,300 | 34,310 | ||||||
Helix Energy Solutions Group, Inc.* | 6,336 | 34,278 | ||||||
Newpark Resources, Inc.* | 4,779 | 32,832 | ||||||
Matrix Service Co.* | 1,439 | 25,816 | ||||||
Exterran Corp.* | 1,430 | 25,311 | ||||||
Bristow Group, Inc.*,1 | 8,778 | 21,330 | ||||||
Oil States International, Inc.* | 1,382 | 19,735 | ||||||
Ring Energy, Inc.* | 3,380 | 17,170 | ||||||
Total Energy | 709,983 | |||||||
Basic Materials - 6.0% | ||||||||
Clearwater Paper Corp.* | 4,057 | 98,869 | ||||||
Rayonier Advanced Materials, Inc. | 8,220 | 87,543 | ||||||
PH Glatfelter Co. | 8,031 | 78,383 | ||||||
Kraton Corp.* | 3,280 | 71,635 | ||||||
Century Aluminum Co.* | 9,400 | 68,714 | ||||||
AdvanSix, Inc.* | 1,190 | 28,965 | ||||||
Koppers Holdings, Inc.* | 1,690 | 28,798 | ||||||
Innophos Holdings, Inc. | 970 | 23,794 | ||||||
Schweitzer-Mauduit International, Inc. | 850 | 21,292 | ||||||
Total Basic Materials | 507,993 | |||||||
Technology - 3.7% | ||||||||
Ultra Clean Holdings, Inc.* | 13,370 | 113,244 | ||||||
Insight Enterprises, Inc.* | 1,608 | 65,526 | ||||||
Photronics, Inc.* | 4,668 | 45,186 | ||||||
TiVo Corp. | 2,400 | 22,584 | ||||||
Donnelley Financial Solutions, Inc.* | 1,600 | 22,448 | ||||||
Digi International, Inc.* | 2,130 | 21,492 | ||||||
Sykes Enterprises, Inc.* | 856 | 21,169 | ||||||
Total Technology | 311,649 | |||||||
Communications - 1.7% | ||||||||
Gannett Company, Inc. | 7,380 | 62,952 | ||||||
New Media Investment Group, Inc. | 4,855 | 56,172 | ||||||
Frontier Communications Corp.*,1 | 10,871 | 25,873 | ||||||
Total Communications | 144,997 | |||||||
Total Common Stocks | ||||||||
(Cost $8,497,485) | 8,377,785 | |||||||
RIGHTS†††- 0.0% | ||||||||
A Schulman, Inc. | ||||||||
Expires 09/30/19*,2 | 1,164 | — | ||||||
Total Rights | ||||||||
(Cost $—) | — | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,3 - 0.9% | ||||||||
JPMorgan Chase & Co. | $ | 43,724 | 43,724 | |||||
Barclays Capital | 18,183 | 18,183 | ||||||
Bank of America Merrill Lynch | 12,122 | 12,122 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $74,029) | 74,029 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT|49 |
SCHEDULE OF INVESTMENTS(concluded) | December 31, 2018 |
S&P SMALLCAP 600® PURE VALUE FUND |
| Shares | Value | ||||||
SECURITIES LENDING COLLATERAL†,4 - 0.9% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 2.32%5 | 72,895 | $ | 72,895 | |||||
Total Securities Lending Collateral | ||||||||
(Cost $72,895) | 72,895 | |||||||
Total Investments - 101.3% | ||||||||
(Cost $8,644,409) | $ | 8,524,709 | ||||||
Other Assets & Liabilities, net - (1.3)% | (110,360 | ) | ||||||
Total Net Assets - 100.0% | $ | 8,414,349 |
* | 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 a portion of this security is on loan at December 31, 2018 — See Note 7. |
2 | Security was fair valued by the Valuation Committee at December 31, 2018. The total market value of fair valued securities amounts to $0, (cost $0) or 0.0% of total net assets. |
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, 2018. |
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, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 8,377,785 | $ | — | $ | — | $ | 8,377,785 | ||||||||
Rights | — | — | — | * | — | |||||||||||
Repurchase Agreements | — | 74,029 | — | 74,029 | ||||||||||||
Securities Lending Collateral | 72,895 | — | — | 72,895 | ||||||||||||
Total Assets | $ | 8,450,680 | $ | 74,029 | $ | — | $ | 8,524,709 |
* | Includes securities with 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, 2018, 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, 2018 |
Assets: | ||||
Investments, at value - including $76,068 of securities loaned (cost $8,570,380) | $ | 8,450,680 | ||
Repurchase agreements, at value (cost $74,029) | 74,029 | |||
Cash | 12,335 | |||
Receivables: | ||||
Dividends | 12,514 | |||
Securities lending income | 441 | |||
Interest | 6 | |||
Total assets | 8,550,005 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 85,231 | |||
Fund shares redeemed | 5,359 | |||
Management fees | 5,317 | |||
Transfer agent and administrative fees | 1,772 | |||
Investor service fees | 1,772 | |||
Portfolio accounting fees | 709 | |||
Trustees’ fees* | 326 | |||
Miscellaneous | 35,170 | |||
Total liabilities | 135,656 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 8,414,349 | ||
Net assets consist of: | ||||
Paid in capital | $ | 12,122,557 | ||
Total distributable earnings (loss) | (3,708,208 | ) | ||
Net assets | $ | 8,414,349 | ||
Capital shares outstanding | 159,344 | |||
Net asset value per share | $ | 52.81 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $227) | $ | 252,849 | ||
Interest | 1,754 | |||
Income from securities lending, net | 17,993 | |||
Total investment income | 272,596 | |||
Expenses: | ||||
Management fees | 117,810 | |||
Investor service fees | 39,270 | |||
Transfer agent and administrative fees | 39,270 | |||
Professional fees | 19,747 | |||
Portfolio accounting fees | 15,708 | |||
Trustees’ fees* | 4,656 | |||
Custodian fees | 2,312 | |||
Line of credit fees | 22 | |||
Miscellaneous | 15,541 | |||
Total expenses | 254,336 | |||
Net investment income | 18,260 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (768,745 | ) | ||
Net realized loss | (768,745 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (2,189,576 | ) | ||
Net change in unrealized appreciation (depreciation) | (2,189,576 | ) | ||
Net realized and unrealized loss | (2,958,321 | ) | ||
Net decrease in net assets resulting from operations | $ | (2,940,061 | ) |
* | 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 | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | 18,260 | $ | (63,031 | ) | |||
Net realized loss on investments | (768,745 | ) | (18,013 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | (2,189,576 | ) | (1,426,664 | ) | ||||
Net decrease in net assets resulting from operations | (2,940,061 | ) | (1,507,708 | ) | ||||
Distributions to shareholders | — | (398,643 | )1 | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 29,766,017 | 32,718,612 | ||||||
Distributions reinvested | — | 398,643 | ||||||
Cost of shares redeemed | (36,159,635 | ) | (41,870,956 | ) | ||||
Net decrease from capital share transactions | (6,393,618 | ) | (8,753,701 | ) | ||||
Net decrease in net assets | (9,333,679 | ) | (10,660,052 | ) | ||||
Net assets: | ||||||||
Beginning of year | 17,748,028 | 28,408,080 | ||||||
End of year | $ | 8,414,349 | $ | 17,748,028 | ||||
Capital share activity: | ||||||||
Shares sold | 430,933 | 502,067 | ||||||
Shares issued from reinvestment of distributions | — | 6,643 | ||||||
Shares redeemed | (538,553 | ) | (652,665 | ) | ||||
Net decrease in shares | (107,620 | ) | (143,955 | ) |
1 | For the year ended December 31, 2017, the total distributions to shareholders were all from net realized gains (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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 66.48 | $ | 69.13 | $ | 52.48 | $ | 65.72 | $ | 79.11 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .08 | (.23 | ) | (.45 | ) | (.06 | ) | (.39 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | (13.75 | ) | (.20 | ) | 17.10 | (8.15 | ) | 1.28 | ||||||||||||
Total from investment operations | (13.67 | ) | (.43 | ) | 16.65 | (8.21 | ) | .89 | ||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | — | (2.22 | ) | — | (5.03 | ) | (14.28 | ) | ||||||||||||
Total distributions | — | (2.22 | ) | — | (5.03 | ) | (14.28 | ) | ||||||||||||
Net asset value, end of period | $ | 52.81 | $ | 66.48 | $ | 69.13 | $ | 52.48 | $ | 65.72 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (20.58 | %) | (0.28 | %) | 31.74 | % | (13.54 | %) | 1.31 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 8,414 | $ | 17,748 | $ | 28,408 | $ | 11,747 | $ | 14,318 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.12 | % | (0.35 | %) | (0.44 | %) | (0.09 | %) | (0.50 | %) | ||||||||||
Total expenses | 1.62 | % | 1.61 | % | 1.56 | % | 1.50 | % | 1.57 | % | ||||||||||
Portfolio turnover rate | 194 | % | 204 | % | 303 | % | 245 | % | 144 | % |
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 NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT|53 |
PERFORMANCE REPORT AND FUND PROFILE(Unaudited) | December 31, 2018 |
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 Europe 50® Index (the “underlying index”).
For the one-year period ended December 31, 2018, 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 -18.97% while the underlying index returned -14.52% over the same period.
The sectors detracting the most from the return of the underlying index of the period were Financials and Consumer Staples. No sector contributed to performance. The Utilities sector detracted the least to the performance of the underlying index for the period.
The stocks contributing the most to performance of the underlying index were Glaxo SmithKline Plc, AstraZeneca Plc, and Novartis AG. Those detracting the most from return of the underlying index were British American Tobacco Plc, Bayer AG, and Anheuser-Busch InBev SA NV.
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, 2018 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. 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.
