UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811- 08821
Rydex Variable Trust
(Exact name of registrant as specified in charter)
702 King Farm Boulevard, Suite 200
Rockville, Maryland 20850
(Address of principal executive offices) (Zip code)
Amy J. Lee
Rydex Variable Trust
702 King Farm Boulevard, Suite 200
Rockville, Maryland 20850
(Name and address of agent for service)
Registrant's telephone number, including area code:1-301-296-5100
Date of fiscal year end:December 31
Date of reporting period:January 1, 2019 - December 31, 2019
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 semi-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:
12.31.2019
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 may no longer be sent by mail, unless you specifically request paper copies of the reports from the insurance company that offers your contract 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. Instructions for requesting paper copies will be provided by your insurance company.
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 the insurance company electronically by following the instructions provided by the insurance company.
You may elect to receive all future shareholder reports in paper free of charge. You can inform the insurance company that you wish to receive paper copies of reports by following the instructions provided by the insurance company. Your election to receive reports in paper will apply to all portfolio companies available under your contract.
GuggenheimInvestments.com | RVALTS-ANN-2-1219x1220 |
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 | 28 |
MULTI-HEDGE STRATEGIES FUND | 38 |
COMMODITIES STRATEGY FUND | 64 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | 71 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 86 |
OTHER INFORMATION | 87 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS | 89 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE | 95 |
THE RYDEX FUNDS ANNUAL REPORT | 1 |
| December 31, 2019 |
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, 2019.
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, 2020
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 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
2 | THE RYDEX FUNDS ANNUAL REPORT |
| December 31, 2019 |
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. ● See 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, 2019 |
Recent U.S. economic data demonstrates that the expansion is being helped by lower interest rates. New home sales have risen at a double-digit, year-over-year pace for four consecutive months since August, spurred by lower mortgage rates but also base effects. Manufacturing production rose in both November and December, corroborating the signal seen in improving manufacturing surveys. Monthly non-farm payroll gains averaged 184,000 jobs in the fourth quarter of 2019, above underlying labor force growth. Income gains and a positive wealth effect are also flowing through into retail sales, where “core” sales recovered in December after three months of declines.
The latest evidence suggests that the U.S. Federal Reserve’s (the “Fed”) easing efforts have given the U.S. economy the extra gas it needs to extend the cycle. Furthermore, the new year kicks off with some clarity on U.S.-China trade policy. The eleventh-hour phase one U.S.-China trade agreement may give U.S. companies some comfort that they can expect tariffs on either side to remain where they are for now. This should help support U.S. manufacturing activity, especially if China steps up purchases of U.S. goods as promised.
Over the next several months, we expect the Fed will stay on hold as it watches incoming data to ensure that the current level of fed funds remains appropriate. Monetary policy acts on the economy with a timing lag, so the effects of the last rate cut in October 2019 might not be apparent until mid-2020. More economic data improvements may come as low rates flow through to consumers and to the credit markets.
While the Fed successfully pushed off a recession in 2019, 2020 arrives with several risks worth watching, including the U.S. presidential election, U.S.-Europe trade negotiations, the potential for a military conflict between the U.S. and Iran, and rising corporate and local government defaults in China.
For the 12 months ended December 31, 2019, the Standard & Poor’s 500® (“S&P 500®”) Index* returned 31.49%. The MSCI Europe-Australasia-Far East (“EAFE”) Index* returned 22.01%. The return of the MSCI Emerging Markets Index* was 18.42%.
In the bond market, the Bloomberg Barclays U.S. Aggregate Bond Index* posted a 8.72% return for the period, while the Bloomberg Barclays U.S. Corporate High Yield Index* returned 14.32%. The return of the ICE Bank of America (“BofA”) Merrill Lynch 3-Month U.S. Treasury Bill Index* was 2.28% 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, 2019 |
*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.
Morningstar Long/Short Equity Category Average represents long-short portfolios which hold sizable stakes in both long and short positions in equities and related derivatives. Some funds that fall into this category will shift their exposure to long and short positions depending on their macro outlook or the opportunities they uncover through bottom-up research. Some funds may simply hedge long stock positions through exchange traded funds or derivatives. At least 75% of the assets are in equity securities or derivatives.
Russell 3000® Index measures the performance of the largest 3,000 U.S. companies, representing approximately 98% of the investable U.S. equity market.
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 assets under management) Commodity Trading Advisors, or CTAs, and be representative of the managed futures space. The CTA Index is equally weighted, and rebalanced 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, 2019 and ending December 31, 2019.
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 | 1.70% | 3.96% | $ 1,000.00 | $ 1,039.60 | $ 8.74 |
Global Managed Futures Strategy Fund | 1.69% | 2.09% | 1,000.00 | 1,020.90 | 8.61 |
Multi-Hedge Strategies Fund | 1.65% | 1.07% | 1,000.00 | 1,010.70 | 8.36 |
Commodities Strategy Fund | 1.69% | 3.50% | 1,000.00 | 1,035.00 | 8.67 |
| |||||
Table 2. Based on hypothetical 5% return (before expenses) | |||||
Long Short Equity Fund | 1.70% | 5.00% | $ 1,000.00 | $ 1,016.64 | $ 8.64 |
Global Managed Futures Strategy Fund | 1.69% | 5.00% | 1,000.00 | 1,016.69 | 8.59 |
Multi-Hedge Strategies Fund | 1.65% | 5.00% | 1,000.00 | 1,016.89 | 8.39 |
Commodities Strategy Fund | 1.69% | 5.00% | 1,000.00 | 1,016.69 | 8.59 |
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 1.15%. |
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, 2019 to December 31, 2019. |
THE RYDEX FUNDS ANNUAL REPORT | 7 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
LONG SHORT EQUITY FUND
OBJECTIVE: Seeks long-term capital appreciation.
For the one-year period ended December 31, 2019, the Long Short Equity Fund returned 5.54%. The two benchmarks used by the Fund in the period, the HFRX Equity Hedge Index and the S&P 500, returned 10.71% and 31.49%, respectively, for the same one-year period. For another comparison, the Morningstar Long/Short Equity Category Average returned 9.79% for the year.
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 year began by rebounding strongly from 2018’s end-of-year plunging markets. The economy had begun to slow, and the trade conflict continued to escalate, leading the U.S. Federal Reserve (the “Fed”) to change its tone from hawkish to dovish. The Fed course reversal became a large driver of the risk market, as the fears of steady rate rises causing a recession quickly dissipated. Equity markets took a short-term hit in May when trade threats against China and Mexico escalated. But like most other recent dips, it was short lived and quickly reversed, as the administration softened its trade rhetoric.
As global growth expectations decreased while the risk of trade conflict escalation and a disorderly Brexit increased, investors continued moving towards safer assets, such as long-term U.S. Treasurys and high-quality stocks. In August, the yield curve between the 2-year and 10-year U.S. Treasury rates briefly inverted, a historical indicator that has presaged past recessions. The markets took the clues and began punishing a whole host of more cyclical industries, while groups with any sort of organic growth (whether profitable or not) became market favorites. The Fed fully abandoned last year’s hawkish stance and cut short-term rates three times during the period, calling it a “midcycle adjustment to policy.”
By the end of year, two political risk events suddenly cleared up. A phase one trade deal was signed with China, which for the time being resolved further escalations. Also, a new election in the UK seems to have resolved the muddy Brexit approach by consolidating power for the new Prime Minister. Both helped to resolve major market uncertainty—and along with the several rate cuts—further contributed to steady U.S. stock market moves higher, with the S&P 500 Index ending the year with a remarkable gain over 30%.
At period end, the Fund held about 147% of assets in long securities, and 87% short, for a net-dollar exposure of 60%. The net exposure averaged 57% during the year (ranging between 52% and 60%). The realized net beta (sensitivity of daily Fund returns to the S&P 500 index) averaged around 0.61 during the year. The long positions (on a standalone unlevered basis) averaged a return of 24.0%, compared to the Russell 3000 index return of 30.9%. Short positions returned 30.9% on a stand-alone basis. The underwhelming total return results for the year stem mostly from poor alpha on the long side, while shorts ended up with market-like total returns, serving no better than a simple market hedge this year.
8 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(continued) | December 31, 2019 |
The Fund’s sector positioning had basically no net impact on the Fund for the full year, contributing -0.2% to attribution. Net long positions in Consumer Staples and Utilities paid off on a beta-adjusted basis, but much of that was offset by underweights in REITs and Financials, both of which did well during the year. The Fund’s fundamental style tilts were the primary negative contributor to the period’s returns, resulting in about -6.8% of the contribution. The Fund’s tilts towards value names and away from high growth companies both underperformed.
A performance factor early in the year was the unprecedented persistence of value names underperforming expensive stocks. The magnitude of cumulative value style underperformance had reached historic levels last seen in the 1999 Tech bubble. In early September, we saw a huge reversal of the above trend over the course of a few days. The weekly move in ‘momentum’ and ‘value’ factors were of magnitudes not seen in a decade. That reversal in value names continued a bit—helping the Fund achieve positive returns in the fourth quarter of the year. A key question going forward is: is the break in expensive momentum names a short-term fluke, or a long overdue rotation back to cheaper companies? The equity style reversal in September may have simply been a knee jerk reaction to the quick pop in interest rates at that time (the compression in yields has highly correlated with the bias towards expensive stocks). History also shows that strong momentum creates crowding in narrow market leaders, and that crowding can turn into a rush to exit as soon as the leading names become more volatile.
The Fund’s strategy is to determine attractiveness of broad groups of stocks relative to their fundamentals. The value factor has seen its risk premium (or embedded valuation) improve as the returns have struggled—implying that the valuation of the stocks (both cheaper and expensive) have spread much further than fundamentals of the companies. To what extent this ‘behavioral’ cycle will continue is a key question—and one that is very difficult to answer. In every market environment there are elements of the macro-economic cycle that are somewhat predictable, and elements that are new and completely unpredictable (global quantitative easing, negative rates, and trade conflicts being the most unique factors this time around). These unique elements can drive market sentiment in ways that are hard to predict.
Focusing on corporate fundamentals tends to produce slightly more predictability. Companies must invest in operations & research to produce sales and earnings—and there are some bounds on how much and how little the companies can earn on that capital before competition comes in to erode them. Given some bounded limits on corporate earnings power, we believe that the valuations awarded the most expensive tiers of the equity market have far surpassed the likely long-term earnings power.
We find some comfort during a poor relative performance period in knowing that, in past periods of value drawdown, the forward performance of the factor has been tremendous due to the rewinding of all the excess valuations.
Positioning
At period end, the Fund’s net dollar exposure was 60%. The Fund maintains its large style bias towards cheaper valuation names, while maintaining moderate 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 macro research team is still wary of a potential recession in the next year or so and vulnerability in overall markets—and the Fund has likewise taken a cautious positioning with quality style characteristics and managed overall market exposure.
From an industry perspective, the Fund now holds a underweight in the Technology sector after prior years of being positioned quite long. The flip in exposure occurred during this year in response to relative attractiveness of the names vis-à-vis other sector opportunities. The net short in Financials has begun to shrink after remaining quite negative for a few years. The largest sector net long exposures are in Healthcare, Consumer Staples, and Transportation. The largest net short exposures exist in Real Estate, Materials, and IT sectors.
Performance displayed represents past performance which is no guarantee of future results.
The opinions and forecast 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.
THE RYDEX FUNDS ANNUAL REPORT | 9 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 1, 2002
Ten Largest Holdings (% of Total Net Assets) | |
Exxon Mobil Corp. | 1.2% |
Verizon Communications, Inc. | 1.2% |
AT&T, Inc. | 1.1% |
Archer-Daniels-Midland Co. | 1.1% |
Kimberly-Clark Corp. | 1.1% |
Omnicom Group, Inc. | 1.1% |
Merck & Company, Inc. | 1.0% |
Pfizer, Inc. | 1.0% |
Eli Lilly & Co. | 1.0% |
Amgen, Inc. | 1.0% |
Top Ten Total | 10.8% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments.
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Long Short Equity Fund | 5.54% | 1.47% | 3.49% |
HFRX Equity Hedge Fund Index | 10.71% | 1.52% | 1.16% |
S&P 500 Index | 31.49% | 11.70% | 13.56% |
Morningstar Long/Short Equity Category Average | 9.79% | 2.42% | 4.43% |
* | 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 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. 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
10 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
LONG SHORT EQUITY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.4% | ||||||||
Consumer, Non-cyclical - 30.8% | ||||||||
Archer-Daniels-Midland Co. | 7,073 | $ | 327,833 | |||||
Kimberly-Clark Corp.1 | 2,349 | 323,105 | ||||||
Merck & Company, Inc.1 | 3,494 | 317,779 | ||||||
Pfizer, Inc.1 | 8,040 | 315,007 | ||||||
Eli Lilly & Co. | 2,379 | 312,672 | ||||||
Amgen, Inc.1 | 1,261 | 303,989 | ||||||
McKesson Corp.1 | 2,105 | 291,164 | ||||||
Johnson & Johnson1 | 1,995 | 291,011 | ||||||
CVS Health Corp.1 | 3,679 | 273,313 | ||||||
Gilead Sciences, Inc.1 | 4,184 | 271,876 | ||||||
Ingredion, Inc.1 | 2,677 | 248,827 | ||||||
JM Smucker Co. | 2,360 | 245,747 | ||||||
Molson Coors Beverage Co. — Class B1 | 4,515 | 243,359 | ||||||
Kellogg Co. | 3,508 | 242,613 | ||||||
Procter & Gamble Co.1 | 1,913 | 238,934 | ||||||
General Mills, Inc. | 4,432 | 237,378 | ||||||
Sysco Corp.1 | 2,762 | 236,261 | ||||||
Darling Ingredients, Inc.* | 7,985 | 224,219 | ||||||
Hormel Foods Corp. | 4,901 | 221,084 | ||||||
Medtronic plc | 1,864 | 211,471 | ||||||
Post Holdings, Inc.* | 1,925 | 210,018 | ||||||
Abbott Laboratories | 2,166 | 188,139 | ||||||
Baxter International, Inc.1 | 1,988 | 166,236 | ||||||
Philip Morris International, Inc.1 | 1,925 | 163,798 | ||||||
Zimmer Biomet Holdings, Inc.1 | 1,088 | 162,852 | ||||||
Hologic, Inc.*,1 | 3,118 | 162,791 | ||||||
Campbell Soup Co. | 3,256 | �� | 160,912 | |||||
Jazz Pharmaceuticals plc*,1 | 1,063 | 158,685 | ||||||
Becton Dickinson and Co. | 562 | 152,847 | ||||||
Thermo Fisher Scientific, Inc. | 450 | 146,191 | ||||||
Cardinal Health, Inc.1 | 2,799 | 141,573 | ||||||
Alexion Pharmaceuticals, Inc.* | 1,090 | 117,884 | ||||||
Clorox Co. | 761 | 116,844 | ||||||
PepsiCo, Inc.1 | 803 | 109,746 | ||||||
Integer Holdings Corp.*,1 | 1,358 | 109,224 | ||||||
Herbalife Nutrition Ltd.* | 2,272 | 108,306 | ||||||
B&G Foods, Inc.2 | 5,653 | 101,358 | ||||||
H&R Block, Inc. | 4,160 | 97,677 | ||||||
United Therapeutics Corp.* | 1,089 | 95,919 | ||||||
Mondelez International, Inc. — Class A | 1,716 | 94,517 | ||||||
Innoviva, Inc.* | 6,628 | 93,853 | ||||||
STERIS plc | 610 | 92,976 | ||||||
TrueBlue, Inc.* | 3,825 | 92,029 | ||||||
Molina Healthcare, Inc.* | 678 | 91,998 | ||||||
TreeHouse Foods, Inc.* | 1,791 | 86,864 | ||||||
Cal-Maine Foods, Inc. | 1,885 | 80,584 | ||||||
John B Sanfilippo & Son, Inc. | 862 | 78,683 | ||||||
Macquarie Infrastructure Corp. | 1,703 | 72,957 | ||||||
UnitedHealth Group, Inc. | 241 | 70,849 | ||||||
Coca-Cola Co. | 1,175 | 65,036 | ||||||
Regeneron Pharmaceuticals, Inc.* | 173 | 64,958 | ||||||
Biogen, Inc.*,1 | 217 | 64,390 | ||||||
Hershey Co. | 420 | 61,732 | ||||||
Altria Group, Inc. | 1,101 | 54,951 | ||||||
Cigna Corp. | 268 | 54,803 | ||||||
Anthem, Inc. | 180 | 54,365 | ||||||
Tyson Foods, Inc. — Class A | 460 | 41,878 | ||||||
AbbVie, Inc. | 472 | 41,791 | ||||||
Kraft Heinz Co. | 1,228 | 39,456 | ||||||
Total Consumer, Non-cyclical | 9,447,312 | |||||||
Industrial - 15.3% | ||||||||
Norfolk Southern Corp.1 | 1,504 | 291,971 | ||||||
Lincoln Electric Holdings, Inc. | 2,468 | 238,730 | ||||||
Crane Co. | 2,720 | 234,954 | ||||||
CSX Corp.1 | 3,118 | 225,618 | ||||||
Caterpillar, Inc.1 | 1,390 | 205,275 | ||||||
CH Robinson Worldwide, Inc. | 2,543 | 198,863 | ||||||
Gentex Corp. | 6,518 | 188,892 | ||||||
Werner Enterprises, Inc. | 4,911 | 178,711 | ||||||
Landstar System, Inc. | 1,509 | 171,830 | ||||||
FedEx Corp.1 | 1,117 | 168,902 | ||||||
Kansas City Southern1 | 1,073 | 164,341 | ||||||
Regal Beloit Corp. | 1,876 | 160,604 | ||||||
Textron, Inc.1 | 3,348 | 149,321 | ||||||
Honeywell International, Inc. | 821 | 145,317 | ||||||
J.B. Hunt Transport Services, Inc. | 1,230 | 143,639 | ||||||
Union Pacific Corp.1 | 787 | 142,282 | ||||||
Kennametal, Inc.1 | 3,837 | 141,547 | ||||||
Schneider National, Inc. — Class B | 5,988 | 130,658 | ||||||
Agilent Technologies, Inc. | 1,349 | 115,083 | ||||||
Heartland Express, Inc. | 5,262 | 110,765 | ||||||
Waters Corp.*,1 | 473 | 110,516 | ||||||
Sturm Ruger & Company, Inc. | 2,309 | 108,592 | ||||||
Marten Transport Ltd. | 4,983 | 107,085 | ||||||
Garmin Ltd. | 1,070 | 104,389 | ||||||
Knight-Swift Transportation Holdings, Inc. | 2,865 | 102,682 | ||||||
Oshkosh Corp. | 1,073 | 101,560 | ||||||
Echo Global Logistics, Inc.* | 4,862 | 100,643 | ||||||
Mettler-Toledo International, Inc.* | 120 | 95,194 | ||||||
Old Dominion Freight Line, Inc. | 416 | 78,948 | ||||||
Emerson Electric Co. | 989 | 75,421 | ||||||
Vishay Intertechnology, Inc. | 3,216 | 68,469 | ||||||
3M Co. | 359 | 63,335 | ||||||
MDU Resources Group, Inc. | 2,109 | 62,658 | ||||||
Total Industrial | 4,686,795 | |||||||
Consumer, Cyclical - 14.6% | ||||||||
Lear Corp.1 | 1,524 | 209,093 | ||||||
Southwest Airlines Co.1 | 3,668 | 197,999 | ||||||
Carnival Corp. | 3,555 | 180,701 | ||||||
World Fuel Services Corp. | 4,000 | 173,680 | ||||||
Las Vegas Sands Corp.1 | 2,490 | 171,910 | ||||||
Whirlpool Corp.1 | 1,118 | 164,939 | ||||||
Cracker Barrel Old Country Store, Inc.2 | 1,066 | 163,887 | ||||||
Autoliv, Inc. | 1,900 | 160,379 | ||||||
BorgWarner, Inc. | 3,683 | 159,769 | ||||||
Allison Transmission Holdings, Inc.1 | 3,271 | 158,055 | ||||||
Gentherm, Inc.* | 3,559 | 157,984 | ||||||
Extended Stay America, Inc. | 10,543 | 156,669 | ||||||
Brunswick Corp. | 2,573 | 154,329 |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 11 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
LONG SHORT EQUITY FUND |
| Shares | Value | ||||||
Delta Air Lines, Inc. | 2,582 | $ | 150,995 | |||||
Cummins, Inc. | 767 | 137,262 | ||||||
Wyndham Destinations, Inc. | 2,632 | 136,048 | ||||||
Aptiv plc | 1,424 | 135,237 | ||||||
AutoZone, Inc.* | 101 | 120,322 | ||||||
Toll Brothers, Inc. | 2,943 | 116,278 | ||||||
Starbucks Corp. | 1,313 | 115,439 | ||||||
Polaris, Inc. | 1,120 | 113,904 | ||||||
Norwegian Cruise Line Holdings Ltd.* | 1,850 | 108,058 | ||||||
Royal Caribbean Cruises Ltd. | 759 | 101,334 | ||||||
General Motors Co. | 2,632 | 96,331 | ||||||
PulteGroup, Inc.1 | 2,479 | 96,185 | ||||||
United Airlines Holdings, Inc.*,1 | 1,023 | 90,116 | ||||||
SkyWest, Inc. | 1,350 | 87,250 | ||||||
Lennar Corp. — Class A1 | 1,516 | 84,578 | ||||||
Goodyear Tire & Rubber Co. | 5,345 | 83,141 | ||||||
DR Horton, Inc. | 1,456 | 76,804 | ||||||
Allegiant Travel Co. — Class A | 394 | 68,572 | ||||||
NIKE, Inc. — Class B | 672 | 68,080 | ||||||
JetBlue Airways Corp.*,1 | 3,314 | 62,038 | ||||||
Home Depot, Inc.1 | 283 | 61,802 | ||||||
Walmart, Inc. | 510 | 60,608 | ||||||
Mohawk Industries, Inc.* | 417 | 56,870 | ||||||
Costco Wholesale Corp. | 168 | 49,379 | ||||||
Total Consumer, Cyclical | 4,486,025 | |||||||
Utilities - 11.0% | ||||||||
AES Corp.1 | 13,679 | 272,212 | ||||||
PPL Corp.1 | 7,431 | 266,624 | ||||||
Exelon Corp.1 | 5,745 | 261,915 | ||||||
FirstEnergy Corp.1 | 5,357 | 260,350 | ||||||
Evergy, Inc. | 3,895 | 253,526 | ||||||
NRG Energy, Inc. | 6,098 | 242,395 | ||||||
Portland General Electric Co. | 4,042 | 225,503 | ||||||
Pinnacle West Capital Corp.1 | 2,457 | 220,958 | ||||||
Ameren Corp. | 2,641 | 202,829 | ||||||
National Fuel Gas Co.1 | 4,309 | 200,541 | ||||||
Vistra Energy Corp. | 8,539 | 196,312 | ||||||
Avangrid, Inc. | 3,813 | 195,073 | ||||||
Public Service Enterprise Group, Inc. | 2,773 | 163,746 | ||||||
Southern Co. | 2,424 | 154,409 | ||||||
Entergy Corp. | 861 | 103,148 | ||||||
NiSource, Inc. | 3,191 | 88,837 | ||||||
Avista Corp.1 | 1,304 | 62,709 | ||||||
Total Utilities | 3,371,087 | |||||||
Communications - 9.5% | ||||||||
Verizon Communications, Inc.1 | 6,156 | 377,979 | ||||||
AT&T, Inc.1 | 8,547 | 334,017 | ||||||
Omnicom Group, Inc. | 3,986 | 322,946 | ||||||
Alphabet, Inc. — Class C* | 209 | 279,437 | ||||||
Discovery, Inc. — Class A*,1,2 | 5,395 | 176,632 | ||||||
eBay, Inc. | 4,802 | 173,400 | ||||||
Booking Holdings, Inc.* | 80 | 164,298 | ||||||
AMC Networks, Inc. — Class A* | 3,838 | 151,601 | ||||||
Amazon.com, Inc.* | 82 | 151,523 | ||||||
News Corp. — Class A | 10,557 | 149,276 | ||||||
Facebook, Inc. — Class A*,1 | 621 | 127,460 | ||||||
Yelp, Inc. — Class A* | 3,090 | 107,625 | ||||||
TEGNA, Inc. | 5,520 | 92,129 | ||||||
Juniper Networks, Inc.1 | 3,286 | 80,934 | ||||||
Scholastic Corp. | 1,800 | 69,210 | ||||||
Cisco Systems, Inc.1 | 1,266 | 60,717 | ||||||
Comcast Corp. — Class A | 1,131 | 50,861 | ||||||
Walt Disney Co. | 343 | 49,608 | ||||||
Total Communications | 2,919,653 | |||||||
Financial - 7.8% | ||||||||
Equity Commonwealth REIT1 | 8,938 | 293,435 | ||||||
Weingarten Realty Investors REIT | 8,268 | 258,292 | ||||||
Lexington Realty Trust REIT | 23,586 | 250,483 | ||||||
JPMorgan Chase & Co.1 | 1,257 | 175,226 | ||||||
Apartment Investment & Management Co. — Class A REIT | 3,313 | 171,117 | ||||||
Brixmor Property Group, Inc. REIT | 7,297 | 157,688 | ||||||
Berkshire Hathaway, Inc. — Class B* | 558 | 126,387 | ||||||
Summit Hotel Properties, Inc. REIT | 9,929 | 122,524 | ||||||
Deluxe Corp. | 1,833 | 91,503 | ||||||
Bank of America Corp. | 2,495 | 87,874 | ||||||
Janus Henderson Group plc | 3,466 | 84,744 | ||||||
Wells Fargo & Co. | 1,343 | 72,253 | ||||||
Sunstone Hotel Investors, Inc. REIT | 4,898 | 68,180 | ||||||
Visa, Inc. — Class A1 | 342 | 64,262 | ||||||
M&T Bank Corp. | 376 | 63,826 | ||||||
Comerica, Inc. | 876 | 62,853 | ||||||
Travelers Companies, Inc. | 457 | 62,586 | ||||||
U.S. Bancorp | 1,046 | 62,017 | ||||||
Hartford Financial Services Group, Inc.1 | 997 | 60,588 | ||||||
Franklin Resources, Inc. | 2,310 | 60,014 | ||||||
Total Financial | 2,395,852 | |||||||
Energy - 6.0% | ||||||||
Exxon Mobil Corp. | 5,494 | 383,371 | ||||||
Chevron Corp. | 2,351 | 283,319 | ||||||
Valero Energy Corp.1 | 1,645 | 154,054 | ||||||
Devon Energy Corp. | 5,411 | 140,524 | ||||||
Kinder Morgan, Inc. | 6,419 | 135,890 | ||||||
ConocoPhillips | 1,926 | 125,248 | ||||||
Phillips 661 | 1,088 | 121,214 | ||||||
HollyFrontier Corp.1 | 2,384 | 120,893 | ||||||
CVR Energy, Inc. | 2,542 | 102,773 | ||||||
Delek US Holdings, Inc.1 | 3,054 | 102,401 | ||||||
ONEOK, Inc. | 1,015 | 76,805 | ||||||
EOG Resources, Inc. | 563 | 47,157 | ||||||
Pioneer Natural Resources Co. | 306 | 46,319 | ||||||
Total Energy | 1,839,968 | |||||||
Technology - 4.2% | ||||||||
Microsoft Corp. | 1,804 | 284,491 | ||||||
Apple, Inc. | 919 | 269,865 | ||||||
Activision Blizzard, Inc. | 2,017 | 119,850 | ||||||
Oracle Corp.1 | 1,819 | 96,370 | ||||||
Skyworks Solutions, Inc.1 | 606 | 73,254 | ||||||
Texas Instruments, Inc. | 518 | 66,454 |
12 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
LONG SHORT EQUITY FUND |
| Shares | Value | ||||||
Teradata Corp.* | 2,431 | $ | 65,078 | |||||
Intel Corp.1 | 1,065 | 63,740 | ||||||
International Business Machines Corp. | 456 | 61,122 | ||||||
QUALCOMM, Inc. | 678 | 59,820 | ||||||
Micron Technology, Inc.* | 1,104 | 59,373 | ||||||
Cognizant Technology Solutions Corp. — Class A | 817 | 50,670 | ||||||
Total Technology | 1,270,087 | |||||||
Basic Materials - 0.2% | ||||||||
Domtar Corp. | 1,874 | 71,662 | ||||||
Total Common Stocks | ||||||||
(Cost $27,529,990) | 30,488,441 | |||||||
MONEY MARKET FUND† - 3.0% | ||||||||
Invesco Short-Term Investments Trust Treasury Obligations Portfolio — Institutional Class 1.47%3 | 929,502 | 929,502 | ||||||
Total Money Market Fund | ||||||||
(Cost $929,502) | 929,502 | |||||||
SECURITIES LENDING COLLATERAL†,4 - 0.8% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.47%3 | 239,621 | 239,621 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $239,621) | 239,621 | |||||||
Total Investments - 103.2% | ||||||||
(Cost $28,699,113) | $ | 31,657,564 | ||||||
Other Assets & Liabilities, net - (3.2)% | (974,142 | ) | ||||||
Total Net Assets - 100.0% | $ | 30,683,422 |
Custom Basket Swap Agreements | |||||||||||||||
Counterparty | Reference | Financing Rate Pay (Receive) | Payment | Maturity | Notional | Value and | |||||||||
OTC Custom Basket Swap Agreements †† | |||||||||||||||
Morgan Stanley Capital Services LLC | MS Equity Custom Basket | 1.95% (Fed Funds Rate + 0.40%) | At Maturity | 03/27/24 | $ | 7,235,320 | $ | 497,122 | |||||||
Goldman Sachs International | GS Equity Custom Basket | 2.00% (Fed Funds Rate + 0.45%) | At Maturity | 05/06/24 | 7,224,745 | 496,788 | |||||||||
$ | 14,460,065 | $ | 993,910 | ||||||||||||
OTC Custom Basket Swap Agreements Sold Short †† | |||||||||||||||
Morgan Stanley Capital Services LLC | MS Equity Custom Basket | (1.25)% (Fed Funds Rate - 0.30%) | At Maturity | 03/27/24 | $ | 13,510,573 | $ | (945,217 | ) | ||||||
Goldman Sachs International | GS Equity Custom Basket | (1.35)% (Fed Funds Rate - 0.20%) | At Maturity | 05/06/24 | 12,864,533 | (770,069 | ) | ||||||||
$ | 26,375,106 | $ | (1,715,286 | ) |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 13 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
LONG SHORT EQUITY FUND |
| Shares | Percentage | Value and | |||||||||
MS EQUITY LONG CUSTOM BASKET | ||||||||||||
Technology | ||||||||||||
Apple, Inc. | 216 | 0.88 | % | $ | 15,807 | |||||||
Microsoft Corp. | 424 | 0.92 | % | 15,260 | ||||||||
Skyworks Solutions, Inc. | 142 | 0.24 | % | 7,414 | ||||||||
Activision Blizzard, Inc. | 474 | 0.39 | % | 2,772 | ||||||||
QUALCOMM, Inc. | 159 | 0.19 | % | 2,116 | ||||||||
Micron Technology, Inc. | 259 | 0.19 | % | 1,957 | ||||||||
Intel Corp. | 250 | 0.21 | % | 1,857 | ||||||||
Texas Instruments, Inc. | 121 | 0.21 | % | (6 | ) | |||||||
Oracle Corp. | 428 | 0.31 | % | (73 | ) | |||||||
Cognizant Technology Solutions Corp. — Class A | 192 | 0.16 | % | (139 | ) | |||||||
International Business Machines Corp. | 107 | 0.20 | % | (1,287 | ) | |||||||
Teradata Corp. | 572 | 0.21 | % | (1,575 | ) | |||||||
Total Technology | 44,103 | |||||||||||
Utilities | ||||||||||||
AES Corp. | 3,218 | 0.89 | % | 9,624 | ||||||||
FirstEnergy Corp. | 1,260 | 0.85 | % | 7,322 | ||||||||
PPL Corp. | 1,748 | 0.87 | % | 6,860 | ||||||||
Southern Co. | 570 | 0.50 | % | 3,923 | ||||||||
Portland General Electric Co. | 951 | 0.73 | % | 3,080 | ||||||||
Avangrid, Inc. | 897 | 0.63 | % | 1,995 | ||||||||
NRG Energy, Inc. | 1,435 | 0.79 | % | 1,946 | ||||||||
NiSource, Inc. | 751 | 0.29 | % | 1,029 | ||||||||
Ameren Corp. | 621 | 0.66 | % | 892 | ||||||||
Avista Corp. | 306 | 0.20 | % | 727 | ||||||||
Entergy Corp. | 202 | 0.33 | % | 427 | ||||||||
Evergy, Inc. | 916 | 0.82 | % | (143 | ) | |||||||
Public Service Enterprise Group, Inc. | 652 | 0.53 | % | (752 | ) | |||||||
Exelon Corp. | 1,351 | 0.85 | % | (2,715 | ) | |||||||
Pinnacle West Capital Corp. | 578 | 0.72 | % | (2,800 | ) | |||||||
Vistra Energy Corp. | 2,289 | 0.73 | % | (7,330 | ) | |||||||
National Fuel Gas Co. | 1,014 | 0.65 | % | (10,825 | ) | |||||||
Total Utilities | 13,260 | |||||||||||
Consumer, Cyclical | ||||||||||||
World Fuel Services Corp. | 869 | 0.52 | % | 11,954 | ||||||||
Carnival Corp. | 836 | 0.59 | % | 6,889 | ||||||||
Las Vegas Sands Corp. | 585 | 0.56 | % | 6,345 | ||||||||
Lear Corp. | 358 | 0.68 | % | 4,816 | ||||||||
Norwegian Cruise Line Holdings Ltd. | 435 | 0.35 | % | 4,355 | ||||||||
BorgWarner, Inc. | 1,024 | 0.61 | % | 4,070 | ||||||||
Aptiv plc | 415 | 0.54 | % | 3,970 | ||||||||
Autoliv, Inc. | 447 | 0.52 | % | 3,805 | ||||||||
Wyndham Destinations, Inc. | 619 | 0.44 | % | 3,521 | ||||||||
Royal Caribbean Cruises Ltd. | 178 | 0.33 | % | 3,353 | ||||||||
Southwest Airlines Co. | 863 | 0.64 | % | 3,222 | ||||||||
AutoZone, Inc. | 23 | 0.38 | % | 3,199 | ||||||||
Gentherm, Inc. | 837 | 0.51 | % | 2,827 | ||||||||
Delta Air Lines, Inc. | 607 | 0.49 | % | 2,663 | ||||||||
Allison Transmission Holdings, Inc. | 769 | 0.51 | % | 2,392 | ||||||||
Walmart, Inc. | 120 | 0.20 | % | 2,259 | ||||||||
DR Horton, Inc. | 342 | 0.25 | % | 2,235 | ||||||||
Toll Brothers, Inc. | 692 | 0.38 | % | 2,214 | ||||||||
Cummins, Inc. | 180 | 0.45 | % | 2,108 | ||||||||
JetBlue Airways Corp. | 779 | 0.20 | % | 2,010 | ||||||||
PulteGroup, Inc. | 583 | 0.31 | % | 1,539 | ||||||||
Home Depot, Inc. | 66 | 0.20 | % | 1,531 | ||||||||
NIKE, Inc. — Class B | 158 | 0.22 | % | 1,495 | ||||||||
United Airlines Holdings, Inc. | 240 | 0.29 | % | 760 | ||||||||
SkyWest, Inc. | 317 | 0.28 | % | 683 | ||||||||
Extended Stay America, Inc. | 2,480 | 0.51 | % | 645 | ||||||||
Brunswick Corp. | 605 | 0.50 | % | 591 | ||||||||
Allegiant Travel Co. — Class A | 92 | 0.22 | % | 440 | ||||||||
Starbucks Corp. | 309 | 0.38 | % | 295 | ||||||||
Polaris, Inc. | 263 | 0.37 | % | 67 | ||||||||
Costco Wholesale Corp. | 39 | 0.16 | % | (358 | ) | |||||||
Mohawk Industries, Inc. | 98 | 0.18 | % | (746 | ) | |||||||
Lennar Corp. — Class A | 356 | 0.27 | % | (937 | ) | |||||||
Whirlpool Corp. | 263 | 0.54 | % | (1,001 | ) | |||||||
Goodyear Tire & Rubber Co. | 1,257 | 0.27 | % | (1,074 | ) | |||||||
General Motors Co. | 619 | 0.31 | % | (1,568 | ) | |||||||
Cracker Barrel Old Country Store, Inc. | 251 | 0.53 | % | (1,572 | ) | |||||||
Total Consumer, Cyclical | 78,997 | |||||||||||
Consumer, Non-cyclical | ||||||||||||
CVS Health Corp. | 865 | 0.89 | % | 16,929 | ||||||||
Eli Lilly & Co. | 559 | 1.02 | % | 13,427 | ||||||||
Darling Ingredients, Inc. | 1,878 | 0.73 | % | 12,584 | ||||||||
Amgen, Inc. | 296 | 0.99 | % | 11,223 | ||||||||
Sysco Corp. | 649 | 0.77 | % | 10,436 | ||||||||
McKesson Corp. | 466 | 0.89 | % | 8,951 | ||||||||
Medtronic plc | 438 | 0.69 | % | 8,080 | ||||||||
Merck & Company, Inc. | 822 | 1.03 | % | 7,043 | ||||||||
Archer-Daniels-Midland Co. | 1,664 | 1.07 | % | 6,279 | ||||||||
Kellogg Co. | 825 | 0.79 | % | 6,258 | ||||||||
Zimmer Biomet Holdings, Inc. | 256 | 0.53 | % | 6,181 | ||||||||
Kimberly-Clark Corp. | 552 | 1.05 | % | 5,191 | ||||||||
Hologic, Inc. | 733 | 0.53 | % | 4,829 |
14 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
LONG SHORT EQUITY FUND |
| Shares | Percentage | Value and | |||||||||
Thermo Fisher Scientific, Inc. | 106 | 0.48 | % | $ | 4,617 | |||||||
Johnson & Johnson | 469 | 0.95 | % | 4,603 | ||||||||
Campbell Soup Co. | 766 | 0.52 | % | 3,952 | ||||||||
Molina Healthcare, Inc. | 159 | 0.30 | % | 3,748 | ||||||||
Procter & Gamble Co. | 450 | 0.78 | % | 3,718 | ||||||||
Jazz Pharmaceuticals plc | 250 | 0.52 | % | 3,632 | ||||||||
Becton Dickinson and Co. | 132 | 0.50 | % | 3,481 | ||||||||
Biogen, Inc. | 51 | 0.21 | % | 3,363 | ||||||||
Hormel Foods Corp. | 1,153 | 0.72 | % | 3,246 | ||||||||
Abbott Laboratories | 509 | 0.61 | % | 2,971 | ||||||||
PepsiCo, Inc. | 189 | 0.36 | % | 2,793 | ||||||||
Anthem, Inc. | 42 | 0.18 | % | 2,724 | ||||||||
Herbalife Nutrition Ltd. | 534 | 0.35 | % | 2,221 | ||||||||
Integer Holdings Corp. | 319 | 0.35 | % | 2,207 | ||||||||
UnitedHealth Group, Inc. | 56 | 0.23 | % | 2,197 | ||||||||
Post Holdings, Inc. | 452 | 0.68 | % | 1,715 | ||||||||
Macquarie Infrastructure Corp. | 400 | 0.24 | % | 1,642 | ||||||||
Baxter International, Inc. | 467 | 0.54 | % | 1,641 | ||||||||
Innoviva, Inc. | 1,559 | 0.31 | % | 1,599 | ||||||||
Cardinal Health, Inc. | 1,168 | 0.82 | % | 1,552 | ||||||||
Gilead Sciences, Inc. | 984 | 0.88 | % | 1,544 | ||||||||
Regeneron Pharmaceuticals, Inc. | 40 | 0.21 | % | 1,509 | ||||||||
TrueBlue, Inc. | 900 | 0.30 | % | 1,486 | ||||||||
General Mills, Inc. | 1,042 | 0.77 | % | 1,412 | ||||||||
Ingredion, Inc. | 629 | 0.81 | % | 1,196 | ||||||||
Alexion Pharmaceuticals, Inc. | 256 | 0.38 | % | 1,185 | ||||||||
Clorox Co. | 179 | 0.38 | % | 1,113 | ||||||||
Coca-Cola Co. | 276 | 0.21 | % | 1,007 | ||||||||
STERIS plc | 143 | 0.30 | % | 910 | ||||||||
Cigna Corp. | 63 | 0.18 | % | 871 | ||||||||
Altria Group, Inc. | 259 | 0.18 | % | 792 | ||||||||
Mondelez International, Inc. — Class A | 403 | 0.31 | % | 781 | ||||||||
Kraft Heinz Co. | 289 | 0.13 | % | 314 | ||||||||
AbbVie, Inc. | 111 | 0.14 | % | 188 | ||||||||
Cal-Maine Foods, Inc. | 443 | 0.26 | % | 74 | ||||||||
Pfizer, Inc. | 1,891 | 1.02 | % | 0 | ||||||||
Tyson Foods, Inc. — Class A | 108 | 0.14 | % | (28 | ) | |||||||
Molson Coors Beverage Co. — Class B | 1,062 | 0.79 | % | (248 | ) | |||||||
United Therapeutics Corp. | 256 | 0.31 | % | (256 | ) | |||||||
TreeHouse Foods, Inc. | 421 | 0.28 | % | (282 | ) | |||||||
Philip Morris International, Inc. | 453 | 0.53 | % | (509 | ) | |||||||
Hershey Co. | 99 | 0.20 | % | (747 | ) | |||||||
John B Sanfilippo & Son, Inc. | 203 | 0.26 | % | (1,226 | ) | |||||||
JM Smucker Co. | 555 | 0.80 | % | (2,175 | ) | |||||||
B&G Foods, Inc. | 1,330 | 0.33 | % | (2,442 | ) | |||||||
H&R Block, Inc. | 978 | 0.32 | % | (4,207 | ) | |||||||
Total Consumer, Non-cyclical | 177,295 | |||||||||||
Financial | ||||||||||||
JPMorgan Chase & Co. | 295 | 0.57 | % | 11,282 | ||||||||
Weingarten Realty Investors | 1,945 | 0.84 | % | 4,670 | ||||||||
Bank of America Corp. | 587 | 0.29 | % | 3,977 | ||||||||
Deluxe Corp. | 431 | 0.30 | % | 3,109 | ||||||||
Berkshire Hathaway, Inc. — Class B | 131 | 0.41 | % | 2,793 | ||||||||
Janus Henderson Group plc | 815 | 0.28 | % | 2,696 | ||||||||
Brixmor Property Group, Inc. | 1,717 | 0.51 | % | 2,683 | ||||||||
Hartford Financial Services Group, Inc. | 234 | 0.20 | % | 2,628 | ||||||||
Summit Hotel Properties, Inc. | 2,336 | 0.40 | % | 2,090 | ||||||||
Wells Fargo & Co. | 316 | 0.23 | % | 1,597 | ||||||||
Lexington Realty Trust | 5,549 | 0.81 | % | 1,352 | ||||||||
Apartment Investment & Management Co. — Class A | 779 | 0.56 | % | 966 | ||||||||
Visa, Inc. — Class A | 80 | 0.21 | % | 680 | ||||||||
M&T Bank Corp. | 88 | 0.21 | % | 673 | ||||||||
Comerica, Inc. | 206 | 0.20 | % | 622 | ||||||||
U.S. Bancorp | 246 | 0.20 | % | 240 | ||||||||
Equity Commonwealth | 2,103 | 0.95 | % | (5 | ) | |||||||
Sunstone Hotel Investors, Inc. | 1,152 | 0.22 | % | (21 | ) | |||||||
Travelers Companies, Inc. | 107 | 0.20 | % | (374 | ) | |||||||
Franklin Resources, Inc. | 963 | 0.35 | % | (954 | ) | |||||||
Total Financial | 40,704 | |||||||||||
Energy | ||||||||||||
Devon Energy Corp. | 1,273 | 0.46 | % | 5,115 | ||||||||
ConocoPhillips | 453 | 0.41 | % | 4,942 | ||||||||
Phillips 66 | 256 | 0.39 | % | 3,700 | ||||||||
Valero Energy Corp. | 387 | 0.50 | % | 2,282 | ||||||||
Kinder Morgan, Inc. | 1,510 | 0.44 | % | 1,786 | ||||||||
EOG Resources, Inc. | 132 | 0.15 | % | 1,418 | ||||||||
ONEOK, Inc. | 238 | 0.25 | % | 1,303 | ||||||||
Pioneer Natural Resources Co. | 72 | 0.15 | % | 1,286 | ||||||||
HollyFrontier Corp. | 560 | 0.39 | % | 369 | ||||||||
Chevron Corp. | 553 | 0.92 | % | (1,029 | ) | |||||||
Delek US Holdings, Inc. | 718 | 0.33 | % | (2,469 | ) | |||||||
CVR Energy, Inc. | 598 | 0.33 | % | (3,665 | ) | |||||||
Exxon Mobil Corp. | 1,292 | 1.27 | % | (8,600 | ) | |||||||
Total Energy | 6,438 | |||||||||||
Communications | ||||||||||||
AT&T, Inc. | 2,011 | 1.09 | % | 8,351 | ||||||||
Alphabet, Inc. — Class C | 49 | 0.91 | % | 6,280 |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 15 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
LONG SHORT EQUITY FUND |
| Shares | Percentage | Value and | |||||||||
Discovery, Inc. — Class A | 1,269 | 0.57 | % | $ | 5,299 | |||||||
Facebook, Inc. — Class A | 146 | 0.41 | % | 5,253 | ||||||||
News Corp. — Class A | 2,484 | 0.49 | % | 3,825 | ||||||||
Omnicom Group, Inc. | 937 | 1.05 | % | 3,487 | ||||||||
TEGNA, Inc. | 1,298 | 0.30 | % | 3,092 | ||||||||
Amazon.com, Inc. | 19 | 0.49 | % | 2,608 | ||||||||
Booking Holdings, Inc. | 18 | 0.51 | % | 1,829 | ||||||||
Verizon Communications, Inc. | 1,448 | 1.23 | % | 1,686 | ||||||||
Juniper Networks, Inc. | 773 | 0.26 | % | 931 | ||||||||
Yelp, Inc. — Class A | 727 | 0.35 | % | 276 | ||||||||
Scholastic Corp. | 423 | 0.22 | % | (69 | ) | |||||||
Comcast Corp. — Class A | 266 | 0.17 | % | (97 | ) | |||||||
Walt Disney Co. | 80 | 0.16 | % | (217 | ) | |||||||
AMC Networks, Inc. — Class A | 903 | 0.49 | % | (253 | ) | |||||||
Cisco Systems, Inc. | 297 | 0.20 | % | (854 | ) | |||||||
eBay, Inc. | 1,130 | 0.56 | % | (1,873 | ) | |||||||
Total Communications | 39,554 | |||||||||||
Industrial | ||||||||||||
Kansas City Southern | 252 | 0.53 | % | 9,049 | ||||||||
Lincoln Electric Holdings, Inc. | 580 | 0.78 | % | 7,858 | ||||||||
Caterpillar, Inc. | 327 | 0.67 | % | 7,185 | ||||||||
Regal Beloit Corp. | 441 | 0.52 | % | 6,732 | ||||||||
Crane Co. | 640 | 0.76 | % | 6,136 | ||||||||
Norfolk Southern Corp. | 354 | 0.95 | % | 5,528 | ||||||||
Agilent Technologies, Inc. | 317 | 0.37 | % | 5,324 | ||||||||
Oshkosh Corp. | 252 | 0.33 | % | 5,194 | ||||||||
Union Pacific Corp. | 185 | 0.46 | % | 5,088 | ||||||||
Old Dominion Freight Line, Inc. | 97 | 0.25 | % | 4,474 | ||||||||
Marten Transport Ltd. | 1,172 | 0.35 | % | 3,861 | ||||||||
Mettler-Toledo International, Inc. | 28 | 0.31 | % | 3,433 | ||||||||
Garmin Ltd. | 251 | 0.34 | % | 3,420 | ||||||||
Gentex Corp. | 1,533 | 0.61 | % | 3,315 | ||||||||
Honeywell International, Inc. | 193 | 0.47 | % | 3,196 | ||||||||
Landstar System, Inc. | 355 | 0.56 | % | 3,127 | ||||||||
Knight-Swift Transportation Holdings, Inc. | 674 | 0.33 | % | 3,006 | ||||||||
Emerson Electric Co. | 232 | 0.24 | % | 2,901 | ||||||||
Werner Enterprises, Inc. | 1,155 | 0.58 | % | 2,734 | ||||||||
Vishay Intertechnology, Inc. | 756 | 0.22 | % | 2,612 | ||||||||
Kennametal, Inc. | 902 | 0.46 | % | 2,424 | ||||||||
Heartland Express, Inc. | 1,238 | 0.36 | % | 2,125 | ||||||||
Schneider National, Inc. — Class B | 1,409 | 0.42 | % | 1,668 | ||||||||
Sturm Ruger & Company, Inc. | 543 | 0.35 | % | 1,360 | ||||||||
CSX Corp. | 733 | 0.73 | % | 456 | ||||||||
3M Co. | 84 | 0.20 | % | 454 | ||||||||
MDU Resources Group, Inc. | 496 | 0.20 | % | 283 | ||||||||
J.B. Hunt Transport Services, Inc. | 289 | 0.47 | % | 186 | ||||||||
Waters Corp. | 111 | 0.36 | % | (92 | ) | |||||||
Echo Global Logistics, Inc. | 1,144 | 0.33 | % | (354 | ) | |||||||
CH Robinson Worldwide, Inc. | 598 | 0.65 | % | (1,336 | ) | |||||||
Textron, Inc. | 787 | 0.49 | % | (2,283 | ) | |||||||
FedEx Corp. | 404 | 0.84 | % | (3,559 | ) | |||||||
Total Industrial | 95,505 | |||||||||||
Basic Materials | ||||||||||||
Domtar Corp. | 441 | 0.23 | % | 1,266 | ||||||||
Total MS Equity Long Custom Basket | $ | 497,122 | ||||||||||
MS EQUITY SHORT CUSTOM BASKET | ||||||||||||
Utilities | ||||||||||||
California Water Service Group | 895 | (0.34 | )% | 1,073 | ||||||||
PNM Resources, Inc. | 930 | (0.35 | )% | 460 | ||||||||
Eversource Energy | 558 | (0.35 | )% | (571 | ) | |||||||
South Jersey Industries, Inc. | 1,477 | (0.36 | )% | (747 | ) | |||||||
Sempra Energy | 205 | (0.23 | )% | (947 | ) | |||||||
WEC Energy Group, Inc. | 514 | (0.35 | )% | (981 | ) | |||||||
Alliant Energy Corp. | 858 | (0.35 | )% | (1,340 | ) | |||||||
NextEra Energy, Inc. | 113 | (0.20 | )% | (1,433 | ) | |||||||
MGE Energy, Inc. | 404 | (0.24 | )% | (1,662 | ) | |||||||
American States Water Co. | 888 | (0.57 | )% | (2,419 | ) | |||||||
Atmos Energy Corp. | 414 | (0.34 | )% | (3,451 | ) | |||||||
American Water Works Company, Inc. | 644 | (0.59 | )% | (5,456 | ) | |||||||
Dominion Energy, Inc. | 3,672 | (2.25 | )% | (16,979 | ) | |||||||
Total Utilities | (34,453 | ) | ||||||||||
Financial | ||||||||||||
WP Carey, Inc. | 1,975 | (1.17 | )% | 13,319 | ||||||||
Realty Income Corp. | 2,183 | (1.19 | )% | 7,519 | ||||||||
Essential Properties Realty Trust, Inc. | 3,787 | (0.70 | )% | 6,272 | ||||||||
Acadia Realty Trust | 2,189 | (0.42 | )% | 5,265 | ||||||||
CME Group, Inc. — Class A | 221 | (0.33 | )% | 1,077 | ||||||||
Northwest Bancshares, Inc. | 3,431 | (0.42 | )% | 965 | ||||||||
American Assets Trust, Inc. | 2,812 | (0.96 | )% | 216 | ||||||||
National Storage Affiliates Trust | 1,469 | (0.37 | )% | 20 | ||||||||
UDR, Inc. | 2,124 | (0.73 | )% | (96 | ) |
16 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
LONG SHORT EQUITY FUND |
| Shares | Percentage |
| |||||||||
American Campus Communities, Inc. | 3,478 | (1.21 | )% | $ | (402 | ) | ||||||
BancorpSouth Bank | 1,713 | (0.40 | )% | (409 | ) | |||||||
Camden Property Trust | 616 | (0.48 | )% | (677 | ) | |||||||
Intercontinental Exchange, Inc. | 1,153 | (0.79 | )% | (859 | ) | |||||||
Agree Realty Corp. | 2,450 | (1.27 | )% | (1,236 | ) | |||||||
Capitol Federal Financial, Inc. | 3,979 | (0.40 | )% | (1,623 | ) | |||||||
Armada Hoffler Properties, Inc. | 5,846 | (0.79 | )% | (1,654 | ) | |||||||
BankUnited, Inc. | 868 | (0.23 | )% | (1,668 | ) | |||||||
Atlantic Union Bankshares Corp. | 1,185 | (0.33 | )% | (1,792 | ) | |||||||
Americold Realty Trust | 9,754 | (2.53 | )% | (1,807 | ) | |||||||
Global Net Lease, Inc. | 2,671 | (0.40 | )% | (1,822 | ) | |||||||
Reinsurance Group of America, Inc. — Class A | 898 | (1.08 | )% | (2,241 | ) | |||||||
Columbia Financial, Inc. | 3,111 | (0.39 | )% | (4,435 | ) | |||||||
Douglas Emmett, Inc. | 1,458 | (0.47 | )% | (4,436 | ) | |||||||
STAG Industrial, Inc. | 2,643 | (0.62 | )% | (4,871 | ) | |||||||
RenaissanceRe Holdings Ltd. | 501 | (0.73 | )% | (5,047 | ) | |||||||
Brown & Brown, Inc. | 3,094 | (0.90 | )% | (5,058 | ) | |||||||
QTS Realty Trust, Inc. — Class A | 1,486 | (0.60 | )% | (5,176 | ) | |||||||
Healthcare Realty Trust, Inc. | 4,410 | (1.09 | )% | (5,262 | ) | |||||||
Washington Real Estate Investment Trust | 3,188 | (0.69 | )% | (5,687 | ) | |||||||
Synovus Financial Corp. | 1,340 | (0.39 | )% | (5,726 | ) | |||||||
Crown Castle International Corp. | 513 | (0.54 | )% | (6,791 | ) | |||||||
STORE Capital Corp. | 3,451 | (0.95 | )% | (9,017 | ) | |||||||
Old National Bancorp | 7,318 | (0.99 | )% | (9,342 | ) | |||||||
Glacier Bancorp, Inc. | 1,469 | (0.50 | )% | (9,501 | ) | |||||||
People’s United Financial, Inc. | 7,404 | (0.93 | )% | (10,066 | ) | |||||||
Valley National Bancorp | 6,891 | (0.58 | )% | (10,355 | ) | |||||||
BOK Financial Corp. | 1,389 | (0.90 | )% | (11,135 | ) | |||||||
American Tower Corp. — Class A | 640 | (1.09 | )% | (13,087 | ) | |||||||
Arthur J Gallagher & Co. | 1,668 | (1.18 | )% | (14,545 | ) | |||||||
Equinix, Inc. | 121 | (0.52 | )% | (15,039 | ) | |||||||
Athene Holding Ltd. — Class A | 1,891 | (0.66 | )% | (15,189 | ) | |||||||
EastGroup Properties, Inc. | 780 | (0.77 | )% | (15,674 | ) | |||||||
Fifth Third Bancorp | 4,039 | (0.92 | )% | (15,757 | ) | |||||||
SBA Communications Corp. | 505 | (0.90 | )% | (15,821 | ) | |||||||
Alexandria Real Estate Equities, Inc. | 1,325 | (1.58 | )% | (15,997 | ) | |||||||
Easterly Government Properties, Inc. | 9,259 | (1.63 | )% | (17,230 | ) | |||||||
| Shares | Percentage | Value and | |||||||||
Everest Re Group Ltd. | 442 | (0.91 | )% | $ | (17,433 | ) | ||||||
First Republic Bank | 1,199 | (1.04 | )% | (19,792 | ) | |||||||
Hudson Pacific Properties, Inc. | 6,232 | (1.74 | )% | (21,626 | ) | |||||||
RLI Corp. | 1,586 | (1.06 | )% | (23,500 | ) | |||||||
Sun Communities, Inc. | 1,160 | (1.29 | )% | (35,120 | ) | |||||||
Terreno Realty Corp. | 3,554 | (1.42 | )% | (38,198 | ) | |||||||
Rexford Industrial Realty, Inc. | 4,557 | (1.54 | )% | (41,750 | ) | |||||||
Total Financial | (429,296 | ) | ||||||||||
Technology | ||||||||||||
Appian Corp. | 546 | (0.15 | )% | 8,483 | ||||||||
Workday, Inc. — Class A | 136 | (0.17 | )% | 4,587 | ||||||||
Elastic N.V. | 245 | (0.12 | )% | 2,694 | ||||||||
Alteryx, Inc. — Class A | 210 | (0.16 | )% | 2,370 | ||||||||
MongoDB, Inc. | 219 | (0.21 | )% | 2,024 | ||||||||
Veeva Systems, Inc. — Class A | 153 | (0.16 | )% | 1,906 | ||||||||
Atlassian Corporation plc — Class A | 174 | (0.15 | )% | 1,127 | ||||||||
Intuit, Inc. | 116 | (0.22 | )% | 908 | ||||||||
ServiceNow, Inc. | 89 | (0.19 | )% | 670 | ||||||||
Zscaler, Inc. | 403 | (0.14 | )% | 429 | ||||||||
Manhattan Associates, Inc. | 238 | (0.14 | )% | 416 | ||||||||
Twilio, Inc. — Class A | 184 | (0.13 | )% | (44 | ) | |||||||
Aspen Technology, Inc. | 192 | (0.17 | )% | (121 | ) | |||||||
Workiva, Inc. | 446 | (0.14 | )% | (460 | ) | |||||||
LivePerson, Inc. | 510 | (0.14 | )% | (601 | ) | |||||||
Paychex, Inc. | 739 | (0.47 | )% | (841 | ) | |||||||
Guidewire Software, Inc. | 195 | (0.16 | )% | (1,174 | ) | |||||||
Coupa Software, Inc. | 166 | (0.18 | )% | (1,578 | ) | |||||||
Fair Isaac Corp. | 67 | (0.19 | )% | (1,626 | ) | |||||||
Appfolio, Inc. — Class A | 176 | (0.14 | )% | (1,701 | ) | |||||||
HubSpot, Inc. | 319 | (0.37 | )% | (1,930 | ) | |||||||
Accenture plc — Class A | 78 | (0.12 | )% | (1,997 | ) | |||||||
PROS Holdings, Inc. | 346 | (0.15 | )% | (2,543 | ) | |||||||
Tyler Technologies, Inc. | 54 | (0.12 | )% | (2,651 | ) | |||||||
ANSYS, Inc. | 79 | (0.15 | )% | (3,386 | ) | |||||||
ExlService Holdings, Inc. | 1,397 | (0.72 | )% | (4,530 | ) | |||||||
Smartsheet, Inc. — Class A | 816 | (0.27 | )% | (4,645 | ) | |||||||
Broadcom, Inc. | 109 | (0.25 | )% | (4,889 | ) | |||||||
Paycom Software, Inc. | 100 | (0.20 | )% | (4,903 | ) | |||||||
Five9, Inc. | 284 | (0.14 | )% | (4,944 | ) | |||||||
Adobe, Inc. | 159 | (0.39 | )% | (5,901 | ) | |||||||
Monolithic Power Systems, Inc. | 141 | (0.19 | )% | (5,985 | ) | |||||||
Science Applications International Corp. | 1,668 | (1.07 | )% | (7,103 | ) | |||||||
DocuSign, Inc. | 666 | (0.37 | )% | (7,460 | ) | |||||||
EPAM Systems, Inc. | 405 | (0.64 | )% | (9,300 | ) | |||||||
Black Knight, Inc. | 1,769 | (0.84 | )% | (9,617 | ) | |||||||
ACI Worldwide, Inc. | 2,510 | (0.70 | )% | (10,433 | ) | |||||||
salesforce.com, Inc. | 690 | (0.83 | )% | (10,466 | ) | |||||||
Genpact Ltd. | 2,660 | (0.83 | )% | (10,776 | ) |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 17 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
LONG SHORT EQUITY FUND |
| Shares | Percentage | Value and | |||||||||
CACI International, Inc. — Class A | 613 | (1.13 | )% | $ | (16,092 | ) | ||||||
Envestnet, Inc. | 1,246 | (0.64 | )% | (18,879 | ) | |||||||
Splunk, Inc. | 608 | (0.67 | )% | (19,827 | ) | |||||||
Total Technology | (150,789 | ) | ||||||||||
Consumer, Non-cyclical | ||||||||||||
Rollins, Inc. | 1,206 | (0.30 | )% | 5,256 | ||||||||
Guardant Health, Inc. | 301 | (0.17 | )% | 3,877 | ||||||||
Verisk Analytics, Inc. — Class A | 216 | (0.24 | )% | 2,155 | ||||||||
Gartner, Inc. | 513 | (0.59 | )% | 2,150 | ||||||||
Glaukos Corp. | 288 | (0.12 | )% | 1,251 | ||||||||
FleetCor Technologies, Inc. | 274 | (0.58 | )% | 1,049 | ||||||||
Avalara, Inc. | 252 | (0.14 | )% | (152 | ) | |||||||
Booz Allen Hamilton Holding Corp. | 415 | (0.22 | )% | (745 | ) | |||||||
Bright Horizons Family Solutions, Inc. | 518 | (0.58 | )% | (1,221 | ) | |||||||
Intuitive Surgical, Inc. | 28 | (0.12 | )% | (1,662 | ) | |||||||
Illumina, Inc. | 51 | (0.13 | )% | (1,989 | ) | |||||||
LiveRamp Holdings, Inc. | 423 | (0.15 | )% | (2,301 | ) | |||||||
ResMed, Inc. | 104 | (0.12 | )% | (2,629 | ) | |||||||
Viad Corp. | 1,236 | (0.62 | )% | (3,241 | ) | |||||||
Paylocity Holding Corp. | 138 | (0.12 | )% | (3,719 | ) | |||||||
IHS Markit Ltd. | 365 | (0.20 | )% | (4,582 | ) | |||||||
PayPal Holdings, Inc. | 952 | (0.76 | )% | (6,133 | ) | |||||||
Euronet Worldwide, Inc. | 463 | (0.54 | )% | (6,213 | ) | |||||||
MarketAxess Holdings, Inc. | 121 | (0.34 | )% | (7,764 | ) | |||||||
WEX, Inc. | 734 | (1.14 | )% | (10,464 | ) | |||||||
Brink’s Co. | 972 | (0.65 | )% | (11,375 | ) | |||||||
Avery Dennison Corp. | 883 | (0.85 | )% | (17,625 | ) | |||||||
Total Consumer, Non-cyclical | (66,077 | ) | ||||||||||
Basic Materials | ||||||||||||
WR Grace & Co. | 1,671 | (0.86 | )% | 10,977 | ||||||||
Allegheny Technologies, Inc. | 2,037 | (0.31 | )% | 9,798 | ||||||||
Livent Corp. | 1 | 0.00 | % | 2 | ||||||||
Carpenter Technology Corp. | 1,669 | (0.61 | )% | (1,000 | ) | |||||||
Kaiser Aluminum Corp. | 718 | (0.59 | )% | (5,971 | ) | |||||||
Southern Copper Corp. | 1,378 | (0.43 | )% | (7,500 | ) | |||||||
Air Products & Chemicals, Inc. | 348 | (0.61 | )% | (8,268 | ) | |||||||
Steel Dynamics, Inc. | 1,479 | (0.37 | )% | (8,471 | ) | |||||||
Balchem Corp. | 1,198 | (0.90 | )% | (10,709 | ) | |||||||
Reliance Steel & Aluminum Co. | 509 | (0.45 | )% | (11,429 | ) | |||||||
Commercial Metals Co. | 2,378 | (0.39 | )% | (11,614 | ) | |||||||
Freeport-McMoRan, Inc. | 5,467 | (0.53 | )% | (12,707 | ) | |||||||
Compass Minerals International, Inc. | 1,923 | (0.87 | )% | (13,717 | ) | |||||||
PPG Industries, Inc. | 781 | (0.77 | )% | (15,816 | ) | |||||||
RPM International, Inc. | 1,382 | (0.79 | )% | (19,070 | ) | |||||||
Sherwin-Williams Co. | 200 | (0.86 | )% | (19,437 | ) | |||||||
Linde plc | 993 | (1.58 | )% | (22,509 | ) | |||||||
Total Basic Materials | (147,441 | ) | ||||||||||
Consumer, Cyclical | ||||||||||||
Wingstop, Inc. | 892 | (0.57 | )% | 6,125 | ||||||||
McDonald’s Corp. | 155 | (0.23 | )% | 1,181 | ||||||||
Toro Co. | 740 | (0.44 | )% | (5,195 | ) | |||||||
Total Consumer, Cyclical | 2,111 | |||||||||||
Communications | ||||||||||||
8x8, Inc. | 3,492 | (0.47 | )% | 7,142 | ||||||||
Proofpoint, Inc. | 700 | (0.59 | )% | 2,742 | ||||||||
Palo Alto Networks, Inc. | 296 | (0.51 | )% | 2,520 | ||||||||
Okta, Inc. | 249 | (0.21 | )% | 1,535 | ||||||||
VeriSign, Inc. | 122 | (0.17 | )% | 521 | ||||||||
Charter Communications, Inc. — Class A | 63 | (0.23 | )% | (1,559 | ) | |||||||
Zendesk, Inc. | 1,007 | (0.57 | )% | (2,174 | ) | |||||||
Anaplan, Inc. | 460 | (0.18 | )% | (2,493 | ) | |||||||
Trade Desk, Inc. — Class A | 79 | (0.15 | )% | (3,244 | ) | |||||||
RingCentral, Inc. — Class A | 135 | (0.17 | )% | (6,011 | ) | |||||||
Q2 Holdings, Inc. | 1,119 | (0.67 | )% | (8,536 | ) | |||||||
Total Communications | (9,557 | ) | ||||||||||
Industrial | ||||||||||||
HEICO Corp. | 355 | (0.30 | )% | 5,103 | ||||||||
Roper Technologies, Inc. | 166 | (0.44 | )% | 2,437 | ||||||||
Ball Corp. | 1,342 | (0.64 | )% | 1,350 | ||||||||
Exponent, Inc. | 843 | (0.43 | )% | 960 | ||||||||
Materion Corp. | 1,771 | (0.78 | )% | (2,900 | ) | |||||||
Casella Waste Systems, Inc. — Class A | 1,078 | (0.37 | )% | (3,017 | ) | |||||||
Universal Display Corp. | 113 | (0.17 | )% | (3,737 | ) | |||||||
Sonoco Products Co. | 1,001 | (0.46 | )% | (6,105 | ) | |||||||
Westinghouse Air Brake Technologies Corp. | 618 | (0.36 | )% | (8,205 | ) | |||||||
Vulcan Materials Co. | 890 | (0.95 | )% | (9,595 | ) | |||||||
Worthington Industries, Inc. | 2,610 | (0.81 | )% | (14,181 | ) | |||||||
Martin Marietta Materials, Inc. | 497 | (1.03 | )% | (27,725 | ) | |||||||
TransDigm Group, Inc. | 377 | (1.56 | )% | (39,741 | ) | |||||||
Total Industrial | (105,356 | ) | ||||||||||
Energy | ||||||||||||
Warrior Met Coal, Inc. | 2,446 | (0.38 | )% | (4,359 | ) | |||||||
Total MS Equity Short Custom Basket | $ | (945,217 | ) |
18 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
LONG SHORT EQUITY FUND |
| Shares | Percentage | Value and | |||||||||
GS EQUITY LONG CUSTOM BASKET | ||||||||||||
Communications | ||||||||||||
Alphabet, Inc. — Class C | 49 | 0.91 | % | $ | 8,910 | |||||||
AT&T, Inc. | 2,011 | 1.09 | % | 7,697 | ||||||||
Verizon Communications, Inc. | 1,448 | 1.23 | % | 5,845 | ||||||||
News Corp. — Class A | 2,484 | 0.49 | % | 4,419 | ||||||||
Discovery, Inc. — Class A | 1,269 | 0.58 | % | 4,311 | ||||||||
Facebook, Inc. — Class A | 146 | 0.41 | % | 3,711 | ||||||||
Amazon.com, Inc. | 19 | 0.49 | % | 2,464 | ||||||||
Scholastic Corp. | 423 | 0.23 | % | 2,310 | ||||||||
TEGNA, Inc. | 1,298 | 0.30 | % | 2,227 | ||||||||
Omnicom Group, Inc. | 937 | 1.05 | % | 2,128 | ||||||||
Booking Holdings, Inc. | 18 | 0.51 | % | 1,902 | ||||||||
Juniper Networks, Inc. | 773 | 0.26 | % | 827 | ||||||||
Yelp, Inc. — Class A | 727 | 0.35 | % | 400 | ||||||||
Comcast Corp. — Class A | 266 | 0.17 | % | (96 | ) | |||||||
Walt Disney Co. | 80 | 0.16 | % | (244 | ) | |||||||
AMC Networks, Inc. — Class A | 903 | 0.49 | % | (286 | ) | |||||||
Cisco Systems, Inc. | 297 | 0.20 | % | (1,593 | ) | |||||||
eBay, Inc. | 1,130 | 0.56 | % | (2,030 | ) | |||||||
Total Communications | 42,902 | |||||||||||
Consumer, Non-cyclical | ||||||||||||
CVS Health Corp. | 865 | 0.89 | % | 16,371 | ||||||||
Darling Ingredients, Inc. | 1,878 | 0.73 | % | 15,147 | ||||||||
Eli Lilly & Co. | 559 | 1.02 | % | 13,143 | ||||||||
Amgen, Inc. | 296 | 0.99 | % | 12,334 | ||||||||
Ingredion, Inc. | 629 | 0.81 | % | 7,889 | ||||||||
Zimmer Biomet Holdings, Inc. | 256 | 0.53 | % | 7,608 | ||||||||
Sysco Corp. | 649 | 0.77 | % | 7,255 | ||||||||
Archer-Daniels-Midland Co. | 1,664 | 1.07 | % | 6,815 | ||||||||
Merck & Company, Inc. | 822 | 1.03 | % | 6,546 | ||||||||
Kellogg Co. | 825 | 0.79 | % | 6,168 | ||||||||
Medtronic plc | 438 | 0.69 | % | 5,734 | ||||||||
Jazz Pharmaceuticals plc | 250 | 0.52 | % | 4,856 | ||||||||
Becton Dickinson and Co. | 132 | 0.50 | % | 4,613 | ||||||||
Johnson & Johnson | 469 | 0.95 | % | 4,267 | ||||||||
Thermo Fisher Scientific, Inc. | 106 | 0.48 | % | 3,858 | ||||||||
Campbell Soup Co. | 766 | 0.52 | % | 3,743 | ||||||||
Molina Healthcare, Inc. | 159 | 0.30 | % | 3,468 | ||||||||
Biogen, Inc. | 51 | 0.21 | % | 3,404 | ||||||||
Hormel Foods Corp. | 1,153 | 0.72 | % | 3,173 | ||||||||
Hologic, Inc. | 733 | 0.53 | % | 3,167 | ||||||||
Philip Morris International, Inc. | 453 | 0.53 | % | 3,014 | ||||||||
Procter & Gamble Co. | 450 | 0.78 | % | 3,002 | ||||||||
Anthem, Inc. | 42 | 0.18 | % | 2,686 | ||||||||
Abbott Laboratories | 509 | 0.61 | % | 2,593 | ||||||||
TrueBlue, Inc. | 900 | 0.30 | % | 2,532 | ||||||||
McKesson Corp. | 466 | 0.89 | % | 2,405 | ||||||||
Cardinal Health, Inc. | 1,168 | 0.82 | % | 2,360 | ||||||||
Post Holdings, Inc. | 452 | 0.68 | % | 2,290 | ||||||||
Herbalife Nutrition Ltd. | 534 | 0.35 | % | 2,277 | ||||||||
Baxter International, Inc. | 467 | 0.54 | % | 2,203 | ||||||||
UnitedHealth Group, Inc. | 56 | 0.23 | % | 2,131 | ||||||||
Kimberly-Clark Corp. | 552 | 1.05 | % | 1,894 | ||||||||
Macquarie Infrastructure Corp. | 400 | 0.24 | % | 1,540 | ||||||||
Regeneron Pharmaceuticals, Inc. | 40 | 0.21 | % | 1,422 | ||||||||
Innoviva, Inc. | 1,559 | 0.31 | % | 1,277 | ||||||||
Clorox Co. | 179 | 0.38 | % | 1,231 | ||||||||
Integer Holdings Corp. | 319 | 0.36 | % | 1,223 | ||||||||
Alexion Pharmaceuticals, Inc. | 256 | 0.38 | % | 1,094 | ||||||||
General Mills, Inc. | 1,042 | 0.77 | % | 945 | ||||||||
Coca-Cola Co. | 276 | 0.21 | % | 921 | ||||||||
Cigna Corp. | 63 | 0.18 | % | 898 | ||||||||
Cal-Maine Foods, Inc. | 443 | 0.26 | % | 889 | ||||||||
STERIS plc | 143 | 0.30 | % | 873 | ||||||||
Altria Group, Inc. | 259 | 0.18 | % | 824 | ||||||||
PepsiCo, Inc. | 189 | 0.36 | % | 684 | ||||||||
Molson Coors Beverage Co. — Class B | 1,062 | 0.79 | % | 467 | ||||||||
Kraft Heinz Co. | 289 | 0.13 | % | 392 | ||||||||
Mondelez International, Inc. — Class A | 403 | 0.31 | % | 338 | ||||||||
AbbVie, Inc. | 111 | 0.14 | % | 123 | ||||||||
Tyson Foods, Inc. — Class A | 108 | 0.14 | % | 93 | ||||||||
TreeHouse Foods, Inc. | 421 | 0.28 | % | (311 | ) | |||||||
United Therapeutics Corp. | 256 | 0.31 | % | (470 | ) | |||||||
Gilead Sciences, Inc. | 984 | 0.89 | % | (487 | ) | |||||||
Hershey Co. | 99 | 0.20 | % | (817 | ) | |||||||
John B Sanfilippo & Son, Inc. | 203 | 0.26 | % | (1,207 | ) | |||||||
B&G Foods, Inc. | 1,330 | 0.33 | % | (2,961 | ) | |||||||
JM Smucker Co. | 555 | 0.80 | % | (3,291 | ) | |||||||
Pfizer, Inc. | 1,891 | 1.03 | % | (3,613 | ) | |||||||
H&R Block, Inc. | 978 | 0.32 | % | (4,590 | ) | |||||||
Total Consumer, Non-cyclical | 166,433 | |||||||||||
Consumer, Cyclical | ||||||||||||
World Fuel Services Corp. | 869 | 0.52 | % | 8,716 | ||||||||
Carnival Corp. | 836 | 0.59 | % | 6,798 | ||||||||
Las Vegas Sands Corp. | 585 | 0.56 | % | 6,313 | ||||||||
Norwegian Cruise Line Holdings Ltd. | 435 | 0.35 | % | 4,289 | ||||||||
Lear Corp. | 358 | 0.68 | % | 4,271 | ||||||||
Aptiv plc | 415 | 0.55 | % | 4,022 | ||||||||
BorgWarner, Inc. | 1,024 | 0.61 | % | 3,954 | ||||||||
Autoliv, Inc. | 447 | 0.52 | % | 3,628 |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 19 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
LONG SHORT EQUITY FUND |
| Shares | Percentage | Value and | |||||||||
Wyndham Destinations, Inc. | 619 | 0.44 | % | $ | 3,469 | |||||||
Royal Caribbean Cruises Ltd. | 178 | 0.33 | % | 3,310 | ||||||||
Allison Transmission Holdings, Inc. | 769 | 0.51 | % | 3,253 | ||||||||
AutoZone, Inc. | 23 | 0.38 | % | 3,135 | ||||||||
Gentherm, Inc. | 837 | 0.51 | % | 2,790 | ||||||||
Southwest Airlines Co. | 863 | 0.64 | % | 2,675 | ||||||||
DR Horton, Inc. | 342 | 0.25 | % | 2,113 | ||||||||
Toll Brothers, Inc. | 692 | 0.38 | % | 1,737 | ||||||||
PulteGroup, Inc. | 583 | 0.31 | % | 1,521 | ||||||||
Delta Air Lines, Inc. | 607 | 0.49 | % | 1,509 | ||||||||
NIKE, Inc. — Class B | 158 | 0.22 | % | 1,463 | ||||||||
Cummins, Inc. | 180 | 0.45 | % | 1,237 | ||||||||
Walmart, Inc. | 120 | 0.20 | % | 1,144 | ||||||||
Home Depot, Inc. | 66 | 0.20 | % | 1,034 | ||||||||
SkyWest, Inc. | 317 | 0.28 | % | 769 | ||||||||
Brunswick Corp. | 605 | 0.50 | % | 706 | ||||||||
Extended Stay America, Inc. | 2,480 | 0.51 | % | 628 | ||||||||
Allegiant Travel Co. — Class A | 92 | 0.22 | % | 470 | ||||||||
Starbucks Corp. | 309 | 0.38 | % | 272 | ||||||||
United Airlines Holdings, Inc. | 240 | 0.29 | % | 204 | ||||||||
Polaris, Inc. | 263 | 0.37 | % | 89 | ||||||||
JetBlue Airways Corp. | 779 | 0.20 | % | (239 | ) | |||||||
Costco Wholesale Corp. | 39 | 0.16 | % | (383 | ) | |||||||
Mohawk Industries, Inc. | 98 | 0.18 | % | (699 | ) | |||||||
Lennar Corp. — Class A | 356 | 0.27 | % | (1,027 | ) | |||||||
Goodyear Tire & Rubber Co. | 1,257 | 0.27 | % | (1,060 | ) | |||||||
Whirlpool Corp. | 263 | 0.54 | % | (1,107 | ) | |||||||
General Motors Co. | 619 | 0.31 | % | (1,434 | ) | |||||||
Cracker Barrel Old Country Store, Inc. | 251 | 0.53 | % | (1,549 | ) | |||||||
Total Consumer, Cyclical | 68,021 | |||||||||||
Utilities | ||||||||||||
AES Corp. | 3,218 | 0.89 | % | 12,005 | ||||||||
PPL Corp. | 1,748 | 0.87 | % | 9,245 | ||||||||
FirstEnergy Corp. | 1,260 | 0.85 | % | 6,243 | ||||||||
Southern Co. | 570 | 0.50 | % | 3,739 | ||||||||
Avangrid, Inc. | 897 | 0.64 | % | 2,071 | ||||||||
NRG Energy, Inc. | 1,435 | 0.79 | % | 1,626 | ||||||||
Portland General Electric Co. | 951 | 0.73 | % | 1,389 | ||||||||
NiSource, Inc. | 751 | 0.29 | % | 1,091 | ||||||||
Ameren Corp. | 621 | 0.66 | % | 710 | ||||||||
Avista Corp. | 306 | 0.20 | % | 525 | ||||||||
Entergy Corp. | 202 | 0.33 | % | 452 | ||||||||
Evergy, Inc. | 916 | 0.83 | % | (50 | ) | |||||||
Public Service Enterprise Group, Inc. | 652 | 0.53 | % | (1,050 | ) | |||||||
Exelon Corp. | 1,351 | 0.85 | % | (1,815 | ) | |||||||
Pinnacle West Capital Corp. | 578 | 0.72 | % | (2,790 | ) | |||||||
Vistra Energy Corp. | 1,829 | 0.58 | % | (4,788 | ) | |||||||
National Fuel Gas Co. | 1,014 | 0.65 | % | (4,935 | ) | |||||||
Total Utilities | 23,668 | |||||||||||
Financial | ||||||||||||
JPMorgan Chase & Co. | 295 | 0.57 | % | 8,407 | ||||||||
Weingarten Realty Investors | 1,945 | 0.84 | % | 4,670 | ||||||||
Bank of America Corp. | 587 | 0.29 | % | 4,040 | ||||||||
Deluxe Corp. | 431 | 0.30 | % | 3,581 | ||||||||
Janus Henderson Group plc | 815 | 0.28 | % | 2,682 | ||||||||
Brixmor Property Group, Inc. | 1,717 | 0.51 | % | 2,599 | ||||||||
Berkshire Hathaway, Inc. — Class B | 131 | 0.41 | % | 2,516 | ||||||||
Summit Hotel Properties, Inc. | 2,336 | 0.40 | % | 1,590 | ||||||||
Wells Fargo & Co. | 316 | 0.24 | % | 1,514 | ||||||||
Hartford Financial Services Group, Inc. | 234 | 0.20 | % | 1,382 | ||||||||
Lexington Realty Trust | 5,549 | 0.82 | % | 1,235 | ||||||||
Visa, Inc. — Class A | 80 | 0.21 | % | 682 | ||||||||
M&T Bank Corp. | 88 | 0.21 | % | 629 | ||||||||
Comerica, Inc. | 206 | 0.20 | % | 478 | ||||||||
Apartment Investment & Management Co. — Class A | 779 | 0.56 | % | 448 | ||||||||
U.S. Bancorp | 246 | 0.20 | % | 179 | ||||||||
Sunstone Hotel Investors, Inc. | 1,152 | 0.22 | % | (27 | ) | |||||||
Travelers Companies, Inc. | 107 | 0.20 | % | (383 | ) | |||||||
Franklin Resources, Inc. | 963 | 0.35 | % | (1,058 | ) | |||||||
Equity Commonwealth | 2,103 | 0.96 | % | (1,465 | ) | |||||||
Total Financial | 33,699 | |||||||||||
Energy | ||||||||||||
Phillips 66 | 256 | 0.39 | % | 6,836 | ||||||||
HollyFrontier Corp. | 560 | 0.39 | % | 5,706 | ||||||||
Devon Energy Corp. | 1,273 | 0.46 | % | 5,307 | ||||||||
Valero Energy Corp. | 387 | 0.50 | % | 5,149 | ||||||||
ConocoPhillips | 453 | 0.41 | % | 4,671 | ||||||||
EOG Resources, Inc. | 132 | 0.15 | % | 1,470 | ||||||||
ONEOK, Inc. | 238 | 0.25 | % | 1,322 | ||||||||
Pioneer Natural Resources Co. | 72 | 0.15 | % | 1,301 | ||||||||
Kinder Morgan, Inc. | 1,510 | 0.44 | % | 624 | ||||||||
Chevron Corp. | 553 | 0.92 | % | (506 | ) | |||||||
Delek US Holdings, Inc. | 718 | 0.33 | % | (1,573 | ) | |||||||
CVR Energy, Inc. | 598 | 0.33 | % | (3,733 | ) |
20 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
LONG SHORT EQUITY FUND |
| Shares | Percentage | Value and | |||||||||
Exxon Mobil Corp. | 1,292 | 1.25 | % | $ | (4,062 | ) | ||||||
Total Energy | 22,512 | |||||||||||
Industrial | ||||||||||||
Kansas City Southern | 252 | 0.53 | % | 8,196 | ||||||||
Lincoln Electric Holdings, Inc. | 580 | 0.78 | % | 7,664 | ||||||||
Caterpillar, Inc. | 327 | 0.67 | % | 6,744 | ||||||||
Regal Beloit Corp. | 441 | 0.52 | % | 6,543 | ||||||||
Crane Co. | 640 | 0.77 | % | 5,988 | ||||||||
Schneider National, Inc. — Class B | 1,409 | 0.43 | % | 5,453 | ||||||||
Werner Enterprises, Inc. | 1,155 | 0.58 | % | 5,350 | ||||||||
Old Dominion Freight Line, Inc. | 97 | 0.25 | % | 4,757 | ||||||||
Union Pacific Corp. | 185 | 0.46 | % | 4,710 | ||||||||
Agilent Technologies, Inc. | 317 | 0.37 | % | 4,690 | ||||||||
Oshkosh Corp. | 252 | 0.33 | % | 4,223 | ||||||||
Vishay Intertechnology, Inc. | 756 | 0.22 | % | 4,113 | ||||||||
Kennametal, Inc. | 902 | 0.46 | % | 3,978 | ||||||||
Landstar System, Inc. | 355 | 0.56 | % | 3,921 | ||||||||
Marten Transport Ltd. | 1,172 | 0.35 | % | 3,412 | ||||||||
Gentex Corp. | 1,533 | 0.61 | % | 3,337 | ||||||||
Garmin Ltd. | 251 | 0.34 | % | 3,318 | ||||||||
Mettler-Toledo International, Inc. | 28 | 0.31 | % | 3,313 | ||||||||
Knight-Swift Transportation Holdings, Inc. | 674 | 0.33 | % | 3,222 | ||||||||
Honeywell International, Inc. | 193 | 0.47 | % | 3,040 | ||||||||
Emerson Electric Co. | 232 | 0.24 | % | 2,791 | ||||||||
Heartland Express, Inc. | 1,238 | 0.36 | % | 2,659 | ||||||||
Waters Corp. | 111 | 0.36 | % | 2,622 | ||||||||
Norfolk Southern Corp. | 354 | 0.95 | % | 2,463 | ||||||||
Sturm Ruger & Company, Inc. | 543 | 0.35 | % | 1,045 | ||||||||
3M Co. | 84 | 0.21 | % | 445 | ||||||||
MDU Resources Group, Inc. | 496 | 0.20 | % | 309 | ||||||||
J.B. Hunt Transport Services, Inc. | 289 | 0.47 | % | 117 | ||||||||
Echo Global Logistics, Inc. | 1,144 | 0.33 | % | 40 | ||||||||
CH Robinson Worldwide, Inc. | 598 | 0.65 | % | (1,731 | ) | |||||||
Textron, Inc. | 787 | 0.49 | % | (2,180 | ) | |||||||
CSX Corp. | 733 | 0.73 | % | (2,296 | ) | |||||||
FedEx Corp. | 404 | 0.85 | % | (2,513 | ) | |||||||
Total Industrial | 99,743 | |||||||||||
Technology | ||||||||||||
Apple, Inc. | 216 | 0.88 | % | 15,017 | ||||||||
Microsoft Corp. | 424 | 0.93 | % | 10,404 | ||||||||
Skyworks Solutions, Inc. | 142 | 0.24 | % | 6,661 | ||||||||
Intel Corp. | 250 | 0.21 | % | 3,250 | ||||||||
Activision Blizzard, Inc. | 474 | 0.39 | % | 2,761 | ||||||||
QUALCOMM, Inc. | 159 | 0.19 | % | 1,995 | ||||||||
Micron Technology, Inc. | 259 | 0.19 | % | 1,826 | ||||||||
Texas Instruments, Inc. | 121 | 0.21 | % | (57 | ) | |||||||
Cognizant Technology Solutions Corp. — Class A | 192 | 0.16 | % | (175 | ) | |||||||
Oracle Corp. | 428 | 0.31 | % | (462 | ) | |||||||
International Business Machines Corp. | 107 | 0.20 | % | (1,337 | ) | |||||||
Teradata Corp. | 572 | 0.21 | % | (1,341 | ) | |||||||
Total Technology | 38,542 | |||||||||||
Basic Materials | ||||||||||||
Domtar Corp. | 441 | 0.23 | % | 1,268 | ||||||||
Total GS Equity Long Custom Basket | $ | 496,788 | ||||||||||
GS EQUITY SHORT CUSTOM BASKET | ||||||||||||
Technology | ||||||||||||
Appian Corp. | 546 | (0.16 | )% | 7,770 | ||||||||
Elastic N.V. | 245 | (0.12 | )% | 6,348 | ||||||||
Workday, Inc. — Class A | 136 | (0.17 | )% | 4,717 | ||||||||
Alteryx, Inc. — Class A | 210 | (0.16 | )% | 4,030 | ||||||||
Veeva Systems, Inc. — Class A | 153 | (0.17 | )% | 3,180 | ||||||||
MongoDB, Inc. | 219 | (0.22 | )% | 2,986 | ||||||||
Atlassian Corporation plc — Class A | 174 | (0.16 | )% | 2,173 | ||||||||
Aspen Technology, Inc. | 192 | (0.18 | )% | 1,478 | ||||||||
ServiceNow, Inc. | 89 | (0.20 | )% | 979 | ||||||||
Zscaler, Inc. | 403 | (0.15 | )% | 695 | ||||||||
Manhattan Associates, Inc. | 238 | (0.15 | )% | 625 | ||||||||
Coupa Software, Inc. | 166 | (0.19 | )% | 356 | ||||||||
Intuit, Inc. | 116 | (0.24 | )% | 147 | ||||||||
Twilio, Inc. — Class A | 184 | (0.14 | )% | (22 | ) | |||||||
LivePerson, Inc. | 510 | (0.15 | )% | (422 | ) | |||||||
Workiva, Inc. | 446 | (0.15 | )% | (562 | ) | |||||||
Paychex, Inc. | 739 | (0.49 | )% | (737 | ) | |||||||
HubSpot, Inc. | 319 | (0.39 | )% | (1,271 | ) | |||||||
Guidewire Software, Inc. | 195 | (0.17 | )% | (1,453 | ) | |||||||
Fair Isaac Corp. | 67 | (0.20 | )% | (1,611 | ) | |||||||
Appfolio, Inc. — Class A | 176 | (0.15 | )% | (1,903 | ) | |||||||
Accenture plc — Class A | 78 | (0.13 | )% | (1,958 | ) | |||||||
Tyler Technologies, Inc. | 54 | (0.13 | )% | (2,645 | ) | |||||||
PROS Holdings, Inc. | 346 | (0.16 | )% | (2,691 | ) | |||||||
ANSYS, Inc. | 79 | (0.16 | )% | (3,811 | ) | |||||||
Paycom Software, Inc. | 100 | (0.21 | )% | (3,889 | ) | |||||||
Smartsheet, Inc. — Class A | 816 | (0.28 | )% | (4,053 | ) | |||||||
ExlService Holdings, Inc. | 1,397 | (0.75 | )% | (4,518 | ) | |||||||
Five9, Inc. | 284 | (0.14 | )% | (4,558 | ) | |||||||
Broadcom, Inc. | 109 | (0.27 | )% | (4,623 | ) | |||||||
Adobe, Inc. | 159 | (0.41 | )% | (5,653 | ) |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 21 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
LONG SHORT EQUITY FUND |
| Shares | Percentage | Value and | |||||||||
Monolithic Power Systems, Inc. | 141 | (0.20 | )% | $ | (6,384 | ) | ||||||
Science Applications International Corp. | 1,668 | (1.13 | )% | (6,664 | ) | |||||||
DocuSign, Inc. | 666 | (0.38 | )% | (8,751 | ) | |||||||
EPAM Systems, Inc. | 405 | (0.67 | )% | (9,040 | ) | |||||||
Black Knight, Inc. | 1,769 | (0.89 | )% | (9,341 | ) | |||||||
salesforce.com, Inc. | 690 | (0.87 | )% | (9,538 | ) | |||||||
Genpact Ltd. | 2,660 | (0.87 | )% | (10,451 | ) | |||||||
ACI Worldwide, Inc. | 2,510 | (0.74 | )% | (10,758 | ) | |||||||
CACI International, Inc. — Class A | 613 | (1.19 | )% | (15,784 | ) | |||||||
Envestnet, Inc. | 1,246 | (0.67 | )% | (18,717 | ) | |||||||
Splunk, Inc. | 608 | (0.71 | )% | (18,989 | ) | |||||||