Cumulative Fund Performance*,†
Inception Date:October 1, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 32.6% |
Guggenheim Ultra Short Duration Fund | 25.9% |
Nestle S.A. ADR | 1.8% |
Novartis AG ADR | 1.6% |
HSBC Holdings plc ADR | 1.3% |
Roche Holding AG ADR | 1.2% |
Royal Dutch Shell plc — Class A ADR | 1.0% |
BP plc ADR | 1.0% |
Total S.A. ADR | 0.9% |
Linde plc | 0.7% |
Top Ten Total | 68.0% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
Country Diversification
Country | % of Long-Term |
United Kingdom | 34% |
Switzerland | 20% |
France | 16% |
Germany | 13% |
Netherlands | 6% |
Spain | 3% |
Denmark | 2% |
Other | 6% |
Total Long-Term Investments | 100% |
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Europe 1.25x Strategy Fund | (18.97%) | (4.39%) | 2.15% |
STOXX Europe 50 Index | (14.52%) | (1.56%) | 4.33% |
* | 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 Europe 50 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 | 55 |
SCHEDULE OF INVESTMENTS | December 31, 2018 |
EUROPE 1.25x STRATEGY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 25.9% | ||||||||
Consumer, Non-cyclical - 10.8% | ||||||||
Nestle S.A. ADR | 602 | $ | 48,738 | |||||
Novartis AG ADR | 505 | 43,334 | ||||||
Roche Holding AG ADR | 1,069 | 33,224 | ||||||
Diageo plc ADR | 125 | 17,725 | ||||||
AstraZeneca plc ADR | 452 | 17,167 | ||||||
Novo Nordisk A/S ADR | 353 | 16,263 | ||||||
Unilever N.V. — Class Y | 300 | 16,140 | ||||||
Sanofi ADR | 363 | 15,758 | ||||||
GlaxoSmithKline plc ADR | 386 | 14,749 | ||||||
British American Tobacco plc ADR | 443 | 14,114 | ||||||
Anheuser-Busch InBev S.A. ADR | 197 | 12,964 | ||||||
Bayer AG ADR | 656 | 11,526 | ||||||
Unilever plc ADR | 218 | 11,391 | ||||||
Reckitt Benckiser Group plc ADR | 583 | 8,821 | ||||||
L’Oreal S.A. ADR | 193 | 8,812 | ||||||
Total Consumer, Non-cyclical | 290,726 | |||||||
Financial - 4.9% | ||||||||
HSBC Holdings plc ADR | 825 | 33,916 | ||||||
Allianz SE ADR | 793 | 15,971 | ||||||
Prudential plc ADR | 316 | 11,177 | ||||||
Banco Santander S.A. ADR | 2,455 | 10,998 | ||||||
Zurich Insurance Group AG ADR | 282 | 8,405 | ||||||
BNP Paribas S.A. ADR | 364 | 8,205 | ||||||
Intesa Sanpaolo SpA ADR | 576 | 7,730 | ||||||
UBS Group AG* | 611 | 7,564 | ||||||
Lloyds Banking Group plc ADR | 2,887 | 7,391 | ||||||
AXA S.A. ADR | 332 | 7,101 | ||||||
ING Groep N.V. ADR | 657 | 7,004 | ||||||
Banco Bilbao Vizcaya Argentaria S.A. ADR | 1,084 | 5,734 | ||||||
Total Financial | 131,196 | |||||||
Energy - 3.1% | ||||||||
Royal Dutch Shell plc — Class A ADR | 469 | 27,329 | ||||||
BP plc ADR | 688 | 26,089 | ||||||
Total S.A. ADR | 450 | 23,481 | ||||||
Eni SpA ADR | 204 | 6,426 | ||||||
Total Energy | 83,325 | |||||||
Basic Materials - 2.2% | ||||||||
Linde plc | 120 | 18,725 | ||||||
BASF SE ADR | 671 | 11,803 | ||||||
Rio Tinto plc ADR | 235 | 11,393 | ||||||
Air Liquide S.A. ADR | 341 | 8,412 | ||||||
Glencore plc ADR1 | 974 | 7,052 | ||||||
Total Basic Materials | 57,385 | |||||||
Industrial - 1.9% | ||||||||
Siemens AG ADR | 259 | 14,525 | ||||||
Airbus SE ADR | 361 | 8,585 | ||||||
ABB Ltd. ADR | 409 | 7,775 | ||||||
Vinci S.A. ADR | 356 | 7,301 | ||||||
Safran S.A. ADR | 236 | 7,054 | ||||||
Schneider Electric SE ADR | 436 | 5,895 | ||||||
Total Industrial | 51,135 | |||||||
Technology - 1.2% | ||||||||
SAP SE ADR | 165 | 16,426 | ||||||
ASML Holding N.V. — Class G | 94 | 14,628 | ||||||
Total Technology | 31,054 | |||||||
Communications - 0.9% | ||||||||
Vodafone Group plc ADR | 499 | 9,621 | ||||||
Deutsche Telekom AG ADR | 516 | 8,762 | ||||||
Telefonica S.A. ADR | 753 | 6,370 | ||||||
Total Communications | 24,753 | |||||||
Consumer, Cyclical - 0.7% | ||||||||
LVMH Moet Hennessy Louis Vuitton SE ADR | 209 | 12,218 | ||||||
Daimler AG ADR | 573 | 7,512 | ||||||
Total Consumer, Cyclical | 19,730 | |||||||
Utilities - 0.2% | ||||||||
National Grid plc ADR | 128 | 6,141 | ||||||
Total Common Stocks | ||||||||
(Cost $656,086) | 695,445 | |||||||
MUTUAL FUNDS† - 58.5% | ||||||||
Guggenheim Strategy Fund II2 | 35,332 | 876,931 | ||||||
Guggenheim Ultra Short Duration Fund2,8 | 69,886 | 696,060 | ||||||
Total Mutual Funds | ||||||||
(Cost $1,580,133) | 1,572,991 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 9.4% | ||||||||
U.S. Treasury Bills | ||||||||
2.21% due 01/08/193,4 | $ | 253,000 | 252,905 | |||||
Total U.S. Treasury Bills | ||||||||
(Cost $252,888) | 252,905 | |||||||
REPURCHASE AGREEMENTS††,5 - 7.9% | ||||||||
JPMorgan Chase & Co. | 124,634 | 124,634 | ||||||
Barclays Capital | 51,832 | 51,832 | ||||||
Bank of America Merrill Lynch | 34,555 | 34,555 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $211,021) | 211,021 |
56|THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS(continued) | December 31, 2018 |
EUROPE 1.25x STRATEGY FUND |
| Shares | Value | ||||||
SECURITIES LENDING COLLATERAL†,6 - 0.1% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 2.32%7 | 3,246 | $ | 3,246 | |||||
Total Securities Lending Collateral | ||||||||
(Cost $3,246) | 3,246 | |||||||
Total Investments - 101.8% | ||||||||
(Cost $2,703,374) | $ | 2,735,608 | ||||||
Other Assets & Liabilities, net - (1.8)% | (48,451 | ) | ||||||
Total Net Assets - 100.0% | $ | 2,687,157 |
Futures Contracts | |||||||||||||
Description | Number of | Expiration | Notional | Value and | |||||||||
Currency Futures Contracts Purchased† | |||||||||||||
Euro FX Futures Contracts | 19 | Mar 2019 | $ | 2,738,256 | $ | 12,771 | |||||||
Equity Futures Contracts Purchased†† | |||||||||||||
STOXX Europe 50 Index Futures Contracts | 84 | Mar 2019 | 2,647,815 | (18,901 | ) |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | 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 on loan at December 31, 2018 — See Note 7. |
2 | Affiliated issuer. |
3 | All or a portion of this security is pledged as futures collateral at December 31, 2018. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | Repurchase Agreements — See Note 6. |
6 | Securities lending collateral — See Note 7. |
7 | Rate indicated is the 7-day yield as of December 31, 2018. |
8 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
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, 2018 |
EUROPE 1.25x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 695,445 | $ | — | $ | — | $ | 695,445 | ||||||||
Mutual Funds | 1,572,991 | — | — | 1,572,991 | ||||||||||||
U.S. Treasury Bills | — | 252,905 | — | 252,905 | ||||||||||||
Repurchase Agreements | — | 211,021 | — | 211,021 | ||||||||||||
Securities Lending Collateral | 3,246 | — | — | 3,246 | ||||||||||||
Currency Futures Contracts** | 12,771 | — | — | 12,771 | ||||||||||||
Total Assets | $ | 2,284,453 | $ | 463,926 | $ | — | $ | 2,748,379 | ||||||||
| ||||||||||||||||
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Futures Contracts** | $ | — | $ | 18,901 | $ | — | $ | 18,901 |
** | This derivative is reported as unrealized appreciation/depreciation 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, 2018, there were no transfers between levels.
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Cash Management Funds”), each of which are 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, 2018, 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/1601445/000089180418000513/gug75569-ncsr.htm.
Transactions during the year ended December 31, 2018, in which the portfolio company is an “affiliated person”, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | Capital | |||||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 906,537 | $ | 797,820 | $ | (820,000 | ) | $ | (969) | $ | (6,457 | ) | $ | 876,931 | 35,332 | $ | 32,251 | $ | 510 | |||||||||||||||||
Guggenheim Ultra Short Duration Fund1 | 266,751 | 1,959,824 | (1,525,000 | ) | (2,008 | ) | (3,507 | ) | 696,060 | 69,886 | 24,059 | 705 | ||||||||||||||||||||||||
$ | 1,173,288 | $ | 2,757,644 | $ | (2,345,000 | ) | $ | (2,977 | ) | $ | (9,964 | ) | $ | 1,572,991 | $ | 56,310 | $ | 1,215 |
1 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
58|THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
EUROPE 1.25x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $3,663 of securities loaned (cost $912,220) | $ | 951,596 | ||
Investments in affiliated issuers, at value (cost $1,580,133) | 1,572,991 | |||
Repurchase agreements, at value (cost $211,021) | 211,021 | |||
Cash | 8,765 | |||
Receivables: | ||||
Fund shares sold | 72,863 | |||
Variation margin on futures contracts | 26,320 | |||
Foreign tax reclaims | 10,050 | |||
Dividends | 4,336 | |||
Other | 258 | |||
Securities lending income | 32 | |||
Interest | 17 | |||
Total assets | 2,858,249 | |||
Liabilities: | ||||
Payable for: | ||||
Securities purchased | 146,254 | |||
Due to broker | 8,233 | |||
Return of securities lending collateral | 3,795 | |||
Management fees | 1,853 | |||
Transfer agent and administrative fees | 564 | |||
Investor service fees | 564 | |||
Portfolio accounting fees | 226 | |||
Fund shares redeemed | 140 | |||
Trustees’ fees* | 67 | |||
Miscellaneous | 9,396 | |||
Total liabilities | 171,092 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 2,687,157 | ||
Net assets consist of: | ||||
Paid in capital | $ | 4,248,521 | ||
Total distributable earnings (loss) | (1,561,364 | ) | ||
Net assets | $ | 2,687,157 | ||
Capital shares outstanding | 31,805 | |||
Net asset value per share | $ | 84.49 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $5,287) | $ | 84,786 | ||
Dividends from securities of affiliated issuers | 56,310 | |||
Interest | 7,767 | |||
Income from securities lending, net | 2,785 | |||
Total investment income | 151,648 | |||
Expenses: | ||||
Management fees | 39,497 | |||
Investor service fees | 10,971 | |||
Transfer agent and administrative fees | 10,971 | |||
Professional fees | 6,230 | |||
Portfolio accounting fees | 4,389 | |||
Trustees’ fees* | 1,304 | |||
Custodian fees | 630 | |||
Line of credit fees | 70 | |||
Miscellaneous | 3,909 | |||
Total expenses | 77,971 | |||
Less: | ||||
Expenses waived by Adviser | (179 | ) | ||
Net expenses | 77,792 | |||
Net investment income | 73,856 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | (102,961 | ) | ||
Investments in affiliated issuers | (2,977 | ) | ||
Distributions received from affiliated investment company shares | 1,215 | |||
Futures contracts | (695,254 | ) | ||
Foreign currency transactions | 405 | |||
Net realized loss | (799,572 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (223,697 | ) | ||
Investments in affiliated issuers | (9,964 | ) | ||
Futures contracts | (17,936 | ) | ||
Foreign currency translations | 56 | |||
Net change in unrealized appreciation (depreciation) | (251,541 | ) | ||
Net realized and unrealized loss | (1,051,113 | ) | ||
Net decrease in net assets resulting from operations | $ | (977,257 | ) |
* | 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 | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 73,856 | $ | 11,928 | ||||
Net realized gain (loss) on investments | (799,572 | ) | 679,374 | |||||
Net change in unrealized appreciation (depreciation) on investments | (251,541 | ) | 264,177 | |||||
Net increase (decrease) in net assets resulting from operations | (977,257 | ) | 955,479 | |||||
Distributions to shareholders | (15,264 | ) | (40,552 | )1 | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 14,938,345 | 16,896,795 | ||||||
Distributions reinvested | 15,264 | 40,552 | ||||||
Cost of shares redeemed | (16,999,276 | ) | (14,679,728 | ) | ||||
Net increase (decrease) from capital share transactions | (2,045,667 | ) | 2,257,619 | |||||
Net increase (decrease) in net assets | (3,038,188 | ) | 3,172,546 | |||||
Net assets: | ||||||||
Beginning of year | 5,725,345 | 2,552,799 | ||||||
End of year | $ | 2,687,157 | $ | 5,725,345 | ||||
Capital share activity: | ||||||||
Shares sold | 149,773 | 176,252 | ||||||
Shares issued from reinvestment of distributions | 153 | 412 | ||||||
Shares redeemed | (172,823 | ) | (153,070 | ) | ||||
Net increase (decrease) in shares | (22,897 | ) | 23,594 |
1 | For the year ended December 31, 2017, the total distributions to shareholders were all from net investment income (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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 104.66 | $ | 82.06 | $ | 88.28 | $ | 96.17 | $ | 112.32 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | 1.66 | .25 | .25 | .66 | 1.26 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | (21.46 | ) | 23.17 | (6.25 | ) | (7.35 | ) | (15.19 | ) | |||||||||||
Total from investment operations | (19.80 | ) | 23.42 | (6.00 | ) | (6.69 | ) | (13.93 | ) | |||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.37 | ) | (.82 | ) | (.22 | ) | (1.20 | ) | (2.22 | ) | ||||||||||
Total distributions | (.37 | ) | (.82 | ) | (.22 | ) | (1.20 | ) | (2.22 | ) | ||||||||||
Net asset value, end of period | $ | 84.49 | $ | 104.66 | $ | 82.06 | $ | 88.28 | $ | 96.17 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (18.97 | %) | 28.60 | % | (5.58 | %) | (7.19 | %) | (12.49 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 2,687 | $ | 5,725 | $ | 2,553 | $ | 3,083 | $ | 3,304 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.67 | % | 0.26 | % | 1.70 | % | 0.63 | % | 1.14 | % | ||||||||||
Total expensesc | 1.78 | % | 1.80 | % | 1.73 | % | 1.66 | % | 1.75 | % | ||||||||||
Net expensesd | 1.77 | % | 1.80 | % | 1.73 | % | 1.66 | % | 1.75 | % | ||||||||||
Portfolio turnover rate | 187 | % | 121 | % | 441 | % | 620 | % | 401 | % |
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 reimbursements, as applicable. |
e | 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 NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT|61 |
PERFORMANCE REPORT AND FUND PROFILE(Unaudited) | December 31, 2018 |
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, 2018, 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 -22.95%, while the underlying index returned -10.35% over the same time period.