Total Technology | (135,313 | ) | ||||||||||
Financial | ||||||||||||
WP Carey, Inc. | 1,975 | (1.23 | )% | 15,738 | ||||||||
Realty Income Corp. | 2,183 | (1.25 | )% | 7,417 | ||||||||
Essential Properties Realty Trust, Inc. | 3,787 | (0.73 | )% | 6,145 | ||||||||
Acadia Realty Trust | 2,189 | (0.44 | )% | 5,259 | ||||||||
CME Group, Inc. — Class A | 221 | (0.34 | )% | 1,142 | ||||||||
Northwest Bancshares, Inc. | 3,431 | (0.44 | )% | 901 | ||||||||
National Storage Affiliates Trust | 1,469 | (0.38 | )% | 528 | ||||||||
UDR, Inc. | 2,124 | (0.77 | )% | 510 | ||||||||
Camden Property Trust | 616 | (0.51 | )% | 308 | ||||||||
American Assets Trust, Inc. | 2,812 | (1.00 | )% | 213 | ||||||||
Capitol Federal Financial, Inc. | 3,979 | (0.42 | )% | 200 | ||||||||
Intercontinental Exchange, Inc. | 1,153 | (0.83 | )% | (400 | ) | |||||||
BancorpSouth Bank | 1,713 | (0.42 | )% | (425 | ) | |||||||
American Campus Communities, Inc. | 3,478 | (1.27 | )% | (1,014 | ) | |||||||
Atlantic Union Bankshares Corp. | 1,185 | (0.35 | )% | (1,376 | ) | |||||||
Armada Hoffler Properties, Inc. | 5,846 | (0.83 | )% | (1,632 | ) | |||||||
BankUnited, Inc. | 868 | (0.25 | )% | (1,673 | ) | |||||||
Global Net Lease, Inc. | 2,671 | (0.42 | )% | (1,811 | ) | |||||||
Reinsurance Group of America, Inc. — Class A | 898 | (1.14 | )% | (2,130 | ) | |||||||
Crown Castle International Corp. | 513 | (0.57 | )% | (3,149 | ) | |||||||
RLI Corp. | 1,586 | (1.11 | )% | (3,520 | ) | |||||||
Douglas Emmett, Inc. | 1,458 | (0.50 | )% | (4,310 | ) | |||||||
RenaissanceRe Holdings Ltd. | 501 | (0.76 | )% | (4,694 | ) | |||||||
STAG Industrial, Inc. | 2,643 | (0.65 | )% | (4,817 | ) | |||||||
Brown & Brown, Inc. | 3,094 | (0.95 | )% | (5,062 | ) | |||||||
QTS Realty Trust, Inc. — Class A | 1,486 | (0.63 | )% | (5,227 | ) | |||||||
Synovus Financial Corp. | 1,340 | (0.41 | )% | (5,325 | ) | |||||||
Healthcare Realty Trust, Inc. | 4,410 | (1.14 | )% | (5,403 | ) | |||||||
Washington Real Estate Investment Trust | 3,188 | (0.72 | )% | (5,577 | ) | |||||||
Columbia Financial, Inc. | 3,111 | (0.41 | )% | (6,047 | ) | |||||||
Valley National Bancorp | 6,891 | (0.61 | )% | (6,605 | ) | |||||||
STORE Capital Corp. | 3,451 | (1.00 | )% | (8,064 | ) | |||||||
Old National Bancorp | 7,318 | (1.04 | )% | (8,172 | ) | |||||||
SBA Communications Corp. | 505 | (0.95 | )% | (8,446 | ) | |||||||
Glacier Bancorp, Inc. | 1,469 | (0.53 | )% | (8,550 | ) | |||||||
Everest Re Group Ltd. | 442 | (0.95 | )% | (9,168 | ) | |||||||
Agree Realty Corp. | 2,450 | (1.34 | )% | (9,387 | ) | |||||||
Equinix, Inc. | 121 | (0.55 | )% | (9,427 | ) | |||||||
American Tower Corp. — Class A | 640 | (1.14 | )% | (9,836 | ) | |||||||
People’s United Financial, Inc. | 7,404 | (0.97 | )% | (9,981 | ) | |||||||
Alexandria Real Estate Equities, Inc. | 1,325 | (1.66 | )% | (11,360 | ) | |||||||
EastGroup Properties, Inc. | 780 | (0.80 | )% | (13,888 | ) | |||||||
Arthur J Gallagher & Co. | 1,668 | (1.23 | )% | (14,110 | ) | |||||||
BOK Financial Corp. | 1,389 | (0.94 | )% | (14,437 | ) | |||||||
Athene Holding Ltd. — Class A | 1,891 | (0.69 | )% | (15,180 | ) | |||||||
Fifth Third Bancorp | 4,039 | (0.97 | )% | (15,210 | ) | |||||||
Easterly Government Properties, Inc. | 9,259 | (1.71 | )% | (17,571 | ) | |||||||
Hudson Pacific Properties, Inc. | 6,232 | (1.80 | )% | (21,177 | ) | |||||||
First Republic Bank | 1,199 | (1.09 | )% | (21,220 | ) | |||||||
Terreno Realty Corp. | 3,554 | (1.50 | )% | (23,399 | ) | |||||||
Sun Communities, Inc. | 1,160 | (1.35 | )% | (24,467 | ) | |||||||
Rexford Industrial Realty, Inc. | 4,557 | (1.62 | )% | (26,638 | ) | |||||||
Total Financial | (331,524 | ) | ||||||||||
Basic Materials | ||||||||||||
WR Grace & Co. | 1,671 | (0.91 | )% | 8,522 | ||||||||
Allegheny Technologies, Inc. | 2,037 | (0.33 | )% | 7,485 | ||||||||
Carpenter Technology Corp. | 1,669 | (0.65 | )% | (560 | ) | |||||||
Balchem Corp. | 1,198 | (0.95 | )% | (5,870 | ) | |||||||
Southern Copper Corp. | 1,379 | (0.46 | )% | (7,557 | ) | |||||||
Air Products & Chemicals, Inc. | 348 | (0.64 | )% | (8,547 | ) | |||||||
Steel Dynamics, Inc. | 1,479 | (0.39 | )% | (8,657 | ) | |||||||
Compass Minerals International, Inc. | 1,923 | (0.91 | )% | (9,666 | ) |
22 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
LONG SHORT EQUITY FUND |
| Shares | Percentage | Value and | |||||||||
Reliance Steel & Aluminum Co. | 509 | (0.47 | )% | $ | (11,358 | ) | ||||||
Commercial Metals Co. | 2,378 | (0.41 | )% | (11,613 | ) | |||||||
Kaiser Aluminum Corp. | 718 | (0.62 | )% | (12,209 | ) | |||||||
Freeport-McMoRan, Inc. | 5,468 | (0.56 | )% | (13,044 | ) | |||||||
PPG Industries, Inc. | 781 | (0.81 | )% | (15,103 | ) | |||||||
Linde plc | 993 | (1.64 | )% | (16,410 | ) | |||||||
Sherwin-Williams Co. | 200 | (0.91 | )% | (17,050 | ) | |||||||
RPM International, Inc. | 1,382 | (0.82 | )% | (20,798 | ) | |||||||
Total Basic Materials | (142,435 | ) | ||||||||||
Consumer, Non-cyclical | ||||||||||||
Rollins, Inc. | 1,206 | (0.31 | )% | 5,281 | ||||||||
Verisk Analytics, Inc. — Class A | 216 | (0.25 | )% | 2,165 | ||||||||
Gartner, Inc. | 513 | (0.61 | )% | 2,110 | ||||||||
Avalara, Inc. | 252 | (0.14 | )% | 1,836 | ||||||||
Glaukos Corp. | 288 | (0.12 | )% | 1,443 | ||||||||
FleetCor Technologies, Inc. | 274 | (0.61 | )% | 1,187 | ||||||||
Guardant Health, Inc. | 301 | (0.18 | )% | 760 | ||||||||
Bright Horizons Family Solutions, Inc. | 518 | (0.61 | )% | 326 | ||||||||
Booz Allen Hamilton Holding Corp. | 415 | (0.23 | )% | (570 | ) | |||||||
Illumina, Inc. | 51 | (0.13 | )% | (1,790 | ) | |||||||
Intuitive Surgical, Inc. | 28 | (0.13 | )% | (2,048 | ) | |||||||
Paylocity Holding Corp. | 138 | (0.13 | )% | (2,064 | ) | |||||||
LiveRamp Holdings, Inc. | 423 | (0.16 | )% | (2,071 | ) | |||||||
ResMed, Inc. | 104 | (0.13 | )% | (2,587 | ) | |||||||
Viad Corp. | 1,236 | (0.65 | )% | (3,536 | ) | |||||||
IHS Markit Ltd. | 365 | (0.21 | )% | (4,496 | ) | |||||||
MarketAxess Holdings, Inc. | 121 | (0.36 | )% | (5,424 | ) | |||||||
Euronet Worldwide, Inc. | 463 | (0.57 | )% | (5,557 | ) | |||||||
PayPal Holdings, Inc. | 952 | (0.80 | )% | (5,758 | ) | |||||||
WEX, Inc. | 734 | (1.20 | )% | (9,809 | ) | |||||||
Brink’s Co. | 972 | (0.69 | )% | (10,377 | ) | |||||||
Avery Dennison Corp. | 883 | (0.90 | )% | (17,037 | ) | |||||||
Total Consumer, Non-cyclical | (58,016 | ) | ||||||||||
Industrial | ||||||||||||
Materion Corp. | 1,771 | (0.82 | )% | 9,377 | ||||||||
HEICO Corp. | 355 | (0.31 | )% | 5,570 | ||||||||
Ball Corp. | 1,342 | (0.67 | )% | 4,390 | ||||||||
Roper Technologies, Inc. | 166 | (0.46 | )% | 2,661 | ||||||||
Exponent, Inc. | 843 | (0.45 | )% | 1,084 | ||||||||
Universal Display Corp. | 113 | (0.18 | )% | (1,702 | ) | |||||||
Casella Waste Systems, Inc. — Class A | 1,078 | (0.39 | )% | (2,907 | ) | |||||||
Vulcan Materials Co. | 890 | (1.00 | )% | (4,482 | ) | |||||||
Sonoco Products Co. | 1,001 | (0.48 | )% | (5,921 | ) | |||||||
Westinghouse Air Brake Technologies Corp. | 618 | (0.37 | )% | (7,624 | ) | |||||||
Worthington Industries, Inc. | 2,610 | (0.86 | )% | (14,093 | ) | |||||||
Martin Marietta Materials, Inc. | 497 | (1.08 | )% | (21,135 | ) | |||||||
TransDigm Group, Inc. | 377 | (1.64 | )% | (33,957 | ) | |||||||
Total Industrial | (68,739 | ) | ||||||||||
Utilities | ||||||||||||
California Water Service Group | 895 | (0.36 | )% | 1,142 | ||||||||
PNM Resources, Inc. | 930 | (0.37 | )% | 593 | ||||||||
Eversource Energy | 558 | (0.37 | )% | (467 | ) | |||||||
WEC Energy Group, Inc. | 514 | (0.37 | )% | (937 | ) | |||||||
Sempra Energy | 205 | (0.24 | )% | (1,050 | ) | |||||||
South Jersey Industries, Inc. | 1,477 | (0.38 | )% | (1,193 | ) | |||||||
NextEra Energy, Inc. | 113 | (0.21 | )% | (1,457 | ) | |||||||
Alliant Energy Corp. | 858 | (0.36 | )% | (1,550 | ) | |||||||
MGE Energy, Inc. | 404 | (0.25 | )% | (1,695 | ) | |||||||
American States Water Co. | 888 | (0.60 | )% | (2,241 | ) | |||||||
American Water Works Company, Inc. | 644 | (0.61 | )% | (3,061 | ) | |||||||
Atmos Energy Corp. | 414 | (0.36 | )% | (3,568 | ) | |||||||
Total Utilities | (15,484 | ) | ||||||||||
Communications | ||||||||||||
8x8, Inc. | 3,492 | (0.50 | )% | 7,062 | ||||||||
Okta, Inc. | 249 | (0.22 | )% | 3,196 | ||||||||
VeriSign, Inc. | 122 | (0.18 | )% | 958 | ||||||||
Zendesk, Inc. | 1,007 | (0.60 | )% | (773 | ) | |||||||
Proofpoint, Inc. | 700 | (0.62 | )% | (984 | ) | |||||||
Charter Communications, Inc. — Class A | 63 | (0.24 | )% | (1,590 | ) | |||||||
Anaplan, Inc. | 460 | (0.19 | )% | (2,272 | ) | |||||||
Trade Desk, Inc. — Class A | 79 | (0.16 | )% | (2,586 | ) | |||||||
RingCentral, Inc. — Class A | 135 | (0.18 | )% | (5,528 | ) | |||||||
Q2 Holdings, Inc. | 1,119 | (0.71 | )% | (6,717 | ) | |||||||
Palo Alto Networks, Inc. | 296 | (0.53 | )% | (7,855 | ) | |||||||
Total Communications | (17,089 | ) | ||||||||||
Consumer, Cyclical | ||||||||||||
Wingstop, Inc. | 892 | (0.60 | )% | 6,377 | ||||||||
McDonald’s Corp. | 155 | (0.24 | )% | 1,383 | ||||||||
Toro Co. | 740 | (0.46 | )% | (5,111 | ) | |||||||
Total Consumer, Cyclical | 2,649 | |||||||||||
Energy | ||||||||||||
Warrior Met Coal, Inc. | 2,446 | (0.40 | )% | (4,118 | ) | |||||||
Total GS Equity Short Custom Basket | $ | (770,069 | ) |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 23 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
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 equity custom basket swap collateral at December 31, 2019. |
2 | All or a portion of this security is on loan at December 31, 2019 — See Note 7. |
3 | Rate indicated is the 7-day yield as of December 31, 2019. |
4 | Securities lending collateral — See Note 7. |
GS — Goldman Sachs International | |
MS — Morgan Stanley Capital Services LLC | |
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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 30,488,441 | $ | — | $ | — | $ | 30,488,441 | ||||||||
Money Market Fund | 929,502 | — | — | 929,502 | ||||||||||||
Securities Lending Collateral | 239,621 | — | — | 239,621 | ||||||||||||
Equity custom basket swap agreements** | — | 993,910 | — | 993,910 | ||||||||||||
Total Assets | $ | 31,657,564 | $ | 993,910 | $ | — | $ | 32,651,474 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity custom basket swap agreements** | $ | — | $ | 1,715,286 | $ | — | $ | 1,715,286 | ||||||||
Total Liabilities | $ | — | $ | 1,715,286 | $ | — | $ | 1,715,286 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
24 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
LONG SHORT EQUITY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value - including $233,908 of securities loaned (cost $28,699,113) | $ | 31,657,564 | ||
Cash | 610 | |||
Unrealized appreciation on OTC swap agreements | 993,910 | |||
Receivables: | ||||
Fund shares sold | 140,436 | |||
Dividends | 45,909 | |||
Securities lending income | 160 | |||
Total assets | 32,838,589 | |||
Liabilities: | ||||
Unrealized depreciation on OTC swap agreements | 1,715,286 | |||
Payable for: | ||||
Return of securities lending collateral | 239,621 | |||
Swap settlement | 79,059 | |||
Management fees | 22,424 | |||
Fund shares redeemed | 16,966 | |||
Investor service fees | 6,229 | |||
Transfer agent and administrative fees | 2,492 | |||
Portfolio accounting fees | 2,492 | |||
Trustees’ fees* | 480 | |||
Miscellaneous | 70,118 | |||
Total liabilities | 2,155,167 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 30,683,422 | ||
Net assets consist of: | ||||
Paid in capital | $ | 32,883,313 | ||
Total distributable earnings (loss) | (2,199,891 | ) | ||
Net assets | $ | 30,683,422 | ||
Capital shares outstanding | 2,216,323 | |||
Net asset value per share | $ | 13.84 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends | $ | 676,841 | ||
Income from securities lending, net | 1,108 | |||
Total investment income | 677,949 | |||
Expenses: | ||||
Management fees | 256,454 | |||
Investor service fees | 71,237 | |||
Transfer agent and administrative fees | 28,495 | |||
Professional fees | 48,207 | |||
Portfolio accounting fees | 28,495 | |||
Trustees’ fees* | 7,087 | |||
Custodian fees | 5,999 | |||
Miscellaneous | 45,529 | |||
Total expenses | 491,503 | |||
Net investment income | 186,446 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (283,265 | ) | ||
Swap agreements | (2,366,422 | ) | ||
Net realized loss | (2,649,687 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 5,714,953 | |||
Swap agreements | (1,611,277 | ) | ||
Net change in unrealized appreciation (depreciation) | 4,103,676 | |||
Net realized and unrealized gain | 1,453,989 | |||
Net increase in net assets resulting from operations | $ | 1,640,435 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 25 |
LONG SHORT EQUITY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 186,446 | $ | 177,914 | ||||
Net realized loss on investments | (2,649,687 | ) | (1,900,182 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | 4,103,676 | (3,213,298 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 1,640,435 | (4,935,566 | ) | |||||
Distributions to shareholders | (168,099 | ) | (4,359,341 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 9,806,958 | 10,995,300 | ||||||
Distributions reinvested | 168,099 | 4,359,341 | ||||||
Cost of shares redeemed | (9,974,536 | ) | (15,986,990 | ) | ||||
Net increase (decrease) from capital share transactions | 521 | (632,349 | ) | |||||
Net increase (decrease) in net assets | 1,472,857 | (9,927,256 | ) | |||||
Net assets: | ||||||||
Beginning of year | 29,210,565 | 39,137,821 | ||||||
End of year | $ | 30,683,422 | $ | 29,210,565 | ||||
Capital share activity: | ||||||||
Shares sold | 739,247 | 675,872 | ||||||
Shares issued from reinvestment of distributions | 12,735 | 306,996 | ||||||
Shares redeemed | (749,957 | ) | (993,262 | ) | ||||
Net increase (decrease) in shares | 2,025 | (10,394 | ) |
26 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
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 | $ | 13.19 | $ | 17.59 | $ | 15.37 | $ | 15.27 | $ | 15.08 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .09 | .08 | (.05 | ) | .01 | (.11 | ) | |||||||||||||
Net gain (loss) on investments (realized and unrealized) | .64 | (2.19 | ) | 2.33 | .09 | .30 | ||||||||||||||
Total from investment operations | .73 | (2.11 | ) | 2.28 | .10 | .19 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.08 | ) | — | (.06 | ) | — | — | |||||||||||||
Net realized gains | — | (2.29 | ) | — | — | — | ||||||||||||||
Total distributions | (.08 | ) | (2.29 | ) | (.06 | ) | — | — | ||||||||||||
Net asset value, end of period | $ | 13.84 | $ | 13.19 | $ | 17.59 | $ | 15.37 | $ | 15.27 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 5.54 | % | (12.94 | %) | 14.85 | % | 0.65 | % | 1.26 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 30,683 | $ | 29,211 | $ | 39,138 | $ | 31,887 | $ | 39,120 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.65 | % | 0.52 | % | (0.32 | %) | 0.04 | % | (0.71 | %) | ||||||||||
Total expensesc,d | 1.72 | % | 1.62 | % | 1.78 | % | 2.22 | % | 2.28 | % | ||||||||||
Portfolio turnover rate | 170 | % | 266 | % | 258 | % | 239 | % | 244 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Total expenses may include certain non-operating expenses. Excluding these non-operating expenses, the net expense ratios for the years ended December 31 would be: |
2019 | 2018 | 2017 | 2016 | 2015 | |
1.72% | 1.62% | 1.61% | 1.56% | 1.51% |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 27 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
GLOBAL MANAGED FUTURES STRATEGY FUND
OBJECTIVE: Seeks to generate positive total returns over time.
For the one-year period ended December 31, 2019, Guggenheim Global Managed Futures Strategy Fund returned 8.35%. The ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index, the Fund’s benchmark, returned 2.28%.
The Fund is comprised of multiple proprietary strategies designed to systematically exploit market inefficiencies in futures markets around the globe.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but that fee is waived by the respective investee fund. For the one-year period ended December 31, 2019, investment in the Short Term Investment Vehicles benefited Fund performance.
In addition to its benchmark, the Fund outperformed the SG (Societe Generale) CTA Index, which tracks the performance of the largest 20 (by assets under management) Commodity Trading Advisors, or CTAs, and is representative of the managed futures space. For the year ended December 31, 2019, the index returned 6.25%.
For the one-year period ending December 31, 2019, positions in fixed income and equities contributed positively to the Fund’s return. Positions in commodities and currencies detracted from performance. Among the futures that contributed the most to performance were positions in 10-year bonds from Australia, Italy, and the U.S.
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 opinions and forecast 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.
28 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
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.
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 | 36.1% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 20.0% |
Guggenheim Strategy Fund III | 16.2% |
Guggenheim Strategy Fund II | 12.4% |
Total | 84.7% |
“Largest Holdings” excludes any temporary cash or derivative investments.
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Global Managed Futures Strategy Fund | 8.35% | (2.14%) | (2.11%) |
ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index | 2.28% | 1.07% | 0.58% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 29 |
CONSOLIDATED SCHEDULE OF INVESTMENTS | December 31, 2019 |
GLOBAL MANAGED FUTURES STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 84.7% | ||||||||
Guggenheim Variable Insurance Strategy Fund III1 | 208,075 | $ | 5,151,929 | |||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 286,754 | 2,853,202 | ||||||
Guggenheim Strategy Fund III1 | 93,807 | 2,318,911 | ||||||
Guggenheim Strategy Fund II1 | 71,603 | 1,771,464 | ||||||
Total Mutual Funds | ||||||||
(Cost $12,138,897) | 12,095,506 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 13.6% | ||||||||
U.S. Treasury Bills | ||||||||
1.47% due 02/04/202,3 | $ | 1,956,000 | 1,953,193 | |||||
Total U.S. Treasury Bills | ||||||||
(Cost $1,953,229) | 1,953,193 | |||||||
REPURCHASE AGREEMENTS††,4 - 2.8% | ||||||||
J.P. Morgan Securities LLC | 239,793 | 239,793 | ||||||
Barclays Capital, Inc. | 77,320 | 77,320 | ||||||
BofA Securities, Inc. | 77,320 | 77,320 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $394,433) | 394,433 | |||||||
Total Investments - 101.1% | ||||||||
(Cost $14,486,559) | $ | 14,443,132 | ||||||
Other Assets & Liabilities, net - (1.1)% | (161,208 | ) | ||||||
Total Net Assets - 100.0% | $ | 14,281,924 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Commodity Futures Contracts Purchased† | ||||||||||||||||
Gold 100 oz. Futures Contracts | 8 | Feb 2020 | $ | 1,216,480 | $ | 38,666 | ||||||||||
NY Harbor ULSD Futures Contracts | 11 | Mar 2020 | 925,294 | 33,249 | ||||||||||||
Gasoline RBOB Futures Contracts | 15 | Jan 2020 | 1,067,283 | 29,491 | ||||||||||||
Live Cattle Futures Contracts | 43 | Jun 2020 | 2,045,510 | 18,358 | ||||||||||||
Brent Crude Futures Contracts | 7 | Jan 2020 | 462,210 | 15,596 | ||||||||||||
Soybean Oil Futures Contracts | 10 | Mar 2020 | 208,920 | 12,434 | ||||||||||||
Silver Futures Contracts | 3 | Mar 2020 | 268,725 | 8,817 | ||||||||||||
LME Nickel Futures Contracts | 1 | Feb 2020 | 83,994 | 5,249 | ||||||||||||
Wheat Futures Contracts | 2 | Mar 2020 | 55,950 | 4,569 | ||||||||||||
Platinum Futures Contracts | 2 | Apr 2020 | 97,150 | 3,532 | ||||||||||||
Coffee ‘C’ Futures Contracts | 3 | Mar 2020 | 145,294 | 2,849 | ||||||||||||
Live Cattle Futures Contracts | 6 | Feb 2020 | 302,340 | 1,181 | ||||||||||||
WTI Crude Futures Contracts | 2 | Jan 2020 | 122,360 | 655 | ||||||||||||
LME Lead Futures Contracts | 1 | Feb 2020 | 48,144 | 147 | ||||||||||||
Low Sulphur Gas Oil Futures Contracts | 4 | Apr 2020 | 243,200 | (2,747 | ) | |||||||||||
Cocoa Futures Contracts | 4 | Mar 2020 | 101,520 | (4,032 | ) | |||||||||||
Natural Gas Futures Contracts | 36 | Feb 2020 | 775,080 | (21,692 | ) | |||||||||||
$ | 8,169,454 | $ | 146,322 | |||||||||||||
Currency Futures Contracts Purchased† | ||||||||||||||||
Canadian Dollar Futures Contracts | 27 | Mar 2020 | $ | 2,080,080 | $ | 38,156 | ||||||||||
Mexican Peso Futures Contracts | 51 | Mar 2020 | 1,334,160 | 24,271 | ||||||||||||
British Pound Futures Contracts | 11 | Mar 2020 | 912,588 | 6,232 | ||||||||||||
$ | 4,326,828 | $ | 68,659 |
30 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
GLOBAL MANAGED FUTURES STRATEGY FUND |
Futures Contracts (continued) | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||||
CAC 40 10 Euro Index Futures Contracts†† | 15 | Jan 2020 | $ | 1,008,804 | $ | 10,445 | ||||||||||
Nikkei 225 (OSE) Index Futures Contracts†† | 3 | Mar 2020 | 649,511 | 6,419 | ||||||||||||
MSCI Emerging Markets Index Futures Contracts | 4 | Mar 2020 | 223,720 | 5,692 | ||||||||||||
S&P 500 Index Mini Futures Contracts | 6 | Mar 2020 | 968,850 | 5,584 | ||||||||||||
Dow Jones Industrial Average Index Mini Futures Contracts | 3 | Mar 2020 | 427,455 | 3,564 | ||||||||||||
Amsterdam Index Futures Contracts†† | 6 | Jan 2020 | 817,449 | 3,135 | ||||||||||||
S&P MidCap 400 Index Mini Futures Contracts | 1 | Mar 2020 | 206,430 | 2,374 | ||||||||||||
S&P/TSX 60 IX Index Futures Contracts | 4 | Mar 2020 | 623,316 | 2,147 | ||||||||||||
MSCI EAFE Index Futures Contracts | 3 | Mar 2020 | 305,445 | 2,029 | ||||||||||||
SPI 200 Index Futures Contracts†† | 6 | Mar 2020 | 697,894 | 657 | ||||||||||||
Tokyo Stock Price Index Futures Contracts†† | 1 | Mar 2020 | 157,507 | 218 | ||||||||||||
FTSE/JSE TOP 40 Index Futures Contracts†† | 1 | Mar 2020 | 36,837 | (117 | ) | |||||||||||
Russell 2000 Index Mini Futures Contracts | 4 | Mar 2020 | 333,960 | (152 | ) | |||||||||||
OMX Stockholm 30 Index Futures Contracts†† | 3 | Jan 2020 | 56,674 | (170 | ) | |||||||||||
NASDAQ-100 Index Mini Futures Contracts | 2 | Mar 2020 | 349,910 | (173 | ) | |||||||||||
IBEX 35 Index Futures Contracts†† | 3 | Jan 2020 | 321,475 | (949 | ) | |||||||||||
MSCI Taiwan Stock Index Futures Contracts | 22 | Jan 2020 | 1,011,560 | (3,086 | ) | |||||||||||
DAX Index Futures Contracts†† | 3 | Mar 2020 | 1,106,730 | (15,971 | ) | |||||||||||
CBOE Volatility Index Futures Contracts | 43 | Jan 2020 | 636,400 | (38,696 | ) | |||||||||||
$ | 9,939,927 | $ | (17,050 | ) | ||||||||||||
Interest Rate Futures Contracts Purchased† | ||||||||||||||||
Euro - Bobl Futures Contracts†† | 1 | Mar 2020 | $ | 149,647 | $ | (633 | ) | |||||||||
Euro - BTP Italian Government Bond Futures Contracts†† | 10 | Mar 2020 | 1,598,564 | (2,452 | ) | |||||||||||
Euro - 30 year Bond Futures Contracts†† | 1 | Mar 2020 | 223,067 | (2,628 | ) | |||||||||||
U.S. Treasury 10 Year Note Futures Contracts | 30 | Mar 2020 | 3,847,969 | (3,118 | ) | |||||||||||
U.S. Treasury Long Bond Futures Contracts | 6 | Mar 2020 | 933,375 | (5,005 | ) | |||||||||||
U.S. Treasury Ultra Long Bond Futures Contracts | 3 | Mar 2020 | 543,562 | (9,884 | ) | |||||||||||
Euro - OATS Futures Contracts†† | 17 | Mar 2020 | 3,103,220 | (22,350 | ) | |||||||||||
Australian Government 10 Year Bond Futures Contracts†† | 33 | Mar 2020 | 3,305,326 | (41,157 | ) | |||||||||||
$ | 13,704,730 | $ | (87,227 | ) | ||||||||||||
Interest Rate Futures Contracts Sold Short† | ||||||||||||||||
Long Gilt Futures Contracts†† | 21 | Mar 2020 | $ | 3,647,674 | $ | 23,116 | ||||||||||
Canadian Government 10 Year Bond Futures Contracts†† | 29 | Mar 2020 | 3,068,246 | 19,132 | ||||||||||||
Euro - Schatz Futures Contracts†† | 180 | Mar 2020 | 22,598,452 | 8,422 | ||||||||||||
Australian Government 3 Year Bond Futures Contracts†† | 13 | Mar 2020 | 1,049,123 | 716 | ||||||||||||
U.S. Treasury 5 Year Note Futures Contracts | 3 | Mar 2020 | 355,523 | 214 | ||||||||||||
Euro - Bund Futures Contracts†† | 2 | Mar 2020 | 382,408 | 154 | ||||||||||||
$ | 31,101,426 | $ | 51,754 | |||||||||||||
Equity Futures Contracts Sold Short† | ||||||||||||||||
CBOE Volatility Index Futures Contracts | 10 | Apr 2020 | $ | 175,200 | $ | 2,088 | ||||||||||
Euro STOXX 50 Index Futures Contracts†† | 4 | Mar 2020 | 167,488 | 1,519 | ||||||||||||
FTSE 100 Index Futures Contracts†† | 1 | Mar 2020 | 99,550 | 632 | ||||||||||||
CBOE Volatility Index Futures Contracts | 16 | Mar 2020 | 272,800 | (3,418 | ) | |||||||||||
CBOE Volatility Index Futures Contracts | 44 | Feb 2020 | 739,200 | (11,142 | ) | |||||||||||
$ | 1,454,238 | $ | (10,321 | ) |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 31 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
GLOBAL MANAGED FUTURES STRATEGY FUND |
Futures Contracts (concluded) | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Currency Futures Contracts Sold Short† | ||||||||||||||||
Japanese Yen Futures Contracts | 17 | Mar 2020 | $ | 1,963,288 | $ | 2 | ||||||||||
New Zealand Dollar Futures Contracts | 4 | Mar 2020 | 269,560 | (521 | ) | |||||||||||
Australian Dollar Futures Contracts | 6 | Mar 2020 | 421,800 | (12,368 | ) | |||||||||||
Swiss Franc Futures Contracts | 21 | Mar 2020 | 2,726,850 | (33,361 | ) | |||||||||||
Euro FX Futures Contracts | 27 | Mar 2020 | 3,803,963 | (35,657 | ) | |||||||||||
$ | 9,185,461 | $ | (81,905 | ) | ||||||||||||
Commodity Futures Contracts Sold Short† | ||||||||||||||||
Natural Gas Futures Contracts | 40 | Jan 2020 | $ | 872,400 | $ | 33,098 | ||||||||||
Low Sulphur Gas Oil Futures Contracts | 4 | Feb 2020 | 245,900 | 3,034 | ||||||||||||
Natural Gas Futures Contracts | 5 | Mar 2020 | 107,250 | 1,987 | ||||||||||||
Soybean Meal Futures Contracts | 13 | Mar 2020 | 396,500 | 1,140 | ||||||||||||
Lean Hogs Futures Contracts | 8 | Feb 2020 | 228,000 | 230 | ||||||||||||
Cattle Feeder Futures Contracts | 1 | Mar 2020 | 72,100 | (266 | ) | |||||||||||
Cotton #2 Futures Contracts | 5 | Mar 2020 | 172,375 | (641 | ) | |||||||||||
LME Zinc Futures Contracts | 2 | Feb 2020 | 113,888 | (1,300 | ) | |||||||||||
Corn Futures Contracts | 15 | Mar 2020 | 290,438 | (2,062 | ) | |||||||||||
LME Primary Aluminum Futures Contracts | 5 | Feb 2020 | 225,125 | (5,734 | ) | |||||||||||
Copper Futures Contracts | 3 | Mar 2020 | 209,887 | (10,641 | ) | |||||||||||
Live Cattle Futures Contracts | 31 | Apr 2020 | 1,577,280 | (11,875 | ) | |||||||||||
Sugar #11 Futures Contracts | 25 | Feb 2020 | 376,320 | (13,652 | ) | |||||||||||
Hard Red Winter Wheat Futures Contracts | 7 | Mar 2020 | 170,013 | (15,021 | ) | |||||||||||
Gasoline RBOB Futures Contracts | 10 | Mar 2020 | 790,818 | (27,158 | ) | |||||||||||
Soybean Futures Contracts | 14 | Mar 2020 | 669,200 | (33,430 | ) | |||||||||||
NY Harbor ULSD Futures Contracts | 11 | Jan 2020 | 936,335 | (33,977 | ) | |||||||||||
$ | 7,453,829 | $ | (116,268 | ) |
** | 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 | All or a portion of this security is pledged as futures collateral at December 31, 2019. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | Repurchase Agreements — See Note 6. |
See Sector Classification in Other Information section. |
32 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
GLOBAL MANAGED FUTURES STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Consolidated Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 12,095,506 | $ | — | $ | — | $ | 12,095,506 | ||||||||
U.S. Treasury Bills | — | 1,953,193 | — | 1,953,193 | ||||||||||||
Repurchase Agreements | — | 394,433 | — | 394,433 | ||||||||||||
Commodity Futures Contracts** | 214,282 | — | — | 214,282 | ||||||||||||
Currency Futures Contracts** | 68,661 | — | — | 68,661 | ||||||||||||
Equity Futures Contracts** | 23,478 | 23,025 | — | 46,503 | ||||||||||||
Interest Rate Futures Contracts** | 214 | 51,540 | — | 51,754 | ||||||||||||
Total Assets | $ | 12,402,141 | $ | 2,422,191 | $ | — | $ | 14,824,332 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Commodity Futures Contracts** | $ | 184,228 | $ | — | $ | — | $ | 184,228 | ||||||||
Currency Futures Contracts** | 81,907 | — | — | 81,907 | ||||||||||||
Equity Futures Contracts** | 56,667 | 17,207 | — | 73,874 | ||||||||||||
Interest Rate Futures Contracts** | 18,007 | 69,220 | — | 87,227 | ||||||||||||
Total Liabilities | $ | 340,809 | $ | 86,427 | $ | — | $ | 427,236 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 33 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
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 “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, 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/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 2,410,909 | $ | 66,337 | $ | (700,000 | ) | $ | 102 | $ | (5,884 | ) | $ | 1,771,464 | 71,603 | $ | 66,536 | |||||||||||||||
Guggenheim Strategy Fund III | 2,258,972 | 66,502 | — | — | (6,563 | ) | 2,318,911 | 93,807 | 66,696 | |||||||||||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 726,522 | 2,529,542 | (400,000 | ) | (18 | ) | (2,844 | ) | 2,853,202 | 286,754 | 29,486 | |||||||||||||||||||||
Guggenheim Variable Insurance Strategy Fund III | 5,318,567 | 131,474 | (300,000 | ) | (2,699 | ) | 4,587 | 5,151,929 | 208,075 | 131,324 | ||||||||||||||||||||||
$ | 10,714,970 | $ | 2,793,855 | $ | (1,400,000 | ) | $ | (2,615 | ) | $ | (10,704 | ) | $ | 12,095,506 | $ | 294,042 |
34 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
GLOBAL MANAGED FUTURES STRATEGY FUND |
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $1,953,229) | $ | 1,953,193 | ||
Investments in affiliated issuers, at value (cost $12,138,897) | 12,095,506 | |||
Repurchase agreements, at value (cost $394,433) | 394,433 | |||
Cash | 210 | |||
Receivables: | ||||
Fund shares sold | 40,486 | |||
Dividends | 21,133 | |||
Interest | 16 | |||
Total assets | 14,504,977 | |||
Liabilities: | ||||
Payable for: | ||||
Variation margin on futures contracts | 133,608 | |||
Securities purchased | 21,772 | |||
Fund shares redeemed | 14,696 | |||
Management fees | 10,136 | |||
Investor service fees | 2,977 | |||
Transfer agent and administrative fees | 1,191 | |||
Portfolio accounting fees | 1,191 | |||
Trustees’ fees* | 238 | |||
Miscellaneous | 37,244 | |||
Total liabilities | 223,053 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 14,281,924 | ||
Net assets consist of: | ||||
Paid in capital | $ | 14,094,191 | ||
Total distributable earnings (loss) | 187,733 | |||
Net assets | $ | 14,281,924 | ||
Capital shares outstanding | 858,120 | |||
Net asset value per share | $ | 16.64 |
CONSOLIDATED STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 294,042 | ||
Interest | 68,280 | |||
Total investment income | 362,322 | |||
Expenses: | ||||
Management fees | 133,993 | |||
Investor service fees | 35,309 | |||
Transfer agent and administrative fees | 14,124 | |||
Professional fees | 34,279 | |||
Portfolio accounting fees | 14,124 | |||
Trustees’ fees* | 3,439 | |||
Custodian fees | 2,707 | |||
Miscellaneous | 18,202 | |||
Total expenses | 256,177 | |||
Less: | ||||
Expenses waived by Adviser | (10,048 | ) | ||
Net expenses | 246,129 | |||
Net investment income | 116,193 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | (4 | ) | ||
Investments in affiliated issuers | (2,615 | ) | ||
Futures contracts | 1,172,541 | |||
Foreign currency transactions | (6,345 | ) | ||
Net realized gain | 1,163,577 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (140 | ) | ||
Investments in affiliated issuers | (10,704 | ) | ||
Futures contracts | (254,242 | ) | ||
Foreign currency translations | (101 | ) | ||
Net change in unrealized appreciation (depreciation) | (265,187 | ) | ||
Net realized and unrealized gain | 898,390 | |||
Net increase in net assets resulting from operations | $ | 1,014,583 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 35 |
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 | $ | 116,193 | $ | 175,689 | ||||
Net realized gain (loss) on investments | 1,163,577 | (1,330,963 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | (265,187 | ) | (209,471 | ) | ||||
Net increase (decrease) in net assets resulting from operations | 1,014,583 | (1,364,745 | ) | |||||
Distributions to shareholders | (124,141 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 6,039,386 | 3,343,451 | ||||||
Distributions reinvested | 124,141 | — | ||||||
Cost of shares redeemed | (6,053,438 | ) | (3,488,782 | ) | ||||
Net increase (decrease) from capital share transactions | 110,089 | (145,331 | ) | |||||
Net increase (decrease) in net assets | 1,000,531 | (1,510,076 | ) | |||||
Net assets: | ||||||||
Beginning of year | 13,281,393 | 14,791,469 | ||||||
End of year | $ | 14,281,924 | $ | 13,281,393 | ||||
Capital share activity: | ||||||||
Shares sold | 356,833 | 198,960 | ||||||
Shares issued from reinvestment of distributions | 7,506 | — | ||||||
Shares redeemed | (363,126 | ) | (209,139 | ) | ||||
Net increase (decrease) in shares | 1,213 | (10,179 | ) |
36 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED 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 | $ | 15.50 | $ | 17.06 | $ | 15.93 | $ | 19.42 | $ | 20.89 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .14 | .20 | .10 | .06 | (.07 | ) | ||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 1.15 | (1.76 | ) | 1.27 | (2.88 | ) | (.25 | ) | ||||||||||||
Total from investment operations | 1.29 | (1.56 | ) | 1.37 | (2.82 | ) | (.32 | ) | ||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.15 | ) | — | (.24 | ) | (.67 | ) | (.48 | ) | |||||||||||
Net realized gains | — | — | — | — | (.67 | ) | ||||||||||||||
Total distributions | (.15 | ) | — | (.24 | ) | (.67 | ) | (1.15 | ) | |||||||||||
Net asset value, end of period | $ | 16.64 | $ | 15.50 | $ | 17.06 | $ | 15.93 | $ | 19.42 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 8.35 | % | (9.14 | %) | 8.71 | % | (14.77 | %) | (1.55 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 14,282 | $ | 13,281 | $ | 14,791 | $ | 14,782 | $ | 17,536 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.82 | % | 1.21 | % | 0.59 | % | 0.32 | % | (0.35 | %) | ||||||||||
Total expensesc | 1.81 | % | 1.72 | % | 1.69 | % | 1.69 | % | 1.65 | % | ||||||||||
Net expensesd | 1.74 | % | 1.66 | % | 1.64 | % | 1.62 | % | 1.57 | % | ||||||||||
Portfolio turnover rate | 13 | % | 8 | % | 1 | % | 39 | % | 33 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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 CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 37 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
MULTI-HEDGE STRATEGIES FUND
OBJECTIVE: Seeks to provide long-term capital appreciation with less risk than traditional equity funds.