The sectors contributing the most to the return of the underlying index of the period were Consumer Staples and Health Care. The Industrials and the Information Technology sectors detracted the most from the performance of the underlying index for the period.
Stocks contributing most to return of the underlying index were Fast Retailing Co. Ltd., FamilyMart UNY Holdings Co. Ltd., and Terumo Corp. Those detracting most from performance of the underlying index were Fanuc Corp., SoftBank Group Corp., and Tokyo Electron Ltd.
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, 2018 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. 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.
Cumulative Fund Performance*,†
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 | 33.9% |
Guggenheim Ultra Short Duration Fund | 22.7% |
Total | 56.6% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Japan 2x Strategy Fund | (22.95%) | 3.62% | 8.57% |
Nikkei-225 Stock Average Index | (10.35%) | 3.18% | 6.34% |
* | 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 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, 2018 |
JAPAN 2x STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 56.6% | ||||||||
Guggenheim Strategy Fund II1 | 27,538 | $ | 683,491 | |||||
Guggenheim Ultra Short Duration Fund1,8 | 45,879 | 456,957 | ||||||
Total Mutual Funds | ||||||||
(Cost $1,138,133) | 1,140,448 | |||||||
Face | ||||||||
FEDERAL AGENCY NOTES†† - 14.9% | ||||||||
Federal Farm Credit Bank3 | ||||||||
2.45% (1 Month USD LIBOR -0.05%, Rate Floor: 0.00%) due 01/23/192 | $ | 100,000 | 99,998 | |||||
Freddie Mac7 | ||||||||
1.75% due 05/30/19 | 100,000 | 99,683 | ||||||
Farmer Mac3 | ||||||||
1.55% due 07/03/19 | 100,000 | 99,444 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $299,180) | 299,125 | |||||||
U.S. TREASURY BILLS†† - 4.8% | ||||||||
U.S. Treasury Bills | ||||||||
2.21% due 01/08/194,5 | 96,000 | 95,964 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $95,957) | 95,964 | |||||||
REPURCHASE AGREEMENTS††,6 - 33.3% | ||||||||
JPMorgan Chase & Co. | 396,342 | 396,342 | ||||||
Barclays Capital | 164,828 | 164,828 | ||||||
Bank of America Merrill Lynch | 109,885 | 109,885 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $671,055) | 671,055 | |||||||
Total Investments - 109.6% | ||||||||
(Cost $2,204,325) | $ | 2,206,592 | ||||||
Other Assets & Liabilities, net - (9.6)% | (193,547 | ) | ||||||
Total Net Assets - 100.0% | $ | 2,013,045 |
Futures Contracts | |||||||||||||
Description | Number of | Expiration | Notional | Value and | |||||||||
Currency Futures Contracts Purchased† | |||||||||||||
Japanese Yen Futures Contracts | 35 | Mar 2019 | $ | 4,014,938 | $ | 90,227 | |||||||
Equity Futures Contracts Purchased† | |||||||||||||
Nikkei-225 (CME) Index Equity Futures Contracts | 41 | Mar 2019 | 4,070,275 | (160,756 | ) |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Variable rate security. Rate indicated is the rate effective at December 31, 2018. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
3 | The issuer operates under a Congressional charter; its securities are neither issued nor guaranteed by the U.S. Government. |
4 | All or a portion of this security is pledged as futures collateral at December 31, 2018. |
5 | Rate indicated is the effective yield at the time of purchase. |
6 | Repurchase Agreements — See Note 6. |
7 | On September 7, 2008, the issuer was placed in conservatorship by the Federal Housing Finance Agency (FHFA). As conservator, the FHFA has full power to control the assets and operations of the firm. |
8 | Effective November 30, 2018, Guggenheim Strategy Fund I was also reorganized with and into the Guggenheim Ultra Short Duration Fund. |
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, 2018 |
JAPAN 2x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 1,140,448 | $ | — | $ | — | $ | 1,140,448 | ||||||||
Federal Agency Notes | — | 299,125 | — | 299,125 | ||||||||||||
U.S. Treasury Bills | — | 95,964 | — | 95,964 | ||||||||||||
Repurchase Agreements | — | 671,055 | — | 671,055 | ||||||||||||
Currency Futures Contracts** | 90,227 | — | — | 90,227 | ||||||||||||
Total Assets | $ | 1,230,675 | $ | 1,066,144 | $ | — | $ | 2,296,819 | ||||||||
| ||||||||||||||||
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Futures Contracts** | $ | 160,756 | $ | — | $ | — | $ | 160,756 |
** | This derivative is reported as unrealized appreciation/depreciation 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, 2018, there were no transfers between levels.
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Cash Management Funds”), each of which are 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, 2018, 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/1601445/000089180418000513/gug75569-ncsr.htm.
Transactions during the year ended December 31, 2018, in which the company is an “affiliated person”, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | Capital | |||||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 1,852,417 | $ | 1,561,317 | $ | (2,725,000 | ) | $ | (858) | $ | (4,385 | ) | $ | 683,491 | 27,538 | $ | 30,974 | $ | 353 | |||||||||||||||||
Guggenheim Ultra Short Duration Fund1 | 1,486,508 | 2,229,038 | (3,255,000 | ) | (255 | ) | (3,334 | ) | 456,957 | 45,879 | 28,679 | 404 | ||||||||||||||||||||||||
$ | 3,338,925 | $ | 3,790,355 | $ | (5,980,000 | ) | $ | (1,113 | ) | $ | (7,719 | ) | $ | 1,140,448 | $ | 59,653 | $ | 757 |
1 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT|65 |
JAPAN 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $395,137) | $ | 395,089 | ||
Investments in affiliated issuers, at value (cost $1,138,133) | 1,140,448 | |||
Repurchase agreements, at value (cost $671,055) | 671,055 | |||
Segregated cash with broker | 2,295 | |||
Receivables: | ||||
Variation margin on futures contracts | 8,043 | |||
Dividends | 1,993 | |||
Swap settlement | 1,839 | |||
Interest | 1,033 | |||
Total assets | 2,221,795 | |||
Liabilities: | ||||
Payable for: | ||||
Securities purchased | 202,101 | |||
Management fees | 996 | |||
Transfer agent and administrative fees | 368 | |||
Investor service fees | 368 | |||
Fund shares redeemed | 296 | |||
Portfolio accounting fees | 147 | |||
Trustees’ fees* | 38 | |||
Miscellaneous | 4,436 | |||
Total liabilities | 208,750 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 2,013,045 | ||
Net assets consist of: | ||||
Paid in capital | $ | 4,139,480 | ||
Total distributable earnings (loss) | (2,126,435 | ) | ||
Net assets | $ | 2,013,045 | ||
Capital shares outstanding | 32,311 | |||
Net asset value per share | $ | 62.30 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 59,653 | ||
Interest | 20,249 | |||
Total investment income | 79,902 | |||
Expenses: | ||||
Management fees | 25,608 | |||
Investor service fees | 8,536 | |||
Transfer agent and administrative fees | 8,536 | |||
Professional fees | 6,170 | |||
Portfolio accounting fees | 3,414 | |||
Trustees’ fees* | 944 | |||
Custodian fees | 519 | |||
Line of credit fees | 12 | |||
Miscellaneous | 336 | |||
Total expenses | 54,075 | |||
Less: | ||||
Expenses waived by Adviser | (109 | ) | ||
Net expenses | 53,966 | |||
Net investment income | 25,936 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 7 | |||
Investments in affiliated issuers | (1,113 | ) | ||
Distributions received from affiliated investment company shares | 757 | |||
Futures contracts | (440,653 | ) | ||
Net realized loss | (441,002 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (47 | ) | ||
Investments in affiliated issuers | (7,719 | ) | ||
Futures contracts | (246,144 | ) | ||
Net change in unrealized appreciation (depreciation) | (253,910 | ) | ||
Net realized and unrealized loss | (694,912 | ) | ||
Net decrease in net assets resulting from operations | $ | (668,976 | ) |
* | 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 | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | 25,936 | $ | (5,644 | ) | |||
Net realized gain (loss) on investments | (441,002 | ) | 1,508,664 | |||||
Net change in unrealized appreciation (depreciation) on investments | (253,910 | ) | 28,618 | |||||
Net increase (decrease) in net assets resulting from operations | (668,976 | ) | 1,531,638 | |||||
Distributions to shareholders | (556,668 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 31,061,412 | 16,175,572 | ||||||
Distributions reinvested | 556,668 | — | ||||||
Cost of shares redeemed | (33,993,486 | ) | (14,591,761 | ) | ||||
Net increase (decrease) from capital share transactions | (2,375,406 | ) | 1,583,811 | |||||
Net increase (decrease) in net assets | (3,601,050 | ) | 3,115,449 | |||||
Net assets: | ||||||||
Beginning of year | 5,614,095 | 2,498,646 | ||||||
End of year | $ | 2,013,045 | $ | 5,614,095 | ||||
Capital share activity: | ||||||||
Shares sold | 341,586 | 195,913 | ||||||
Shares issued from reinvestment of distributions | 6,993 | — | ||||||
Shares redeemed | (371,950 | ) | (177,480 | ) | ||||
Net increase (decrease) in shares | (23,371 | ) | 18,433 |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 100.82 | $ | 67.08 | $ | 61.65 | $ | 55.02 | $ | 171.68 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .70 | (.13 | ) | (.06 | ) | (.78 | ) | (1.68 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | (19.56 | ) | 33.87 | 5.49 | 7.41 | (16.58 | ) | |||||||||||||
Total from investment operations | (18.86 | ) | 33.74 | 5.43 | 6.63 | (18.26 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (19.66 | ) | — | — | — | (98.40 | ) | |||||||||||||
Total distributions | (19.66 | ) | — | — | — | (98.40 | ) | |||||||||||||
Net asset value, end of period | $ | 62.30 | $ | 100.82 | $ | 67.08 | $ | 61.65 | $ | 55.02 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (22.95 | %) | 50.30 | % | 8.86 | % | 12.00 | % | (15.41 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 2,013 | $ | 5,614 | $ | 2,499 | $ | 3,577 | $ | 2,608 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.76 | % | (0.15 | %) | (0.50 | %) | �� | (1.22 | %) | (1.39 | %) | |||||||||
Total expensesc | 1.58 | % | 1.83 | % | 1.56 | % | 1.50 | % | 1.59 | % | ||||||||||
Net expensesd | 1.58 | % | 1.83 | % | 1.56 | % | 1.50 | % | 1.59 | % | ||||||||||
Portfolio turnover rate | 180 | % | 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 | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | 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. |
68|THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE(Unaudited) | December 31, 2018 |
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, 2018, 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 11.82%, compared with a return of 4.40% for its benchmark, the underlying index.
Contributing the most to performance of the underlying index for the year were the Japanese Yen, Swiss Franc, and Swedish Krona. The Euro, Canadian Dollar, and British Pound detracted the most from performance.
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, 2018 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. 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.
Cumulative Fund Performance*,†
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 | 32.5% |
Guggenheim Ultra Short Duration Fund | 27.5% |
Total | 60.0% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Strengthening Dollar 2x Strategy Fund | 11.82% | 6.55% | (0.40%) |
U.S. Dollar Index | 4.40% | 3.74% | 1.69% |
* | 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, 2018 |
STRENGTHENING DOLLAR 2x STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 60.0% | ||||||||
Guggenheim Strategy Fund II1 | 44,811 | $ | 1,112,218 | |||||
Guggenheim Ultra Short Duration Fund1,9 | 94,540 | 941,620 | ||||||
Total Mutual Funds | ||||||||
(Cost $2,055,808) | 2,053,838 | |||||||
Face | ||||||||
FEDERAL AGENCY NOTES†† - 6.6% | ||||||||
Farmer Mac2 | ||||||||
1.55% due 07/03/19 | $ | 100,000 | 99,444 | |||||
Freddie Mac3 | ||||||||
1.75% due 05/30/19 | 75,000 | 74,762 | ||||||
Federal Farm Credit Bank2 | ||||||||
2.45% (1 Month USD LIBOR -0.05%, Rate Floor: 0.00%) due 01/23/194 | 50,000 | 49,999 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $224,253) | 224,205 | |||||||
U.S. TREASURY BILLS†† - 4.1% | ||||||||
U.S. Treasury Bills | ||||||||
2.21% due 01/08/195,6 | 140,000 | 139,948 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $139,938) | 139,948 | |||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 2.9% | ||||||||
Freddie Mac3 | ||||||||
2.25% due 01/03/196 | 100,000 | 99,993 | ||||||
Total Federal Agency Discount Notes | ||||||||
(Cost $99,988) | 99,993 | |||||||
REPURCHASE AGREEMENTS††,7 - 22.5% | ||||||||
JPMorgan Chase & Co. | 454,859 | 454,859 | ||||||
Barclays Capital | 189,163 | 189,163 | ||||||
Bank of America Merrill Lynch | 126,108 | 126,108 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $770,130) | 770,130 | |||||||
Total Investments - 96.1% | ||||||||
(Cost $3,290,117) | $ | 3,288,114 | ||||||
Other Assets & Liabilities, net - 3.9% | 132,167 | |||||||
Total Net Assets - 100.0% | $ | 3,420,281 |
Futures Contracts | |||||||||||||
Description | Number of | Expiration | Notional | Value and | |||||||||
Currency Futures Contracts Purchased† | |||||||||||||
U.S. Dollar Index Futures Contracts | 54 | Mar 2019 | $ | 5,168,070 | $ | (42,298 | ) |
Total Return Swap Agreements | ||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | |||||
OTC Currency Index Swap Agreements†† | ||||||||||||
Goldman Sachs International | U.S. Dollar Index | N/A | At Maturity | 03/20/19 | 16,788 | $ | 1,606,718 | $ | (9,676 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT|71 |
SCHEDULE OF INVESTMENTS(continued) | December 31, 2018 |
STRENGTHENING DOLLAR 2x STRATEGY FUND |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | 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 | 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 | Variable rate security. Rate indicated is the rate effective at December 31, 2018. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
5 | All or a portion of this security is pledged as futures collateral at December 31, 2018. |
6 | Rate indicated is the effective yield at the time of purchase. |
7 | Repurchase Agreements — See Note 6. |
8 | All or a portion of this security is pledged as currency index swap collateral at December 31, 2018. |
9 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
LIBOR — London Interbank Offered Rate | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 2,053,838 | $ | — | $ | — | $ | 2,053,838 | ||||||||
Federal Agency Notes | — | 224,205 | — | 224,205 | ||||||||||||
U.S. Treasury Bills | — | 139,948 | — | 139,948 | ||||||||||||
Federal Agency Discount Notes | — | 99,993 | — | 99,993 | ||||||||||||
Repurchase Agreements | — | 770,130 | — | 770,130 | ||||||||||||
Total Assets | $ | 2,053,838 | $ | 1,234,276 | $ | — | $ | 3,288,114 | ||||||||
| ||||||||||||||||
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Currency Futures Contracts** | $ | 42,298 | $ | — | $ | — | $ | 42,298 | ||||||||
Currency Index Swap Agreements** | — | 9,676 | — | 9,676 | ||||||||||||
Total Liabilities | $ | 42,298 | $ | 9,676 | $ | — | $ | 51,974 |
** | This derivative is reported as unrealized appreciation/depreciation 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, 2018, there were no transfers between levels.
72|THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS(concluded) | December 31, 2018 |
STRENGTHENING DOLLAR 2x STRATEGY FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Cash Management Funds”), each of which are 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, 2018, 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/1601445/000089180418000513/gug75569-ncsr.htm.
Transactions during the year ended December 31, 2018, in which the company is an “affiliated person”, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | Capital | |||||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 592,767 | $ | 2,775,256 | $ | (2,245,000 | ) | $ | (2,855 | ) | $ | (7,950 | ) | $ | 1,112,218 | 44,811 | $ | 29,321 | $ | 836 | ||||||||||||||||
Guggenheim Ultra Short Duration Fund1 | 486,103 | 2,588,659 | (2,125,000 | ) | (3,251 | ) | (4,891 | ) | 941,620 | 94,540 | 27,463 | 1,120 | ||||||||||||||||||||||||
$ | 1,078,870 | $ | 5,363,915 | $ | (4,370,000 | ) | $ | (6,106 | ) | $ | (12,841 | ) | $ | 2,053,838 | $ | 56,784 | $ | 1,956 |
1 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT|73 |
STRENGTHENING DOLLAR 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $464,179) | $ | 464,146 | ||
Investments in affiliated issuers, at value (cost $2,055,808) | 2,053,838 | |||
Repurchase agreements, at value (cost $770,130) | 770,130 | |||
Receivables: | ||||
Fund shares sold | 219,940 | |||
Dividends | 4,717 | |||
Interest | 974 | |||
Total assets | 3,513,745 | |||
Liabilities: | ||||
Unrealized depreciation on swap agreements | 9,676 | |||
Payable for: | ||||
Securities purchased | 54,948 | |||
Variation margin on futures contracts | 13,782 | |||
Management fees | 2,644 | |||
Fund shares redeemed | 1,564 | |||
Transfer agent and administrative fees | 810 | |||
Investor service fees | 810 | |||
Swap settlement | 443 | |||
Portfolio accounting fees | 324 | |||
Trustees’ fees* | 48 | |||
Miscellaneous | 8,415 | |||
Total liabilities | 93,464 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 3,420,281 | ||
Net assets consist of: | ||||
Paid in capital | $ | 4,423,990 | ||
Total distributable earnings (loss) | (1,003,709 | ) | ||
Net assets | $ | 3,420,281 | ||
Capital shares outstanding | 86,089 | |||
Net asset value per share | $ | 39.73 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 56,784 | ||
Interest | 19,450 | |||
Total investment income | 76,234 | |||
Expenses: | ||||
Management fees | 26,891 | |||
Investor service fees | 7,470 | |||
Transfer agent and administrative fees | 7,470 | |||
Professional fees | 3,401 | |||
Portfolio accounting fees | 2,988 | |||
Trustees’ fees* | 823 | |||
Custodian fees | 435 | |||
Line of credit fees | 3 | |||
Miscellaneous | 5,207 | |||
Total expenses | 54,688 | |||
Less: | ||||
Expenses waived by Adviser | (274 | ) | ||
Net expenses | 54,414 | |||
Net investment income | 21,820 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 10 | |||
Investments in affiliated issuers | (6,106 | ) | ||
Distributions received from affiliated investment company shares | 1,956 | |||
Swap agreements | 12,411 | |||
Futures contracts | 282,196 | |||
Net realized gain | 290,467 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (35 | ) | ||
Investments in affiliated issuers | (12,841 | ) | ||
Swap agreements | (5,896 | ) | ||
Futures contracts | (6,819 | ) | ||
Net change in unrealized appreciation (depreciation) | (25,591 | ) | ||
Net realized and unrealized gain | 264,876 | |||
Net increase in net assets resulting from operations | $ | 286,696 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
74|THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STRENGTHENING DOLLAR 2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | 21,820 | $ | (2,805 | ) | |||
Net realized gain (loss) on investments | 290,467 | (501,880 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | (25,591 | ) | (122,233 | ) | ||||
Net increase (decrease) in net assets resulting from operations | 286,696 | (626,918 | ) | |||||
Distributions to shareholders | — | (54,703 | )1 | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 22,522,330 | 12,652,905 | ||||||
Distributions reinvested | — | 54,703 | ||||||
Cost of shares redeemed | (21,125,360 | ) | (15,933,084 | ) | ||||
Net increase (decrease) from capital share transactions | 1,396,970 | (3,225,476 | ) | |||||
Net increase (decrease) in net assets | 1,683,666 | (3,907,097 | ) | |||||
Net assets: | ||||||||
Beginning of year | 1,736,615 | 5,643,712 | ||||||
End of year | $ | 3,420,281 | $ | 1,736,615 | ||||
Capital share activity: | ||||||||
Shares sold | 599,981 | 327,875 | ||||||
Shares issued from reinvestment of distributions | — | 1,446 | ||||||
Shares redeemed | (562,774 | ) | (408,989 | ) | ||||
Net increase (decrease) in shares | 37,207 | (79,668 | ) |
1 | For the year ended December 31, 2017, the total distributions to shareholders were all from net realized gains (See Note 11). |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT|75 |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 35.53 | $ | 43.90 | $ | 43.45 | $ | 42.19 | $ | 34.32 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .27 | (.04 | ) | (.23 | ) | (.55 | ) | (.47 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | 3.93 | (7.67 | ) | 2.96 | 6.09 | 8.34 | ||||||||||||||
Total from investment operations | 4.20 | (7.71 | ) | 2.73 | 5.54 | 7.87 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | — | (.66 | ) | (2.28 | ) | (4.28 | ) | — | ||||||||||||
Total distributions | — | (.66 | ) | (2.28 | ) | (4.28 | ) | — | ||||||||||||
Net asset value, end of period | $ | 39.73 | $ | 35.53 | $ | 43.90 | $ | 43.45 | $ | 42.19 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 11.82 | % | (17.65 | %) | 7.00 | % | 13.35 | % | 22.93 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 3,420 | $ | 1,737 | $ | 5,644 | $ | 3,303 | $ | 6,980 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.73 | % | (0.10 | %) | (0.57 | %) | (1.21 | %) | (1.24 | %) | ||||||||||
Total expensesc | 1.83 | % | 1.80 | % | 1.76 | % | 1.70 | % | 1.76 | % | ||||||||||
Net expensesd | 1.82 | % | 1.80 | % | 1.76 | % | 1.70 | % | 1.76 | % | ||||||||||
Portfolio turnover rate | 241 | % | 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 | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Reverse share split — Per share amounts for the period presented through January 24, 2014 has been restated to reflect a 1:3 reverse share split effective January 24, 2014. |
76|THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE(Unaudited) | December 31, 2018 |
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, 2018, 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 -11.63%, compared with a return of 4.40% for its benchmark, the underlying index.
Contributing the most to performance of the underlying index for the year were the Japanese Yen, Swiss Franc, and Swedish Krona. The Euro, Canadian Dollar, and British Pound detracted the most from performance.
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 | 77 |
PERFORMANCE REPORT AND FUND PROFILE(Unaudited)(concluded) | December 31, 2018 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. 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.