2019 was the tenth 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, Guggenheim Multi-Hedge Strategies Fund produced a return of 5.15%. The Fund still succeeded in maintaining low correlation with stock and bond indices, as its correlation with the S&P 500 and the Bloomberg Barclays U.S. Aggregate Bond Index came in at 10% and 17%, 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 8.68% 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 57% with the S&P 500 in 2019.
Since the Fund changed its investment objective (starting August 1, 2009), it has outperformed the HFRX Global Hedge Fund Index by more than 12% (roughly 0.67% annualized), net of fees, while doing so with lower correlation to equity markets.
Three of the five hedge fund strategies used within the Fund contributed to gross Fund returns in 2019. Specifically, Equity Market Neutral, Global Macro, and Merger Arbitrage strategies were positive contributors for the year. Long Short Equity strategies detracted from 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 had a positive contribution to Fund performance for the year.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but that fee is waived by the respective investee fund. For the one-year period ended December 31, 2019, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance which is no guarantee of future results.
The opinions and forecast 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.
* | 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. |
38 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
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.
Inception Date: November 29, 2005
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Ultra Short Duration Fund — Institutional Class | 10.3% |
Guggenheim Variable Insurance Strategy Fund III | 9.7% |
Guggenheim Strategy Fund II | 9.3% |
Guggenheim Strategy Fund III | 8.6% |
WellCare Health Plans, Inc. | 2.0% |
Zayo Group Holdings, Inc. | 1.9% |
Allergan plc | 1.8% |
Caesars Entertainment Corp. | 1.5% |
Wesco Aircraft Holdings, Inc. | 1.4% |
Advanced Disposal Services, Inc. | 1.3% |
Top Ten Total | 47.8% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments.
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Multi-Hedge Strategies Fund | 5.15% | 0.93% | 2.26% |
S&P 500 Index | 31.49% | 11.70% | 13.56% |
HFRX Global Hedge Fund Index | 8.68% | 1.20% | 1.12% |
* | 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 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 39 |
CONSOLIDATED SCHEDULE OF INVESTMENTS | December 31, 2019 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 27.4% | ||||||||
Consumer, Non-cyclical - 8.2% | ||||||||
WellCare Health Plans, Inc.*,1 | 2,139 | $ | 706,319 | |||||
Allergan plc | 3,268 | 624,743 | ||||||
Medicines Co.* | 3,129 | 265,777 | ||||||
ArQule, Inc.* | 13,287 | 265,208 | ||||||
Ra Pharmaceuticals, Inc.* | 5,558 | 260,837 | ||||||
Synthorx, Inc.* | 2,572 | 179,757 | ||||||
Achillion Pharmaceuticals, Inc.* | 28,493 | 171,813 | ||||||
Craft Brew Alliance, Inc.* | 8,080 | 133,320 | ||||||
Audentes Therapeutics, Inc.* | 2,207 | 132,067 | ||||||
Wright Medical Group N.V.* | 2,976 | 90,708 | ||||||
Total Consumer, Non-cyclical | 2,830,549 | |||||||
Consumer, Cyclical - 4.8% | ||||||||
Caesars Entertainment Corp.*,1 | 37,240 | 506,464 | ||||||
Wesco Aircraft Holdings, Inc.* | 43,920 | 483,998 | ||||||
Tiffany & Co. | 2,616 | 349,629 | ||||||
WABCO Holdings, Inc.*,1 | 2,297 | 311,244 | ||||||
Total Consumer, Cyclical | 1,651,335 | |||||||
Technology - 3.7% | ||||||||
Cypress Semiconductor Corp.1 | 17,061 | 398,033 | ||||||
Mellanox Technologies Ltd.*,1 | 2,524 | 295,762 | ||||||
Fitbit, Inc. — Class A* | 37,436 | 245,954 | ||||||
Cision Ltd.* | 17,506 | 174,535 | ||||||
Tech Data Corp.* | 1,215 | 174,474 | ||||||
Total Technology | 1,288,758 | |||||||
Communications - 2.7% | ||||||||
Zayo Group Holdings, Inc.*,1 | 18,541 | 642,446 | ||||||
Acacia Communications, Inc.*,1 | 3,252 | 220,518 | ||||||
Sprint Corp.*,1 | 15,782 | 82,224 | ||||||
Total Communications | 945,188 | |||||||
Financial - 2.1% | ||||||||
Liberty Property Trust REIT | 3,045 | 182,852 | ||||||
IBERIABANK Corp. | 2,421 | 181,163 | ||||||
Carolina Financial Corp. | 4,046 | 174,909 | ||||||
Genworth Financial, Inc. — Class A* | 21,996 | 96,782 | ||||||
Aircastle Ltd. | 2,717 | 86,971 | ||||||
Total Financial | 722,677 | |||||||
Industrial - 1.8% | ||||||||
Advanced Disposal Services, Inc.*,1 | 13,689 | 449,957 | ||||||
Continental Building Products, Inc.* | 4,853 | 176,795 | ||||||
Total Industrial | 626,752 | |||||||
Energy - 1.8% | ||||||||
Tallgrass Energy, LP — Class A | 11,807 | 261,172 | ||||||
Jagged Peak Energy, Inc.*,2 | 25,920 | 220,061 | ||||||
SRC Energy, Inc.* | 33,320 | 137,278 | ||||||
Total Energy | 618,511 | |||||||
Basic Materials - 1.5% | ||||||||
OMNOVA Solutions, Inc.* | 35,332 | 357,207 | ||||||
Innophos Holdings, Inc. | 5,352 | 171,157 | ||||||
Total Basic Materials | 528,364 | |||||||
Utilities - 0.8% | ||||||||
El Paso Electric Co.1 | 3,974 | 269,795 | ||||||
Total Common Stocks | ||||||||
(Cost $9,156,303) | 9,481,929 | |||||||
RIGHTS† - 0.0% | ||||||||
Bristol-Myers Squibb Co. | 5,855 | 17,624 | ||||||
Total Rights | ||||||||
(Cost $13,467) | 17,624 | |||||||
MUTUAL FUNDS† - 37.9% | ||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class3 | 357,563 | 3,557,751 | ||||||
Guggenheim Variable Insurance Strategy Fund III3 | 136,191 | 3,372,100 | ||||||
Guggenheim Strategy Fund II3 | 130,294 | 3,223,473 | ||||||
Guggenheim Strategy Fund III3 | 120,122 | 2,969,422 | ||||||
Total Mutual Funds | ||||||||
(Cost $13,215,409) | 13,122,746 | |||||||
CLOSED-END FUNDS† - 9.4% | ||||||||
Dividend and Income Fund | 4,833 | 65,053 | ||||||
RMR Real Estate Income Fund | 2,389 | 48,259 | ||||||
Lazard Global Total Return and Income Fund, Inc. | 2,040 | 33,762 | ||||||
New Ireland Fund, Inc. | 3,328 | 32,980 | ||||||
Salient Midstream & MLP Fund | 2,910 | 22,669 | ||||||
Cushing Energy Income Fund | 3,256 | 21,880 | ||||||
GDL Fund | 2,319 | 21,567 | ||||||
Tortoise Energy Independence Fund, Inc. | 4,674 | 20,263 | ||||||
Kayne Anderson Midstream/Energy Fund, Inc. | 1,898 | 19,967 | ||||||
Morgan Stanley India Investment Fund, Inc. | 990 | 19,691 | ||||||
Eagle Growth & Income Opportunities Fund | 1,156 | 19,687 | ||||||
Boulder Growth & Income Fund, Inc. | 1,663 | 19,607 | ||||||
Gabelli Healthcare & WellnessRx Trust | 1,629 | 18,766 | ||||||
Herzfeld Caribbean Basin Fund, Inc. | 2,814 | 18,629 | ||||||
Neuberger Berman MLP & Energy Income Fund, Inc. | 2,733 | 18,475 | ||||||
Voya Natural Resources Equity Income Fund | 4,357 | 17,951 | ||||||
General American Investors Company, Inc. | 473 | 17,851 | ||||||
ClearBridge MLP & Midstream Total Return Fund, Inc. | 2,076 | 17,833 | ||||||
BlackRock Resources & Commodities Strategy Trust | 2,207 | 17,811 | ||||||
Taiwan Fund, Inc. | 864 | 17,781 | ||||||
Swiss Helvetia Fund, Inc. | 2,100 | 17,661 |
40 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Value | ||||||
Aberdeen Japan Equity Fund, Inc. | 2,258 | $ | 17,567 | |||||
Western Asset Inflation-Linked Opportunities & Income Fund | 1,517 | 17,506 | ||||||
Cushing MLP & Infrastructure Total Return Fund | 1,702 | 17,411 | ||||||
ClearBridge MLP & Midstream Fund, Inc. | 1,522 | 17,138 | ||||||
New Germany Fund, Inc. | 1,090 | 17,091 | ||||||
Japan Smaller Capitalization Fund, Inc. | 1,908 | 17,067 | ||||||
Gabelli Dividend & Income Trust | 775 | 17,011 | ||||||
Aberdeen Emerging Markets Equity Income Fund, Inc. | 2,216 | 16,886 | ||||||
ClearBridge Energy Midstream Opportunity Fund, Inc. | 2,005 | 16,862 | ||||||
BrandywineGLOBAL Global Income Opportunities Fund, Inc. | 1,330 | 16,798 | ||||||
Central and Eastern Europe Fund, Inc. | 590 | 16,697 | ||||||
Nuveen Senior Income Fund | 2,801 | 16,694 | ||||||
Source Capital, Inc. | 431 | 16,675 | ||||||
Voya Infrastructure Industrials and Materials Fund | 1,447 | 16,655 | ||||||
BlackRock Enhanced International Dividend Trust | 2,815 | 16,580 | ||||||
Tortoise Pipeline & Energy Fund, Inc.2 | 1,277 | 16,435 | ||||||
Voya Asia Pacific High Dividend Equity Income Fund | 1,928 | 16,388 | ||||||
Adams Natural Resources Fund, Inc. | 991 | 16,312 | ||||||
Nuveen Global High Income Fund | 995 | 16,298 | ||||||
Delaware Investments Minnesota Municipal Income Fund II, Inc. | 1,238 | 16,267 | ||||||
Nuveen Floating Rate Income Fund | 1,586 | 16,240 | ||||||
Tekla Healthcare Investors | 776 | 16,203 | ||||||
Kayne Anderson MLP/Midstream Investment Co. | 1,163 | 16,201 | ||||||
Aberdeen Global Dynamic Dividend Fund | 1,551 | 16,130 | ||||||
Aberdeen Total Dynamic Dividend Fund | 1,797 | 16,083 | ||||||
Voya Global Equity Dividend and Premium Opportunity Fund | 2,594 | 16,057 | ||||||
BlackRock Enhanced Global Dividend Trust | 1,460 | 16,046 | ||||||
Clough Global Opportunities Fund | 1,694 | 15,991 | ||||||
Korea Fund, Inc. | 536 | 15,989 | ||||||
Nuveen Floating Rate Income Opportunity Fund | 1,596 | 15,944 | ||||||
Sprott Focus Trust, Inc. | 2,161 | 15,905 | ||||||
BlackRock MuniYield Pennsylvania Quality Fund | 1,108 | 15,833 | ||||||
Aberdeen Global Premier Properties Fund | 2,438 | 15,798 | ||||||
Eaton Vance Limited Duration Income Fund | 1,191 | 15,781 | ||||||
Voya Emerging Markets High Income Dividend Equity Fund | 1,975 | 15,780 | ||||||
Nuveen Georgia Quality Municipal Income Fund | 1,251 | 15,775 | ||||||
Macquarie Global Infrastructure Total Return Fund, Inc. | 635 | 15,761 | ||||||
Aberdeen Asia-Pacific Income Fund, Inc. | 3,706 | 15,750 | ||||||
Nuveen New Jersey Quality Municipal Income Fund | 1,074 | 15,745 | ||||||
Templeton Dragon Fund, Inc. | 809 | 15,735 | ||||||
Royce Micro-Capital Trust, Inc. | 1,837 | 15,688 | ||||||
BlackRock California Municipal Income Trust | 1,156 | 15,675 | ||||||
Nuveen All Capital Energy MLP Opportunities Fund | 2,977 | 15,659 | ||||||
Nuveen Maryland Quality Municipal Income Fund | 1,164 | 15,656 | ||||||
Western Asset Inflation - Linked Securities & Income Fund | 1,286 | 15,625 | ||||||
AllianzGI NFJ Dividend Interest & Premium Strategy Fund | 1,200 | 15,600 | ||||||
First Trust New Opportunities MLP & Energy Fund | 1,670 | 15,581 | ||||||
Royce Value Trust, Inc. | 1,054 | 15,568 | ||||||
Cushing Renaissance Fund | 1,148 | 15,544 | ||||||
Tekla Life Sciences Investors | 891 | 15,530 | ||||||
BlackRock MuniYield Michigan Quality Fund, Inc. | 1,091 | 15,487 | ||||||
PGIM Global High Yield Fund, Inc. | 1,027 | 15,425 | ||||||
Delaware Investments National Municipal Income Fund | 1,160 | 15,412 | ||||||
BlackRock Debt Strategies Fund, Inc. | 1,374 | 15,389 | ||||||
Nuveen Michigan Quality Municipal Income Fund | 1,085 | 15,342 | ||||||
First Trust Energy Infrastructure Fund | 910 | 15,315 | ||||||
Templeton Emerging Markets Fund/United States | 981 | 15,294 | ||||||
European Equity Fund, Inc. | 1,630 | 15,289 | ||||||
Aberdeen Australia Equity Fund, Inc. | 2,823 | 15,272 | ||||||
Tekla Healthcare Opportunities Fund | 798 | 15,218 | ||||||
Eaton Vance New York Municipal Income Trust | 1,133 | 15,176 | ||||||
Nuveen Credit Strategies Income Fund | 1,978 | 15,171 | ||||||
Neuberger Berman New York Municipal Fund, Inc. | 1,215 | 15,140 | ||||||
BlackRock MuniYield California Fund, Inc.2 | 1,072 | 15,137 | ||||||
Franklin Universal Trust | 1,945 | 15,132 | ||||||
BlackRock MuniHoldings New Jersey Quality Fund, Inc. | 1,053 | 15,111 | ||||||
LMP Capital and Income Fund, Inc. | 972 | 15,105 | ||||||
CBRE Clarion Global Real Estate Income Fund | 1,881 | 15,086 | ||||||
Ares Dynamic Credit Allocation Fund, Inc. | 982 | 15,074 | ||||||
Western Asset Global High Income Fund, Inc. | 1,502 | 15,050 | ||||||
Nuveen Arizona Quality Municipal Income Fund | 1,116 | 15,033 | ||||||
BlackRock Energy and Resources Trust | 1,265 | 15,028 | ||||||
Nuveen New York Municipal Value Fund 2 | 1,051 | 15,027 | ||||||
Tortoise Power and Energy Infrastructure Fund, Inc. | 886 | 15,027 | ||||||
PGIM High Yield Bond Fund, Inc. | 975 | 15,015 |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 41 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Value | ||||||
BlackRock Muni Intermediate Duration Fund, Inc. | 1,054 | $ | 15,009 | |||||
Eaton Vance California Municipal Bond Fund | 1,334 | 15,008 | ||||||
BlackRock MuniYield California Quality Fund, Inc. | 1,054 | 14,977 | ||||||
Nuveen AMT-Free Quality Municipal Income Fund | 1,040 | 14,955 | ||||||
BlackRock MuniHoldings California Quality Fund, Inc. | 1,068 | 14,941 | ||||||
Morgan Stanley China A Share Fund, Inc. | 687 | 14,922 | ||||||
First Trust High Income Long/Short Fund | 947 | 14,915 | ||||||
Nuveen New York AMT-Free Quality Municipal Income Fund | 1,099 | 14,913 | ||||||
First Trust Aberdeen Emerging Opportunity Fund | 1,044 | 14,898 | ||||||
Western Asset Emerging Markets Debt Fund, Inc. | 1,044 | 14,898 | ||||||
Morgan Stanley Emerging Markets Debt Fund, Inc. | 1,537 | 14,878 | ||||||
AllianceBernstein National Municipal Income Fund, Inc. | 1,063 | 14,861 | ||||||
Morgan Stanley Emerging Markets Domestic Debt Fund, Inc. | 2,125 | 14,854 | ||||||
BlackRock MuniYield New York Quality Fund, Inc. | 1,134 | 14,844 | ||||||
Nuveen Texas Quality Municipal Income Fund | 1,033 | 14,803 | ||||||
BlackRock MuniHoldings New York Quality Fund, Inc. | 1,086 | 14,802 | ||||||
BlackRock Municipal Income Quality Trust | 1,053 | 14,795 | ||||||
Nuveen New Jersey Municipal Value Fund | 1,057 | 14,785 | ||||||
BlackRock MuniYield Quality Fund III, Inc. | 1,095 | 14,783 | ||||||
DTF Tax-Free Income, Inc. | 997 | 14,755 | ||||||
John Hancock Tax-Advantaged Global Shareholder Yield Fund | 2,086 | 14,748 | ||||||
Ivy High Income Opportunities Fund | 1,060 | 14,734 | ||||||
BlackRock MuniHoldings Quality Fund, Inc. | 1,170 | 14,707 | ||||||
Nuveen Real Asset Income and Growth Fund | 801 | 14,707 | ||||||
Voya Global Advantage and Premium Opportunity Fund | 1,401 | 14,682 | ||||||
Madison Covered Call & Equity Strategy Fund | 2,209 | 14,646 | ||||||
Tri-Continental Corp. | 519 | 14,636 | ||||||
BlackRock Municipal 2030 Target Term Trust | 605 | 14,635 | ||||||
Delaware Enhanced Global Dividend & Income Fund | 1,407 | 14,633 | ||||||
Nuveen Pennsylvania Quality Municipal Income Fund | 1,030 | 14,574 | ||||||
Mexico Equity & Income Fund, Inc. | 1,251 | 14,512 | ||||||
BlackRock MuniYield Quality Fund II, Inc. | 1,116 | 14,508 | ||||||
Eaton Vance New York Municipal Bond Fund | 1,200 | 14,496 | ||||||
Neuberger Berman California Municipal Fund, Inc. | 1,037 | 14,466 | ||||||
Nuveen Multi-Market Income Fund2 | 1,954 | 14,460 | ||||||
Eaton Vance Short Duration Diversified Income Fund | 1,071 | 14,459 | ||||||
Nuveen New York Quality Municipal Income Fund | 1,018 | 14,456 | ||||||
Nuveen Quality Municipal Income Fund | 990 | 14,454 | ||||||
Western Asset High Income Opportunity Fund, Inc. | 2,849 | 14,444 | ||||||
Brookfield Global Listed Infrastructure Income Fund, Inc. | 1,033 | 14,410 | ||||||
AllianceBernstein Global High Income Fund, Inc. | 1,187 | 14,398 | ||||||
Western Asset Municipal Partners Fund, Inc. | 944 | 14,396 | ||||||
BlackRock New York Municipal Income Trust II | 999 | 14,396 | ||||||
Adams Diversified Equity Fund, Inc. | 912 | 14,382 | ||||||
BlackRock MuniHoldings Investment Quality Fund | 1,081 | 14,366 | ||||||
Eaton Vance California Municipal Income Trust | 1,065 | 14,356 | ||||||
Clough Global Equity Fund | 1,189 | 14,351 | ||||||
Wells Fargo Global Dividend Opportunity Fund | 2,532 | 14,331 | ||||||
Western Asset Intermediate Muni Fund, Inc. | 1,577 | 14,319 | ||||||
Federated Premier Municipal Income Fund | 1,015 | 14,312 | ||||||
MFS Investment Grade Municipal Trust | 1,464 | 14,299 | ||||||
BlackRock Credit Allocation Income Trust | 1,021 | 14,274 | ||||||
Templeton Emerging Markets Income Fund | 1,546 | 14,208 | ||||||
BNY Mellon High Yield Strategies Fund | 4,581 | 14,201 | ||||||
BlackRock MuniHoldings Quality Fund II, Inc. | 1,126 | 14,199 | ||||||
Nuveen AMT-Free Municipal Credit Income Fund | 851 | 14,186 | ||||||
Macquarie/First Trust Global Infrastructure/Utilities Dividend & Income Fund | 1,323 | 14,183 | ||||||
Nuveen Ohio Quality Municipal Income Fund | 919 | 14,176 | ||||||
India Fund, Inc. | 703 | 14,151 | ||||||
DWS Municipal Income Trust | 1,248 | 14,140 | ||||||
John Hancock Investors Trust | 796 | 14,137 | ||||||
Clough Global Dividend and Income Fund | 1,284 | 14,060 | ||||||
AllianzGI Equity & Convertible Income Fund | 620 | 14,049 | ||||||
Western Asset Global Corporate Defined Opportunity Fund, Inc. | 770 | 14,037 | ||||||
Western Asset High Income Fund II, Inc. | 2,082 | 14,033 | ||||||
Pioneer Diversified High Income Trust | 941 | 14,002 | ||||||
Western Asset High Yield Defined Opportunity Fund, Inc. | 894 | 13,991 | ||||||
BlackRock New York Municipal Income Quality Trust | 1,015 | 13,956 |
42 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Value | ||||||
Eaton Vance Floating-Rate Income Plus Fund | 869 | $ | 13,904 | |||||
Bancroft Fund Ltd. | 531 | 13,867 | ||||||
Wells Fargo Income Opportunities Fund | 1,646 | 13,859 | ||||||
MFS Charter Income Trust | 1,644 | 13,843 | ||||||
BlackRock Core Bond Trust | 949 | 13,836 | ||||||
BlackRock Corporate High Yield Fund, Inc. | 1,234 | 13,821 | ||||||
Credit Suisse Asset Management Income Fund, Inc. | 4,266 | 13,737 | ||||||
BlackRock Enhanced Capital and Income Fund, Inc. | 796 | 13,731 | ||||||
Nuveen California Quality Municipal Income Fund | 922 | 13,729 | ||||||
Neuberger Berman High Yield Strategies Fund, Inc. | 1,111 | 13,721 | ||||||
Principal Real Estate Income Fund | 648 | 13,686 | ||||||
Nuveen California AMT-Free Quality Municipal Income Fund | 898 | 13,659 | ||||||
Pioneer Municipal High Income Trust | 1,128 | 13,626 | ||||||
BlackRock Limited Duration Income Trust | 831 | 13,620 | ||||||
Eaton Vance Municipal Income Trust | 1,068 | 13,617 | ||||||
Nuveen Energy MLP Total Return Fund | 1,754 | 13,611 | ||||||
Eaton Vance Tax-Advantaged Global Dividend Income Fund | 752 | 13,551 | ||||||
BlackRock Enhanced Equity Dividend Trust | 1,365 | 13,541 | ||||||
Gabelli Global Utility & Income Trust | 717 | 13,537 | ||||||
Duff & Phelps Utility and Infrastructure Fund, Inc. | 887 | 13,482 | ||||||
Nuveen Diversified Dividend & Income Fund | 1,237 | 13,471 | ||||||
First Trust Dynamic Europe Equity Income Fund | 899 | 13,422 | ||||||
Ellsworth Growth and Income Fund Ltd. | 1,136 | 13,359 | ||||||
Nuveen Pennsylvania Municipal Value Fund | 915 | 13,354 | ||||||
First Trust Aberdeen Global Opportunity Income Fund | 1,190 | 13,316 | ||||||
Nuveen Virginia Quality Municipal Income Fund | 907 | 13,242 | ||||||
Wells Fargo Multi-Sector Income Fund | 1,026 | 13,215 | ||||||
Nuveen Real Estate Income Fund | 1,240 | 13,169 | ||||||
Neuberger Berman Real Estate Securities Income Fund, Inc. | 2,359 | 13,163 | ||||||
MFS Multimarket Income Trust | 2,145 | 13,127 | ||||||
Putnam Municipal Opportunities Trust | 997 | 13,111 | ||||||
Putnam Master Intermediate Income Trust | 2,761 | 13,087 | ||||||
Duff & Phelps Utility and Corporate Bond Trust, Inc. | 1,426 | 13,034 | ||||||
Cohen & Steers Infrastructure Fund, Inc. | 497 | 13,024 | ||||||
Nuveen Massachusetts Quality Municipal Income Fund | 915 | 13,011 | ||||||
Pioneer High Income Trust | 1,355 | 12,927 | ||||||
Goldman Sachs MLP Energy and Renaissance Fund | 2,976 | 12,797 | ||||||
Brookfield Real Assets Income Fund, Inc. | 582 | 12,426 | ||||||
BlackRock Multi-Sector Income Trust | 755 | 12,201 | ||||||
Eaton Vance Municipal Bond Fund | 909 | 11,708 | ||||||
Advent Convertible and Income | 671 | 10,434 | ||||||
Invesco High Income Trust II | 476 | 6,797 | ||||||
Total Closed-End Funds | ||||||||
(Cost $2,919,808) | 3,237,334 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 15.0% | ||||||||
U.S. Treasury Bills | ||||||||
1.51% due 06/04/204,5 | $ | 3,700,000 | 3,675,681 | |||||
1.47% due 02/04/205,6 | 1,529,000 | 1,526,806 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $5,202,620) | 5,202,487 | |||||||
REPURCHASE AGREEMENTS††,7 - 4.4% | ||||||||
J.P. Morgan Securities LLC | 916,508 | 916,508 | ||||||
Barclays Capital, Inc. | 295,524 | 295,525 | ||||||
BofA Securities, Inc. | 295,524 | 295,524 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $1,507,557) | 1,507,557 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,8 - 0.6% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.47%9 | 193,550 | 193,550 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $193,550) | 193,550 | |||||||
Total Investments - 94.7% | ||||||||
(Cost $32,208,714) | $ | 32,763,227 | ||||||
MASTER LIMITED PARTNERSHIPS SOLD SHORT† - (0.0)% | ||||||||
Energy - (0.0)% | ||||||||
Energy Transfer, LP | 26 | (334 | ) | |||||
Total Master Limited Partnerships Sold Short | ||||||||
(Proceeds $306) | (334 | ) | ||||||
COMMON STOCKS SOLD SHORT† - (5.6)% | ||||||||
Industrial - (0.0)% | ||||||||
Hillenbrand, Inc. | 1 | (33 | ) | |||||
Communications - (0.4)% | ||||||||
T-Mobile US, Inc.* | 1,619 | (126,962 | ) |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 43 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Value | ||||||
Consumer, Cyclical - (0.6)% | ||||||||
Eldorado Resorts, Inc.* | 3,348 | $ | (199,675 | ) | ||||
Energy - (1.0)% | ||||||||
Callon Petroleum Co.* | 1 | (5 | ) | |||||
PDC Energy, Inc.* | 5,265 | (137,785 | ) | |||||
Parsley Energy, Inc. — Class A | 11,586 | (219,091 | ) | |||||
Total Energy | (356,881 | ) | ||||||
Financial - (1.6)% | ||||||||
Truist Financial Corp. | 1 | (56 | ) | |||||
Prosperity Bancshares, Inc. | 1 | (72 | ) | |||||
United Bankshares, Inc. | 4,572 | (176,753 | ) | |||||
Prologis, Inc. | 2,055 | (183,182 | ) | |||||
First Horizon National Corp. | 11,098 | (183,783 | ) | |||||
Total Financial | (543,846 | ) | ||||||
Consumer, Non-cyclical - (2.0)% | ||||||||
Glaukos Corp.* | 1 | (54 | ) | |||||
Exact Sciences Corp.* | 1 | (92 | ) | |||||
AbbVie, Inc. | 2,830 | (250,568 | ) | |||||
Centene Corp.* | 7,230 | (454,550 | ) | |||||
Total Consumer, Non-cyclical | (705,264 | ) | ||||||
Total Common Stocks Sold Short | ||||||||
(Proceeds $1,723,303) | (1,932,661 | ) | ||||||
EXCHANGE-TRADED FUNDS SOLD SHORT† - (8.9)% | ||||||||
Technology Select Sector SPDR Fund | 54 | (4,950 | ) | |||||
SPDR S&P 500 ETF Trust | 28 | (9,012 | ) | |||||
Industrial Select Sector SPDR Fund | 211 | (17,190 | ) | |||||
iShares MSCI South Korea ETF | 339 | (21,082 | ) | |||||
iShares Russell 1000 Value ETF | 178 | (24,293 | ) | |||||
Invesco QQQ Trust Series 1 | 117 | (24,875 | ) | |||||
Materials Select Sector SPDR Fund | 451 | (27,700 | ) | |||||
iShares MSCI Taiwan ETF | 677 | (27,845 | ) | |||||
VanEck Vectors Gold Miners ETF | 982 | (28,753 | ) | |||||
iShares MSCI Mexico ETF | 687 | (30,936 | ) | |||||
Consumer Discretionary Select Sector SPDR Fund | 250 | (31,355 | ) | |||||
Consumer Staples Select Sector SPDR Fund | 568 | (35,773 | ) | |||||
iShares MSCI Emerging Markets ETF | 947 | (42,492 | ) | |||||
iShares Russell 1000 Growth ETF | 253 | (44,508 | ) | |||||
iShares MSCI Australia ETF | 2,289 | (51,823 | ) | |||||
iShares China Large-Capital ETF | 1,385 | (60,428 | ) | |||||
Health Care Select Sector SPDR Fund | 611 | (62,236 | ) | |||||
Financial Select Sector SPDR Fund | 2,053 | (63,191 | ) | |||||
iShares MSCI EAFE ETF | 968 | (67,218 | ) | |||||
VanEck Vectors Russia ETF | 3,775 | (94,262 | ) | |||||
iShares MSCI United Kingdom ETF | 3,510 | (119,691 | ) | |||||
iShares Russell 2000 Index ETF | 757 | (125,412 | ) | |||||
iShares iBoxx $ Investment Grade Corporate Bond ETF | 1,003 | (128,344 | ) | |||||
iShares MSCI Japan ETF | 2,234 | (132,342 | ) | |||||
iShares U.S. Real Estate ETF | 1,472 | (137,014 | ) | |||||
Utilities Select Sector SPDR Fund | 2,150 | (138,933 | ) | |||||
iShares 20+ Year Treasury Bond ETF | 1,073 | (145,370 | ) | |||||
iShares 7-10 Year Treasury Bond ETF | 1,321 | (145,601 | ) | |||||
iShares TIPS Bond ETF | 1,645 | (191,758 | ) | |||||
iShares Core U.S. Aggregate Bond ETF | 1,979 | (222,380 | ) | |||||
Energy Select Sector SPDR Fund | 4,862 | (291,916 | ) | |||||
SPDR Bloomberg Barclays High Yield Bond ETF | 4,959 | (542,863 | ) | |||||
Total Exchange-Traded Funds Sold Short | ||||||||
(Proceeds $3,085,719) | (3,091,546 | ) | ||||||
Total Securities Sold Short - (14.5)% | ||||||||
(Proceeds $4,809,328) | $ | (5,024,541 | ) | |||||
Other Assets & Liabilities, net - 19.8% | 6,871,320 | |||||||
Total Net Assets - 100.0% | $ | 34,610,006 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Commodity Futures Contracts Purchased† | ||||||||||||||||
NY Harbor ULSD Futures Contracts | 23 | Mar 2020 | $ | 1,934,705 | $ | 70,527 | ||||||||||
Gasoline RBOB Futures Contracts | 27 | Jan 2020 | 1,921,109 | 48,857 | ||||||||||||
Live Cattle Futures Contracts | 89 | Jun 2020 | 4,233,730 | 37,996 | ||||||||||||
Gold 100 oz. Futures Contracts | 4 | Feb 2020 | 608,240 | 15,142 | ||||||||||||
Silver Futures Contracts | 3 | Mar 2020 | 268,725 | 8,442 | ||||||||||||
LME Nickel Futures Contracts | 1 | Feb 2020 | 83,994 | 5,249 | ||||||||||||
Soybean Oil Futures Contracts | 8 | Mar 2020 | 167,136 | 2,631 | ||||||||||||
Brent Crude Futures Contracts | 4 | Jan 2020 | 264,120 | 2,418 | ||||||||||||
Coffee ‘C’ Futures Contracts | 3 | Mar 2020 | 145,294 | 1,172 | ||||||||||||
WTI Crude Futures Contracts | 1 | Jan 2020 | 61,180 | 327 | ||||||||||||
LME Lead Futures Contracts | 2 | Feb 2020 | 96,287 | (193 | ) | |||||||||||
Copper Futures Contracts | 1 | Mar 2020 | 69,963 | (1,278 | ) |
44 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
MULTI-HEDGE STRATEGIES FUND |
Futures Contracts (continued) | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Commodity Futures Contracts Purchased† (continued) | ||||||||||||||||
Cocoa Futures Contracts | 8 | Mar 2020 | $ | 203,040 | $ | (4,638 | ) | |||||||||
Low Sulphur Gas Oil Futures Contracts | 8 | Apr 2020 | 486,400 | (5,495 | ) | |||||||||||
Natural Gas Futures Contracts | 75 | Feb 2020 | 1,614,750 | (45,191 | ) | |||||||||||
$ | 12,158,673 | $ | 135,966 | |||||||||||||
Currency Futures Contracts Purchased† | ||||||||||||||||
Canadian Dollar Futures Contracts | 41 | Mar 2020 | $ | 3,158,640 | $ | 57,940 | ||||||||||
British Pound Futures Contracts | 24 | Mar 2020 | 1,991,100 | 28,737 | ||||||||||||
$ | 5,149,740 | $ | 86,677 | |||||||||||||
Interest Rate Futures Contracts Purchased† | ||||||||||||||||
U.S. Treasury 10 Year Note Futures Contracts | 50 | Mar 2020 | $ | 6,413,281 | $ | 710 | ||||||||||
U.S. Treasury Long Bond Futures Contracts | 4 | Mar 2020 | 622,250 | (2,351 | ) | |||||||||||
Euro - 30 year Bond Futures Contracts†† | 1 | Mar 2020 | 223,067 | (2,650 | ) | |||||||||||
U.S. Treasury Ultra Long Bond Futures Contracts | 3 | Mar 2020 | 543,563 | (5,028 | ) | |||||||||||
Euro - BTP Italian Government Bond Futures Contracts†† | 21 | Mar 2020 | 3,356,984 | (5,275 | ) | |||||||||||
Australian Government 10 Year Bond Futures Contracts†† | 46 | Mar 2020 | 4,607,425 | (39,347 | ) | |||||||||||
Euro - OATS Futures Contracts†† | 34 | Mar 2020 | 6,206,440 | (43,944 | ) | |||||||||||
$ | 21,973,010 | $ | (97,885 | ) | ||||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||||
Nikkei 225 (OSE) Index Futures Contracts†† | 1 | Mar 2020 | $ | 216,504 | $ | 1,771 | ||||||||||
CAC 40 10 Euro Index Futures Contracts†† | 2 | Jan 2020 | 134,507 | 1,554 | ||||||||||||
S&P/TSX 60 IX Index Futures Contracts | 2 | Mar 2020 | 311,658 | 1,074 | ||||||||||||
FTSE 100 Index Futures Contracts†† | 2 | Mar 2020 | 199,100 | 757 | ||||||||||||
FTSE MIB Index Futures Contracts†† | 1 | Mar 2020 | 131,616 | 705 | ||||||||||||
Amsterdam Index Futures Contracts†† | 1 | Jan 2020 | 136,242 | 523 | ||||||||||||
SPI 200 Index Futures Contracts†† | 2 | Mar 2020 | 232,631 | 219 | ||||||||||||
IBEX 35 Index Futures Contracts†† | 1 | Jan 2020 | 107,158 | 143 | ||||||||||||
S&P 500 Index Mini Futures Contracts | 1 | Mar 2020 | 161,475 | (63 | ) | |||||||||||
Russell 2000 Index Mini Futures Contracts | 2 | Mar 2020 | 166,980 | (76 | ) | |||||||||||
NASDAQ-100 Index Mini Futures Contracts | 1 | Mar 2020 | 174,955 | (86 | ) | |||||||||||
Tokyo Stock Price Index Futures Contracts†† | 1 | Mar 2020 | 157,507 | (197 | ) | |||||||||||
OMX Stockholm 30 Index Futures Contracts†† | 7 | Jan 2020 | 132,240 | (398 | ) | |||||||||||
DAX Index Futures Contracts†† | 3 | Mar 2020 | 1,106,730 | (15,470 | ) | |||||||||||
CBOE Volatility Index Futures Contracts | 116 | Jan 2020 | 1,716,800 | (112,714 | ) | |||||||||||
$ | 5,086,103 | $ | (122,258 | ) | ||||||||||||
Interest Rate Futures Contracts Sold Short†† | ||||||||||||||||
Long Gilt Futures Contracts | 42 | Mar 2020 | $ | 7,295,349 | $ | 46,466 | ||||||||||
Canadian Government 10 Year Bond Futures Contracts | 61 | Mar 2020 | 6,453,898 | 43,442 | ||||||||||||
Euro - Bund Futures Contracts | 14 | Mar 2020 | 2,676,854 | 1,074 | ||||||||||||
$ | 16,426,101 | $ | 90,982 | |||||||||||||
Equity Futures Contracts Sold Short† | ||||||||||||||||
Euro STOXX 50 Index Futures Contracts†† | 24 | Mar 2020 | $ | 1,004,928 | $ | 8,689 | ||||||||||
CBOE Volatility Index Futures Contracts | 26 | Apr 2020 | 455,520 | 5,429 | ||||||||||||
CBOE Volatility Index Futures Contracts | 44 | Mar 2020 | 750,200 | (9,727 | ) | |||||||||||
CBOE Volatility Index Futures Contracts | 120 | Feb 2020 | 2,016,000 | (30,896 | ) | |||||||||||
$ | 4,226,648 | $ | (26,505 | ) |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 45 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
MULTI-HEDGE STRATEGIES FUND |
Futures Contracts (concluded) | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Commodity Futures Contracts Sold Short† | ||||||||||||||||
Natural Gas Futures Contracts | 72 | Jan 2020 | $ | 1,570,320 | $ | 123,436 | ||||||||||
Low Sulphur Gas Oil Futures Contracts | 5 | Feb 2020 | 307,375 | 3,793 | ||||||||||||
Natural Gas Futures Contracts | 9 | Mar 2020 | 193,050 | 3,577 | ||||||||||||
Soybean Meal Futures Contracts | 23 | Mar 2020 | 701,500 | 1,229 | ||||||||||||
Live Cattle Futures Contracts | 1 | Feb 2020 | 50,390 | 327 | ||||||||||||
Cattle Feeder Futures Contracts | 4 | Mar 2020 | 288,400 | (75 | ) | |||||||||||
LME Zinc Futures Contracts | 3 | Feb 2020 | 170,831 | (678 | ) | |||||||||||
Lean Hogs Futures Contracts | 9 | Feb 2020 | 256,500 | (1,593 | ) | |||||||||||
LME Primary Aluminum Futures Contracts | 4 | Feb 2020 | 180,100 | (2,637 | ) | |||||||||||
Corn Futures Contracts | 29 | Mar 2020 | 561,513 | (2,930 | ) | |||||||||||
Sugar #11 Futures Contracts | 24 | Feb 2020 | 361,267 | (9,727 | ) | |||||||||||
Wheat Futures Contracts | 7 | Mar 2020 | 195,825 | (10,896 | ) | |||||||||||
Hard Red Winter Wheat Futures Contracts | 8 | Mar 2020 | 194,300 | (15,149 | ) | |||||||||||
Live Cattle Futures Contracts | 64 | Apr 2020 | 3,256,320 | (24,517 | ) | |||||||||||
Soybean Futures Contracts | 15 | Mar 2020 | 717,000 | (28,189 | ) | |||||||||||
Gasoline RBOB Futures Contracts | 21 | Mar 2020 | 1,660,718 | (57,031 | ) | |||||||||||
NY Harbor ULSD Futures Contracts | 21 | Jan 2020 | 1,787,549 | (63,810 | ) | |||||||||||
$ | 12,452,958 | $ | (84,870 | ) | ||||||||||||
Currency Futures Contracts Sold Short† | ||||||||||||||||
New Zealand Dollar Futures Contracts | 8 | Mar 2020 | $ | 539,120 | $ | (1,041 | ) | |||||||||
Japanese Yen Futures Contracts | 8 | Mar 2020 | 923,900 | (3,875 | ) | |||||||||||
Euro FX Futures Contracts | 22 | Mar 2020 | 3,099,525 | (19,654 | ) | |||||||||||
Australian Dollar Futures Contracts | 16 | Mar 2020 | 1,124,800 | (26,669 | ) | |||||||||||
Swiss Franc Futures Contracts | 43 | Mar 2020 | 5,583,550 | (70,070 | ) | |||||||||||
$ | 11,270,895 | $ | (121,309 | ) |