Cumulative Fund Performance*,†
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 | 36.4% |
Guggenheim Ultra Short Duration Fund | 22.8% |
Total | 59.2% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Average Annual Returns*,†
Periods Ended December 31, 2018
| 1 Year | 5 Year | 10 Year |
Weakening Dollar 2x Strategy Fund | (11.63%) | (8.97%) | (5.08%) |
U.S. Dollar Index | 4.40% | 3.74% | 1.69% |
* | 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. |
78 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2018 |
WEAKENING DOLLAR 2x STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 59.2% | ||||||||
Guggenheim Strategy Fund II1 | 8,548 | $ | 212,172 | |||||
Guggenheim Ultra Short Duration Fund1,9 | 13,315 | 132,622 | ||||||
Total Mutual Funds | ||||||||
(Cost $343,231) | 344,794 | |||||||
Face | ||||||||
FEDERAL AGENCY NOTES†† - 12.9% | ||||||||
Federal Farm Credit Bank7 | ||||||||
2.45% (1 Month USD LIBOR 0.05%, Rate Floor: 0.00%) due 01/23/192 | $ | 50,000 | 49,999 | |||||
Freddie Mac8 | ||||||||
1.75% due 05/30/19 | 25,000 | 24,921 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $74,932) | 74,920 | |||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 4.3% | ||||||||
Freddie Mac8 | ||||||||
2.25% due 01/03/193 | 25,000 | 24,998 | ||||||
Total Federal Agency Discount Notes | ||||||||
(Cost $24,997) | 24,998 | |||||||
U.S. TREASURY BILLS†† - 1.7% | ||||||||
U.S. Treasury Bills | ||||||||
2.21% due 01/08/193,4 | 10,000 | 9,996 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $9,995) | 9,996 | |||||||
REPURCHASE AGREEMENTS††,5 - 26.8% | ||||||||
JPMorgan Chase & Co. | 92,083 | 92,083 | ||||||
Barclays Capital | 38,295 | 38,295 | ||||||
Bank of America Merrill Lynch | 25,530 | 25,530 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $155,908) | 155,908 | |||||||
Total Investments - 104.9% | ||||||||
(Cost $609,063) | $ | 610,616 | ||||||
Other Assets & Liabilities, net - (4.9)% | (28,745 | ) | ||||||
Total Net Assets - 100.0% | $ | 581,871 |
Futures Contracts | |||||||||||||
Description | Number of | Expiration | Notional | Value and | |||||||||
Currency Futures Contracts Sold Short† | |||||||||||||
U.S. Dollar Index Futures Contracts | 7 | Mar 2019 | $ | 669,935 | $ | 5,546 |
Total Return Swap Agreements | ||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | |||||
OTC Currency Index Swap Agreements Sold Short†† | ||||||||||||
Goldman Sachs International | U.S. Dollar Index | N/A | At Maturity | 03/20/19 | 5,159 | $ | 493,771 | $ | 4,038 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT|79 |
SCHEDULE OF INVESTMENTS(continued) | December 31, 2018 |
WEAKENING DOLLAR 2x STRATEGY FUND |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Variable rate security. Rate indicated is the rate effective at December 31, 2018. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | All or a portion of this security is pledged as futures collateral at December 31, 2018. |
5 | Repurchase Agreements — See Note 6. |
6 | All or a portion of this security is pledged as currency index swap collateral at December 31, 2018. |
7 | The issuer operates under a Congressional charter; its securities are neither issued nor guaranteed by the U.S. Government. |
8 | 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. |
9 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
LIBOR — London Interbank Offered Rate | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2018 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 344,794 | $ | — | $ | — | $ | 344,794 | ||||||||
Federal Agency Notes | — | 74,920 | — | 74,920 | ||||||||||||
Federal Agency Discount Notes | — | 24,998 | — | 24,998 | ||||||||||||
U.S. Treasury Bills | — | 9,996 | — | 9,996 | ||||||||||||
Repurchase Agreements | — | 155,908 | — | 155,908 | ||||||||||||
Currency Futures Contracts** | 5,546 | — | — | 5,546 | ||||||||||||
Currency Index Swap Agreements** | — | 4,038 | — | 4,038 | ||||||||||||
Total Assets | $ | 350,340 | $ | 269,860 | $ | — | $ | 620,200 |
** | This derivative is reported as unrealized appreciation/depreciation 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, 2018, there were no transfers between levels.
80|THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS(concluded) | December 31, 2018 |
WEAKENING DOLLAR 2x STRATEGY FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Cash Management Funds”), each of which are 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, 2018, 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/1601445/000089180418000513/gug75569-ncsr.htm.
Transactions during the year ended December 31, 2018, in which the company is an “affiliated person”, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | Capital | |||||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 236,637 | $ | 402,280 | $ | (425,000 | ) | $ | 386 | $ | (2,131 | ) | $ | 212,172 | 8,548 | $ | 7,150 | $ | 116 | |||||||||||||||||
Guggenheim Ultra Short Duration Fund1 | 187,101 | 636,699 | (690,000 | ) | (320 | ) | (858 | ) | 132,622 | 13,315 | 6,535 | 158 | ||||||||||||||||||||||||
$ | 423,738 | $ | 1,038,979 | $ | (1,115,000 | ) | $ | 66 | $ | (2,989 | ) | $ | 344,794 | $ | 13,685 | $ | 274 |
1 | Effective November 30, 2018, Guggenheim Strategy Fund I was reorganized with and into the Guggenheim Ultra Short Duration Fund. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT|81 |
WEAKENING DOLLAR 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2018 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $109,924) | $ | 109,914 | ||
Investments in affiliated issuers, at value (cost $343,231) | 344,794 | |||
Repurchase agreements, at value (cost $155,908) | 155,908 | |||
Segregated cash with broker | 1,605 | |||
Unrealized appreciation on swap agreements | 4,038 | |||
Receivables: | ||||
Fund shares sold | 15,652 | |||
Variation margin on futures contracts | 1,820 | |||
Dividends | 664 | |||
Swap settlement | 604 | |||
Interest | 81 | |||
Total assets | 635,080 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 49,537 | |||
Securities purchased | 704 | |||
Management fees | 436 | |||
Transfer agent and administrative fees | 131 | |||
Investor service fees | 131 | |||
Portfolio accounting fees | 53 | |||
Trustees’ fees* | 13 | |||
Miscellaneous | 2,204 | |||
Total liabilities | 53,209 | |||
Commitments and contingent liabilities (Note 13) | — | |||
Net assets | $ | 581,871 | ||
Net assets consist of: | ||||
Paid in capital | $ | 1,984,227 | ||
Total distributable earnings (loss) | (1,402,356 | ) | ||
Net assets | $ | 581,871 | ||
Capital shares outstanding | 9,769 | |||
Net asset value per share | $ | 59.56 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2018 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 13,685 | ||
Interest | 5,187 | |||
Total investment income | 18,872 | |||
Expenses: | ||||
Management fees | 7,005 | |||
Investor service fees | 1,946 | |||
Transfer agent and administrative fees | 1,946 | |||
Portfolio accounting fees | 779 | |||
Professional fees | 726 | |||
Trustees’ fees* | 223 | |||
Custodian fees | 117 | |||
Line of credit fees | 2 | |||
Miscellaneous | 1,394 | |||
Total expenses | 14,138 | |||
Less: | ||||
Expenses waived by Adviser | (38 | ) | ||
Net expenses | 14,100 | |||
Net investment income | 4,772 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in affiliated issuers | 66 | |||
Distributions received from affiliated investment company shares | 274 | |||
Swap agreements | (29,256 | ) | ||
Futures contracts | (91,226 | ) | ||
Net realized loss | (120,142 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (12 | ) | ||
Investments in affiliated issuers | (2,989 | ) | ||
Swap agreements | (2,002 | ) | ||
Futures contracts | (5,576 | ) | ||
Net change in unrealized appreciation (depreciation) | (10,579 | ) | ||
Net realized and unrealized loss | (130,721 | ) | ||
Net decrease in net assets resulting from operations | $ | (125,949 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
82|THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
WEAKENING DOLLAR 2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | 4,772 | $ | (2,521 | ) | |||
Net realized loss on investments | (120,142 | ) | (3,141 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | (10,579 | ) | 25,310 | |||||
Net increase (decrease) in net assets resulting from operations | (125,949 | ) | 19,648 | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 5,364,653 | 13,687,425 | ||||||
Cost of shares redeemed | (5,435,766 | ) | (13,615,500 | ) | ||||
Net increase (decrease) from capital share transactions | (71,113 | ) | 71,925 | |||||
Net increase (decrease) in net assets | (197,062 | ) | 91,573 | |||||
Net assets: | ||||||||
Beginning of year | 778,933 | 687,360 | ||||||
End of year | $ | 581,871 | $ | 778,933 | ||||
Capital share activity: | ||||||||
Shares sold | 83,147 | 221,937 | ||||||
Shares redeemed | (84,935 | ) | (222,548 | ) | ||||
Net decrease in shares | (1,788 | ) | (611 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT|83 |
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 | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 67.40 | $ | 56.49 | $ | 61.90 | $ | 74.41 | $ | 95.30 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .40 | (.14 | ) | (.11 | ) | (.80 | ) | (1.28 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | (8.24 | ) | 11.05 | (5.30 | ) | (11.71 | ) | (19.61 | ) | |||||||||||
Total from investment operations | (7.84 | ) | 10.91 | (5.41 | ) | (12.51 | ) | (20.89 | ) | |||||||||||
Net asset value, end of period | $ | 59.56 | $ | 67.40 | $ | 56.49 | $ | 61.90 | $ | 74.41 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (11.63 | %) | 19.31 | % | (8.71 | %) | (16.83 | %) | (21.91 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 582 | $ | 779 | $ | 687 | $ | 1,297 | $ | 1,209 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.61 | % | (0.22 | %) | (0.63 | %) | (1.22 | %) | (1.44 | %) | ||||||||||
Total expensesc | 1.82 | % | 1.80 | % | 1.76 | % | 1.71 | % | 1.76 | % | ||||||||||
Net expensesd | 1.81 | % | 1.80 | % | 1.76 | % | 1.71 | % | 1.76 | % | ||||||||||
Portfolio turnover rate | 213 | % | 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 | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | 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. |
84|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, 2018, 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 a fund’s securities and other assets, less all liabilities, by the number of outstanding shares of that 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 sale 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 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 | 85 |
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 their NAV.
Repurchase agreements are valued at amortized cost, provided such amounts approximate market value.
The value of futures contracts is accounted for using the unrealized appreciation or depreciation 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 appreciation or depreciation 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, subject to review and approval by the Valuation Committee, pursuant to methods established or ratified by the Board. Valuations in accordance with these methods are intended to reflect each security’s (or asset’s or liability’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 U.S. Treasury securities, 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 appreciation or depreciation. 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 appreciation or depreciation. Payments received or made as a result of an agreement or termination of an agreement are recognized as realized gains or losses.
(e) 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 gain or loss and unrealized appreciation or depreciation 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 appreciation or depreciation 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.
86 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS(continued) |
(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, 2018, 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 realized gains. The actual amounts of income, return of capital, and realized 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 2.40% at December 31, 2018.
(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 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
THE RYDEX FUNDS ANNUAL REPORT | 87 |
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 | $ | 6,641,289 | $ | — | ||||
Japan 2x Strategy Fund | Index exposure, Leverage, Liquidity | 11,429,600 | — | ||||||
Strengthening Dollar 2x Strategy Fund | Index exposure, Leverage, Liquidity | 4,698,173 | — | ||||||
Weakening Dollar 2x Strategy Fund | Index exposure, Leverage, Liquidity | — | 1,185,534 |
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 exchange-traded futures contracts. 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. 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.