Custom Basket Swap Agreements | |||||||||||||||
Counterparty | Reference Obligation | Financing Rate Pay (Receive) | Payment | Maturity Date | Notional | Value and | |||||||||
OTC Custom Basket Swap Agreements †† | |||||||||||||||
Morgan Stanley Capital Services LLC | Morgan Stanley Equity Market Neutral Custom Basket | 1.95% (Fed Funds Rate + 0.40%) | At Maturity | 08/31/23 | $ | 6,854,719 | $ | 621,602 | |||||||
Morgan Stanley Capital Services LLC | Morgan Stanley Long/Short Equity Custom Basket | 1.95% (Fed Funds Rate + 0.40%) | At Maturity | 08/31/23 | 5,999,330 | 489,064 | |||||||||
Goldman Sachs International | Goldman Sachs Long/Short Equity Custom Basket | 2.00% (Fed Funds Rate + 0.45%) | At Maturity | 05/06/24 | 5,998,824 | 392,330 | |||||||||
Goldman Sachs International | Goldman Sachs Equity Market Neutral Custom Basket | 2.00% (Fed Funds Rate + 0.45% | At Maturity | 05/06/24 | 6,322,272 | 360,844 | |||||||||
$ | 25,175,145 | $ | 1,863,840 |
46 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
MULTI-HEDGE STRATEGIES FUND |
Counterparty | Reference Obligation | Financing Rate Pay (Receive) | Payment | Maturity Date | Notional | Value and | |||||||||
OTC Custom Basket Swap Agreements Sold Short †† | |||||||||||||||
Morgan Stanley Capital Services LLC | Morgan Stanley Long/Short Equity Custom Basket | (1.25%) (Fed Funds Rate - 0.30%) | At Maturity | 08/31/23 | $ | 4,643,008 | $ | (337,856 | ) | ||||||
Goldman Sachs International | Goldman Sachs Long/Short Equity Custom Basket | (1.35%) (Fed Funds Rate - 0.20%) | At Maturity | 05/06/24 | 4,420,729 | (279,643 | ) | ||||||||
Goldman Sachs International | Goldman Sachs Equity Market Neutral Custom Basket | (1.28%) (Fed Funds Rate - 0.28%) | At Maturity | 05/06/24 | 6,449,630 | (74,052 | ) | ||||||||
Morgan Stanley Capital Services LLC | Morgan Stanley Equity Market Neutral Custom Basket | (1.17%) (Fed Funds Rate -0.38%) | At Maturity | 08/31/23 | 6,449,630 | (26,665 | ) | ||||||||
$ | 21,962,997 | $ | (718,216 | ) |
| Shares | Percentage | Value and | |||||||||
MS EQUITY MARKET NEUTRAL LONG CUSTOM BASKET | ||||||||||||
Financial | ||||||||||||
Safehold, Inc. | 10,805 | 6.34 | % | $ | 107,473 | |||||||
Americold Realty Trust | 15,235 | 7.79 | % | 83,316 | ||||||||
Healthpeak Properties, Inc. | 9,211 | 4.63 | % | 64,388 | ||||||||
Equinix, Inc. | 336 | 2.86 | % | 53,398 | ||||||||
Equity LifeStyle Properties, Inc. | 2,247 | 2.31 | % | 50,402 | ||||||||
Sun Communities, Inc. | 1,036 | 2.27 | % | 47,360 | ||||||||
Omega Healthcare Investors, Inc. | 7,382 | 4.56 | % | 45,878 | ||||||||
Invitation Homes, Inc. | 5,325 | 2.33 | % | 43,105 | ||||||||
Rexford Industrial Realty, Inc. | 2,678 | 1.78 | % | 35,963 | ||||||||
Terreno Realty Corp. | 2,313 | 1.83 | % | 31,294 | ||||||||
Highwoods Properties, Inc. | 4,337 | 3.09 | % | 26,410 | ||||||||
Park Hotels & Resorts, Inc. | 6,771 | 2.56 | % | 21,653 | ||||||||
Spirit Realty Capital, Inc. | 3,953 | 2.84 | % | 14,068 | ||||||||
Annaly Capital Management, Inc. | 26,084 | 3.58 | % | 12,497 | ||||||||
STAG Industrial, Inc. | 5,214 | 2.40 | % | 11,074 | ||||||||
CyrusOne, Inc. | 3,101 | 2.96 | % | 10,055 | ||||||||
Host Hotels & Resorts, Inc. | 8,672 | 2.35 | % | 6,834 | ||||||||
Weyerhaeuser Co. | 6,573 | 2.90 | % | 5,045 | ||||||||
Vornado Realty Trust | 2,341 | 2.27 | % | 482 | ||||||||
Paramount Group, Inc. | 11,177 | 2.27 | % | 364 | ||||||||
AGNC Investment Corp. | 8,641 | 2.23 | % | (112 | ) | |||||||
National Storage Affiliates Trust | 4,660 | 2.29 | % | (1,145 | ) | |||||||
PotlatchDeltic Corp. | 3,589 | 2.27 | % | (1,249 | ) | |||||||
Alexander & Baldwin, Inc. | 9,198 | 2.81 | % | (1,845 | ) | |||||||
MGM Growth Properties LLC — Class A | 5,078 | 2.29 | % | (2,544 | ) | |||||||
Federal Realty Investment Trust | 1,144 | 2.15 | % | (4,210 | ) | |||||||
Extra Space Storage, Inc. | 1,843 | 2.84 | % | (6,001 | ) | |||||||
Retail Opportunity Investments Corp. | 8,452 | 2.18 | % | (6,634 | ) | |||||||
CareTrust REIT, Inc. | 7,709 | 2.32 | % | (8,833 | ) | |||||||
Regency Centers Corp. | 2,335 | 2.15 | % | (9,209 | ) | |||||||
Ventas, Inc. | 4,758 | 4.01 | % | (18,153 | ) | |||||||
Pebblebrook Hotel Trust | 6,866 | 2.69 | % | (36,364 | ) | |||||||
Total Financial | 574,760 | |||||||||||
Technology | ||||||||||||
InterXion Holding N.V. | 2,440 | 2.98 | % | 25,871 | ||||||||
Consumer, Cyclical | ||||||||||||
Red Rock Resorts, Inc. — Class A | 8,222 | 2.87 | % | 20,971 | ||||||||
Total MS Equity Market Neutral Long Custom Basket | $ | 621,602 | ||||||||||
MS EQUITY MARKET NEUTRAL SHORT CUSTOM BASKET | ||||||||||||
Financial | ||||||||||||
Hersha Hospitality Trust | 14,029 | (3.17 | )% | $ | 46,282 | |||||||
Service Properties Trust | 7,179 | (2.71 | )% | 33,453 | ||||||||
Public Storage | 904 | (2.98 | )% | 21,757 | ||||||||
PS Business Parks, Inc. | 846 | (2.16 | )% | 15,572 | ||||||||
Washington Prime Group, Inc. | 29,887 | (1.69 | )% | 7,472 | ||||||||
Digital Realty Trust, Inc. | 2,574 | (4.78 | )% | 7,431 | ||||||||
American Finance Trust, Inc. | 11,409 | (2.35 | )% | 6,195 | ||||||||
Retail Properties of America, Inc. — Class A | 11,325 | (2.35 | )% | 3,757 | ||||||||
Xenia Hotels & Resorts, Inc. | 7,589 | (2.54 | )% | 2,687 | ||||||||
Life Storage, Inc. | 2,118 | (3.56 | )% | 906 | ||||||||
Physicians Realty Trust | 14,451 | (4.24 | )% | (545 | ) |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 47 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Percentage | Value and | |||||||||
Healthcare Trust of America, Inc. — Class A | 6,562 | (3.08 | )% | $ | (1,253 | ) | ||||||
Columbia Property Trust, Inc. | 7,407 | (2.40 | )% | (2,486 | ) | |||||||
Industrial Logistics Properties Trust | 5,411 | (1.88 | )% | (5,804 | ) | |||||||
Brandywine Realty Trust | 10,046 | (2.45 | )% | (6,116 | ) | |||||||
Monmouth Real Estate Investment Corp. | 15,853 | (3.56 | )% | (7,555 | ) | |||||||
Healthcare Realty Trust, Inc. | 6,367 | (3.29 | )% | (7,772 | ) | |||||||
Howard Hughes Corp. | 1,571 | (3.09 | )% | (8,563 | ) | |||||||
Cushman & Wakefield plc | 6,093 | (1.93 | )% | (9,737 | ) | |||||||
VEREIT, Inc. | 25,412 | (3.64 | )% | (9,923 | ) | |||||||
RLJ Lodging Trust | 9,532 | (2.62 | )% | (10,377 | ) | |||||||
Brixmor Property Group, Inc. | 9,253 | (3.10 | )% | (10,624 | ) | |||||||
Washington Real Estate Investment Trust | 6,543 | (2.96 | )% | (11,700 | ) | |||||||
Kimco Realty Corp. | 11,042 | (3.55 | )% | (15,750 | ) | |||||||
Piedmont Office Realty Trust, Inc. — Class A | 13,479 | (4.65 | )% | (30,362 | ) | |||||||
Total Financial | 6,945 | |||||||||||
Communications | ||||||||||||
Switch, Inc. — Class A | 12,238 | (2.81 | )% | 10,387 | ||||||||
Consumer, Cyclical | ||||||||||||
Toll Brothers, Inc. | 2,988 | (1.83 | )% | (1,758 | ) | |||||||
KB Home | 3,540 | (1.88 | )% | (5,913 | ) | |||||||
Royal Caribbean Cruises Ltd. | 1,307 | (2.71 | )% | (19,613 | ) | |||||||
Total Consumer, Cyclical | (27,284 | ) | ||||||||||
Exchange Traded Funds | ||||||||||||
Vanguard Real Estate ETF | 11,150 | (16.04 | )% | (16,713 | ) | |||||||
Total MS Equity Market Neutral Short Custom Basket | $ | (26,665 | ) | |||||||||
MS LONG/SHORT EQUITY LONG CUSTOM BASKET | ||||||||||||
Technology | ||||||||||||
Skyworks Solutions, Inc. | 142 | 0.30 | % | $ | 7,950 | |||||||
Activision Blizzard, Inc. | 348 | 0.35 | % | 2,409 | ||||||||
Oracle Corp. | 256 | 0.23 | % | 1,261 | ||||||||
Teradata Corp. | 572 | 0.26 | % | (1,712 | ) | |||||||
Total Technology | 9,908 | |||||||||||
Utilities | ||||||||||||
AES Corp. | 3,181 | 1.06 | % | 17,275 | ||||||||
FirstEnergy Corp. | 1,230 | 1.00 | % | 13,361 | ||||||||
PPL Corp. | 1,707 | 1.02 | % | 8,104 | ||||||||
Portland General Electric Co. | 952 | 0.89 | % | 6,077 | ||||||||
Pinnacle West Capital Corp. | 605 | 0.91 | % | 6,011 | ||||||||
Southern Co. | 418 | 0.44 | % | 2,546 | ||||||||
NRG Energy, Inc. | 1,405 | 0.93 | % | 2,002 | ||||||||
Exelon Corp. | 1,297 | 0.99 | % | 1,999 | ||||||||
Avangrid, Inc. | 881 | 0.75 | % | 1,960 | ||||||||
NiSource, Inc. | 750 | 0.35 | % | 1,027 | ||||||||
Ameren Corp. | 555 | 0.71 | % | 837 | ||||||||
Avista Corp. | 340 | 0.27 | % | 808 | ||||||||
Entergy Corp. | 178 | 0.36 | % | 376 | ||||||||
Evergy, Inc. | 903 | 0.98 | % | (69 | ) | |||||||
Public Service Enterprise Group, Inc. | 529 | 0.52 | % | (493 | ) | |||||||
Vistra Energy Corp. | 2,034 | 0.78 | % | (6,498 | ) | |||||||
National Fuel Gas Co. | 925 | 0.72 | % | (7,845 | ) | |||||||
Total Utilities | 47,478 | |||||||||||
Consumer, Cyclical | ||||||||||||
World Fuel Services Corp. | 984 | 0.71 | % | 13,995 | ||||||||
Carnival Corp. | 816 | 0.69 | % | 6,644 | ||||||||
Las Vegas Sands Corp. | 520 | 0.60 | % | 5,837 | ||||||||
Norwegian Cruise Line Holdings Ltd. | 417 | 0.41 | % | 4,291 | ||||||||
BorgWarner, Inc. | 860 | 0.62 | % | 3,805 | ||||||||
Wyndham Destinations, Inc. | 617 | 0.53 | % | 3,549 | ||||||||
Aptiv plc | 349 | 0.55 | % | 3,532 | ||||||||
Southwest Airlines Co. | 835 | 0.75 | % | 3,392 | ||||||||
Autoliv, Inc. | 444 | 0.62 | % | 3,374 | ||||||||
Royal Caribbean Cruises Ltd. | 167 | 0.37 | % | 3,146 | ||||||||
Allison Transmission Holdings, Inc. | 801 | 0.65 | % | 2,869 | ||||||||
Delta Air Lines, Inc. | 523 | 0.51 | % | 2,822 | ||||||||
AutoZone, Inc. | 19 | 0.38 | % | 2,748 | ||||||||
Gentherm, Inc. | 757 | 0.56 | % | 2,720 | ||||||||
Toll Brothers, Inc. | 681 | 0.45 | % | 2,565 | ||||||||
JetBlue Airways Corp. | 765 | 0.24 | % | 2,030 | ||||||||
PulteGroup, Inc. | 571 | 0.37 | % | 1,508 | ||||||||
Lear Corp. | 344 | 0.79 | % | 1,418 | ||||||||
Starbucks Corp. | 199 | 0.29 | % | 773 | ||||||||
SkyWest, Inc. | 341 | 0.37 | % | 735 | ||||||||
Extended Stay America, Inc. | 2,268 | 0.56 | % | 627 | ||||||||
Brunswick Corp. | 587 | 0.59 | % | 573 | ||||||||
Allegiant Travel Co. — Class A | 105 | 0.30 | % | 502 | ||||||||
DR Horton, Inc. | 274 | 0.24 | % | 470 | ||||||||
United Airlines Holdings, Inc. | 203 | 0.30 | % | 136 | ||||||||
Polaris, Inc. | 247 | 0.42 | % | 63 | ||||||||
Cummins, Inc. | 132 | 0.39 | % | (179 | ) | |||||||
Mohawk Industries, Inc. | 98 | 0.22 | % | (746 | ) | |||||||
Lennar Corp. — Class A | 329 | 0.31 | % | (866 | ) | |||||||
Goodyear Tire & Rubber Co. | 1,150 | 0.30 | % | (983 | ) |
48 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Percentage | Value and | |||||||||
Whirlpool Corp. | 258 | 0.63 | % | $ | (988 | ) | ||||||
Cracker Barrel Old Country Store, Inc. | 231 | 0.59 | % | (1,441 | ) | |||||||
General Motors Co. | 546 | 0.33 | % | (1,442 | ) | |||||||
Total Consumer, Cyclical | 67,479 | |||||||||||
Financial | ||||||||||||
Weingarten Realty Investors | 1,938 | 1.01 | % | 4,950 | ||||||||
Apartment Investment & Management Co. — Class A | 721 | 0.62 | % | 4,700 | ||||||||
JPMorgan Chase & Co. | 112 | 0.26 | % | 4,401 | ||||||||
Deluxe Corp. | 430 | 0.36 | % | 3,988 | ||||||||
Hartford Financial Services Group, Inc. | 234 | 0.24 | % | 3,506 | ||||||||
Brixmor Property Group, Inc. | 1,710 | 0.62 | % | 2,872 | ||||||||
Equity Commonwealth | 2,093 | 1.15 | % | 2,366 | ||||||||
Janus Henderson Group plc | 662 | 0.27 | % | 2,190 | ||||||||
Lexington Realty Trust | 5,530 | 0.98 | % | 1,528 | ||||||||
M&T Bank Corp. | 88 | 0.25 | % | 673 | ||||||||
Comerica, Inc. | 206 | 0.25 | % | 622 | ||||||||
Sunstone Hotel Investors, Inc. | 1,164 | 0.27 | % | (21 | ) | |||||||
Travelers Companies, Inc. | 107 | 0.24 | % | (433 | ) | |||||||
Franklin Resources, Inc. | 660 | 0.29 | % | (654 | ) | |||||||
Summit Hotel Properties, Inc. | 2,011 | 0.41 | % | (849 | ) | |||||||
Total Financial | 29,839 | |||||||||||
Consumer, Non-cyclical | ||||||||||||
CVS Health Corp. | 793 | 0.98 | % | 16,826 | ||||||||
Darling Ingredients, Inc. | 1,891 | 0.89 | % | 15,863 | ||||||||
Merck & Company, Inc. | 680 | 1.03 | % | 13,732 | ||||||||
Eli Lilly & Co. | 511 | 1.12 | % | 12,321 | ||||||||
Kimberly-Clark Corp. | 532 | 1.22 | % | 11,419 | ||||||||
Zimmer Biomet Holdings, Inc. | 235 | 0.59 | % | 11,267 | ||||||||
Sysco Corp. | 618 | 0.88 | % | 10,451 | ||||||||
Amgen, Inc. | 262 | 1.05 | % | 9,490 | ||||||||
Baxter International, Inc. | 441 | 0.61 | % | 7,719 | ||||||||
McKesson Corp. | 491 | 1.13 | % | 7,671 | ||||||||
Medtronic plc | 329 | 0.62 | % | 6,781 | ||||||||
Post Holdings, Inc. | 469 | 0.85 | % | 6,731 | ||||||||
Kellogg Co. | 813 | 0.94 | % | 6,684 | ||||||||
Archer-Daniels-Midland Co. | 1,596 | 1.23 | % | 5,845 | ||||||||
Hologic, Inc. | 713 | 0.62 | % | 5,246 | ||||||||
Jazz Pharmaceuticals plc | 248 | 0.62 | % | 4,839 | ||||||||
Campbell Soup Co. | 758 | 0.62 | % | 4,558 | ||||||||
Philip Morris International, Inc. | 440 | 0.62 | % | 4,550 | ||||||||
Becton Dickinson and Co. | 117 | 0.53 | % | 3,852 | ||||||||
Molina Healthcare, Inc. | 140 | 0.32 | % | 3,551 | ||||||||
Johnson & Johnson | 320 | 0.78 | % | 3,398 | ||||||||
Hormel Foods Corp. | 1,134 | 0.85 | % | 3,376 | ||||||||
Integer Holdings Corp. | 315 | 0.42 | % | 2,481 | ||||||||
Thermo Fisher Scientific, Inc. | 70 | 0.38 | % | 2,242 | ||||||||
Herbalife Nutrition Ltd. | 538 | 0.43 | % | 2,238 | ||||||||
General Mills, Inc. | 1,020 | 0.91 | % | 2,005 | ||||||||
Abbott Laboratories | 410 | 0.59 | % | 1,841 | ||||||||
Macquarie Infrastructure Corp. | 401 | 0.29 | % | 1,700 | ||||||||
TrueBlue, Inc. | 895 | 0.36 | % | 1,201 | ||||||||
Clorox Co. | 173 | 0.44 | % | 1,075 | ||||||||
Procter & Gamble Co. | 313 | 0.65 | % | 1,064 | ||||||||
Ingredion, Inc. | 629 | 0.97 | % | 874 | ||||||||
STERIS plc | 147 | 0.37 | % | 796 | ||||||||
PepsiCo, Inc. | 112 | 0.26 | % | 759 | ||||||||
Cardinal Health, Inc. | 834 | 0.70 | % | 758 | ||||||||
Cal-Maine Foods, Inc. | 523 | 0.37 | % | 720 | ||||||||
JM Smucker Co. | 548 | 0.95 | % | 411 | ||||||||
Mondelez International, Inc. — Class A | 345 | 0.32 | % | 190 | ||||||||
United Therapeutics Corp. | 258 | 0.38 | % | (258 | ) | |||||||
TreeHouse Foods, Inc. | 419 | 0.34 | % | (280 | ) | |||||||
Alexion Pharmaceuticals, Inc. | 220 | 0.40 | % | (501 | ) | |||||||
Gilead Sciences, Inc. | 911 | 0.99 | % | (565 | ) | |||||||
Pfizer, Inc. | 1,577 | 1.03 | % | (572 | ) | |||||||
Hershey Co. | 99 | 0.24 | % | (765 | ) | |||||||
Innoviva, Inc. | 1,491 | 0.35 | % | (1,043 | ) | |||||||
John B Sanfilippo & Son, Inc. | 208 | 0.32 | % | (1,157 | ) | |||||||
Molson Coors Beverage Co. — Class B | 1,025 | 0.92 | % | (1,979 | ) | |||||||
B&G Foods, Inc. | 1,307 | 0.39 | % | (3,427 | ) | |||||||
H&R Block, Inc. | 886 | 0.35 | % | (4,019 | ) | |||||||
Total Consumer, Non-cyclical | 181,959 | |||||||||||
Energy | ||||||||||||
Devon Energy Corp. | 1,350 | 0.58 | % | 5,422 | ||||||||
Phillips 66 | 222 | 0.41 | % | 5,157 | ||||||||
Valero Energy Corp. | 358 | 0.56 | % | 3,894 | ||||||||
Kinder Morgan, Inc. | 1,316 | 0.46 | % | 3,680 | ||||||||
ConocoPhillips | 434 | 0.47 | % | 3,349 | ||||||||
Chevron Corp. | 415 | 0.83 | % | 1,500 | ||||||||
HollyFrontier Corp. | 559 | 0.47 | % | 1,273 | ||||||||
ONEOK, Inc. | 204 | 0.26 | % | 1,117 | ||||||||
Delek US Holdings, Inc. | 736 | 0.41 | % | 502 | ||||||||
CVR Energy, Inc. | 614 | 0.41 | % | (3,763 | ) | |||||||
Exxon Mobil Corp. | 1,049 | 1.22 | % | (4,754 | ) | |||||||
Total Energy | 17,377 | |||||||||||
Communications | ||||||||||||
AT&T, Inc. | 1,597 | 1.04 | % | 12,246 |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 49 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Percentage | Value and | |||||||||
Verizon Communications, Inc. | 1,215 | 1.24 | % | $ | 8,212 | |||||||
TEGNA, Inc. | 1,236 | 0.34 | % | 5,461 | ||||||||
Discovery, Inc. — Class A | 1,254 | 0.68 | % | 5,216 | ||||||||
Omnicom Group, Inc. | 925 | 1.25 | % | 4,201 | ||||||||
News Corp. — Class A | 2,408 | 0.57 | % | 3,022 | ||||||||
Booking Holdings, Inc. | 16 | 0.55 | % | 1,626 | ||||||||
Juniper Networks, Inc. | 569 | 0.23 | % | 685 | ||||||||
Alphabet, Inc. — Class C | 12 | 0.27 | % | 418 | ||||||||
Yelp, Inc. — Class A | 660 | 0.38 | % | 251 | ||||||||
Scholastic Corp. | 421 | 0.27 | % | 162 | ||||||||
AMC Networks, Inc. — Class A | 899 | 0.59 | % | (252 | ) | |||||||
eBay, Inc. | 1,086 | 0.65 | % | (1,800 | ) | |||||||
Total Communications | 39,448 | |||||||||||
Industrial | ||||||||||||
Kansas City Southern | 228 | 0.58 | % | 11,129 | ||||||||
Norfolk Southern Corp. | 328 | 1.06 | % | 9,280 | ||||||||
Lincoln Electric Holdings, Inc. | 571 | 0.92 | % | 8,034 | ||||||||
Regal Beloit Corp. | 445 | 0.64 | % | 7,161 | ||||||||
Caterpillar, Inc. | 263 | 0.65 | % | 6,980 | ||||||||
Crane Co. | 637 | 0.92 | % | 6,291 | ||||||||
CSX Corp. | 666 | 0.80 | % | 5,798 | ||||||||
Marten Transport Ltd. | 1,153 | 0.41 | % | 5,270 | ||||||||
Oshkosh Corp. | 200 | 0.32 | % | 4,868 | ||||||||
Agilent Technologies, Inc. | 261 | 0.37 | % | 4,563 | ||||||||
Union Pacific Corp. | 140 | 0.42 | % | 4,025 | ||||||||
Old Dominion Freight Line, Inc. | 76 | 0.24 | % | 3,542 | ||||||||
Gentex Corp. | 1,500 | 0.72 | % | 3,444 | ||||||||
Landstar System, Inc. | 353 | 0.67 | % | 3,319 | ||||||||
Mettler-Toledo International, Inc. | 26 | 0.34 | % | 3,188 | ||||||||
Werner Enterprises, Inc. | 1,218 | 0.74 | % | 3,015 | ||||||||
Knight-Swift Transportation Holdings, Inc. | 720 | 0.43 | % | 2,949 | ||||||||
Garmin Ltd. | 210 | 0.34 | % | 2,894 | ||||||||
Kennametal, Inc. | 850 | 0.52 | % | 2,195 | ||||||||
Heartland Express, Inc. | 1,260 | 0.44 | % | 2,073 | ||||||||
Honeywell International, Inc. | 120 | 0.35 | % | 1,987 | ||||||||
Schneider National, Inc. — Class B | 1,492 | 0.54 | % | 1,590 | ||||||||
Waters Corp. | 106 | 0.41 | % | 1,419 | ||||||||
Vishay Intertechnology, Inc. | 756 | 0.27 | % | 1,320 | ||||||||
Sturm Ruger & Company, Inc. | 485 | 0.38 | % | 1,215 | ||||||||
MDU Resources Group, Inc. | 496 | 0.25 | % | 283 | ||||||||
J.B. Hunt Transport Services, Inc. | 251 | 0.49 | % | 161 | ||||||||
Echo Global Logistics, Inc. | 1,193 | 0.41 | % | (323 | ) | |||||||
CH Robinson Worldwide, Inc. | 587 | 0.77 | % | (1,536 | ) | |||||||
Textron, Inc. | 672 | 0.50 | % | (2,366 | ) | |||||||
FedEx Corp. | 308 | 0.78 | % | (7,145 | ) | |||||||
Total Industrial | 96,623 | |||||||||||
Basic Materials | ||||||||||||
Domtar Corp. | 441 | 0.28 | % | (1,047 | ) | |||||||
Total MS Long/Short Equty Long Custom Basket | $ | 489,064 | ||||||||||
MS LONG/SHORT EQUITY SHORT CUSTOM BASKET | ||||||||||||
Utilities | ||||||||||||
California Water Service Group | 287 | (0.31 | )% | $ | 361 | |||||||
South Jersey Industries, Inc. | 473 | (0.33 | )% | 252 | ||||||||
PNM Resources, Inc. | 298 | (0.32 | )% | 158 | ||||||||
Eversource Energy | 179 | (0.32 | )% | (174 | ) | |||||||
WEC Energy Group, Inc. | 165 | (0.32 | )% | (293 | ) | |||||||
Sempra Energy | 66 | (0.21 | )% | (305 | ) | |||||||
Alliant Energy Corp. | 275 | (0.32 | )% | (429 | ) | |||||||
MGE Energy, Inc. | 130 | (0.22 | )% | (535 | ) | |||||||
American States Water Co. | 285 | (0.53 | )% | (827 | ) | |||||||
American Water Works Company, Inc. | 206 | (0.55 | )% | (1,316 | ) | |||||||
Atmos Energy Corp. | 133 | (0.32 | )% | (1,777 | ) | |||||||
NextEra Energy, Inc. | 64 | (0.33 | )% | (3,038 | ) | |||||||
Dominion Energy, Inc. | 1,352 | (2.41 | )% | (6,639 | ) | |||||||
Total Utilities | (14,562 | ) | ||||||||||
Financial | ||||||||||||
WP Carey, Inc. | 684 | (1.18 | )% | 4,956 | ||||||||
Old National Bancorp | 2,325 | (0.92 | )% | 3,293 | ||||||||
Essential Properties Realty Trust, Inc. | 1,217 | (0.65 | )% | 2,015 | ||||||||
Acadia Realty Trust | 695 | (0.39 | )% | 1,691 | ||||||||
Valley National Bancorp | 2,209 | (0.54 | )% | 1,325 | ||||||||
People’s United Financial, Inc. | 2,527 | (0.92 | )% | 637 | ||||||||
CME Group, Inc. — Class A | 115 | (0.50 | )% | 561 | ||||||||
Northwest Bancshares, Inc. | 1,065 | (0.38 | )% | 300 | ||||||||
American Assets Trust, Inc. | 894 | (0.88 | )% | 69 | ||||||||
National Storage Affiliates Trust | 466 | (0.34 | )% | 6 | ||||||||
Glacier Bancorp, Inc. | 484 | (0.48 | )% | (148 | ) | |||||||
BancorpSouth Bank | 619 | (0.42 | )% | (148 | ) | |||||||
American Campus Communities, Inc. | 1,122 | (1.14 | )% | (198 | ) | |||||||
Global Net Lease, Inc. | 743 | (0.32 | )% | (507 | ) |
50 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Percentage |
| |||||||||
Armada Hoffler Properties, Inc. | 1,880 | (0.74 | )% | $ | (528 | ) | ||||||
Atlantic Union Bankshares Corp. | 359 | (0.29 | )% | (543 | ) | |||||||
BankUnited, Inc. | 277 | (0.22 | )% | (574 | ) | |||||||
Capitol Federal Financial, Inc. | 1,213 | (0.36 | )% | (631 | ) | |||||||
Reinsurance Group of America, Inc. — Class A | 287 | (1.01 | )% | (1,065 | ) | |||||||
CenterState Bank Corp. | 623 | (0.34 | )% | (1,098 | ) | |||||||
Camden Property Trust | 240 | (0.55 | )% | (1,204 | ) | |||||||
Mastercard, Inc. — Class A | 61 | (0.39 | )% | (1,204 | ) | |||||||
UDR, Inc. | 691 | (0.70 | )% | (1,433 | ) | |||||||
STAG Industrial, Inc. | 850 | (0.58 | )% | (1,566 | ) | |||||||
UMB Financial Corp. | 245 | (0.36 | )% | (1,581 | ) | |||||||
QTS Realty Trust, Inc. — Class A | 476 | (0.56 | )% | (1,658 | ) | |||||||
RenaissanceRe Holdings Ltd. | 165 | (0.70 | )% | (1,671 | ) | |||||||
Columbia Financial, Inc. | 989 | (0.36 | )% | (1,786 | ) | |||||||
Synovus Financial Corp. | 428 | (0.36 | )% | (1,830 | ) | |||||||
Washington Real Estate Investment Trust | 1,021 | (0.64 | )% | (1,851 | ) | |||||||
Intercontinental Exchange, Inc. | 467 | (0.93 | )% | (1,852 | ) | |||||||
Healthcare Realty Trust, Inc. | 1,417 | (1.02 | )% | (1,897 | ) | |||||||
Brown & Brown, Inc. | 1,199 | (1.02 | )% | (1,960 | ) | |||||||
Douglas Emmett, Inc. | 471 | (0.45 | )% | (2,239 | ) | |||||||
STORE Capital Corp. | 1,101 | (0.88 | )% | (2,771 | ) | |||||||
Agree Realty Corp. | 779 | (1.18 | )% | (3,030 | ) | |||||||
Realty Income Corp. | 716 | (1.14 | )% | (3,034 | ) | |||||||
Crown Castle International Corp. | 241 | (0.74 | )% | (3,719 | ) | |||||||
BOK Financial Corp. | 442 | (0.83 | )% | (4,292 | ) | |||||||
American Tower Corp. — Class A | 239 | (1.18 | )% | (4,819 | ) | |||||||
Americold Realty Trust | 3,146 | (2.38 | )% | (4,847 | ) | |||||||
Athene Holding Ltd. — Class A | 605 | (0.61 | )% | (4,859 | ) | |||||||
Arthur J Gallagher & Co. | 613 | (1.26 | )% | (5,346 | ) | |||||||
Easterly Government Properties, Inc. | 2,896 | (1.48 | )% | (5,503 | ) | |||||||
RLI Corp. | 549 | (1.06 | )% | (6,002 | ) | |||||||
Hudson Pacific Properties, Inc. | 1,919 | (1.56 | )% | (6,071 | ) | |||||||
Equinix, Inc. | 44 | (0.55 | )% | (6,188 | ) | |||||||
First Republic Bank | 407 | (1.03 | )% | (6,227 | ) | |||||||
Fifth Third Bancorp | 1,336 | (0.88 | )% | (6,330 | ) | |||||||
EastGroup Properties, Inc. | 243 | (0.69 | )% | (6,462 | ) | |||||||
SBA Communications Corp. | 193 | (1.00 | )% | (6,558 | ) | |||||||
Everest Re Group Ltd. | 153 | (0.91 | )% | (6,605 | ) | |||||||
| Shares | Percentage | Value and | |||||||||
Alexandria Real Estate Equities, Inc. | 431 | (1.50 | )% | $ | (7,935 | ) | ||||||
Sun Communities, Inc. | 411 | (1.33 | )% | (9,634 | ) | |||||||
Rexford Industrial Realty, Inc. | 1,459 | (1.44 | )% | (15,784 | ) | |||||||
Terreno Realty Corp. | 1,099 | (1.28 | )% | (16,572 | ) | |||||||
Total Financial | (156,907 | ) | ||||||||||
Technology | ||||||||||||
Appian Corp. | 175 | (0.14 | )% | 2,751 | ||||||||
Workday, Inc. — Class A | 44 | (0.16 | )% | 1,532 | ||||||||
Elastic N.V. | 79 | (0.11 | )% | 822 | ||||||||
MongoDB, Inc. | 70 | (0.20 | )% | 711 | ||||||||
Alteryx, Inc. — Class A | 67 | (0.14 | )% | 685 | ||||||||
Veeva Systems, Inc. — Class A | 49 | (0.15 | )% | 573 | ||||||||
Intuit, Inc. | 37 | (0.21 | )% | 316 | ||||||||
Atlassian Corporation plc — Class A | 56 | (0.15 | )% | 311 | ||||||||
ServiceNow, Inc. | 29 | (0.18 | )% | 285 | ||||||||
Zscaler, Inc. | 129 | (0.13 | )% | 144 | ||||||||
Manhattan Associates, Inc. | 77 | (0.13 | )% | 135 | ||||||||
Twilio, Inc. — Class A | 59 | (0.12 | )% | (14 | ) | |||||||
Aspen Technology, Inc. | 62 | (0.16 | )% | (78 | ) | |||||||
Workiva, Inc. | 143 | (0.13 | )% | (148 | ) | |||||||
LivePerson, Inc. | 164 | (0.13 | )% | (195 | ) | |||||||
Paychex, Inc. | 284 | (0.52 | )% | (323 | ) | |||||||
Guidewire Software, Inc. | 63 | (0.15 | )% | (362 | ) | |||||||
Fair Isaac Corp. | 22 | (0.18 | )% | (534 | ) | |||||||
Coupa Software, Inc. | 54 | (0.17 | )% | (573 | ) | |||||||
Appfolio, Inc. — Class A | 57 | (0.13 | )% | (586 | ) | |||||||
Autodesk, Inc. | 61 | (0.24 | )% | (586 | ) | |||||||
HubSpot, Inc. | 108 | (0.37 | )% | (697 | ) | |||||||
Accenture plc — Class A | 50 | (0.23 | )% | (787 | ) | |||||||
PROS Holdings, Inc. | 111 | (0.14 | )% | (816 | ) | |||||||
Tyler Technologies, Inc. | 18 | (0.12 | )% | (873 | ) | |||||||
ANSYS, Inc. | 26 | (0.14 | )% | (1,116 | ) | |||||||
Monolithic Power Systems, Inc. | 46 | (0.18 | )% | (1,295 | ) | |||||||
ExlService Holdings, Inc. | 445 | (0.67 | )% | (1,443 | ) | |||||||
Smartsheet, Inc. — Class A | 261 | (0.25 | )% | (1,483 | ) | |||||||
Five9, Inc. | 91 | (0.13 | )% | (1,584 | ) | |||||||
Paycom Software, Inc. | 32 | (0.18 | )% | (1,603 | ) | |||||||
EPAM Systems, Inc. | 129 | (0.59 | )% | (2,219 | ) | |||||||
Science Applications International Corp. | 535 | (1.00 | )% | (2,265 | ) | |||||||
DocuSign, Inc. | 213 | (0.34 | )% | (2,408 | ) | |||||||
Broadcom, Inc. | 58 | (0.39 | )% | (2,602 | ) | |||||||
Adobe, Inc. | 78 | (0.55 | )% | (2,945 | ) | |||||||
Black Knight, Inc. | 610 | (0.85 | )% | (3,316 | ) | |||||||
salesforce.com, Inc. | 269 | (0.94 | )% | (3,418 | ) | |||||||
Genpact Ltd. | 847 | (0.77 | )% | (3,431 | ) | |||||||
ACI Worldwide, Inc. | 872 | (0.71 | )% | (3,624 | ) |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 51 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Percentage | Value and | |||||||||
CACI International, Inc. — Class A | 197 | (1.06 | )% | $ | (5,172 | ) | ||||||
Envestnet, Inc. | 397 | (0.60 | )% | (6,025 | ) | |||||||
Splunk, Inc. | 194 | (0.63 | )% | (6,328 | ) | |||||||
Total Technology | (50,584 | ) | ||||||||||
Consumer, Non-cyclical | ||||||||||||
Rollins, Inc. | 386 | (0.28 | )% | 1,683 | ||||||||
Guardant Health, Inc. | 97 | (0.16 | )% | 1,325 | ||||||||
Verisk Analytics, Inc. — Class A | 104 | (0.33 | )% | 837 | ||||||||
Gartner, Inc. | 169 | (0.56 | )% | 708 | ||||||||
Glaukos Corp. | 93 | (0.11 | )% | 404 | ||||||||
FleetCor Technologies, Inc. | 101 | (0.63 | )% | 387 | ||||||||
Avalara, Inc. | 81 | (0.13 | )% | (147 | ) | |||||||
Booz Allen Hamilton Holding Corp. | 133 | (0.20 | )% | (239 | ) | |||||||
Bright Horizons Family Solutions, Inc. | 166 | (0.54 | )% | (709 | ) | |||||||
Intuitive Surgical, Inc. | 14 | (0.18 | )% | (725 | ) | |||||||
LiveRamp Holdings, Inc. | 136 | (0.14 | )% | (751 | ) | |||||||
Illumina, Inc. | 25 | (0.18 | )% | (975 | ) | |||||||
ResMed, Inc. | 40 | (0.13 | )% | (1,011 | ) | |||||||
Viad Corp. | 396 | (0.58 | )% | (1,036 | ) | |||||||
Paylocity Holding Corp. | 44 | (0.11 | )% | (1,258 | ) | |||||||
PayPal Holdings, Inc. | 375 | (0.87 | )% | (1,732 | ) | |||||||
Euronet Worldwide, Inc. | 147 | (0.50 | )% | (1,973 | ) | |||||||
IHS Markit Ltd. | 138 | (0.22 | )% | (2,266 | ) | |||||||
WEX, Inc. | 247 | (1.11 | )% | (3,517 | ) | |||||||
Brink’s Co. | 337 | (0.66 | )% | (3,944 | ) | |||||||
MarketAxess Holdings, Inc. | 43 | (0.35 | )% | (5,454 | ) | |||||||
Avery Dennison Corp. | 324 | (0.91 | )% | (6,960 | ) | |||||||
Total Consumer, Non-cyclical | (27,353 | ) | ||||||||||
Basic Materials | ||||||||||||
Allegheny Technologies, Inc. | 650 | (0.29 | )% | 4,441 | ||||||||
Balchem Corp. | 385 | (0.84 | )% | 3,615 | ||||||||
WR Grace & Co. | 527 | (0.79 | )% | 1,569 | ||||||||
Compass Minerals International, Inc. | 625 | (0.82 | )% | 454 | ||||||||
Livent Corp. | 1 | 0.00 | % | 3 | ||||||||
Carpenter Technology Corp. | 533 | (0.57 | )% | (328 | ) | |||||||
Kaiser Aluminum Corp. | 229 | (0.55 | )% | (1,548 | ) | |||||||
Southern Copper Corp. | 438 | (0.40 | )% | (2,384 | ) | |||||||
Steel Dynamics, Inc. | 509 | (0.37 | )% | (2,915 | ) | |||||||
Reliance Steel & Aluminum Co. | 159 | (0.41 | )% | (3,570 | ) | |||||||
Commercial Metals Co. | 747 | (0.36 | )% | (3,648 | ) | |||||||
Freeport-McMoRan, Inc. | 1,894 | (0.54 | )% | (4,402 | ) | |||||||
RPM International, Inc. | 481 | (0.80 | )% | (4,645 | ) | |||||||
Air Products & Chemicals, Inc. | 146 | (0.74 | )% | (6,568 | ) | |||||||
PPG Industries, Inc. | 304 | (0.87 | )% | (6,710 | ) | |||||||
Sherwin-Williams Co. | 69 | (0.87 | )% | (7,667 | ) | |||||||
Linde plc | 348 | (1.60 | )% | (8,613 | ) | |||||||
Total Basic Materials | (42,916 | ) | ||||||||||
Consumer, Cyclical | ||||||||||||
Wingstop, Inc. | 283 | (0.53 | )% | 2,162 | ||||||||
McDonald’s Corp. | 75 | (0.32 | )% | 386 | ||||||||
Toro Co. | 423 | (0.73 | )% | (3,063 | ) | |||||||
Total Consumer, Cyclical | (515 | ) | ||||||||||
Communications | ||||||||||||
8x8, Inc. | 1,115 | (0.44 | )% | 2,280 | ||||||||
Palo Alto Networks, Inc. | 95 | (0.47 | )% | 1,079 | ||||||||
Proofpoint, Inc. | 226 | (0.56 | )% | 572 | ||||||||
Okta, Inc. | 79 | (0.20 | )% | 500 | ||||||||
VeriSign, Inc. | 39 | (0.16 | )% | 167 | ||||||||
Zendesk, Inc. | 325 | (0.54 | )% | (720 | ) | |||||||
Anaplan, Inc. | 148 | (0.17 | )% | (805 | ) | |||||||
Trade Desk, Inc. — Class A | 26 | (0.15 | )% | (1,063 | ) | |||||||
Charter Communications, Inc. — Class A | 30 | (0.31 | )% | (1,150 | ) | |||||||
RingCentral, Inc. — Class A | 43 | (0.16 | )% | (1,915 | ) | |||||||
Q2 Holdings, Inc. | 360 | (0.63 | )% | (2,828 | ) | |||||||
Total Communications | (3,883 | ) | ||||||||||
Industrial | ||||||||||||
HEICO Corp. | 114 | (0.28 | )% | 1,682 | ||||||||
Roper Technologies, Inc. | 73 | (0.56 | )% | 732 | ||||||||
Exponent, Inc. | 270 | (0.40 | )% | 301 | ||||||||
Casella Waste Systems, Inc. — Class A | 343 | (0.34 | )% | (970 | ) | |||||||
Ball Corp. | 449 | (0.63 | )% | (1,204 | ) | |||||||
Universal Display Corp. | 36 | (0.16 | )% | (1,226 | ) | |||||||
Materion Corp. | 597 | (0.76 | )% | (1,620 | ) | |||||||
Sonoco Products Co. | 350 | (0.47 | )% | (2,135 | ) | |||||||
Westinghouse Air Brake Technologies Corp. | 219 | (0.37 | )% | (2,908 | ) | |||||||
Vulcan Materials Co. | 287 | (0.89 | )% | (4,270 | ) | |||||||
Worthington Industries, Inc. | 835 | (0.76 | )% | (4,537 | ) | |||||||
Martin Marietta Materials, Inc. | 159 | (0.96 | )% | (9,652 | ) | |||||||
TransDigm Group, Inc. | 123 | (1.48 | )% | (13,934 | ) | |||||||
Total Industrial | (39,741 | ) | ||||||||||
Energy | ||||||||||||
Warrior Met Coal, Inc. | 783 | (0.36 | )% | (1,395 | ) | |||||||
Total MS Long/Short Equity Short Custom Basket | $ | (337,856 | ) |
52 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Percentage | Value and | |||||||||
GS LONG/SHORT EQUITY LONG CUSTOM BASKET | ||||||||||||
Communications | ||||||||||||
AT&T, Inc. | 1,597 | 1.05 | % | $ | 9,172 | |||||||
Verizon Communications, Inc. | 1,215 | 1.25 | % | 5,339 | ||||||||
News Corp. — Class A | 2,408 | 0.58 | % | 4,399 | ||||||||
Discovery, Inc. — Class A | 1,254 | 0.68 | % | 4,247 | ||||||||
Scholastic Corp. | 421 | 0.27 | % | 2,282 | ||||||||
TEGNA, Inc. | 1,236 | 0.34 | % | 2,139 | ||||||||
Omnicom Group, Inc. | 925 | 1.25 | % | 2,091 | ||||||||
Booking Holdings, Inc. | 16 | 0.55 | % | 1,691 | ||||||||
Juniper Networks, Inc. | 569 | 0.23 | % | 608 | ||||||||
Yelp, Inc. — Class A | 660 | 0.38 | % | 363 | ||||||||
Alphabet, Inc. — Class C | 12 | 0.27 | % | 289 | ||||||||
AMC Networks, Inc. — Class A | 899 | 0.59 | % | (285 | ) | |||||||
eBay, Inc. | 1,086 | 0.65 | % | (1,951 | ) | |||||||
Total Communications | 30,384 | |||||||||||
Consumer, Non-cyclical | ||||||||||||
Darling Ingredients, Inc. | 1,891 | 0.89 | % | 16,388 | ||||||||
CVS Health Corp. | 793 | 0.98 | % | 16,113 | ||||||||
Eli Lilly & Co. | 511 | 1.12 | % | 12,019 | ||||||||
Amgen, Inc. | 262 | 1.05 | % | 10,462 | ||||||||
Ingredion, Inc. | 629 | 0.97 | % | 8,001 | ||||||||
Sysco Corp. | 618 | 0.88 | % | 7,193 | ||||||||
Zimmer Biomet Holdings, Inc. | 235 | 0.59 | % | 6,862 | ||||||||
Kellogg Co. | 813 | 0.94 | % | 6,544 | ||||||||
Archer-Daniels-Midland Co. | 1,596 | 1.23 | % | 5,711 | ||||||||
Merck & Company, Inc. | 680 | 1.03 | % | 5,371 | ||||||||
Medtronic plc | 329 | 0.62 | % | 4,869 | ||||||||
Jazz Pharmaceuticals plc | 248 | 0.62 | % | 4,868 | ||||||||
Campbell Soup Co. | 758 | 0.62 | % | 4,317 | ||||||||
Becton Dickinson and Co. | 117 | 0.53 | % | 4,089 | ||||||||
Cardinal Health, Inc. | 834 | 0.70 | % | 3,352 | ||||||||
Hormel Foods Corp. | 1,134 | 0.85 | % | 3,296 | ||||||||
Molina Healthcare, Inc. | 140 | 0.32 | % | 3,276 | ||||||||
Hologic, Inc. | 713 | 0.62 | % | 3,173 | ||||||||
Johnson & Johnson | 320 | 0.78 | % | 2,959 | ||||||||
McKesson Corp. | 491 | 1.13 | % | 2,809 | ||||||||
Philip Morris International, Inc. | 440 | 0.62 | % | 2,723 | ||||||||
Baxter International, Inc. | 441 | 0.61 | % | 2,540 | ||||||||
TrueBlue, Inc. | 895 | 0.36 | % | 2,396 | ||||||||
Herbalife Nutrition Ltd. | 538 | 0.43 | % | 2,295 | ||||||||
Thermo Fisher Scientific, Inc. | 70 | 0.38 | % | 2,262 | ||||||||
Post Holdings, Inc. | 469 | 0.85 | % | 2,179 | ||||||||
Kimberly-Clark Corp. | 532 | 1.22 | % | 2,001 | ||||||||
Abbott Laboratories | 410 | 0.59 | % | 1,788 | ||||||||
Macquarie Infrastructure Corp. | 401 | 0.29 | % | 1,592 | ||||||||
Clorox Co. | 173 | 0.44 | % | 1,190 | ||||||||
Cal-Maine Foods, Inc. | 523 | 0.37 | % | 1,175 | ||||||||
Procter & Gamble Co. | 313 | 0.65 | % | 1,126 | ||||||||
General Mills, Inc. | 1,020 | 0.91 | % | 965 | ||||||||
Integer Holdings Corp. | 315 | 0.42 | % | 927 | ||||||||
STERIS plc | 147 | 0.37 | % | 759 | ||||||||
Innoviva, Inc. | 1,491 | 0.35 | % | 513 | ||||||||
PepsiCo, Inc. | 112 | 0.26 | % | 389 | ||||||||
Mondelez International, Inc. — Class A | 345 | 0.32 | % | 177 | ||||||||
Alexion Pharmaceuticals, Inc. | 220 | 0.40 | % | 44 | ||||||||
TreeHouse Foods, Inc. | 419 | 0.34 | % | (309 | ) | |||||||
Molson Coors Beverage Co. — Class B | 1,025 | 0.92 | % | (378 | ) | |||||||
United Therapeutics Corp. | 258 | 0.38 | % | (474 | ) | |||||||
Hershey Co. | 99 | 0.24 | % | (836 | ) | |||||||
Gilead Sciences, Inc. | 911 | 0.99 | % | (1,020 | ) | |||||||
John B Sanfilippo & Son, Inc. | 208 | 0.32 | % | (1,124 | ) | |||||||
B&G Foods, Inc. | 1,307 | 0.39 | % | (4,095 | ) | |||||||
JM Smucker Co. | 548 | 0.95 | % | (4,162 | ) | |||||||
H&R Block, Inc. | 886 | 0.35 | % | (4,386 | ) | |||||||
Pfizer, Inc. | 1,577 | 1.03 | % | (4,441 | ) | |||||||
Total Consumer, Non-cyclical | 137,488 | |||||||||||
Consumer, Cyclical | ||||||||||||
World Fuel Services Corp. | 984 | 0.71 | % | 10,086 | ||||||||
Carnival Corp. | 816 | 0.69 | % | 6,557 | ||||||||
Las Vegas Sands Corp. | 520 | 0.60 | % | 5,806 | ||||||||
Norwegian Cruise Line Holdings Ltd. | 417 | 0.41 | % | 4,240 | ||||||||
BorgWarner, Inc. | 860 | 0.62 | % | 3,691 | ||||||||
Lear Corp. | 344 | 0.79 | % | 3,672 | ||||||||
Aptiv plc | 349 | 0.55 | % | 3,576 | ||||||||
Allison Transmission Holdings, Inc. | 801 | 0.65 | % | 3,500 | ||||||||
Wyndham Destinations, Inc. | 617 | 0.53 | % | 3,496 | ||||||||
Autoliv, Inc. | 444 | 0.62 | % | 3,256 | ||||||||
Royal Caribbean Cruises Ltd. | 167 | 0.37 | % | 3,105 | ||||||||
Southwest Airlines Co. | 835 | 0.75 | % | 2,839 | ||||||||
AutoZone, Inc. | 19 | 0.38 | % | 2,691 | ||||||||
Gentherm, Inc. | 757 | 0.56 | % | 2,682 | ||||||||
Toll Brothers, Inc. | 681 | 0.45 | % | 2,024 | ||||||||
PulteGroup, Inc. | 571 | 0.37 | % | 1,490 | ||||||||
Delta Air Lines, Inc. | 523 | 0.51 | % | 1,332 | ||||||||
SkyWest, Inc. | 341 | 0.37 | % | 827 | ||||||||
Starbucks Corp. | 199 | 0.29 | % | 734 | ||||||||
Brunswick Corp. | 587 | 0.59 | % | 685 | ||||||||
Extended Stay America, Inc. | 2,268 | 0.56 | % | 618 |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 53 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Percentage | Value and | |||||||||
Allegiant Travel Co. — Class A | 105 | 0.30 | % | $ | 536 | |||||||
United Airlines Holdings, Inc. | 203 | 0.30 | % | 467 | ||||||||
DR Horton, Inc. | 274 | 0.24 | % | 386 | ||||||||
Polaris, Inc. | 247 | 0.42 | % | 83 | ||||||||
Cummins, Inc. | 132 | 0.39 | % | (255 | ) | |||||||
JetBlue Airways Corp. | 765 | 0.24 | % | (283 | ) | |||||||
Mohawk Industries, Inc. | 98 | 0.22 | % | (699 | ) | |||||||
Lennar Corp. — Class A | 329 | 0.31 | % | (949 | ) | |||||||
Goodyear Tire & Rubber Co. | 1,150 | 0.30 | % | (969 | ) | |||||||
Whirlpool Corp. | 258 | 0.63 | % | (1,096 | ) | |||||||
General Motors Co. | 546 | 0.33 | % | (1,312 | ) | |||||||
Cracker Barrel Old Country Store, Inc. | 231 | 0.59 | % | (1,413 | ) | |||||||
Total Consumer, Cyclical | 61,403 | |||||||||||
Energy | ||||||||||||
Phillips 66 | 222 | 0.41 | % | 5,928 | ||||||||
HollyFrontier Corp. | 559 | 0.47 | % | 5,697 | ||||||||
Devon Energy Corp. | 1,350 | 0.58 | % | 5,628 | ||||||||
Valero Energy Corp. | 358 | 0.56 | % | 5,235 | ||||||||
ConocoPhillips | 434 | 0.47 | % | 3,375 | ||||||||
ONEOK, Inc. | 204 | 0.26 | % | 1,133 | ||||||||
Kinder Morgan, Inc. | 1,316 | 0.46 | % | 513 | ||||||||
Chevron Corp. | 415 | 0.83 | % | (385 | ) | |||||||
Delek US Holdings, Inc. | 736 | 0.41 | % | (1,549 | ) | |||||||
Exxon Mobil Corp. | 1,049 | 1.22 | % | (3,120 | ) | |||||||
CVR Energy, Inc. | 614 | 0.41 | % | (3,833 | ) | |||||||
Total Energy | 18,622 | |||||||||||
Industrial | ||||||||||||
Lincoln Electric Holdings, Inc. | 571 | 0.92 | % | 7,827 | ||||||||
Kansas City Southern | 228 | 0.58 | % | 7,433 | ||||||||
Werner Enterprises, Inc. | 1,218 | 0.74 | % | 6,991 | ||||||||
Regal Beloit Corp. | 445 | 0.64 | % | 6,954 | ||||||||
Caterpillar, Inc. | 263 | 0.65 | % | 6,540 | ||||||||
Crane Co. | 637 | 0.92 | % | 6,142 | ||||||||
Schneider National, Inc. — Class B | 1,492 | 0.54 | % | 5,759 | ||||||||
Landstar System, Inc. | 353 | 0.67 | % | 4,314 | ||||||||
Vishay Intertechnology, Inc. | 756 | 0.27 | % | 4,113 | ||||||||
Marten Transport Ltd. | 1,153 | 0.41 | % | 4,072 | ||||||||
Agilent Technologies, Inc. | 261 | 0.37 | % | 3,985 | ||||||||
Union Pacific Corp. | 140 | 0.42 | % | 3,845 | ||||||||
Old Dominion Freight Line, Inc. | 76 | 0.24 | % | 3,727 | ||||||||
Gentex Corp. | 1,500 | 0.72 | % | 3,479 | ||||||||
Knight-Swift Transportation Holdings, Inc. | 720 | 0.43 | % | 3,442 | ||||||||
Oshkosh Corp. | 200 | 0.32 | % | 3,436 | ||||||||
Kennametal, Inc. | 850 | 0.52 | % | 3,324 | ||||||||
Mettler-Toledo International, Inc. | 26 | 0.34 | % | 3,076 | ||||||||
Heartland Express, Inc. | 1,260 | 0.44 | % | 2,923 | ||||||||
Garmin Ltd. | 210 | 0.34 | % | 2,807 | ||||||||
Waters Corp. | 106 | 0.41 | % | 2,723 | ||||||||
Norfolk Southern Corp. | 328 | 1.06 | % | 2,115 | ||||||||
Honeywell International, Inc. | 120 | 0.35 | % | 1,890 | ||||||||
Sturm Ruger & Company, Inc. | 485 | 0.38 | % | 933 | ||||||||
MDU Resources Group, Inc. | 496 | 0.25 | % | 309 | ||||||||
Echo Global Logistics, Inc. | 1,193 | 0.41 | % | 287 | ||||||||
J.B. Hunt Transport Services, Inc. | 251 | 0.49 | % | 101 | ||||||||
CSX Corp. | 666 | 0.80 | % | (400 | ) | |||||||
CH Robinson Worldwide, Inc. | 587 | 0.77 | % | (1,955 | ) | |||||||
Textron, Inc. | 672 | 0.50 | % | (2,110 | ) | |||||||
FedEx Corp. | 308 | 0.78 | % | (2,281 | ) | |||||||
Total Industrial | 95,801 | |||||||||||
Financial | ||||||||||||
Weingarten Realty Investors | 1,938 | 1.01 | % | 4,944 | ||||||||
Deluxe Corp. | 430 | 0.36 | % | 3,840 | ||||||||
JPMorgan Chase & Co. | 112 | 0.26 | % | 3,217 | ||||||||
Brixmor Property Group, Inc. | 1,710 | 0.62 | % | 2,782 | ||||||||
Janus Henderson Group plc | 662 | 0.27 | % | 2,178 | ||||||||
Hartford Financial Services Group, Inc. | 234 | 0.24 | % | 1,423 | ||||||||
Lexington Realty Trust | 5,530 | 0.98 | % | 1,408 | ||||||||
Summit Hotel Properties, Inc. | 2,011 | 0.41 | % | 1,380 | ||||||||
M&T Bank Corp. | 88 | 0.25 | % | 629 | ||||||||
Comerica, Inc. | 206 | 0.25 | % | 478 | ||||||||
Apartment Investment & Management Co. — Class A | 721 | 0.62 | % | 375 | ||||||||
Sunstone Hotel Investors, Inc. | 1,164 | 0.27 | % | (28 | ) | |||||||
Travelers Companies, Inc. | 107 | 0.24 | % | (445 | ) | |||||||
Franklin Resources, Inc. | 660 | 0.29 | % | (725 | ) | |||||||
Equity Commonwealth | 2,093 | 1.15 | % | (1,591 | ) | |||||||
Total Financial | 19,865 | |||||||||||
Utilities | ||||||||||||
AES Corp. | 3,181 | 1.06 | % | 12,122 | ||||||||
PPL Corp. | 1,707 | 1.02 | % | 9,006 | ||||||||
FirstEnergy Corp. | 1,230 | 1.00 | % | 6,968 | ||||||||
Southern Co. | 418 | 0.44 | % | 2,421 | ||||||||
Avangrid, Inc. | 881 | 0.75 | % | 2,034 |
54 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Percentage | Value and | |||||||||
NRG Energy, Inc. | 1,405 | 0.93 | % | $ | 1,692 | |||||||
NiSource, Inc. | 750 | 0.35 | % | 1,089 | ||||||||
Portland General Electric Co. | 952 | 0.89 | % | 1,025 | ||||||||
Ameren Corp. | 555 | 0.71 | % | 614 | ||||||||
Avista Corp. | 340 | 0.27 | % | 583 | ||||||||
Entergy Corp. | 178 | 0.36 | % | 399 | ||||||||
Evergy, Inc. | 903 | 0.98 | % | 13 | ||||||||
Exelon Corp. | 1,297 | 0.99 | % | (515 | ) | |||||||
Public Service Enterprise Group, Inc. | 529 | 0.52 | % | (805 | ) | |||||||
Pinnacle West Capital Corp. | 605 | 0.91 | % | (3,143 | ) | |||||||
National Fuel Gas Co. | 925 | 0.72 | % | (5,579 | ) | |||||||
Vistra Energy Corp. | 2,012 | 0.77 | % | (5,805 | ) | |||||||
Total Utilities | 22,119 | |||||||||||
Technology | ||||||||||||
Skyworks Solutions, Inc. | 142 | 0.29 | % | 6,661 | ||||||||
Activision Blizzard, Inc. | 348 | 0.34 | % | 2,347 | ||||||||
Oracle Corp. | 256 | 0.23 | % | (220 | ) | |||||||
Teradata Corp. | 572 | 0.26 | % | (1,469 | ) | |||||||
Total Technology | 7,319 | |||||||||||
Basic Materials | ||||||||||||
Domtar Corp. | 441 | 0.28 | % | (671 | ) | |||||||
Total GS Long/Short Equity Long Custom Basket | $ | 392,330 | ||||||||||
GS LONG/SHORT EQUITY SHORT CUSTOM BASKET | ||||||||||||
Technology | ||||||||||||
Appian Corp. | 175 | (0.15 | )% | $ | 2,518 | |||||||
Elastic N.V. | 79 | (0.11 | )% | 2,100 | ||||||||
Workday, Inc. — Class A | 44 | (0.16 | )% | 1,573 | ||||||||
Alteryx, Inc. — Class A | 67 | (0.15 | )% | 1,311 | ||||||||
Veeva Systems, Inc. — Class A | 49 | (0.16 | )% | 1,058 | ||||||||
MongoDB, Inc. | 70 | (0.21 | )% | 1,029 | ||||||||
Atlassian Corporation plc — Class A | 56 | (0.15 | )% | 718 | ||||||||
Aspen Technology, Inc. | 62 | (0.17 | )% | 507 | ||||||||
ServiceNow, Inc. | 29 | (0.19 | )% | 319 | ||||||||
Zscaler, Inc. | 129 | (0.14 | )% | 230 | ||||||||
Manhattan Associates, Inc. | 77 | (0.14 | )% | 202 | ||||||||
Coupa Software, Inc. | 54 | (0.18 | )% | 122 | ||||||||
Intuit, Inc. | 37 | (0.22 | )% | 38 | ||||||||
Twilio, Inc. — Class A | 59 | (0.13 | )% | (7 | ) | |||||||
LivePerson, Inc. | 164 | (0.14 | )% | (137 | ) | |||||||
Workiva, Inc. | 143 | (0.14 | )% | (180 | ) | |||||||
Paychex, Inc. | 284 | (0.55 | )% | (283 | ) | |||||||
HubSpot, Inc. | 108 | (0.39 | )% | (457 | ) | |||||||
Fair Isaac Corp. | 22 | (0.19 | )% | (529 | ) | |||||||
Appfolio, Inc. — Class A | 57 | (0.14 | )% | (605 | ) | |||||||
Guidewire Software, Inc. | 63 | (0.16 | )% | (653 | ) | |||||||
Accenture plc — Class A | 50 | (0.24 | )% | (762 | ) | |||||||
PROS Holdings, Inc. | 111 | (0.15 | )% | (863 | ) | |||||||
Tyler Technologies, Inc. | 18 | (0.12 | )% | (870 | ) | |||||||
Autodesk, Inc. | 61 | (0.25 | )% | (1,048 | ) | |||||||
Paycom Software, Inc. | 32 | (0.19 | )% | (1,204 | ) | |||||||
ANSYS, Inc. | 26 | (0.15 | )% | (1,299 | ) | |||||||
Smartsheet, Inc. — Class A | 261 | (0.27 | )% | (1,300 | ) | |||||||
ExlService Holdings, Inc. | 445 | (0.70 | )% | (1,439 | ) | |||||||
Five9, Inc. | 91 | (0.14 | )% | (1,497 | ) | |||||||
Science Applications International Corp. | 535 | (1.05 | )% | (2,118 | ) | |||||||
Monolithic Power Systems, Inc. | 46 | (0.19 | )% | (2,155 | ) | |||||||
EPAM Systems, Inc. | 129 | (0.62 | )% | (2,284 | ) | |||||||
Broadcom, Inc. | 58 | (0.41 | )% | (2,460 | ) | |||||||
DocuSign, Inc. | 213 | (0.36 | )% | (2,829 | ) | |||||||
Adobe, Inc. | 78 | (0.58 | )% | (3,120 | ) | |||||||
Black Knight, Inc. | 610 | (0.89 | )% | (3,221 | ) | |||||||
Genpact Ltd. | 847 | (0.81 | )% | (3,328 | ) | |||||||
salesforce.com, Inc. | 269 | (0.99 | )% | (3,728 | ) | |||||||
ACI Worldwide, Inc. | 872 | (0.75 | )% | (3,737 | ) | |||||||
CACI International, Inc. — Class A | 197 | (1.11 | )% | (5,072 | ) | |||||||
Envestnet, Inc. | 397 | (0.63 | )% | (5,974 | ) | |||||||
Splunk, Inc. | 194 | (0.66 | )% | (6,052 | ) | |||||||
Total Technology | (47,486 | ) | ||||||||||
Financial | ||||||||||||
WP Carey, Inc. | 684 | (1.24 | )% | 5,721 | ||||||||
Essential Properties Realty Trust, Inc. | 1,217 | (0.68 | )% | 1,975 | ||||||||
Acadia Realty Trust | 695 | (0.41 | )% | 1,690 | ||||||||
CME Group, Inc. — Class A | 115 | (0.52 | )% | 594 | ||||||||
Northwest Bancshares, Inc. | 1,065 | (0.40 | )% | 280 | ||||||||
National Storage Affiliates Trust | 466 | (0.35 | )% | 167 | ||||||||
UDR, Inc. | 691 | (0.73 | )% | 125 | ||||||||
American Assets Trust, Inc. | 894 | (0.93 | )% | 68 | ||||||||
Capitol Federal Financial, Inc. | 1,213 | (0.38 | )% | 61 | ||||||||
BancorpSouth Bank | 619 | (0.44 | )% | (154 | ) | |||||||
Camden Property Trust | 240 | (0.58 | )% | (162 | ) | |||||||
American Campus Communities, Inc. | 1,122 | (1.19 | )% | (326 | ) | |||||||
Atlantic Union Bankshares Corp. | 359 | (0.30 | )% | (417 | ) | |||||||
Global Net Lease, Inc. | 743 | (0.34 | )% | (504 | ) | |||||||
Armada Hoffler Properties, Inc. | 1,880 | (0.78 | )% | (521 | ) | |||||||
BankUnited, Inc. | 277 | (0.23 | )% | (848 | ) |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 55 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Percentage |
| |||||||||
CenterState Bank Corp. | 623 | (0.35 | )% | $ | (933 | ) | ||||||
Realty Income Corp. | 716 | (1.19 | )% | (1,002 | ) | |||||||
Reinsurance Group of America, Inc. — Class A | 287 | (1.06 | )% | (1,017 | ) | |||||||
Intercontinental Exchange, Inc. | 467 | (0.98 | )% | (1,137 | ) | |||||||
RLI Corp. | 549 | (1.12 | )% | (1,222 | ) | |||||||
Douglas Emmett, Inc. | 471 | (0.47 | )% | (1,422 | ) | |||||||
Crown Castle International Corp. | 241 | (0.77 | )% | (1,494 | ) | |||||||
STAG Industrial, Inc. | 850 | (0.61 | )% | (1,549 | ) | |||||||
RenaissanceRe Holdings Ltd. | 165 | (0.73 | )% | (1,557 | ) | |||||||
UMB Financial Corp. | 245 | (0.38 | )% | (1,562 | ) | |||||||
QTS Realty Trust, Inc. — Class A | 476 | (0.58 | )% | (1,674 | ) | |||||||
Synovus Financial Corp. | 428 | (0.38 | )% | (1,702 | ) | |||||||
Mastercard, Inc. — Class A | 61 | (0.41 | )% | (1,743 | ) | |||||||
Healthcare Realty Trust, Inc. | 1,417 | (1.07 | )% | (1,760 | ) | |||||||
Washington Real Estate Investment Trust | 1,021 | (0.67 | )% | (1,814 | ) | |||||||
Brown & Brown, Inc. | 1,199 | (1.07 | )% | (1,962 | ) | |||||||
Columbia Financial, Inc. | 989 | (0.38 | )% | (1,982 | ) | |||||||
Valley National Bancorp | 2,209 | (0.57 | )% | (2,240 | ) | |||||||
STORE Capital Corp. | 1,101 | (0.93 | )% | (2,485 | ) | |||||||
Glacier Bancorp, Inc. | 484 | (0.50 | )% | (2,817 | ) | |||||||
People’s United Financial, Inc. | 2,527 | (0.97 | )% | (2,856 | ) | |||||||
Agree Realty Corp. | 779 | (1.24 | )% | (2,874 | ) | |||||||
Everest Re Group Ltd. | 153 | (0.96 | )% | (3,262 | ) | |||||||
SBA Communications Corp. | 193 | (1.05 | )% | (3,355 | ) | |||||||
Equinix, Inc. | 44 | (0.58 | )% | (3,496 | ) | |||||||
American Tower Corp. — Class A | 239 | (1.24 | )% | (3,580 | ) | |||||||
Old National Bancorp | 2,325 | (0.96 | )% | (3,782 | ) | |||||||
Alexandria Real Estate Equities, Inc. | 431 | (1.58 | )% | (3,812 | ) | |||||||
EastGroup Properties, Inc. | 243 | (0.73 | )% | (4,420 | ) | |||||||
BOK Financial Corp. | 442 | (0.87 | )% | (4,606 | ) | |||||||
Athene Holding Ltd. — Class A | 605 | (0.64 | )% | (4,857 | ) | |||||||
Arthur J Gallagher & Co. | 613 | (1.32 | )% | (5,185 | ) | |||||||
Easterly Government Properties, Inc. | 2,896 | (1.55 | )% | (5,611 | ) | |||||||
Fifth Third Bancorp | 1,336 | (0.93 | )% | (6,105 | ) | |||||||
Hudson Pacific Properties, Inc. | 1,919 | (1.63 | )% | (6,433 | ) | |||||||
First Republic Bank | 407 | (1.08 | )% | (7,166 | ) | |||||||
Terreno Realty Corp. | 1,099 | (1.35 | )% | (7,696 | ) | |||||||
Sun Communities, Inc. | 411 | (1.40 | )% | (8,823 | ) | |||||||
| Shares | Percentage | Value and | |||||||||
Rexford Industrial Realty, Inc. | 1,459 | (1.51 | )% | $ | (8,966 | ) | ||||||
Total Financial | (122,210 | ) | ||||||||||
Basic Materials | ||||||||||||
WR Grace & Co. | 527 | (0.83 | )% | 2,471 | ||||||||
Allegheny Technologies, Inc. | 650 | (0.30 | )% | 2,234 | ||||||||
Carpenter Technology Corp. | 533 | (0.60 | )% | (188 | ) | |||||||
Balchem Corp. | 385 | (0.89 | )% | (1,917 | ) | |||||||
Southern Copper Corp. | 438 | (0.42 | )% | (2,400 | ) | |||||||
Air Products & Chemicals, Inc. | 146 | (0.78 | )% | (2,879 | ) | |||||||
Compass Minerals International, Inc. | 625 | (0.86 | )% | (2,941 | ) | |||||||
Steel Dynamics, Inc. | 509 | (0.39 | )% | (2,979 | ) | |||||||
Reliance Steel & Aluminum Co. | 159 | (0.43 | )% | (3,548 | ) | |||||||
Commercial Metals Co. | 747 | (0.38 | )% | (3,648 | ) | |||||||
Kaiser Aluminum Corp. | 229 | (0.57 | )% | (3,914 | ) | |||||||
Freeport-McMoRan, Inc. | 1,894 | (0.56 | )% | (4,518 | ) | |||||||
PPG Industries, Inc. | 304 | (0.92 | )% | (5,539 | ) | |||||||
Linde plc | 348 | (1.68 | )% | (5,711 | ) | |||||||
Sherwin-Williams Co. | 69 | (0.91 | )% | (6,505 | ) | |||||||
RPM International, Inc. | 481 | (0.84 | )% | (7,577 | ) | |||||||
Total Basic Materials | (49,559 | ) | ||||||||||
Consumer, Non-cyclical | ||||||||||||
Rollins, Inc. | 386 | (0.29 | )% | 1,690 | ||||||||
Verisk Analytics, Inc. — Class A | 104 | (0.35 | )% | 847 | ||||||||
Gartner, Inc. | 169 | (0.59 | )% | 695 | ||||||||
Avalara, Inc. | 81 | (0.13 | )% | 628 | ||||||||
Glaukos Corp. | 93 | (0.11 | )% | 466 | ||||||||
FleetCor Technologies, Inc. | 101 | (0.66 | )% | 437 | ||||||||
Guardant Health, Inc. | 97 | (0.17 | )% | 229 | ||||||||
Bright Horizons Family Solutions, Inc. | 166 | (0.56 | )% | (20 | ) | |||||||
Booz Allen Hamilton Holding Corp. | 133 | (0.21 | )% | (183 | ) | |||||||
Paylocity Holding Corp. | 44 | (0.12 | )% | (658 | ) | |||||||
LiveRamp Holdings, Inc. | 136 | (0.15 | )% | (676 | ) | |||||||
Illumina, Inc. | 25 | (0.19 | )% | (877 | ) | |||||||
Intuitive Surgical, Inc. | 14 | (0.19 | )% | (885 | ) | |||||||
ResMed, Inc. | 40 | (0.14 | )% | (995 | ) | |||||||
Viad Corp. | 396 | (0.60 | )% | (1,132 | ) | |||||||
PayPal Holdings, Inc. | 375 | (0.92 | )% | (1,517 | ) | |||||||
Euronet Worldwide, Inc. | 147 | (0.52 | )% | (1,764 | ) | |||||||
MarketAxess Holdings, Inc. | 43 | (0.37 | )% | (1,826 | ) | |||||||
IHS Markit Ltd. | 138 | (0.24 | )% | (2,168 | ) | |||||||
WEX, Inc. | 247 | (1.17 | )% | (3,302 | ) | |||||||
Brink’s Co. | 337 | (0.69 | )% | (3,598 | ) |
56 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Percentage | Value and | |||||||||
Avery Dennison Corp. | 324 | (0.96 | )% | $ | (6,465 | ) | ||||||
Total Consumer, Non-cyclical | (21,074 | ) | ||||||||||
Industrial | ||||||||||||
Materion Corp. | 597 | (0.80 | )% | 3,424 | ||||||||
HEICO Corp. | 114 | (0.29 | )% | 1,837 | ||||||||
Ball Corp. | 449 | (0.66 | )% | 972 | ||||||||
Roper Technologies, Inc. | 73 | (0.58 | )% | 780 | ||||||||
Exponent, Inc. | 270 | (0.42 | )% | 343 | ||||||||
Universal Display Corp. | 36 | (0.17 | )% | (481 | ) | |||||||
Casella Waste Systems, Inc. — Class A | 343 | (0.36 | )% | (943 | ) | |||||||
Vulcan Materials Co. | 287 | (0.93 | )% | (1,843 | ) | |||||||
Sonoco Products Co. | 350 | (0.49 | )% | (2,070 | ) | |||||||
Westinghouse Air Brake Technologies Corp. | 219 | (0.39 | )% | (2,702 | ) | |||||||
Worthington Industries, Inc. | 835 | (0.80 | )% | (4,509 | ) | |||||||
Martin Marietta Materials, Inc. | 159 | (1.01 | )% | (7,326 | ) | |||||||
TransDigm Group, Inc. | 123 | (1.56 | )% | (11,421 | ) | |||||||
Total Industrial | (23,939 | ) | ||||||||||
Utilities | ||||||||||||
California Water Service Group | 287 | (0.33 | )% | 388 | ||||||||
PNM Resources, Inc. | 298 | (0.34 | )% | 202 | ||||||||
Eversource Energy | 179 | (0.34 | )% | (140 | ) | |||||||
WEC Energy Group, Inc. | 165 | (0.34 | )% | (279 | ) | |||||||
Sempra Energy | 66 | (0.23 | )% | (338 | ) | |||||||
Alliant Energy Corp. | 275 | (0.34 | )% | (497 | ) | |||||||
MGE Energy, Inc. | 130 | (0.23 | )% | (545 | ) | |||||||
South Jersey Industries, Inc. | 473 | (0.35 | )% | (554 | ) | |||||||
American States Water Co. | 285 | (0.56 | )% | (767 | ) | |||||||
American Water Works Company, Inc. | 206 | (0.57 | )% | (995 | ) | |||||||
Atmos Energy Corp. | 133 | (0.34 | )% | (1,215 | ) | |||||||
NextEra Energy, Inc. | 64 | (0.35 | )% | (2,572 | ) | |||||||
Total Utilities | (7,312 | ) | ||||||||||
Communications | ||||||||||||
8x8, Inc. | 1,115 | (0.46 | )% | 2,255 | ||||||||
Okta, Inc. | 79 | (0.21 | )% | 1,090 | ||||||||
VeriSign, Inc. | 39 | (0.17 | )% | 350 | ||||||||
Zendesk, Inc. | 325 | (0.56 | )% | (209 | ) | |||||||
Proofpoint, Inc. | 226 | (0.59 | )% | (546 | ) | |||||||
Anaplan, Inc. | 148 | (0.18 | )% | (732 | ) | |||||||
Trade Desk, Inc. — Class A | 26 | (0.15 | )% | (806 | ) | |||||||
Charter Communications, Inc. — Class A | 30 | (0.33 | )% | (1,160 | ) | |||||||
RingCentral, Inc. — Class A | 43 | (0.16 | )% | (1,761 | ) | |||||||
Q2 Holdings, Inc. | 360 | (0.66 | )% | (2,192 | ) | |||||||
Palo Alto Networks, Inc. | 95 | (0.50 | )% | (2,634 | ) | |||||||
Total Communications | (6,345 | ) | ||||||||||
Consumer, Cyclical | ||||||||||||
Wingstop, Inc. | 283 | (0.55 | )% | 2,049 | ||||||||
McDonald’s Corp. | 75 | (0.34 | )% | 565 | ||||||||
Toro Co. | 423 | (0.76 | )% | (3,013 | ) | |||||||
Total Consumer, Cyclical | (399 | ) | ||||||||||
Energy | ||||||||||||
Warrior Met Coal, Inc. | 783 | (0.37 | )% | (1,319 | ) | |||||||
Total GS Long/Short Equity Short Custom Basket | $ | (279,643 | ) | |||||||||
GS Equity Market Neutral Long Custom Basket | ||||||||||||
Financial | ||||||||||||
Safehold, Inc. | 10,847 | 6.92 | % | $ | 103,694 | |||||||
Omega Healthcare Investors, Inc. | 7,382 | 4.95 | % | 46,118 | ||||||||
Healthpeak Properties, Inc. | 9,211 | 5.02 | % | 26,947 | ||||||||
Equinix, Inc. | 336 | 3.10 | % | 26,723 | ||||||||
Highwoods Properties, Inc. | 4,337 | 3.36 | % | 26,246 | ||||||||
Park Hotels & Resorts, Inc. | 6,771 | 2.77 | % | 21,717 | ||||||||
Sun Communities, Inc. | 1,036 | 2.46 | % | 20,635 | ||||||||
Equity LifeStyle Properties, Inc. | 2,247 | 2.50 | % | 20,571 | ||||||||
Rexford Industrial Realty, Inc. | 2,678 | 1.93 | % | 16,550 | ||||||||
Terreno Realty Corp. | 2,313 | 1.98 | % | 16,353 | ||||||||
Invitation Homes, Inc. | 5,325 | 2.52 | % | 16,135 | ||||||||
Spirit Realty Capital, Inc. | 3,953 | 3.07 | % | 14,162 | ||||||||
Annaly Capital Management, Inc. | 26,084 | 3.89 | % | 12,666 | ||||||||
STAG Industrial, Inc. | 5,214 | 2.60 | % | 11,080 | ||||||||
CyrusOne, Inc. | 3,101 | 3.21 | % | 10,095 | ||||||||
Host Hotels & Resorts, Inc. | 8,672 | 2.54 | % | 6,842 | ||||||||
Weyerhaeuser Co. | 6,573 | 3.14 | % | 5,147 | ||||||||
AGNC Investment Corp. | 8,641 | 2.42 | % | (58 | ) | |||||||
Paramount Group, Inc. | 11,177 | 2.46 | % | (203 | ) | |||||||
Vornado Realty Trust | 2,341 | 2.46 | % | (288 | ) | |||||||
National Storage Affiliates Trust | 4,660 | 2.48 | % | (704 | ) | |||||||
PotlatchDeltic Corp. | 3,589 | 2.46 | % | (1,377 | ) | |||||||
MGM Growth Properties LLC — Class A | 5,078 | 2.49 | % | (2,451 | ) | |||||||
Alexander & Baldwin, Inc. | 9,198 | 3.05 | % | (2,620 | ) | |||||||
Federal Realty Investment Trust | 1,144 | 2.33 | % | (4,122 | ) | |||||||
Extra Space Storage, Inc. | 1,843 | 3.08 | % | (6,062 | ) | |||||||
Retail Opportunity Investments Corp. | 8,452 | 2.36 | % | (6,555 | ) | |||||||
CareTrust REIT, Inc. | 7,709 | 2.52 | % | (8,364 | ) | |||||||
Regency Centers Corp. | 2,335 | 2.33 | % | (9,389 | ) | |||||||
Pebblebrook Hotel Trust | 6,866 | 2.91 | % | (12,830 | ) |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 57 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Percentage | Value and | |||||||||
Ventas, Inc. | 4,758 | 4.35 | % | $ | (32,522 | ) | ||||||
Total Financial | 314,136 | |||||||||||
Technology | ||||||||||||
InterXion Holding N.V. | 2,440 | 3.23 | % | 25,688 | ||||||||
Consumer, Cyclical | ||||||||||||
Red Rock Resorts, Inc. — Class A | 8,222 | 3.11 | % | 21,020 | ||||||||
Total GS Equity Market Neutral Long Custom Basket | $ | 360,844 | ||||||||||
GS EQUITY MARKET NEUTRAL SHORT CUSTOM BASKET | ||||||||||||
Financial | ||||||||||||
Hersha Hospitality Trust | 14,029 | (3.17 | )% | $ | 31,010 | |||||||
Public Storage | 904 | (2.98 | )% | 21,746 | ||||||||
PS Business Parks, Inc. | 846 | (2.16 | )% | 15,538 | ||||||||
Digital Realty Trust, Inc. | 2,574 | (4.78 | )% | 9,155 | ||||||||
Washington Prime Group, Inc. | 29,887 | (1.69 | )% | 7,720 | ||||||||
American Finance Trust, Inc. | 11,409 | (2.35 | )% | 6,375 | ||||||||
Retail Properties of America, Inc. — Class A | 11,325 | (2.35 | )% | 3,941 | ||||||||
Service Properties Trust | 7,179 | (2.71 | )% | 2,010 | ||||||||
Life Storage, Inc. | 2,118 | (3.56 | )% | 101 | ||||||||
Columbia Property Trust, Inc. | 7,407 | (2.40 | )% | (139 | ) | |||||||
Healthcare Trust of America, Inc. — Class A | 6,562 | (3.08 | )% | (1,092 | ) | |||||||
Xenia Hotels & Resorts, Inc. | 7,589 | (2.54 | )% | (3,271 | ) | |||||||
VEREIT, Inc. | 25,412 | (3.64 | )% | (3,531 | ) | |||||||
Brandywine Realty Trust | 10,046 | (2.45 | )% | (3,837 | ) | |||||||
Industrial Logistics Properties Trust | 5,411 | (1.88 | )% | (5,737 | ) | |||||||
Healthcare Realty Trust, Inc. | 6,367 | (3.29 | )% | (6,508 | ) | |||||||
Monmouth Real Estate Investment Corp. | 15,853 | (3.56 | )% | (7,598 | ) | |||||||
Howard Hughes Corp. | 1,571 | (3.09 | )% | (9,091 | ) | |||||||
Cushman & Wakefield plc | 6,093 | (1.93 | )% | (10,000 | ) | |||||||
RLJ Lodging Trust | 9,532 | (2.62 | )% | (10,263 | ) | |||||||
Brixmor Property Group, Inc. | 9,253 | (3.10 | )% | (10,764 | ) | |||||||
Washington Real Estate Investment Trust | 6,543 | (2.96 | )% | (11,542 | ) | |||||||
Physicians Realty Trust | 14,451 | (4.24 | )% | (14,880 | ) | |||||||
Kimco Realty Corp. | 11,042 | (3.55 | )% | (16,499 | ) | |||||||
Piedmont Office Realty Trust, Inc. — Class A | 13,479 | (4.65 | )% | (22,726 | ) | |||||||
Total Financial | (39,882 | ) | ||||||||||
Communications | ||||||||||||
Switch, Inc. — Class A | 12,238 | (2.81 | )% | 10,396 | ||||||||
Consumer, Cyclical | ||||||||||||
Toll Brothers, Inc. | 2,988 | (1.83 | )% | (1,709 | ) | |||||||
KB Home | 3,540 | (1.88 | )% | (5,883 | ) | |||||||
Royal Caribbean Cruises Ltd. | 1,307 | (2.71 | )% | (19,558 | ) | |||||||
Total Consumer, Cyclical | (27,150 | ) | ||||||||||
Exchange Traded Funds | ||||||||||||
Vanguard Real Estate ETF | 11,150 | (16.04 | )% | (17,416 | ) | |||||||
Total GS Equity Market Neutral Short Custom Basket | $ | (74,052 | ) |
* | 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, 2019. |
2 | All or a portion of this security is on loan at December 31, 2019 — See Note 6. |
3 | Affiliated issuer. |
4 | All or a portion of this security is pledged as custom basket swap collateral at December 31, 2019. |
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, 2019. |
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, 2019. |
GS — Goldman Sachs International | |
MS — Morgan Stanley Capital Services LLC | |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
58 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
MULTI-HEDGE STRATEGIES FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Consolidated Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 9,481,929 | $ | — | $ | — | $ | 9,481,929 | ||||||||
Rights | 17,624 | — | — | 17,624 | ||||||||||||
Mutual Funds | 13,122,746 | — | — | 13,122,746 | ||||||||||||
Closed-End Funds | 3,237,334 | — | — | 3,237,334 | ||||||||||||
U.S. Treasury Bills | — | 5,202,487 | — | 5,202,487 | ||||||||||||
Repurchase Agreements | — | 1,507,557 | — | 1,507,557 | ||||||||||||
Securities Lending Collateral | 193,550 | — | — | 193,550 | ||||||||||||
Commodity Futures Contracts** | 325,123 | — | — | 325,123 | ||||||||||||
Interest Rate Futures Contracts** | 710 | 90,982 | — | 91,692 | ||||||||||||
Currency Futures Contracts** | 86,677 | — | — | 86,677 | ||||||||||||
Equity Futures Contracts** | 6,503 | 14,361 | — | 20,864 | ||||||||||||
Equity Custom Basket Swap Agreements** | — | 1,863,840 | — | 1,863,840 | ||||||||||||
Total Assets | $ | 26,472,196 | $ | 8,679,227 | $ | — | $ | 35,151,423 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Master Limited Partnerships | $ | 334 | $ | — | $ | — | $ | 334 | ||||||||
Common Stocks | 1,932,661 | — | — | 1,932,661 | ||||||||||||
Exchange-Traded Funds | 3,091,546 | — | — | 3,091,546 | ||||||||||||
Commodity Futures Contracts** | 274,027 | — | — | 274,027 | ||||||||||||
Equity Futures Contracts** | 153,562 | 16,065 | — | 169,627 | ||||||||||||
Currency Futures Contracts** | 121,309 | — | — | 121,309 | ||||||||||||
Interest Rate Futures Contracts** | 7,379 | 91,216 | — | 98,595 | ||||||||||||
Equity Custom Basket Swap Agreements** | — | 718,216 | — | 718,216 | ||||||||||||
Total Liabilities | $ | 5,580,818 | $ | 825,497 | $ | — | $ | 6,406,315 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 59 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
MULTI-HEDGE STRATEGIES 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 “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, 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/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 5,717,144 | $ | 3,119,913 | $ | (5,600,000 | ) | $ | (22,733 | ) | $ | 9,149 | $ | 3,223,473 | 130,294 | $ | 120,439 | |||||||||||||||
Guggenheim Strategy Fund III | 4,113,656 | 114,041 | (1,250,000 | ) | (11,985 | ) | 3,710 | 2,969,422 | 120,122 | 114,456 | ||||||||||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 42,224 | 4,518,089 | (1,000,000 | ) | (1,189 | ) | (1,373 | ) | 3,557,751 | 357,563 | 17,927 | |||||||||||||||||||||
Guggenheim Variable Insurance Strategy Fund III | 4,116,640 | 103,468 | (850,000 | ) | (10,728 | ) | 12,720 | 3,372,100 | 136,191 | 103,388 | ||||||||||||||||||||||
$ | 13,989,664 | $ | 7,855,511 | $ | (8,700,000 | ) | $ | (46,635 | ) | $ | 24,206 | $ | 13,122,746 | $ | 356,210 |
60 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
MULTI-HEDGE STRATEGIES FUND |
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $187,661 of securities loaned (cost $17,485,748) | $ | 18,132,924 | ||
Investments in affiliated issuers, at value (cost $13,215,409) | 13,122,746 | |||
Repurchase agreements, at value (cost $1,507,557) | 1,507,557 | |||
Cash | 5,791,508 | |||
Segregated cash with broker | 368,673 | |||
Unrealized appreciation on OTC swap agreements | 1,863,840 | |||
Receivables: | ||||
Dividends | 36,929 | |||
Fund shares sold | 1,925 | |||
Foreign tax reclaims | 476 | |||
Securities lending income | 364 | |||
Interest | 63 | |||
Other assets | 9,980 | |||
Total assets | 40,836,985 | |||
Liabilities: | ||||
Securities sold short, at value (proceeds $4,809,328) | 5,024,541 | |||
Unrealized depreciation on OTC swap agreements | 718,216 | |||
Payable for: | ||||
Return of securities lending collateral | 193,550 | |||
Swap settlement | 111,162 | |||
Fund shares redeemed | 70,208 | |||
Variation margin on futures contracts | 41,137 | |||
Management fees | 32,432 | |||
Securities purchased | 22,112 | |||
Miscellaneous | 13,621 | |||
Total liabilities | 6,226,979 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 34,610,006 | ||
Net assets consist of: | ||||