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 | $ | 854,555 | $ | — | ||||
Weakening Dollar 2x Strategy Fund | Index exposure, Leverage, Liquidity | — | 225,081 |
88 | 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, 2018:
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, 2018:
Asset Derivative Investments Value | ||||||||||||||||
Fund | Futures | Futures | Swaps | Total Value at | ||||||||||||
Europe 1.25x Strategy Fund | $ | — | $ | 12,771 | $ | — | $ | 12,771 | ||||||||
Japan 2x Strategy Fund | — | 90,227 | — | 90,227 | ||||||||||||
Weakening Dollar 2x Strategy Fund | — | 5,546 | 4,038 | 9,584 |
Liability Derivative Investments Value | ||||||||||||||||
Fund | Futures | Futures | Swaps | Total Value at | ||||||||||||
Europe 1.25x Strategy Fund | $ | 18,901 | $ | — | $ | — | $ | 18,901 | ||||||||
Japan 2x Strategy Fund | 160,756 | — | — | 160,756 | ||||||||||||
Strengthening Dollar 2x Strategy Fund | — | 42,298 | 9,676 | 51,974 |
* | 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, 2018:
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, 2018:
Realized Gain (Loss) on Derivative Investments Recognized on the Statements of Operations | ||||||||||||||||
Fund | Futures | Futures | Swaps | Total | ||||||||||||
Europe 1.25x Strategy Fund | $ | (387,950 | ) | $ | (307,304 | ) | $ | — | $ | (695,254 | ) | |||||
Japan 2x Strategy Fund | (778,306 | ) | 337,653 | — | (440,653 | ) | ||||||||||
Strengthening Dollar 2x Strategy Fund | — | 282,196 | 12,411 | 294,607 | ||||||||||||
Weakening Dollar 2x Strategy Fund | — | (91,226 | ) | (29,256 | ) | (120,482 | ) |
THE RYDEX FUNDS ANNUAL REPORT | 89 |
NOTES TO FINANCIAL STATEMENTS(continued) |
Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized on the Statements of Operations | ||||||||||||||||
Fund | Futures | Futures | Swaps | Total | ||||||||||||
Europe 1.25x Strategy Fund | $ | 19,192 | $ | (37,128 | ) | $ | — | $ | (17,936 | ) | ||||||
Japan 2x Strategy Fund | (296,855 | ) | 50,711 | — | (246,144 | ) | ||||||||||
Strengthening Dollar 2x Strategy Fund | — | (6,819 | ) | (5,896 | ) | (12,715 | ) | |||||||||
Weakening Dollar 2x Strategy Fund | — | (5,576 | ) | (2,002 | ) | (7,578 | ) |
In conjunction with the use of derivative instruments, the Funds are required to maintain collateral in various forms. Depending on the financial instrument utilized and the broker involved, the Funds use margin deposits at the broker, cash and/or securities segregated at the custodian bank, discount notes or 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. Cash and/or securities pledged or received as collateral by the Funds in connection with an OTC derivative subject to an ISDA Master Agreement generally may not be invested, sold or rehypothecated by the counterparty or the Funds, as applicable, absent an event of default under such agreement, in which case such collateral generally may be applied towards obligations due to and payable by such counterparty or the Funds, as applicable. 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.
90 | 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 | |||||||||||||||||||||||||
Fund | Instrument | Gross | Gross | Net Amount | Financial | Cash | Net | ||||||||||||||||||
Weakening Dollar 2x Strategy Fund | Swap currency contracts | $ | 4,038 | $ | — | $ | 4,038 | $ | — | $ | — | $ | 4,038 |
Gross Amounts Not Offset | |||||||||||||||||||||||||
Fund | Instrument | Gross | Gross | Net Amount | Financial | Cash | Net | ||||||||||||||||||
Strengthening Dollar 2x Strategy Fund | Swap currency contracts | $ | 9,676 | $ | — | $ | 9,676 | $ | — | $ | — | $ | 9,676 |
1 | Exchange-traded futures are excluded from these reported amounts. |
The Funds have the right to offset deposits against any related derivative liabilities outstanding with each counterparty with the exception of exchange traded or centrally cleared derivatives. The following table presents deposits held by others in connection with derivative investments as of December 31, 2018.
Fund | Counterparty | Asset Type | Cash Pledged | Cash Received | ||||||
Japan 2x Strategy Fund | Goldman Sachs Group | Futures contracts | $ | 2,295 | $ | — | ||||
Weakening Dollar 2x Strategy Fund | Goldman Sachs Group | Futures contracts | 1,605 | — |
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 RYDEX FUNDS ANNUAL REPORT | 91 |
NOTES TO FINANCIAL STATEMENTS(continued) |
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 |
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 a fund that is advised by the same adviser or an affiliated adviser, the investing Fund’s adviser has agreed to waive fees at the investing fund level to the extent necessary to offset the proportionate share of any management fee paid by each Fund with respect to its investment in such affiliated fund. 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, 2018, the Europe 1.25x Strategy Fund, Japan 2x Strategy Fund, Strengthening Dollar 2x Strategy Fund and Weakening Dollar 2x Strategy Fund waived $179, $109, $274 and $38, respectively, related to investments in affiliated funds.
Certain officers of the Trust are also officers of GI and/or GFD. The Trust does not compensate its officers or trustees who are officers, directors and/or employees of GI or 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. 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 each Fund’s average daily net assets and out of pocket expenses.
92 | 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, 2018, the repurchase agreements in the joint account were as follows:
Counterparty and | Face Value | Repurchase Price |
| Collateral | Par Value | Fair Value | ||||||||||||
JP Morgan Chase & Co. | U.S. Treasury Note | |||||||||||||||||
2.95% | 1.13% | |||||||||||||||||
Due 01/02/19 | $ | 54,122,377 | $ | 54,131,247 | 06/30/21 | $ | 57,040,000 | $ | 55,203,996 | |||||||||
U.S. Treasury Bill | ||||||||||||||||||
0.00% | ||||||||||||||||||
01/03/19 | 900 | 900 | ||||||||||||||||
57,040,900 | 55,204,896 | |||||||||||||||||
Barclays Capital | U.S. Treasury Note | |||||||||||||||||
2.93% | 2.50% | |||||||||||||||||
Due 01/02/19 | 22,507,947 | 22,511,611 | 05/15/24 | 22,942,600 | 22,958,127 | |||||||||||||
Bank of America Merrill Lynch | U.S. Treasury Strip | |||||||||||||||||
2.95% | 0.00% | |||||||||||||||||
Due 01/02/19 | 15,005,298 | 15,007,757 | 08/15/31 | 22,092,096 | 15,305,404 |
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 | 93 |
NOTES TO FINANCIAL STATEMENTS(continued) |
At December 31, 2018, the Funds participated in securities lending transactions, which are subject to enforceable netting arrangements, as follows:
Gross Amounts Not Offset in the | Securities Lending Collateral | ||||||||||||||||||||||||
Fund | Value of | Collateral | Net | Cash | Cash | Total | |||||||||||||||||||
S&P MidCap 400® Pure Growth Fund | $ | 16,561 | $ | (16,561 | ) | $ | — | $ | 15,915 | $ | 2,693 | $ | 18,608 | ||||||||||||
S&P MidCap 400® Pure Value Fund | 146,071 | (146,071 | ) | — | 125,841 | 21,296 | 147,137 | ||||||||||||||||||
S&P SmallCap 600® Pure Growth Fund | 56,122 | (56,122 | ) | — | 50,084 | 8,476 | 58,560 | ||||||||||||||||||
S&P SmallCap 600® Pure Value Fund | 76,068 | (76,068 | ) | — | 72,895 | 12,336 | 85,231 | ||||||||||||||||||
Europe 1.25x Strategy Fund | 3,663 | (3,663 | ) | — | 3,246 | 549 | 3,795 |
(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, 2018 was as follows:
Fund | Ordinary | Long-Term | Total | |||||||||
S&P 500® Pure Growth Fund | $ | 2,314,070 | $ | 1,894,330 | $ | 4,208,400 | ||||||
S&P 500® Pure Value Fund | 1,352,538 | 1,769,311 | 3,121,849 | |||||||||
S&P MidCap 400® Pure Growth Fund | 1,253,366 | 295,683 | 1,549,049 | |||||||||
S&P MidCap 400® Pure Value Fund | 389,206 | 1,523,738 | 1,912,944 | |||||||||
S&P SmallCap 600® Pure Growth Fund | — | 549,379 | 549,379 | |||||||||
Europe 1.25x Strategy Fund | 15,264 | — | 15,264 | |||||||||
Japan 2x Strategy Fund | 248,466 | 308,202 | 556,668 |
94 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS(continued) |
The tax character of distributions paid during the year ended December 31, 2017 was as follows:
Fund | Ordinary | Long-Term | Total | |||||||||
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 |
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, 2018 were as follows:
Fund | Undistributed | Undistributed | Net Unrealized | Accumulated | Other | Total | ||||||||||||||||||
S&P 500® Pure Growth Fund | $ | — | $ | 893,907 | $ | 4,027,150 | $ | — | — | $ | 4,921,057 | |||||||||||||
S&P 500® Pure Value Fund | 285,841 | 392,845 | (2,698,936 | ) | — | — | (2,020,250 | ) | ||||||||||||||||
S&P MidCap 400® Pure Growth Fund | — | — | 394,260 | (970,497 | ) | — | (576,237 | ) | ||||||||||||||||
S&P MidCap 400® Pure Value Fund | — | — | (479,308 | ) | (485,787 | ) | — | (965,095 | ) | |||||||||||||||
S&P SmallCap 600® Pure Growth Fund | — | — | 1,239,488 | (1,657,272 | ) | — | (417,784 | ) | ||||||||||||||||
S&P SmallCap 600® Pure Value Fund | 28,502 | — | (1,544,442 | ) | (2,195,918 | ) | 3,650 | (3,708,208 | ) | |||||||||||||||
Europe 1.25x Strategy Fund | 73,573 | — | (120,267 | ) | (1,514,670 | ) | — | (1,561,364 | ) | |||||||||||||||
Japan 2x Strategy Fund | 25,936 | — | 2,258 | (2,154,629 | ) | — | (2,126,435 | ) | ||||||||||||||||
Strengthening Dollar 2x Strategy Fund | 21,820 | — | (8,156 | ) | (1,017,373 | ) | — | (1,003,709 | ) | |||||||||||||||
Weakening Dollar 2x Strategy Fund | 4,772 | — | 1,242 | (1,408,370 | ) | — | (1,402,356 | ) |
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. 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, 2018, capital loss carryforwards for the Funds were as follows:
Unlimited | Total | |||||||||||
Fund | Short-Term | Long-Term | Carryforward | |||||||||
S&P MidCap 400® Pure Growth Fund | $ | (970,497 | ) | $ | — | $ | (970,497 | ) | ||||
S&P MidCap 400® Pure Value Fund | (374,861 | ) | (110,926 | ) | (485,787 | ) | ||||||
S&P SmallCap 600® Pure Growth Fund | (1,657,272 | ) | — | (1,657,272 | ) | |||||||
S&P SmallCap 600® Pure Value Fund | (1,803,392 | ) | (392,526 | ) | (2,195,918 | ) | ||||||
Europe 1.25x Strategy Fund | (964,978 | ) | (549,692 | ) | (1,514,670 | ) | ||||||
Japan 2x Strategy Fund | (865,390 | ) | (1,289,239 | ) | (2,154,629 | ) | ||||||
Strengthening Dollar 2x Strategy Fund | (409,333 | ) | (608,040 | ) | (1,017,373 | ) | ||||||
Weakening Dollar 2x Strategy Fund | (580,812 | ) | (827,558 | ) | (1,408,370 | ) |
THE RYDEX FUNDS ANNUAL REPORT | 95 |
NOTES TO FINANCIAL STATEMENTS(continued) |
For the year ended December 31, 2018, the following capital loss carryforward amounts expired or were utilized:
Fund | Expired | Utilized | Total | |||||||||
Europe 1.25x Strategy Fund | $ | 1,734,902 | $ | — | $ | 1,734,902 | ||||||
Strengthening Dollar 2x Strategy Fund | — | 281,051 | 281,051 |
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 certain derivatives. Additional differences may result from the tax treatment of net operating losses and the expiration of capital loss carryforward amounts and the “mark-to-market” for certain derivatives. To the extent these differences are permanent and would require a reclassification between Paid in Capital and Total Distributable Earnings (Loss), such reclassifications are made 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, 2018 for permanent book/tax differences:
Fund | Paid In | Total | ||||||
S&P 500® Pure Growth Fund | $ | 568,292 | $ | (568,292 | ) | |||
S&P 500® Pure Value Fund | 831,721 | (831,721 | ) | |||||
S&P MidCap 400® Pure Growth Fund | (143,014 | ) | 143,014 | |||||
S&P MidCap 400® Pure Value Fund | (2,158 | ) | 2,158 | |||||
S&P SmallCap 600® Pure Growth Fund | (241,938 | ) | 241,938 | |||||
S&P SmallCap 600® Pure Value Fund | (15,594 | ) | 15,594 | |||||
Europe 1.25x Strategy Fund | (1,734,902 | ) | 1,734,902 |
At December 31, 2018, the cost of securities for Federal income tax purposes, the aggregate gross unrealized appreciation for all securities for which there was an excess of value over tax cost and the aggregate gross unrealized depreciation for all securities for which there was an excess of tax cost over value, were as follows:
Fund | Tax | Tax | Tax | Net | ||||||||||||
S&P 500® Pure Growth Fund | $ | 37,910,312 | $ | 4,285,708 | $ | (258,558 | ) | $ | 4,027,150 | |||||||
S&P 500® Pure Value Fund | 35,899,355 | 26,320 | (2,725,256 | ) | (2,698,936 | ) | ||||||||||
S&P MidCap 400® Pure Growth Fund | 13,791,440 | 792,065 | (397,805 | ) | 394,260 | |||||||||||
S&P MidCap 400® Pure Value Fund | 9,611,770 | 545,397 | (1,024,705 | ) | (479,308 | ) | ||||||||||
S&P SmallCap 600® Pure Growth Fund | 15,790,171 | 1,419,148 | (179,660 | ) | 1,239,488 | |||||||||||
S&P SmallCap 600® Pure Value Fund | 10,069,151 | 50,416 | (1,594,858 | ) | (1,544,442 | ) | ||||||||||
Europe 1.25x Strategy Fund | 2,855,850 | — | (120,242 | ) | (120,242 | ) | ||||||||||
Japan 2x Strategy Fund | 2,204,334 | 117,895 | (115,637 | ) | 2,258 | |||||||||||
Strengthening Dollar 2x Strategy Fund | 3,296,270 | 93 | (8,249 | ) | (8,156 | ) | ||||||||||
Weakening Dollar 2x Strategy Fund | 609,374 | 1,256 | (14 | ) | 1,242 |
96 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS(continued) |
Note 9 – Securities Transactions
For the year ended December 31, 2018, 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 | $ | 109,992,068 | $ | 119,995,841 | ||||
S&P 500® Pure Value Fund | 73,816,074 | 78,683,147 | ||||||
S&P MidCap 400® Pure Growth Fund | 37,618,410 | 41,347,772 | ||||||
S&P MidCap 400® Pure Value Fund | 18,526,137 | 24,526,206 | ||||||
S&P SmallCap 600® Pure Growth Fund | 73,029,346 | 73,179,736 | ||||||
S&P SmallCap 600® Pure Value Fund | 29,848,528 | 36,200,292 | ||||||
Europe 1.25x Strategy Fund | 7,393,579 | 10,309,367 | ||||||
Japan 2x Strategy Fund | 3,790,354 | 5,980,000 | ||||||
Strengthening Dollar 2x Strategy Fund | 5,363,916 | 4,370,000 | ||||||
Weakening Dollar 2x Strategy Fund | 1,038,978 | 1,115,000 |
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. 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, 2018, the Funds engaged in purchases and sales of securities, pursuant to Rule 17a-7 of the 1940 Act, as follows:
Fund | Purchases | Sales | Realized | |||||||||
S&P 500® Pure Growth Fund | $ | 23,199,269 | $ | 28,505,560 | $ | (339,099 | ) | |||||
S&P 500® Pure Value Fund | 17,939,230 | 21,175,103 | (362,884 | ) | ||||||||
S&P MidCap 400® Pure Growth Fund | 2,752,875 | 4,123,523 | (369,749 | ) | ||||||||
S&P MidCap 400® Pure Value Fund | 2,305,626 | 3,385,614 | (115,157 | ) | ||||||||
S&P SmallCap 600® Pure Growth Fund | 9,919,834 | 8,163,833 | (312,085 | ) | ||||||||
S&P SmallCap 600® Pure Value Fund | 4,671,961 | 4,677,363 | 58,044 | |||||||||
Europe 1.25x Strategy Fund | 4,342,276 | 6,076,345 | (63,870 | ) |
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 9, 2019. 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 2.91% for the year ended December 31, 2018. The Funds did not have any borrowings outstanding under this agreement at December 31, 2018.
The average daily balances borrowed for the year ended December 31, 2018, were as follows:
Fund | Average Daily Balance | |||
S&P 500® Pure Growth Fund | $ | 4,460 | ||
S&P 500® Pure Value Fund | 2,353 | |||
S&P MidCap 400® Pure Growth Fund | 1,085 | |||
S&P MidCap 400® Pure Value Fund | 290 | |||
S&P SmallCap 600® Pure Growth Fund | 2,907 | |||
S&P SmallCap 600® Pure Value Fund | 668 | |||
Europe 1.25x Strategy Fund | 2,310 | |||
Japan 2x Strategy Fund | 375 | |||
Strengthening Dollar 2x Strategy Fund | 77 | |||
Weakening Dollar 2x Strategy Fund | 68 |
THE RYDEX FUNDS ANNUAL REPORT | 97 |
NOTES TO FINANCIAL STATEMENTS(continued) |
Note 11 – Recent Regulatory Reporting Updates
In August 2018, the U.S. Securities and Exchange Commission adopted amendments to certain disclosure requirements under Regulation S-X to conform to U.S. GAAP, including: (i) an amendment to require presentation of the total, rather than the components, of distributable earnings on the Statements of Assets and Liabilities; and (ii) an amendment to require presentation of the total, rather than the components, of distributions to shareholders, except for tax return of capital distributions, on the Statements of Changes in Net Assets.
As of December 31, 2018, management has implemented the amendments to Regulation S-X, which did not have a material impact on the Funds’ financial statements and related disclosures nor did it impact the Funds’ net assets or results of operations.
Note 12 – Recent Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (the “ASU”) which adds, modifies and removes disclosure requirements related to certain aspects of fair value measurement. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. At this time, management is evaluating the implications of these changes on the financial statements.
Note 13 – 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 entitledKirschner v. FitzSimons, No. 12-2652 (S.D.N.Y.) (formerlyOfficial 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.
TheFitzSimons action and the SLCFC actions have been consolidated with the majority of the other Tribune LBO-related lawsuits in a multidistrict litigation proceeding captionedIn 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 rehearingen 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. On April 3, 2018, Justice Kennedy and Justice Thomas issued a “Statement” related to the petition for certiorari suggesting that the Second Circuit and/or District Court may want to take steps to reexamine the application of the Section 546(e) safe harbor to the previously dismissed state law constructive fraudulent transfer claims based on the Supreme Court’s decision inMerit Management Group LP v. FTI Consulting, Inc.On April 10, 2018, Plaintiffs filed in the Second Circuit a motion for that court to recall its mandate, vacate its prior decision, and remand to the district court for further proceedings consistent with Merit Management. On April 20, 2018, the shareholder defendants filed an opposition to Plaintiffs’ motion to recall the mandate. On May 15, 2018, the Second Circuit issued an order recalling the mandate “in anticipation of further panel review.”
98 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS(concluded) |
On May 23, 2014, the defendants filed motions to dismiss theFitzSimons 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 theFitzSimons 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. On March 8, 2018, the plaintiff renewed his request for leave to file a motion to amend the complaint to assert a constructive fraudulent transfer claim based on the Supreme Court’s ruling inMerit Management Group LP v. FTI Consulting, Inc. The shareholder defendants opposed that request. On June 18, 2018 the District Court ordered that the request would be stayed pending further action by the Second Circuit in the SLCFC actions.
On December 18, 2018, plaintiff filed a letter with the District Court requesting that the stay be dissolved in order to permit briefing on the motion to amend the complaint and indicating plaintiff’s intention to file another motion to amend the complaint to reinstate claims for intentional fraudulent transfer. The shareholder defendants opposed that request. On January 14, 2019, the court held a case management conference, during which the court stated that it would not lift the stay prior to further action from the Second Circuit in the SLCFC actions. The court further stated that it would allow the plaintiff to file a motion to amend to try to reinstate its intentional fraudulent transfer claim. The plaintiff has not yet filed any such motion. On January 23, 2019, the court ordered the parties still facing pending claims to participate in a mediation, to commence on January 28, 2019.
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.
Note 14 – Subsequent Events
The Funds evaluated subsequent events through the date the financial statements were available for issue and determined there were no additional material events that would require adjustment to or disclosure in the Funds’ financial statements.
THE RYDEX FUNDS ANNUAL REPORT | 99 |
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, 2018, 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, 2018, 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, 2018, by correspondence with the custodian, transfer agent, 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 26, 2019
100 | 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 2019, 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 2018.
The Funds’ investment income (dividend income plus short-term gains, if any) qualifies as follows:
Of the taxable ordinary income distributions paid during the fiscal year ended December 31, 2018, the following Funds had the corresponding percentages qualify for the dividends received deduction for corporations.
Fund | Dividend | |||
S&P 500® Pure Growth Fund | 11.04 | % | ||
S&P 500® Pure Value Fund | 52.32 | % | ||
S&P MidCap 400® Pure Growth Fund | 9.81 | % | ||
S&P MidCap 400® Pure Value Fund | 51.87 | % |
With respect to the taxable year ended December 31, 2018, 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 | From long-term capital | ||||||
S&P 500® Pure Growth Fund | $ | 1,894,330 | $ | 1,043,291 | ||||
S&P 500® Pure Value Fund | 1,769,311 | 820,481 | ||||||
S&P MidCap 400® Pure Growth Fund | 295,683 | — | ||||||
S&P MidCap 400® Pure Value Fund | 1,523,738 | — | ||||||
S&P SmallCap 600® Pure Growth Fund | 549,379 | — | ||||||
Japan 2x Strategy Fund | 308,202 | — |
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.
THE RYDEX FUNDS ANNUAL REPORT | 101 |
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.
102 | 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 | Position(s) Held with the | Principal Occupation(s) | Number of | Other |
INDEPENDENT TRUSTEES | ||||
Angela Brock-Kyle (1959) | Trustee, Member of the Audit Committee and Member of the Governance and Nominating Committee (2017-present). | Current: Founder and Chief Executive Officer, B.O.A.R.D.S (consulting firm)
Former: Senior Leader, TIAA (financial services firm) (1987-2012). | 109 | None. |
Corey A. Colehour (1945) | Trustee (1993-present); Member of the Audit Committee (1994-present); Member of the Governance and Nominating Committee (2017-present). | Retired. | 109 | None. |
J. Kenneth Dalton (1941) | Trustee (1995-present); Chairman and Member of the Audit Committee (1997-present); and Member of the Governance and Nominating Committee (2018-present). | Retired. | 109 | Epiphany Funds (2) (2009-present). |
Thomas F. Lydon, Jr. (1960) | Trustee, Member of the Audit Committee (2005-present); Chairman and Member of the Governance and Nominating Committee (2017-present). | Current: President, Global Trends Investments (registered investment adviser) (1996-present). | 109 | US Global Investors (GROW) (1995-present) and Harvest Volatility Edge Trust (3) (2017-present). |
Sandra G. Sponem (1958) | Trustee, Chairwoman and Member of the Audit Committee, (2016-present); and Member of the Governance and Nominating Committee (2017-present). | Retired.