Paid in capital | $ | 35,787,474 | ||
Total distributable earnings (loss) | (1,177,468 | ) | ||
Net assets | $ | 34,610,006 | ||
Capital shares outstanding | 1,431,844 | |||
Net asset value per share | $ | 24.17 |
CONSOLIDATED STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $1,272) | $ | 297,584 | ||
Dividends from securities of affiliated issuers | 356,210 | |||
Interest | 217,598 | |||
Short sales rebate income | 104,865 | |||
Income from securities lending, net | 3,181 | |||
Total investment income | 979,438 | |||
Expenses: | ||||
Management fees | 437,452 | |||
Short sales dividend expense | 196,062 | |||
Miscellaneous | 7,169 | |||
Total expenses | 640,683 | |||
Less: | ||||
Expenses waived by Adviser | (11,217 | ) | ||
Net expenses | 629,466 | |||
Net investment income | 349,972 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 419,800 | |||
Investments in affiliated issuers | (46,635 | ) | ||
Investments sold short | (14,130 | ) | ||
Swap agreements | (607,636 | ) | ||
Futures contracts | 694,754 | |||
Foreign currency transactions | (3,380 | ) | ||
Net realized gain | 442,773 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 1,323,169 | |||
Investments in affiliated issuers | 24,206 | |||
Investments sold short | (1,070,557 | ) | ||
Swap agreements | 1,175,503 | |||
Futures contracts | (279,823 | ) | ||
Foreign currency translations | 36 | |||
Net change in unrealized appreciation (depreciation) | 1,172,534 | |||
Net realized and unrealized gain | 1,615,307 | |||
Net increase in net assets resulting from operations | $ | 1,965,279 |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 61 |
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 | $ | 349,972 | $ | 348,193 | ||||
Net realized gain (loss) on investments | 442,773 | (378,789 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 1,172,534 | (2,258,942 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 1,965,279 | (2,289,538 | ) | |||||
Distributions to shareholders | (875,142 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 3,288,700 | 7,666,661 | ||||||
Distributions reinvested | 875,142 | — | ||||||
Cost of shares redeemed | (10,979,155 | ) | (8,737,138 | ) | ||||
Net decrease from capital share transactions | (6,815,313 | ) | (1,070,477 | ) | ||||
Net decrease in net assets | (5,725,176 | ) | (3,360,015 | ) | ||||
Net assets: | ||||||||
Beginning of year | 40,335,182 | 43,695,197 | ||||||
End of year | $ | 34,610,006 | $ | 40,335,182 | ||||
Capital share activity: | ||||||||
Shares sold | 135,737 | 316,923 | ||||||
Shares issued from reinvestment of distributions | 36,771 | — | ||||||
Shares redeemed | (453,659 | ) | (363,489 | ) | ||||
Net decrease in shares | (281,151 | ) | (46,566 | ) |
62 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
MULTI-HEDGE STRATEGIES FUND |
CONSOLIDATED FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 23.55 | $ | 24.83 | $ | 23.95 | $ | 24.09 | $ | 23.82 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .23 | .20 | (.09 | ) | (.16 | ) | (.15 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | .97 | (1.48 | ) | .97 | .04 | .58 | ||||||||||||||
Total from investment operations | 1.20 | (1.28 | ) | .88 | (.12 | ) | .43 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.58 | ) | — | — | (.02 | ) | (.16 | ) | ||||||||||||
Total distributions | (.58 | ) | — | — | (.02 | ) | (.16 | ) | ||||||||||||
Net asset value, end of period | $ | 24.17 | $ | 23.55 | $ | 24.83 | $ | 23.95 | $ | 24.09 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 5.15 | % | (5.16 | %) | 3.67 | % | (0.48 | %) | 1.85 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 34,610 | $ | 40,335 | $ | 43,695 | $ | 47,953 | $ | 52,281 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.94 | % | 0.85 | % | (0.39 | %) | (0.66 | %) | (0.62 | %) | ||||||||||
Total expensesc | 1.72 | % | 1.54 | % | 1.88 | % | 2.27 | % | 2.38 | % | ||||||||||
Net expensesd | 1.69 | % | 1.52 | % | 1.85 | % | 2.23 | % | 2.34 | % | ||||||||||
Portfolio turnover rate | 163 | % | 162 | % | 158 | % | 119 | % | 160 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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 related to short sales. Excluding interest and dividend expense related to short sales, net expense ratios for the year end would be: |
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | |
1.16% | 1.16% | 1.16% | 1.17% | 1.18% |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 63 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, Rydex Commodities Strategy Fund returned 15.25%, compared with a return of 17.63% for the Index.
Oil led the S&P GSCI higher in the first four months of the year before trading sideways for the last eight months of the year. Fourteen of the twenty-four components in the Index had positive returns during the period. The best-performing component was Unleaded Gasoline, with a return above 40%. Brent Crude, West Texas Intermediate (WTI) Crude and Nickel all had positive returns above 30%. GasOil and Heating Oil rounded out the strong petroleum sector with returns above 20%.
Natural Gas was down more than 30% and Lean Hogs dropped almost 20% for the year.
Three of the five GSCI sectors experienced positive performance during the period. Energy (+30%) and Precious Metals (+18%) were the best GSCI sectors. Livestock was the worst-performing sector with a -6% return.
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.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but that fee is waived by the respective investee fund. For the one-year period ended December 31, 2019, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance which is no guarantee of future results.
The opinions and forecast 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.
64 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
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.
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 Ultra Short Duration Fund — Institutional Class | 24.7% |
Guggenheim Strategy Fund II | 23.5% |
Total | 48.2% |
“Largest Holdings” excludes any temporary cash or derivative investments.
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Commodities Strategy Fund | 15.25% | (5.68%) | (7.19%) |
S&P Goldman Sachs Commodity Index | 17.63% | (4.32%) | (5.44%) |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 65 |
CONSOLIDATED SCHEDULE OF INVESTMENTS | December 31, 2019 |
COMMODITIES STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 48.2% | ||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 79,370 | $ | 789,733 | |||||
Guggenheim Strategy Fund II1 | 30,345 | 750,731 | ||||||
Total Mutual Funds | ||||||||
(Cost $1,540,139) | 1,540,464 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 5.8% | ||||||||
U.S. Treasury Bills | ||||||||
1.47% due 02/04/202,3 | $ | 184,000 | 183,736 | |||||
Total U.S. Treasury Bills | ||||||||
(Cost $183,739) | 183,736 | |||||||
REPURCHASE AGREEMENTS††,4 - 44.3% | ||||||||
J.P. Morgan Securities LLC | 859,038 | 859,038 | ||||||
Barclays Capital, Inc. | 276,993 | 276,993 | ||||||
BofA Securities, Inc. | 276,993 | 276,993 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $1,413,024) | 1,413,024 | |||||||
Total Investments - 98.3% | ||||||||
(Cost $3,136,902) | $ | 3,137,224 | ||||||
Other Assets & Liabilities, net - 1.7% | 55,697 | |||||||
Total Net Assets - 100.0% | $ | 3,192,921 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Commodity Futures Contracts Purchased† | ||||||||||||||||
Goldman Sachs Commodity Index Futures Contracts | 29 | Jan 2020 | $ | 3,161,000 | $ | 100,880 |
** | 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 | All or a portion of this security is pledged as futures collateral at December 31, 2019. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | 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, 2019 (See Note 4 in the Notes to Consolidated Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 1,540,464 | $ | — | $ | — | $ | 1,540,464 | ||||||||
U.S. Treasury Bills | — | 183,736 | — | 183,736 | ||||||||||||
Repurchase Agreements | — | 1,413,024 | — | 1,413,024 | ||||||||||||
Commodity Futures Contracts** | 100,880 | — | — | 100,880 | ||||||||||||
Total Assets | $ | 1,641,344 | $ | 1,596,760 | $ | — | $ | 3,238,104 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
66 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
COMMODITIES 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 “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, 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/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 1,063,576 | $ | 962,143 | $ | (1,272,000 | ) | $ | (2,575 | ) | $ | (413 | ) | $ | 750,731 | 30,345 | $ | 32,229 | ||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 838,500 | 1,752,057 | (1,800,000 | ) | (1,226 | ) | 402 | 789,733 | 79,370 | 27,108 | ||||||||||||||||||||||
$ | 1,902,076 | $ | 2,714,200 | $ | (3,072,000 | ) | $ | (3,801 | ) | $ | (11 | ) | $ | 1,540,464 | $ | 59,337 |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 67 |
COMMODITIES STRATEGY FUND |
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $183,739) | $ | 183,736 | ||
Investments in affiliated issuers, at value (cost $1,540,139) | 1,540,464 | |||
Repurchase agreements, at value (cost $1,413,024) | 1,413,024 | |||
Segregated cash with broker | 6,184 | |||
Receivables: | ||||
Fund shares sold | 88,893 | |||
Dividends | 3,346 | |||
Interest | 58 | |||
Total assets | 3,235,705 | |||
Liabilities: | ||||
Payable for: | ||||
Variation margin on futures contracts | 26,028 | |||
Professional fees | 4,831 | |||
Securities purchased | 3,426 | |||
Management fees | 1,611 | |||
Printing fees | 1,542 | |||
Transfer agent and administrative fees | 603 | |||
Investor service fees | 603 | |||
Portfolio accounting fees | 241 | |||
Fund shares redeemed | 146 | |||
Trustees’ fees* | 55 | |||
Miscellaneous | 3,698 | |||
Total liabilities | 42,784 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 3,192,921 | ||
Net assets consist of: | ||||
Paid in capital | $ | 5,060,197 | ||
Total distributable earnings (loss) | (1,867,276 | ) | ||
Net assets | $ | 3,192,921 | ||
Capital shares outstanding | 39,238 | |||
Net asset value per share | $ | 81.37 |
CONSOLIDATED STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 59,337 | ||
Interest | 25,404 | |||
Total investment income | 84,741 | |||
Expenses: | ||||
Management fees | 28,930 | |||
Investor service fees | 8,314 | |||
Transfer agent and administrative fees | 8,314 | |||
Professional fees | 10,630 | |||
Portfolio accounting fees | 3,326 | |||
Trustees’ fees* | 959 | |||
Custodian fees | 700 | |||
Miscellaneous | 4,643 | |||
Total expenses | 65,816 | |||
Less: | ||||
Expenses waived by Adviser | (6,677 | ) | ||
Net expenses | 59,139 | |||
Net investment income | 25,602 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 13 | |||
Investments in affiliated issuers | (3,801 | ) | ||
Futures contracts | (9,577 | ) | ||
Net realized loss | (13,365 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 39 | |||
Investments in affiliated issuers | (11 | ) | ||
Futures contracts | 382,255 | |||
Net change in unrealized appreciation (depreciation) | 382,283 | |||
Net realized and unrealized gain | 368,918 | |||
Net increase in net assets resulting from operations | $ | 394,520 |
* | 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 CONSOLIDATED FINANCIAL STATEMENTS. |
COMMODITIES STRATEGY FUND |
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 25,602 | $ | 47,266 | ||||
Net realized loss on investments | (13,365 | ) | (289,978 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | 382,283 | (532,869 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 394,520 | (775,581 | ) | |||||
Distributions to shareholders | (45,134 | ) | (242,391 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 7,665,863 | 37,091,840 | ||||||
Distributions reinvested | 45,134 | 242,391 | ||||||
Cost of shares redeemed | (7,966,181 | ) | (37,948,813 | ) | ||||
Net decrease from capital share transactions | (255,184 | ) | (614,582 | ) | ||||
Net increase (decrease) in net assets | 94,202 | (1,632,554 | ) | |||||
Net assets: | ||||||||
Beginning of year | 3,098,719 | 4,731,273 | ||||||
End of year | $ | 3,192,921 | $ | 3,098,719 | ||||
Capital share activity: | ||||||||
Shares sold | 97,122 | 406,945 | ||||||
Shares issued from reinvestment of distributions | 581 | 2,774 | ||||||
Shares redeemed | (101,688 | ) | (420,605 | ) | ||||
Net decrease in shares | (3,985 | ) | (10,886 | ) |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 69 |
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 | $ | 71.69 | $ | 87.44 | $ | 83.74 | $ | 75.82 | $ | 114.64 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .61 | .67 | — | b | (.03 | ) | (1.12 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | 10.26 | (13.34 | ) | 3.70 | 7.95 | (37.70 | ) | |||||||||||||
Total from investment operations | 10.87 | (12.67 | ) | 3.70 | 7.92 | (38.82 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (1.19 | ) | (3.08 | ) | — | — | — | |||||||||||||
Total distributions | (1.19 | ) | (3.08 | ) | — | — | — | |||||||||||||
Net asset value, end of period | $ | 81.37 | $ | 71.69 | $ | 87.44 | $ | 83.74 | $ | 75.82 | ||||||||||
| ||||||||||||||||||||
Total Returnc | 15.25 | % | (15.12 | %) | 4.43 | % | 10.40 | % | (33.80 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 3,193 | $ | 3,099 | $ | 4,731 | $ | 4,498 | $ | 2,671 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.77 | % | 0.75 | % | — | g | (0.48 | %) | (1.16 | %) | ||||||||||
Total expensesd | 1.98 | % | 1.81 | % | 1.82 | % | 1.80 | % | 1.75 | % | ||||||||||
Net expensese | 1.78 | % | 1.69 | % | 1.72 | % | 1.67 | % | 1.63 | % | ||||||||||
Portfolio turnover rate | 128 | % | 187 | % | 107 | % | 231 | % | 198 | % |
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 take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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%. |
70 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Note 1 – Organization, Consolidation of Subsidiary and Significant Accounting Policies
Organization
The Rydex Variable Trust (the “Trust”), a Delaware statutory trust, is registered with the SEC under the Investment Company Act of 1940 (“1940 Act”), as an open-ended investment company of the series type. Each series, in effect, is representing a separate fund (each, a “Fund”). The Trust is authorized to issue an unlimited number of no par value shares. The Trust accounts for the assets of each Fund separately. At December 31, 2019, 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 following funds (collectively, the “Funds”):
Fund Name | Investment |
Long Short Equity Fund | Non-diversified |
Global Managed Futures Strategy Fund | Non-diversified |
Multi-Hedge Strategies Fund | Non-diversified |
Commodities Strategy Fund | Non-diversified |
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 include 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 | Subsidiary | % of Net | |||||||||
Global Managed Futures Strategy Fund | 11/07/08 | $ | 923,595 | 6.5 | % | |||||||
Multi-Hedge Strategies Fund | 04/15/09 | 892,913 | 2.6 | % | ||||||||
Commodities Strategy Fund | 07/21/09 | 540,015 | 16.9 | % |
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 consolidated 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.
THE RYDEX FUNDS ANNUAL REPORT | 71 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Valuations of the Funds’ securities and other assets 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 or traded on a recognized U.S. securities exchange or the National Association of Securities Dealers Automated Quotations (“NASDAQ”) National Market System shall generally be valued on the basis of the last sale price on the primary U.S. exchange or market on which the security is listed or traded; provided, however, that securities listed on NASDAQ will be valued at the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If there is no sale on the valuation date, exchange-traded U.S. equity securities will be valued on the basis of the last bid price.
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 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 generally 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 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 or other underlying position that the swaps pertain to at the close of the New York Stock Exchange (“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 Consolidated 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.
72 | THE RYDEX FUNDS ANNUAL REPORT |
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.
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 receipts or payments are received or made by the Fund depending on fluctuations in the fair value of the reference entity 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.
(f) 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 appreciation and 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.
(g) Foreign Taxes
The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are paid by the Funds and reflected in their Consolidated Statements 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, 2019, if any, are disclosed in the Funds’ Consolidated Statements of Assets and Liabilities.
(h) Security Transactions
Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from securities transactions are recorded using the identified cost basis. Proceeds from lawsuits related to investment holdings are recorded as a reduction to cost if the securities are still held and as realized gains if no longer held 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
THE RYDEX FUNDS ANNUAL REPORT | 73 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
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.
(i) Distributions
Distributions of net investment income and net realized gains, if any, are declared and paid at least annually. Normally, all 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 U.S. federal income tax regulations which may differ from U.S. GAAP.
(j) Cash
The Funds may leave cash overnight in their cash account with the custodian. Periodically, a Fund may have cash due to the custodian bank as an overdraft balance. A fee is incurred on this overdraft, calculated by multiplying the overdraft by a rate based on the federal funds rate, which was 1.55% at December 31, 2019.
(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 Consolidated 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.
74 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Futures Contracts
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 Consolidated Statements of Assets and Liabilities; securities held as collateral are noted on the Consolidated Schedules of Investments.
The following table represents the Funds’ use and volume of futures on a monthly basis:
Average Notional Amount | |||||||||
Fund | Use | Long | Short | ||||||
Global Managed Futures Strategy Fund | Hedge, Leverage, Liquidity, Speculation | $ | 47,919,939 | $ | 29,015,297 | ||||
Multi-Hedge Strategies Fund | Duration, Hedge, Index exposure, Leverage, Liquidity, Speculation | 36,828,247 | 29,341,087 | ||||||
Commodities Strategy Fund | Index exposure, Liquidity | 3,354,274 | — |
Swap Agreements
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. When utilizing OTC swaps, 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 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. For a fund utilizing centrally cleared swaps, the exchange bears the risk of loss resulting from a counterparty not being able to pay. 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.
Custom basket swaps involve commitments where single or multiple cash flows are exchanged based on the price of an underlying reference asset (such as an index or custom basket of securities) for a fixed or variable interest rate. Total return and custom basket 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, with the swap value being adjusted to include dividends accrued, financing charges and/or interest associated with the swap agreement. When utilizing total return or custom basket swaps, 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 if the underlying reference asset declines in value.
The following table represents the Funds’ use and volume of custom basket swaps on a monthly basis:
Average Notional Amount | |||||||||
Fund | Use | Long | Short | ||||||
Long Short Equity Fund | Index exposure, Liquidity | $ | 13,918,530 | $ | 25,646,457 | ||||
Multi-Hedge Strategies Fund | Hedge, Index exposure, Leverage, Liquidity, Speculation | 27,580,254 | 24,608,386 |
Derivative Investment Holdings Categorized by Risk Exposure
The following is a summary of the location of derivative investments on the Funds’ Consolidated Statements of Assets and Liabilities as of December 31, 2019:
THE RYDEX FUNDS ANNUAL REPORT | 75 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Derivative Investment Type | Asset Derivatives | Liability Derivatives |
Equity/Currency/Interest Rate/Commodity contracts | Variation margin on futures contracts | |
Equity contracts | Unrealized appreciation on OTC swap agreements | Unrealized depreciation on OTC swap agreements |
The following table sets forth the fair value of the Funds’ derivative investments categorized by primary risk exposure at December 31, 2019:
Asset Derivative Investment Value | ||||||||||||||||||||||||
Fund | Futures | Swaps | Futures | Futures | Futures | Total Value at | ||||||||||||||||||
Long Short Equity Fund | $ | — | $ | 993,910 | $ | — | $ | — | $ | — | $ | 993,910 | ||||||||||||
Global Managed Futures Strategy Fund | 46,503 | — | 68,661 | 51,754 | 214,282 | 381,200 | ||||||||||||||||||
Multi-Hedge Strategies Fund | 20,864 | 1,863,840 | 86,677 | 91,692 | 325,123 | 2,388,196 | ||||||||||||||||||
Commodities Strategy Fund | — | — | — | — | 100,880 | 100,880 |
Liability Derivative Investments Value | ||||||||||||||||||||||||
Fund | Futures | Swaps | Futures | Futures | Futures | Total Value at | ||||||||||||||||||
Long Short Equity Fund | $ | — | $ | 1,715,286 | $ | — | $ | — | $ | — | $ | 1,715,286 | ||||||||||||
Global Managed Futures Strategy Fund | 73,874 | — | 81,907 | 87,227 | 184,228 | 427,236 | ||||||||||||||||||
Multi-Hedge Strategies Fund | 169,627 | 718,216 | 121,309 | 98,595 | 274,027 | 1,381,774 |
* | Includes cumulative appreciation (depreciation) of futures contracts as reported on the Consolidated Schedules of Investments. For exchange-traded and centrally cleared derivatives, variation margin is reported within the Consolidated Statements of Assets and Liabilities. |
The following is a summary of the location of derivative investments on the Funds’ Consolidated Statements of Operations for the year ended December 31, 2019:
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 Consolidated Statements of Operations categorized by primary risk exposure for the year ended December 31, 2019:
Realized Gain (Loss) on Derivative Investments Recognized on the Consolidated Statements of Operations | ||||||||||||||||||||||||
Fund | Futures | Swaps | Futures | Futures | Futures | Total | ||||||||||||||||||
Long Short Equity Fund | $ | — | $ | (2,366,422 | ) | $ | — | $ | — | $ | — | $ | (2,366,422 | ) | ||||||||||
Global Managed Futures Strategy Fund | 267,658 | — | 248 | 1,432,818 | (528,183 | ) | 1,172,541 | |||||||||||||||||
Multi-Hedge Strategies Fund | 11,515 | (607,636 | ) | 104,473 | 806,636 | (227,870 | ) | 87,118 | ||||||||||||||||
Commodities Strategy Fund | — | — | — | — | (9,577 | ) | (9,577 | ) |
76 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized on the Consolidated Statements of Operations | ||||||||||||||||||||||||
Fund | Futures | Swaps | Futures | Futures | Futures | Total | ||||||||||||||||||
Long Short Equity Fund | $ | — | $ | (1,611,277 | ) | $ | — | $ | — | $ | — | $ | (1,611,277 | ) | ||||||||||
Global Managed Futures Strategy Fund | (80,575 | ) | — | 12,568 | (111,627 | ) | (74,608 | ) | (254,242 | ) | ||||||||||||||
Multi-Hedge Strategies Fund | (241,269 | ) | 1,175,503 | 56,099 | 2,220 | (96,873 | ) | 895,680 | ||||||||||||||||
Commodities Strategy Fund | — | — | — | — | 382,255 | 382,255 |
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 as collateral.
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 Consolidated 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 Consolidated Statements of Assets and Liabilities.
THE RYDEX FUNDS ANNUAL REPORT | 77 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
The following tables present derivative financial instruments and secured financing transactions that are subject to enforceable netting arrangements:
Gross Amounts Not Offset in | |||||||||||||||||||||||||
Fund | Instrument | Gross | Gross | Net Amount | Financial | Cash | Net | ||||||||||||||||||
Long Short Equity Fund | Custom basket swap agreements | $ | 993,910 | $ | — | $ | 993,910 | $ | (993,910 | ) | $ | — | $ | — | |||||||||||
Multi-Hedge Strategies Fund | Custom basket swap agreements | 1,863,840 | — | 1,863,840 | (718,216 | ) | — | 1,145,624 |
Gross Amounts Not Offset in | |||||||||||||||||||||||||
Fund | Instrument | Gross | Gross | Net Amount | Financial | Cash | Net | ||||||||||||||||||
Long Short Equity Fund | Custom basket swap agreements | $ | 1,715,286 | $ | — | $ | 1,715,286 | $ | (1,715,286 | ) | $ | — | $ | — | |||||||||||
Multi-Hedge Strategies Fund | Custom basket swap agreements | 718,216 | — | 718,216 | (718,216 | ) | — | — |
1 | Exchange-traded or centrally-cleared derivatives 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, 2019.
Fund | Counterparty | Asset Type | Cash Pledged | Cash Received | ||||||
Multi-Hedge Strategies Fund | Goldman Sachs Group | Futures Contracts | $ | 368,673 | $ | — | ||||
Commodities Strategy Fund | Goldman Sachs Group | Futures Contracts | 6,184 | — |
Note 4 – Fair Value Measurement
In accordance with U.S. GAAP, fair value is defined as the price that the Funds would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. U.S. GAAP establishes a three-tier fair value hierarchy based on the types of inputs used to value assets and liabilities and requires corresponding disclosure. The hierarchy and the corresponding inputs are summarized below:
Level 1 — | quoted prices in active markets for identical assets or liabilities. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Level 2 — | significant other observable inputs (for example quoted prices for securities that are similar based on characteristics such as interest rates, prepayment speeds, credit risk, etc.). |
Level 3 — | significant unobservable inputs based on the best information available under the circumstances, to the extent observable inputs are not available, which may include assumptions. |
The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly, fair value determinations for Level 3 securities require the greatest amount of judgment.
The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The suitability of the techniques and sources employed to determine fair valuation are regularly monitored and subject to change.
Note 5 – Investment Advisory Agreement and Other Agreements
Under the terms of an investment advisory contract, the Funds pay GI investment advisory fees calculated at the annualized rates below, based on the average daily net assets of the Funds:
Fund | Management Fees |
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. Fees waived under this arrangement are not subject to reimbursement to GI. For the year ended December 31, 2019, the Global Managed Futures Strategy Fund, Multi-Hedge Strategies Fund and Commodities Strategy Fund waived $6,879, $9,226, and $3,988, respectively, related to advisory fees 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 pays operating expenses on behalf of 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 Board 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 in effect for the investing Fund. Fees waived under this arrangement are not subject to reimbursement to GI. For the year ended December 31, 2019, the following Funds waived fees related to investments in affiliated funds:
Fund | Amount Waived | |||
Global Managed Futures Strategy Fund | $ | 3,169 | ||
Multi-Hedge Strategies Fund | 1,991 | |||
Commodities Strategy Fund | 2,689 |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Certain trustees and 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 maintains 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, 2019, the repurchase agreements in the joint account were as follows:
Counterparty and | Face Value | Repurchase Price |
| Collateral | Par Value | Fair Value | ||||||||||||
J.P. Morgan Securities LLC | U.S. Treasury Inflation Indexed Bonds | |||||||||||||||||
1.53% | 0.38% - 3.38% | |||||||||||||||||
Due 01/02/20 | $ | 52,221,118 | $ | 52,225,557 | 07/15/25-04/15/32 | $ | 29,508,166 | $ | 30,293,286 | |||||||||
U.S. Treasury Notes | ||||||||||||||||||
1.38% - 2.50% | ||||||||||||||||||
02/28/21 - 10/31/26 | 16,685,500 | 17,041,602 | ||||||||||||||||
U.S. Treasury Bond | ||||||||||||||||||
6.25% | ||||||||||||||||||
08/15/23 | 3,032,900 | 3,592,802 | ||||||||||||||||
U.S. Treasury Floating Rate Note | ||||||||||||||||||
1.61% | ||||||||||||||||||
10/31/20 | 2,332,000 | 2,337,154 | ||||||||||||||||
U.S. Treasury Bills | ||||||||||||||||||
0.00% | ||||||||||||||||||
01/02/20 - 08/13/20 | 700 | 697 | ||||||||||||||||
51,559,266 | 53,265,541 | |||||||||||||||||
BofA Securities, Inc. | U.S. Treasury Note | |||||||||||||||||
1.50% | 2.00% | |||||||||||||||||
Due 01/02/20 | 16,838,493 | 16,839,896 | 10/31/22 | 16,936,000 | 17,175,334 | |||||||||||||
Barclays Capital, Inc. | U.S. Treasury Inflation Indexed Bond | |||||||||||||||||
1.40% | 0.13% | |||||||||||||||||
Due 01/02/20 | 16,838,493 | 16,839,803 | 10/15/24 | 17,030,300 | 17,175,300 |
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 with which the Funds enter into repurchase agreements to evaluate potential risks.
80 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Note 7 – Portfolio Securities Loaned
The Funds may lend their securities to approved brokers to earn additional income. Security lending income shown on the Consolidated 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.
At December 31, 2019, 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 | $ | 233,908 | $ | (233,908 | ) | $ | — | $ | 239,621 | $ | — | $ | 239,621 | ||||||||||||
Multi-Hedge Strategies Fund | 187,661 | (187,661 | ) | — | 193,550 | — | 193,550 |
(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 U.S. federal income tax returns for all open tax years, and has concluded that no provision for income tax is required in the Funds’ consolidated financial statements. The Funds’ U.S. federal income tax returns are subject to examination by the Internal Revenue Service (“IRS”) 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 U.S. federal income tax requirements under Subchapter M of the Internal Revenue Code. The Funds have received a private letter ruling from the IRS 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. If,
THE RYDEX FUNDS ANNUAL REPORT | 81 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
during a taxable year, the Subsidiary’s taxable losses (and other deductible items) exceed its income and gains, the net loss will not pass through to the Fund as a deductible amount for Federal income tax purposes and cannot be carried forward to reduce future income from the Subsidiary in subsequent years.