Former: Senior Vice President and Chief Financial Officer, M.A. Mortenson Companies, Inc. (general contracting firm) (2007-2017). | 109 | SSGA Funds (125) (2018-present). |
THE RYDEX FUNDS ANNUAL REPORT | 103 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS(Unaudited)(continued) |
Name, Address* | Position(s) Held with the | Principal Occupation(s) |
OFFICERS | ||
Michael P. Byrum (1970) | Vice President (2000-present) | Current: Senior Vice President, Security Investors, LLC (2010-present); Senior Managing Director, Guggenheim Investments (2010-present); President and Chief Investment Officer, Rydex Holdings, LLC (2008-present) and Director and Chairman, Advisory Research Center, Inc. (2006-present).
Former: Manager, Guggenheim Specialized Products, LLC (2005-2018); 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 (2016-present) | 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 (2016-present) | Current: Treasurer and Assistant Treasurer, certain other funds in the Fund Complex (2010-present); Managing Director, Guggenheim Investments (2015-present).
Former: Chief Financial Officer, Guggenheim Specialized Products, LLC (2016-2018); 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 | President (2017-present) | Current: Interested Trustee, certain other funds in the Fund Complex (2018-present); President, certain other funds in the Fund Complex (2017-present); Chief Legal Officer, certain other funds in the Fund Complex (2014-present); Vice President, certain other funds in the Fund Complex (2007-present); Senior Managing Director, Guggenheim Investments (2012-present).
Former: Trustee (2018-February 2019); President and Chief Executive Officer, certain other funds in the Fund Complex (2017-2018); and Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004-2012). |
Mark E. Mathiasen (1978) | Secretary (2017-present) | Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present). |
Glenn McWhinnie (1969) | Assistant Treasurer (2016-present) | Current: Vice President, Guggenheim Investments (2009-present); Assistant Treasurer, certain other funds in the Fund Complex (2016-present). |
Michael P. Megaris (1984) | Assistant Secretary (2018-present) | Current: Assistant Secretary, certain other funds in the Fund Complex (2014-present); Director, Guggenheim Investments (2012-present). |
Elisabeth Miller (1968) | Chief Compliance Officer (2012-present) | Current: Chief Compliance Officer, certain other funds in the Fund Complex (2012-present); Managing Director, Guggenheim Investments (2012-present); Vice President, Guggenheim Funds Distributors, LLC (2014-present).
Former: Chief Compliance Officer, Security Investors, LLC (2012-2018); Chief Compliance Officer, Guggenheim Funds Investment Advisors, LLC (2012-2018); Chief Compliance Officer, Guggenheim Distributors, LLC (2009-2014); Senior Manager, Security Investors, LLC (2004-2014); Senior Manager, Guggenheim Distributors, LLC (2004-2014). |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS(Unaudited)(concluded) |
Name, Address* | Position(s) Held with the | Principal Occupation(s) |
OFFICERS - concluded | ||
Margaux Misantone (1978) | AML Officer (2017-present) | Current: Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investment Advisors, LLC (2018-present); AML Officer, Security Investors, LLC and certain other funds in the Fund Complex (2017-present); Managing Director, Guggenheim Investments (2015-present).
Former: Assistant Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investments Advisors, LLC (2015-2018). |
Adam J. Nelson (1979) | Assistant Treasurer (2016-present) | 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). |
William Rehder (1967) | Assistant Vice President (2018-present) | Current: Managing Director, Guggenheim Investments (2002-present). |
Kimberly J. Scott (1974) | Assistant Treasurer (2016-present) | 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 (2016-present) | Current: Chief Financial Officer, 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 Chief Compliance Officer, 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); Chief Financial Officer and Treasurer, Van Kampen Funds (1996-2004). |
Jon Szafran (1989) | Assistant Treasurer (2017-Present) | 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 “Fund Complex” includes all closed-end and open-end funds (including all of their portfolios) advised by the Adviser and any funds that have an investment adviser or servicing agent that is an affiliated person of the Adviser. Information provided is as of the date of this report. |
*** | Certain of the Trustees may serve as directors on the boards of companies not required to be disclosed above, including certain non-profit companies and charitable foundations. |
THE RYDEX FUNDS ANNUAL REPORT | 105 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE(Unaudited) |
Who We Are
This Privacy Notice describes the data protection practices of Guggenheim Investments. Guggenheim Investments as used herein refers to the affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC, Security Investors, LLC, Guggenheim Investment Advisors (Europe) Limited, Guggenheim Real Estate, LLC, GS Gamma Advisors, LLC, Guggenheim Partners India Management, LLC, Guggenheim Partners Europe Limited, as well as the funds in the Guggenheim Funds complex (the “Funds”) (“Guggenheim Investments,” “we,” “us,” or “our”).
Guggenheim Partners Investment Management Holdings, LLC, located at 330 Madison Avenue, New York, New York 10017 is the data controller for your information. The affiliates who are also controllers of certain of your information are: Guggenheim Investment Advisors (Europe) Limited, Guggenheim Partners Europe Limited, 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.
Our Commitment to You
Guggenheim Investments considers your privacy our utmost concern. When you become our client or investor, you entrust us with not only your hard-earned money but also with your personal and financial information. Because we have access to your private information, we hold ourselves to the highest standards in its safekeeping and use. We strictly limit how we share your information with others, whether you are a current or former Guggenheim Investments client or investor.
The Information We Collect About You
We collect certain nonpublic personal information about you from information you provide on applications, other forms, our website, and/or from third parties including investment advisors. This information includes Social Security or other tax identification number, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, bank account information, marital status, family relationships, information that we collect on our website through the use of “cookies,” and other personal information that you or others provide to us. We may also collect such information through your inquiries by mail, e-mail or telephone. We may also collect customer due diligence information, as required by applicable law and regulation, through third party service providers.
How We Handle Your Personal Information
The legal basis for using your information as set out in this Privacy Notice is as follows: (a) use of your personal data is necessary to perform our obligations under any contract with you (such as a contract for us to provide financial services to you); or (b) where use of your personal data is not necessary for performance of a contract, use of your personal data is necessary for our legitimate interests or the legitimate interests of others (for example, to enforce the legal terms governing our services, operate and market our website and other services we offer, ensure safe environments for our personnel and others, make and receive payments, prevent fraud and to know the customer to whom we are providing the services). Some processing is done to comply with applicable law.
In addition to the specific uses described above, we also use your information in the following manner:
● | We use your information in connection with servicing your accounts. |
● | We use information to respond to your requests or questions. For example, we might use your information to respond to your customer feedback. |
● | We use information to improve our products and services. We may use your information to make our website and products better. We may use your information to customize your experience with us. |
● | We use information for security purposes. We may use your information to protect our company and our customers. |
● | We use information to communicate with you. For example, we will communicate with you about your account or our relationship. We may contact you about your feedback. We might also contact you about this Privacy Notice. We may also enroll you in our email newsletter. |
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GUGGENHEIM INVESTMENTS PRIVACY NOTICE(Unaudited)(continued) |
● | We use information as otherwise permitted by law, as we may notify you. |
● | Aggregate/Anonymous Data. We may aggregate and/or anonymize any information collected through the website so that such information can no longer be linked to you or your device (“Aggregate/Anonymous Information”). We may use Aggregate/Anonymous Information for any purpose, including without limitation for research and marketing purposes, and may also share such data with any third parties, including advertisers, promotional partners, and sponsors. |
We do not sell information about current or former clients or their accounts to third parties. Nor do we share this information, except when necessary to complete transactions at your request, to make you aware of investment products and services that we or our affiliates offer, or as permitted or required by law.
We provide information about you to companies and individuals not affiliated with Guggenheim Investments to complete certain transactions or account changes, or to perform services for us related to your account. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we must provide certain information about you to that company to complete the transaction. We provide the third party with only the information necessary to carry out its responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. To alert you to other Guggenheim Investments products and services, we share your information within our family of affiliated companies. You may limit our sharing with affiliated companies as set out below. We may also share information with any successor to all or part of our business, or in connection with steps leading up to a merger or acquisition. For example, if part of our business was sold we may give customer information as part of that transaction. We may also share information about you with your consent.
We will release information about you if you direct us to do so, if we are compelled by law to do so, or in other circumstances as permitted by law (for example, to protect your account from fraud).
If you close your account(s) or become an inactive client or investor, we will continue to adhere to the privacy policies and practices described in this notice.
Opt-Out Provisions and Your Data Choices
The law allows you to “opt out” of certain kinds of information sharing with third parties. We do not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.
When you are no longer our client or investor, we continue to share your information as described in this notice, and you may contact us at any time to limit our sharing by sending an email to CorporateDataPrivacy@GuggenheimPartners.com.
European Union Data Subjects and certain others: In addition to the choices set forth above, residents of the European Union and certain other jurisdictions have certain rights to (1) request access to or rectification or deletion of information we collect about them, (2) request a restriction on the processing of their information, (3) object to the processing of their information, or (4) request the portability of certain information. To exercise these or other rights, please contact us using the contact information below. We will consider all requests and provide our response within the time period stated by applicable law. Please note, however, that certain information may be exempt from such requests in some circumstances, which may include if we need to keep processing your information for our legitimate interests or to comply with a legal obligation. We may request you provide us with information necessary to confirm your identity before responding to your request.
Residents of France and certain other jurisdictions may also provide us with instructions regarding the manner in which we may continue to store, erase and share your information after your death, and where applicable, the person you have designated to exercise these rights after your death.
THE RYDEX FUNDS ANNUAL REPORT | 107 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE(Unaudited)(concluded) |
How We Protect Privacy Online
We take steps to protect your privacy when you use our web site – www.guggenheiminvestments.com – by using secure forms of online communication, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These safeguards vary based on the sensitivity of the information that we collect and store. However, we cannot and do not guarantee that these measures will prevent every unauthorized attempt to access, use, or disclose your information since despite our efforts, no Internet and/or other electronic transmissions can be completely secure. Our web site uses “http cookies”—tiny pieces of information that we ask your browser to store. We use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your e-mail address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.
How We Safeguard Your Personal Information and Data Retention
We restrict access to nonpublic personal information about you to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
We keep your information for no longer than necessary for the purposes for which it is processed. The length of time for which we retain information depends on the purposes for which we collected and use it and/or as required to comply with applicable laws. Information may persist in copies made for backup and business continuity purposes for additional time.
International Visitors
If you are not a resident of the United States, please be aware that your information may be transferred to, stored and processed in the United States where our servers are located and our databases are operated. The data protection and other laws of the United States and other countries might not be as comprehensive as those in your country.
In such cases, we ensure that a legal basis for such a transfer exists and that adequate protection is provided as required by applicable law, for example, by using standard contractual clauses or by transferring your data to a jurisdiction that has obtained an adequacy finding. Individuals whose data may be transferred on the basis of standard contractual clauses may contact us as described below.
We’ll Keep You Informed
If you have any questions or concerns about how we treat your personal data, we encourage you to consult with us first. You may also contact the relevant supervisory authority.
We reserve the right to modify this policy at any time and will inform you promptly of material changes. You may access our privacy policy from our web site at www.guggenheiminvestments.com. Should you have any questions regarding our privacy policy, contact us by email at CorporateDataPrivacy@GuggenheimPartners.com.
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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”), Sandra Sponem. Ms. Sponem is “independent,” meaning that she 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, 2018 and December 31, 2017 were $873,067 and $867,833, 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, 2018 and December 31, 2017 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, 2018 and December 31, 2017 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, 2018 and December 31, 2017 were $304,132 and $277,916, 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, 2018 and December 31, 2017 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 $304,132 and $277,916, 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 | 3/8/2019 |
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 | 3/8/2019 | |
By (Signature and Title)* | /s/ John L. Sullivan | |
John L. Sullivan, Chief Financial Officer and Treasurer | ||
Date | 3/8/2019 |
* | Print the name and title of each signing officer under his or her signature. |