The tax character of distributions paid during the year ended December 31, 2019 was as follows:
Fund | Ordinary | Long-Term | Total | |||||||||
Long Short Equity Fund | $ | 168,099 | $ | — | $ | 168,099 | ||||||
Global Managed Futures Strategy Fund | 124,141 | — | 124,141 | |||||||||
Multi-Hedge Strategies Fund | 875,142 | — | 875,142 | |||||||||
Commodities Strategy Fund | 45,134 | — | 45,134 |
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 |
Note: For U.S. federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
The tax components of distributable earnings/(loss) as of December 31, 2019 were as follows:
Fund | Undistributed | Undistributed | Net Unrealized | Accumulated | Total | |||||||||||||||
Long Short Equity Fund | $ | 217,379 | $ | — | $ | 1,968,393 | $ | (4,385,663 | ) | $ | (2,199,891 | ) | ||||||||
Global Managed Futures Strategy Fund | 647,598 | 94,949 | (1,180,770 | ) | — | (438,223 | ) | |||||||||||||
Multi-Hedge Strategies Fund | 630,723 | — | 110,569 | (2,193,072 | ) | (1,451,780 | ) | |||||||||||||
Commodities Strategy Fund | 22,689 | — | (1,795,000 | ) | (14,295 | ) | (1,786,606 | ) |
For U.S. 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, 2019, capital loss carryforwards for the Funds were as follows:
Unlimited | ||||||||||||
Fund | Short-Term | Long-Term | Total | |||||||||
Long Short Equity Fund | $ | (3,948,319 | ) | $ | (437,344 | ) | $ | (4,385,663 | ) | |||
Multi-Hedge Strategies Fund | (2,178,911 | ) | — | (2,178,911 | ) | |||||||
Commodities Strategy Fund | — | (14,295 | ) | (14,295 | ) |
For the year ended December 31, 2019, the following capital loss carryforward amounts were utilized:
Fund | Utilized |
Global Managed Futures Strategy Fund | $ 978,251 |
82 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
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, foreign currency gains and losses, and investment in swaps. 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, 2019 for permanent book/tax differences:
Fund | Paid In | Total | ||||||
Long Short Equity Fund | $ | (1,460 | ) | $ | 1,460 | |||
Global Managed Futures Strategy Fund | (527,262 | ) | 527,262 | |||||
Multi-Hedge Strategies Fund | (280,529 | ) | 280,529 | |||||
Commodities Strategy Fund | (6,664 | ) | 6,664 |
At December 31, 2019, the cost of investments for U.S. federal income tax purposes, the aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost and the aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value, were as follows:
Fund | Tax | Tax | Tax | Net | ||||||||||||
Long Short Equity Fund | $ | 28,899,180 | $ | 4,077,029 | $ | (2,108,636 | ) | $ | 1,968,393 | |||||||
Global Managed Futures Strategy Fund | 15,581,990 | 383,170 | (1,563,884 | ) | (1,180,714 | ) | ||||||||||
Multi-Hedge Strategies Fund | 28,722,351 | 2,391,536 | (2,280,892 | ) | 110,644 | |||||||||||
Commodities Strategy Fund | 4,903,799 | — | (1,795,000 | ) | (1,795,000 | ) |
Note 9 – Securities Transactions
For the year ended December 31, 2019, 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 | $ | 47,720,943 | $ | 50,688,797 | ||||
Global Managed Futures Strategy Fund | 2,793,855 | 1,400,000 | ||||||
Multi-Hedge Strategies Fund | 53,699,047 | 55,235,939 | ||||||
Commodities Strategy Fund | 2,714,200 | 3,072,000 |
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 Trustee and/or common officers complies was Rule 17a-7 of the 1940 Act. Further, as defined under these procedures, each transactions, is effected at the current market price to save costs, where permissible. For the year ended December 31, 2019, the Funds did not engage in any 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 8, 2020. 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 3.28% for the year ended December 31, 2019. The Funds did not have any borrowings outstanding under this agreement at December 31, 2019. The Guggenheim Long Short Equity Fund is excluded from the line of credit.
THE RYDEX FUNDS ANNUAL REPORT | 83 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
The average daily balances borrowed for the year ended December 31, 2019 were as follows:
Fund | Average Daily Balance |
Multi-Hedge Strategies Fund | $ 1,551 |
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 “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. Early adoption is permitted. As of December 31, 2019, the Funds have fully adopted the provisions of the 2018 ASU, which did not have a material impact on the Funds’ consolidated financial statements and related disclosures or impact the Funds’ net assets or results of operations.
Note 12 – Legal Proceedings
Tribune Company
Rydex Variable Trust has been named as a defendant and a putative member of the proposed defendant class of shareholders in the case entitled Kirschner v. FitzSimons, No. 12-2652 (S.D.N.Y.) (formerly Official Committee of Unsecured Creditors of Tribune Co. v. FitzSimons, Adv. Pro. No. 10-54010 (Bankr. D. Del.)) (the “FitzSimons action”), as a result of ownership by certain series of the Rydex Variable Trust of shares in the Tribune Company (“Tribune”) in 2007, when Tribune effected a leveraged buyout transaction (“LBO”) by which Tribune converted to a privately-held company. In his complaint, the plaintiff has alleged that, in connection with the LBO, Tribune insiders and shareholders were overpaid for their Tribune stock using financing that the insiders knew would, and ultimately did, leave Tribune insolvent. The plaintiff has asserted claims against certain insiders, major shareholders, professional advisers, and others involved in the LBO. The plaintiff is also attempting to obtain from former Tribune shareholders, including the Rydex Variable Trust, the proceeds they received in connection with the LBO.
In June 2011, a group of Tribune creditors filed multiple actions against former Tribune shareholders involving state law constructive fraudulent conveyance claims arising out of the 2007 LBO (the “SLCFC actions”). Rydex Variable Trust has been named as a defendant in one or more of these suits. In those actions, the creditors seek to recover from Tribune’s former shareholders the proceeds received in connection with the 2007 LBO.
The FitzSimons action and the SLCFC actions have been consolidated with the majority of the other Tribune LBO-related lawsuits in a multidistrict litigation proceeding captioned In re Tribune Company Fraudulent Conveyance Litig., No. 11-md-2296 (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
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (concluded) |
mandate “in anticipation of further panel review.” On December 19, 2019, the Second Circuit issued an amended opinion that again affirmed the district court’s ruling on the basis that plaintiffs’ claims were preempted by Section 546(e) of the Bankruptcy Code. Plaintiffs filed a motion for rehearing and rehearing en banc on January 2, 2020.
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 intended to permit an interlocutory appeal of the dismissal order, but would wait to do so until it has resolved outstanding motions to dismiss filed by other defendants.
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 mediation did not result in a settlement of the claims against the shareholder defendants.
On April 4, 2019, plaintiff filed a motion to amend the Fifth Amended Complaint to assert a federal constructive fraudulent transfer claim against certain shareholder defendants. On April 10, 2019, the shareholder defendants filed a brief in opposition to plaintiff’s motion to amend. On April 12, 2019, the plaintiff filed a reply brief. On April 23, 2019, the court denied the plaintiff’s motion to amend. On June 13, 2019, the court entered judgment pursuant to Rule 54(b). On July 12, 2019, the Plaintiff filed a notice of appeal with respect to the dismissal of his claims and the District Court’s denial of his motion for leave to amend. Plaintiff filed an appellate brief on January 7, 2020. The shareholder defendants’ brief is currently due April 6, 2020.
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 13 – Subsequent Events
The Funds evaluated subsequent events through the date the consolidated financial statements were available for issue and determined there were no material events that would require adjustment to or disclosure in the Funds’ consolidated financial statements.
THE RYDEX FUNDS ANNUAL REPORT | 85 |
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, 2019, 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, 2019, 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, 2019, by correspondence with the custodian, transfer agent, and brokers. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Guggenheim investment companies since 1979.
Tysons, Virginia
February 27, 2020
86 | 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 2020, 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 2019.
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, 2019, the following funds have the corresponding percentages qualify for the dividends received deduction for corporations.
Fund | Dividend | |||
Long Short Equity Fund | 100.00 | % | ||
Multi-Hedge Strategies Fund | 30.90 | % |
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.
Special Meeting of Shareholders — Voting Results
A joint special meeting of shareholders of the Trust was held on October 24, 2019 to elect the following ten nominees to the Board of Trustees of the Trust: Randall C. Barnes, Angela Brock-Kyle, Donald A. Chubb, Jr., Jerry B. Farley, Roman Friedrich III, Thomas F. Lydon, Jr., Ronald A. Nyberg, Sandra G. Sponem, Ronald E. Toupin, Jr. and Amy J. Lee. At the meeting, the following votes were recorded:
Nominee | Shares For | Shares Withheld | ||||||
Randall C. Barnes | 80,976,563 | 3,278,383 | ||||||
Angela Brock-Kyle | 80,976,448 | 3,278,498 | ||||||
Donald A. Chubb, Jr. | 80,889,189 | 3,365,757 | ||||||
Jerry B. Farley | 80,698,759 | 3,556,187 | ||||||
Roman Friedrich III | 80,706,634 | 3,548,312 | ||||||
Thomas F. Lydon, Jr. | 80,699,239 | 3,555,707 | ||||||
Ronald A. Nyberg | 80,694,478 | 3,560,468 | ||||||
Sandra G. Sponem | 80,774,487 | 3,480,459 | ||||||
Ronald E. Toupin, Jr. | 80,771,319 | 3,483,627 | ||||||
Amy J. Lee | 80,977,346 | 3,277,600 |
Corey A. Colehour and J. Kenneth Dalton resigned from the Board of Trustees of the Trust effective as of the conclusion of the quarterly meeting of the Board of Trustees of the Trust held on November 11, 2019.
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OTHER INFORMATION (Unaudited)(concluded) |
Sector Classification
Information in the Consolidated 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 as an exhibit to its reports on Form N-PORT, and for reporting periods ended prior to March 31, 2019, filed such information on Form N-Q. The Funds’ Forms N-PORT and N-Q are available on the SEC’s website at https://www.sec.gov. The Funds’ Forms N-PORT and 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.
88 | 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* | Position(s) Held | Term of Office | Principal Occupation(s) | Number of | Other |
INDEPENDENT TRUSTEES | |||||
Randall C. Barnes (1951) | Trustee | Since 2019 | Current: Private Investor (2001-present).
Former: Senior Vice President and Treasurer, PepsiCo, Inc. (1993-1997); President, Pizza Hut International (1991-1993); Senior Vice President, Strategic Planning and New Business Development, PepsiCo, Inc. (1987-1990). | 157 | Current: Purpose Investments Funds (2013-present).
Former: Managed Duration Investment Grade Municipal Fund (2003-2016). |
Angela Brock-Kyle (1959) | Trustee | Since 2016 | Current: Founder and Chief Executive Officer, B.O.A.R.D.S. (2013-present).
Former: Senior Leader, TIAA (1987-2012). | 156 | Current: Hunt Companies, Inc. (2019-present).
Former: Infinity Property & Casualty Corp. (2014-2018). |
Donald A. Chubb, Jr. (1946) | Trustee and Chairman of the Valuation Oversight Committee | Since 2019 | Current: Retired
Former: Business broker and manager of commercial real estate, Griffith & Blair, Inc. (1997-2017). | 156 | Former: Midland Care, Inc. (2011-2016). |
Jerry B. Farley (1946) | Trustee | Since 2019 | Current: President, Washburn University (1997-present). | 156 | Current: CoreFirst Bank & Trust (2000-present).
Former: Westar Energy, Inc. (2004-2018). |
Roman Friedrich III (1946) | Trustee and Chairman of the Contracts Review Committee | Since 2019 | Current: Founder and Managing Partner, Roman Friedrich & Company (1998-present). | 156 | Former: Zincore Metals, Inc. (2009-2019). |
Thomas F. Lydon, Jr. (1960) | Trustee and Vice Chairman of the Contracts Review Committee | Since 2005 (Trustee) Since 2019 (Vice Chairman of the Contracts Review Committee) | Current: President, Global Trends Investments (1996-present); Co-Chief Executive Officer, ETF Flows, LLC (2019-present); Chief Executive Officer, Lydon Media (2016-present). | 156 | Current: US Global Investors (GROW) (1995-present).
Former: Harvest Volatility Edge Trust (3) (2017-2019). |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) Held | Term of Office | Principal Occupation(s) | Number of | Other |
INDEPENDENT TRUSTEES - continued | |||||
Ronald A. Nyberg (1953) | Trustee and Chairman of the Nominating and Governance Committee | Since 2019 | Current: Partner, Momkus LLC (2016-present).
Former: Partner, Nyberg & Cassioppi, LLC (2000-2016); Executive Vice President, General Counsel, and Corporate Secretary, Van Kampen Investments (1982-1999). | 157 | Current: PPM Funds (9) (2018 - present); Edward-Elmhurst Healthcare System (2012-present); Western Asset Inflation-Linked Opportunities & Income Fund (2004-present); Western Asset Inflation-Linked Income Fund (2003-present).
Former: Managed Duration Investment Grade Municipal Fund (2003-2016). |
Sandra G. Sponem (1958) | Trustee and Chair of the Audit Committee | Since 2016 (Trustee) Since 2019 (Chair of the Audit Committee) | Current: Retired.
Former: Senior Vice President and Chief Financial Officer, M.A. Mortenson-Companies, Inc. (2007-2017). | 156 | Current: SPDR Series Trust (78) (2018-present); SPDR Index Shares Funds (31) (2018-present); SSGA Active Trust (12) (2018-present); and SSGA Master Trust (1) (2018-present). |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) Held | Term of Office | Principal Occupation(s) | Number of | Other |
INDEPENDENT TRUSTEES - concluded | |||||
Ronald E. Toupin, Jr. (1958) | Trustee and Chairman of the Board and Chairman of the Executive Committee | Since 2019 | Current: Portfolio Consultant (2010-present); Member, Governing Council, Independent Directors Council (2013-present); Governor, Board of Governors, Investment Company Institute (2018-present).
Former: Member, Executive Committee, Independent Directors Council (2016-2018); Vice President, Manager and Portfolio Manager, Nuveen Asset Management (1998-1999); Vice President, Nuveen Investment Advisory Corp. (1992-1999); Vice President and Manager, Nuveen Unit Investment Trusts (1991-1999); and Assistant Vice President and Portfolio Manager, Nuveen Unit Investment Trusts (1988-1999), each of John Nuveen & Co., Inc. (1982-1999). | 156 | Current: Western Asset Inflation-Linked Opportunities & Income Fund (2004-present); Western Asset Inflation-Linked Income Fund (2003-present).
Former: Managed Duration Investment Grade Municipal Fund (2003-2016). |
INTERESTED TRUSTEE | |||||
Amy J. Lee*** (1961) | Trustee, Vice President and Chief Legal Officer | Since 2018 (Trustee) Since 2019 (Vice President and Chief Legal Officer) | Current: Interested Trustee, certain other funds in the Fund Complex (2018-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: President and Chief Executive Officer, certain other funds in the Fund Complex (2017-2019); Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004-2012). | 156 | None. |
* | The business address of each Trustee is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each Trustee serves an indefinite term, until his or her successor is elected and qualified. Time served includes time served in the respective position for the Predecessor Corporation. |
*** | This Trustee is deemed to be an “interested person” of the Funds under the 1940 Act by reason of her position with the Funds’ Investment Manager and/or the parent of the Investment Manager. |
THE RYDEX FUNDS ANNUAL REPORT | 91 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) Held with Trust | Term of Office and Length | Principal Occupation(s) |
OFFICERS |
|
| |
Brian E. Binder (1972) | President and Chief Executive Officer | Since 2019 | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2018-present); President, Chief Executive Officer and Chairman of the Board of Managers, Guggenheim Funds Investment Advisors, LLC (2018-present); President and Chief Executive Officer, Security Investors, LLC (2018-present); Board Member of Guggenheim Partners Fund Management (Europe) Limited (2018-present); Senior Managing Director and Chief Administrative Officer, Guggenheim Investments (2018-present).
Former: Managing Director and President, Deutsche Funds, and Head of US Product, Trading and Fund Administration, Deutsche Asset Management (2013-2018); Managing Director, Head of Business Management and Consulting, Invesco Ltd. (2010-2012). |
James M. Howley (1972) | Assistant Treasurer | Since 2016 | 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). |
Mark E. Mathiasen (1978) | Secretary | Since 2017 | Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present). |
Glenn McWhinnie (1969) | Assistant Treasurer | Since 2016 | Current: Vice President, Guggenheim Investments (2009-present); Assistant Treasurer, certain other funds in the Fund Complex (2016-present). |
Michael P. Megaris (1984) | Assistant Secretary | Since 2018 | 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 Trust | Term of Office and Length | Principal Occupation(s) |
OFFICERS - continued | |||
Elisabeth Miller (1968) | Chief Compliance Officer | Since 2012 | Current: Chief Compliance Officer, certain other funds in the Fund Complex (2012-present); Senior Managing Director, Guggenheim Investments (2012-present). Vice President, Guggenheim Funds Distributors, LLC (2014-present).
Former: Chief Compliance Officer, Security Investors, LLC and 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 | Since 2017 | 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). |
William Rehder (1967) | Assistant Vice President | Since 2018 | Current: Managing Director, Guggenheim Investments (2002-present). |
Kimberly J. Scott (1974) | Assistant Treasurer | Since 2016 | 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). |
Bryan Stone (1979) | Vice President | Since 2019 | Current: Vice President, certain other funds in the Fund Complex (2014-present); Managing Director, Guggenheim Investments (2013-present).
Former: Senior Vice President, Neuberger Berman Group LLC (2009-2013); Vice President, Morgan Stanley (2002-2009). |
THE RYDEX FUNDS ANNUAL REPORT | 93 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(concluded) |
Name, Address* | Position(s) Held with Trust | Term of Office and Length | Principal Occupation(s) |
OFFICERS - concluded | |||
John L. Sullivan (1955) | Chief Financial Officer, Chief Accounting Officer and Treasurer | Since 2016 | 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 | Since 2017 | 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). |
* | The business address of each officer is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each officer serves an indefinite term, until his or her successor is duly elected and qualified. |
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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
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GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited)(concluded) |
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.
THE RYDEX FUNDS ANNUAL REPORT | 97 |
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12.31.2019
Rydex Variable Trust Funds 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 may no longer be sent by mail, unless you specifically request paper copies of the reports from the insurance company that offers your contract 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. Instructions for requesting paper copies will be provided by your insurance company.
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 the insurance company electronically by following the instructions provided by the insurance company.
You may elect to receive all future shareholder reports in paper free of charge. You can inform the insurance company that you wish to receive paper copies of reports by following the instructions provided by the insurance company. Your election to receive reports in paper will apply to all portfolio companies available under your contract.
GuggenheimInvestments.com | RVASECF-ANN-2-1219x1220 |
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 | 150 |
OTHER INFORMATION | 151 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS | 153 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE | 158 |
THE RYDEX FUNDS ANNUAL REPORT | 1 |
| December 31, 2019 |
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, 2019.
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, 2020
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 within the same sector or industry. Certain of the sector 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, 2019 |
Recent U.S. economic data demonstrates that the expansion is being helped by lower interest rates. New home sales have risen at a double-digit, year-over-year pace for four consecutive months since August, spurred by lower mortgage rates but also base effects. Manufacturing production rose in both November and December, corroborating the signal seen in improving manufacturing surveys. Monthly non-farm payroll gains averaged 184,000 jobs in the fourth quarter of 2019, above underlying labor force growth. Income gains and a positive wealth effect are also flowing through into retail sales, where “core” sales recovered in December after three months of declines.
The latest evidence suggests that the U.S. Federal Reserve’s (the “Fed”) easing efforts have given the U.S. economy the extra gas it needs to extend the cycle. Furthermore, the new year kicks off with some clarity on U.S.-China trade policy. The eleventh-hour phase one U.S.-China trade agreement may give U.S. companies some comfort that they can expect tariffs on either side to remain where they are for now. This should help support U.S. manufacturing activity, especially if China steps up purchases of U.S. goods as promised.
Over the next several months, we expect the Fed will stay on hold as it watches incoming data to ensure that the current level of federal funds remains appropriate. Monetary policy acts on the economy with a timing lag, so the effects of the last rate cut in October 2019 might not be apparent until mid-2020. More economic data improvements may come as low rates flow through to consumers and to the credit markets.
While the Fed successfully pushed off a recession in 2019, 2020 arrives with several risks worth watching, including the U.S. presidential election, U.S.-Europe trade negotiations, the potential for a military conflict between the U.S. and Iran, and rising corporate and local government defaults in China.
For the 12 months ended December 31, 2019, the Standard & Poor’s 500® (“S&P 500®”) Index* returned 31.49%. The MSCI Europe-Australasia-Far East (“EAFE”) Index* returned 22.01%. The return of the MSCI Emerging Markets Index* was 18.42%.
In the bond market, the Bloomberg Barclays U.S. Aggregate Bond Index* posted a 8.72% return for the period, while the Bloomberg Barclays U.S. Corporate High Yield Index* returned 14.32%. The return of the ICE Bank of America (“BofA”) Merrill Lynch 3-Month U.S. Treasury Bill Index* was 2.28% for the 12-month period.
The opinions and forecasts expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
*Index Definitions:
The following indices are referenced throughout this report. Indices are unmanaged and not available for direct investment. Index performance does not reflect transaction costs, fees, or expenses.
Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, mortgage-backed securities or “MBS” (agency fixed-rate and hybrid adjustable-rate mortgage, or “ARM”, pass-throughs), asset-backed securities (“ABS”), and commercial mortgage-backed securities (“CMBS”) (agency and non-agency).
Bloomberg Barclays U.S. Corporate High Yield Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB +/BB + or below.
ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged market Index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income.
MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada.
MSCI Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global emerging markets.
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®. The Consumer Discretionary index includes companies in the following industries: automobiles and components, consumer durables, apparel, hotels, restaurants, leisure, media and retailing.
THE RYDEX FUNDS ANNUAL REPORT | 3 |
ECONOMIC AND MARKET OVERVIEW (Unaudited)(concluded) | December 31, 2019 |
S&P 500® Consumer Staples Index is a sub-index of the S&P 500®. 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®. 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®. 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®. The Health Care index encompasses two main industry groups. The first includes companies which 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®. The Industrials index includes companies whose businesses are dominated by one of the following activities: the manufacture and distribution of capital goods, including aerospace & defense, construction, engineering & building products, electrical equipment and industrial machinery; the provision of commercial services and supplies, including printing, environmental, office and security services; the provision of professional services, including employment and research & consulting services; or the provision of transportation services, including airlines, couriers, marine, road & rail and transportation infrastructure.
S&P 500® Information Technology Index is a sub-index of the S&P 500®. The Information Technology index covers the following general areas: technology software & services, including companies that primarily develop software in various fields such as the internet, applications, systems, databases management and/or home entertainment, and companies that provide information technology consulting and services, as well as data processing and outsourced services; secondly, technology hardware & equipment, including manufacturers and distributors of communications equipment, computers & peripherals, electronic equipment and related instruments; and thirdly, semiconductors & semiconductor equipment manufacturers.
S&P 500® Materials Index is a sub-index of the S&P 500®. The Materials index encompasses a wide range of commodity-related manufacturing industries. Included in this sector are companies that manufacture chemicals, construction materials, glass, paper, forest products and related packaging products, and metals, minerals and mining companies, including producers of steel.
S&P 500® Telecommunications Services Index is a sub-index of the S&P 500®. 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®. 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, 2019 and ending December 31, 2019.
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 | 1.79% | 11.88% | $ 1,000.00 | $ 1,118.80 | $ 9.56 |
Basic Materials Fund | 1.79% | 4.82% | 1,000.00 | 1,048.20 | 9.24 |
Biotechnology Fund | 1.79% | 9.31% | 1,000.00 | 1,093.10 | 9.44 |
Consumer Products Fund | 1.79% | 8.20% | 1,000.00 | 1,082.00 | 9.39 |
Electronics Fund | 1.80% | 25.58% | 1,000.00 | 1,255.80 | 10.23 |
Energy Fund | 1.80% | (3.26%) | 1,000.00 | 967.40 | 8.93 |
Energy Services Fund | 1.80% | (8.60%) | 1,000.00 | 914.00 | 8.68 |
Financial Services Fund | 1.79% | 8.35% | 1,000.00 | 1,083.50 | 9.40 |
Health Care Fund | 1.79% | 8.87% | 1,000.00 | 1,088.70 | 9.42 |
Internet Fund | 1.79% | 1.54% | 1,000.00 | 1,015.40 | 9.09 |
Leisure Fund | 1.80% | 6.39% | 1,000.00 | 1,063.90 | 9.36 |
Precious Metals Fund | 1.69% | 26.69% | 1,000.00 | 1,266.90 | 9.66 |
Real Estate Fund | 1.79% | 7.37% | 1,000.00 | 1,073.70 | 9.36 |
Retailing Fund | 1.79% | 6.99% | 1,000.00 | 1,069.90 | 9.34 |
Technology Fund | 1.79% | 11.08% | 1,000.00 | 1,110.80 | 9.52 |
Telecommunications Fund | 1.80% | 1.89% | 1,000.00 | 1,018.90 | 9.16 |
Transportation Fund | 1.80% | 7.52% | 1,000.00 | 1,075.20 | 9.42 |
Utilities Fund | 1.79% | 5.70% | 1,000.00 | 1,057.00 | 9.28 |
| |||||
Table 2. Based on hypothetical 5% return (before expenses) | |||||
Banking Fund | 1.79% | 5.00% | $ 1,000.00 | $ 1,016.18 | $ 9.10 |
Basic Materials Fund | 1.79% | 5.00% | 1,000.00 | 1,016.18 | 9.10 |
Biotechnology Fund | 1.79% | 5.00% | 1,000.00 | 1,016.18 | 9.10 |
Consumer Products Fund | 1.79% | 5.00% | 1,000.00 | 1,016.18 | 9.10 |
Electronics Fund | 1.80% | 5.00% | 1,000.00 | 1,016.13 | 9.15 |
Energy Fund | 1.80% | 5.00% | 1,000.00 | 1,016.13 | 9.15 |
Energy Services Fund | 1.80% | 5.00% | 1,000.00 | 1,016.13 | 9.15 |
Financial Services Fund | 1.79% | 5.00% | 1,000.00 | 1,016.18 | 9.10 |
Health Care Fund | 1.79% | 5.00% | 1,000.00 | 1,016.18 | 9.10 |
Internet Fund | 1.79% | 5.00% | 1,000.00 | 1,016.18 | 9.10 |
Leisure Fund | 1.80% | 5.00% | 1,000.00 | 1,016.13 | 9.15 |
Precious Metals Fund | 1.69% | 5.00% | 1,000.00 | 1,016.69 | 8.59 |
Real Estate Fund | 1.79% | 5.00% | 1,000.00 | 1,016.18 | 9.10 |
Retailing Fund | 1.79% | 5.00% | 1,000.00 | 1,016.18 | 9.10 |
Technology Fund | 1.79% | 5.00% | 1,000.00 | 1,016.18 | 9.10 |
Telecommunications Fund | 1.80% | 5.00% | 1,000.00 | 1,016.13 | 9.15 |
Transportation Fund | 1.80% | 5.00% | 1,000.00 | 1,016.13 | 9.15 |
Utilities Fund | 1.79% | 5.00% | 1,000.00 | 1,016.18 | 9.10 |
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, 2019 to December 31, 2019. |
6 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, Banking Fund returned 28.39%, compared with the S&P 500 Index, which returned 31.49%. The S&P 500 Financials Index returned 32.12%.
All industries contributed to performance, led by regional banks, diversified banks, and asset management & custody banks.
Citigroup, Inc., Bank of America Corp., and JPMorgan Chase & Co. were the holdings that contributed the most to the Fund’s return for the period. Valley National Bancorp and Ameris Bancorp 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) | |
Citigroup, Inc. | 4.1% |
JPMorgan Chase & Co. | 4.1% |
Bank of America Corp. | 4.0% |
Wells Fargo & Co. | 4.0% |
U.S. Bancorp | 3.7% |
Truist Financial Corp. | 3.3% |
PNC Financial Services Group, Inc. | 3.2% |
Capital One Financial Corp. | 2.7% |
Bank of New York Mellon Corp. | 2.6% |
State Street Corp. | 2.1% |
Top Ten Total | 33.8% |
“Ten Largest Holdings” excludes any temporary cash investments.
THE RYDEX FUNDS ANNUAL REPORT | 7 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Banking Fund | 28.39% | 7.16% | 7.50% |
S&P 500 Financials Index | 32.12% | 11.17% | 12.26% |
S&P 500 Index | 31.49% | 11.70% | 13.56% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
8 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
BANKING FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.6% | ||||||||
Banks - 90.5% | ||||||||
Citigroup, Inc. | 2,992 | $ | 239,031 | |||||
JPMorgan Chase & Co. | 1,708 | 238,095 | ||||||
Bank of America Corp. | 6,694 | 235,763 | ||||||
Wells Fargo & Co. | 4,366 | 234,891 | ||||||
U.S. Bancorp | 3,625 | 214,926 | ||||||
Truist Financial Corp. | 3,471 | 195,487 | ||||||
PNC Financial Services Group, Inc. | 1,171 | 186,927 | ||||||
Bank of New York Mellon Corp. | 3,021 | 152,047 | ||||||
State Street Corp. | 1,522 | 120,390 | ||||||
Northern Trust Corp. | 1,008 | 107,090 | ||||||
M&T Bank Corp. | 630 | 106,942 | ||||||
Fifth Third Bancorp | 3,396 | 104,393 | ||||||
First Republic Bank | 855 | 100,420 | ||||||
KeyCorp | 4,960 | 100,390 | ||||||
Citizens Financial Group, Inc. | 2,332 | 94,702 | ||||||
Regions Financial Corp. | 5,299 | 90,931 | ||||||
Huntington Bancshares, Inc. | 5,869 | 88,505 | ||||||
SVB Financial Group* | 324 | 81,337 | ||||||
Comerica, Inc. | 1,015 | 72,826 | ||||||
Zions Bancorp North America | 1,296 | 67,288 | ||||||
ICICI Bank Ltd. ADR | 4,318 | 65,159 | ||||||
HDFC Bank Ltd. ADR | 1,026 | 65,018 | ||||||
HSBC Holdings plc ADR | 1,623 | 63,443 | ||||||
Popular, Inc. | 1,060 | 62,275 | ||||||
Commerce Bancshares, Inc. | 916 | 62,216 | ||||||
Signature Bank | 451 | 61,611 | ||||||
Royal Bank of Canada | 775 | 61,380 | ||||||
Toronto-Dominion Bank | 1,091 | 61,238 | ||||||
TCF Financial Corp. | 1,293 | 60,512 | ||||||
Bank of Nova Scotia1 | 1,069 | 60,388 | ||||||
East West Bancorp, Inc. | 1,234 | 60,096 | ||||||
UBS Group AG* | 4,700 | 59,126 | ||||||
Credit Suisse Group AG ADR* | 4,375 | 58,844 | ||||||
Bank of Montreal | 756 | 58,590 | ||||||
Prosperity Bancshares, Inc. | 814 | 58,518 | ||||||
Canadian Imperial Bank of Commerce | 703 | 58,490 | ||||||
Cullen/Frost Bankers, Inc. | 564 | 55,148 | ||||||
Western Alliance Bancorporation | 960 | 54,720 | ||||||
Synovus Financial Corp. | 1,388 | 54,410 | ||||||
First Horizon National Corp. | 3,049 | 50,491 | ||||||
Webster Financial Corp. | 942 | 50,265 | ||||||
Pinnacle Financial Partners, Inc. | 778 | 49,792 | ||||||
First Financial Bankshares, Inc. | 1,379 | 48,403 | ||||||
PacWest Bancorp | 1,243 | 47,570 | ||||||
Valley National Bancorp | 4,150 | 47,517 | ||||||
CIT Group, Inc. | 1,032 | 47,090 | ||||||
Glacier Bancorp, Inc. | 996 | 45,806 | ||||||
Wintrust Financial Corp. | 641 | 45,447 | ||||||
United Bankshares, Inc. | 1,155 | 44,652 | ||||||
Bank OZK | 1,454 | 44,354 | ||||||
Hancock Whitney Corp. | 1,009 | 44,275 | ||||||
IBERIABANK Corp. | 591 | 44,225 | ||||||
First Hawaiian, Inc. | 1,520 | 43,852 | ||||||
Umpqua Holdings Corp. | 2,467 | 43,666 | ||||||
Associated Banc-Corp. | 1,910 | 42,096 | ||||||
UMB Financial Corp. | 602 | 41,321 | ||||||
Home BancShares, Inc. | 2,049 | 40,283 | ||||||
Old National Bancorp | 2,158 | 39,470 | ||||||
CenterState Bank Corp. | 1,561 | 38,994 | ||||||
Cathay General Bancorp | 1,024 | 38,963 | ||||||
Simmons First National Corp. — Class A | 1,447 | 38,765 | ||||||
CVB Financial Corp. | 1,791 | 38,650 | ||||||
Columbia Banking System, Inc. | 946 | 38,488 | ||||||
Ameris Bancorp | 900 | 38,286 | ||||||
Fulton Financial Corp. | 2,169 | 37,806 | ||||||
Texas Capital Bancshares, Inc.* | 660 | 37,468 | ||||||
First Midwest Bancorp, Inc. | 1,537 | 35,443 | ||||||
United Community Banks, Inc. | 1,143 | 35,296 | ||||||
First Financial Bancorp | 1,374 | 34,955 | ||||||
Cadence BanCorp | 1,902 | 34,483 | ||||||
Total Banks | 5,281,735 | |||||||
Savings & Loans - 4.0% | ||||||||
People’s United Financial, Inc. | 3,631 | 61,364 | ||||||
New York Community Bancorp, Inc. | 4,430 | 53,249 | ||||||
Sterling Bancorp | 2,200 | 46,376 | ||||||
Investors Bancorp, Inc. | 3,360 | 40,034 | ||||||
Pacific Premier Bancorp, Inc. | 940 | 30,649 | ||||||
Total Savings & Loans | 231,672 | |||||||
Diversified Financial Services - 2.7% | ||||||||
Capital One Financial Corp. | 1,520 | 156,423 | ||||||
Insurance - 2.4% | ||||||||
AXA Equitable Holdings, Inc. | 3,035 | 75,207 | ||||||
Voya Financial, Inc. | 1,059 | 64,578 | ||||||
Total Insurance | 139,785 | |||||||
Total Common Stocks | ||||||||
(Cost $3,725,220) | 5,809,615 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 9 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
BANKING FUND |
Face Amount | Value | |||||||
REPURCHASE AGREEMENTS††,2 - 0.6% | ||||||||
J.P. Morgan Securities LLC issued 12/31/19 at 1.53% due 01/02/20 | $ | 22,852 | $ | 22,852 | ||||
Barclays Capital, Inc. issued 12/31/19 at 1.40% due 01/02/20 | 7,369 | 7,369 | ||||||
BofA Securities, Inc. issued 12/31/19 at 1.50% due 01/02/20 | 7,368 | 7,368 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $37,589) | 37,589 |
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3- 0.7% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.47%4 | 41,285 | 41,285 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $41,285) | 41,285 | |||||||
Total Investments - 100.9% | ||||||||
(Cost $3,804,094) | $ | 5,888,489 | ||||||
Other Assets & Liabilities, net - (0.9)% | (50,457 | ) | ||||||
Total Net Assets - 100.0% | $ | 5,838,032 |
* | 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, 2019 — 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, 2019. |
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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 5,809,615 | $ | — | $ | — | $ | 5,809,615 | ||||||||
Repurchase Agreements | — | 37,589 | — | 37,589 | ||||||||||||
Securities Lending Collateral | 41,285 | — | — | 41,285 | ||||||||||||
Total Assets | $ | 5,850,900 | $ | 37,589 | $ | — | $ | 5,888,489 |
10 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
BANKING FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value - including $40,560 of securities loaned (cost $3,766,505) | $ | 5,850,900 | ||
Repurchase agreements, at value (cost $37,589) | 37,589 | |||
Receivables: | ||||
Fund shares sold | 35,445 | |||
Securities sold | 33,117 | |||
Dividends | 10,000 | |||
Foreign tax reclaims | 259 | |||
Interest | 2 | |||
Total assets | 5,967,312 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 70,086 | |||
Return of securities lending collateral | 41,285 | |||
Management fees | 3,722 | |||
Transfer agent and administrative fees | 1,095 | |||
Investor service fees | 1,095 | |||
Portfolio accounting fees | 438 | |||
Trustees’ fees* | 80 | |||
Miscellaneous | 11,479 | |||
Total liabilities | 129,280 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 5,838,032 | ||
Net assets consist of: | ||||
Paid in capital | $ | 4,872,988 | ||
Total distributable earnings (loss) | 965,044 | |||
Net assets | $ | 5,838,032 | ||
Capital shares outstanding | 60,059 | |||
Net asset value per share | $ | 97.20 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $1,838) | $ | 134,540 | ||
Interest | 587 | |||
Income from securities lending, net | 16 | |||
Total investment income | 135,143 | |||
Expenses: | ||||
Management fees | 39,728 | |||
Investor service fees | 11,685 | |||
Transfer agent and administrative fees | 11,684 | |||
Professional fees | 12,182 | |||
Portfolio accounting fees | 4,674 | |||
Trustees’ fees* | 1,443 | |||
Custodian fees | 1,160 | |||
Line of credit fees | 7 | |||
Miscellaneous | 2,500 | |||
Total expenses | 85,063 | |||
Net investment income | 50,080 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 396,840 | |||
Net realized gain | 396,840 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 851,331 | |||
Net change in unrealized appreciation (depreciation) | 851,331 | |||
Net realized and unrealized gain | 1,248,171 | |||
Net increase in net assets resulting from operations | $ | 1,298,251 |
* | 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 | $ | 50,080 | $ | 40,316 | ||||
Net realized gain on investments | 396,840 | 696,638 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 851,331 | (1,739,382 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 1,298,251 | (1,002,428 | ) | |||||
Distributions to shareholders | (40,316 | ) | (36,389 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 13,610,333 | 24,259,647 | ||||||
Distributions reinvested | 40,316 | 36,389 | ||||||
Cost of shares redeemed | (14,618,756 | ) | (27,401,238 | ) | ||||
Net decrease from capital share transactions | (968,107 | ) | (3,105,202 | ) | ||||
Net increase (decrease) in net assets | 289,828 | (4,144,019 | ) | |||||
Net assets: | ||||||||
Beginning of year | 5,548,204 | 9,692,223 | ||||||
End of year | $ | 5,838,032 | $ | 5,548,204 | ||||
Capital share activity: | ||||||||
Shares sold | 155,138 | 259,935 | ||||||
Shares issued from reinvestment of distributions | 458 | 384 | ||||||
Shares redeemed | (168,105 | ) | (289,569 | ) | ||||
Net decrease in shares | (12,509 | ) | (29,250 | ) |
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 | $ | 76.46 | $ | 95.19 | $ | 84.90 | $ | 67.87 | $ | 71.43 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .94 | .56 | .28 | .10 | .42 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 20.67 | (18.70 | ) | 10.28 | 17.11 | (3.86 | ) | |||||||||||||
Total from investment operations | 21.61 | (18.14 | ) | 10.56 | 17.21 | (3.44 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.87 | ) | (.56 | ) | (.27 | ) | (.18 | ) | (.12 | ) | ||||||||||
Net realized gains | — | (.03 | ) | — | — | — | ||||||||||||||
Total distributions | (.87 | ) | (.59 | ) | (.27 | ) | (.18 | ) | (.12 | ) | ||||||||||
Net asset value, end of period | $ | 97.20 | $ | 76.46 | $ | 95.19 | $ | 84.90 | $ | 67.87 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 28.39 | % | (19.19 | %) | 12.48 | % | 27.25 | % | (4.86 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 5,838 | $ | 5,548 | $ | 9,692 | $ | 16,076 | $ | 5,611 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.07 | % | 0.59 | % | 0.33 | % | 0.69 | % | 0.62 | % | ||||||||||
Total expenses | 1.82 | % | 1.71 | % | 1.70 | % | 1.67 | % | 1.59 | % | ||||||||||
Portfolio turnover rate | 246 | % | 320 | % | 273 | % | 417 | % | 388 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Reverse share split — Per share amounts for the years 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, 2019 |
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, 2019, Basic Materials Fund returned 21.43%, compared with a return of 31.49% for the S&P 500 Index. The S&P 500 Materials Index returned 24.58%.
The specialty chemicals industry was the largest contributor to the Fund’s return for the period, followed by the gold industry and paper packaging industry. The diversified chemicals industry detracted the most from the Fund’s return for the period, followed by the aluminum industry.
The top-performing holdings were Sherwin-Williams Co., Air Products & Chemicals, Inc., and Linde plc. The worst-performing holdings included Mosaic Co., DuPont de Nemours, Inc., and Chemours Co.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 2, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Ecolab, Inc. | 3.1% |
Sherwin-Williams Co. | 3.1% |
Air Products & Chemicals, Inc. | 3.0% |
DuPont de Nemours, Inc. | 2.9% |
Dow, Inc. | 2.7% |
Newmont Goldcorp Corp. | 2.6% |
Linde plc | 2.4% |
PPG Industries, Inc. | 2.4% |
LyondellBasell Industries N.V. — Class A | 2.3% |
Barrick Gold Corp. | 2.2% |
Top Ten Total | 26.7% |
“Ten Largest Holdings” excludes any temporary cash investments.
14 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Basic Materials Fund | 21.43% | 5.67% | 4.38% |
S&P 500 Materials Index | 24.58% | 7.07% | 9.13% |
S&P 500 Index | 31.49% | 11.70% | 13.56% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 15 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
BASIC MATERIALS FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.4% | ||||||||
Chemicals - 45.0% | ||||||||
Ecolab, Inc. | 1,049 | $ | 202,447 | |||||
Sherwin-Williams Co. | 346 | 201,905 | ||||||
Air Products & Chemicals, Inc. | 849 | 199,506 | ||||||
DuPont de Nemours, Inc. | 2,959 | 189,968 | ||||||
Dow, Inc. | 3,202 | 175,245 | ||||||
Linde plc | 740 | 157,546 | ||||||
PPG Industries, Inc. | 1,163 | 155,249 | ||||||
LyondellBasell Industries N.V. — Class A | 1,623 | 153,341 | ||||||
Celanese Corp. — Class A | 858 | 105,637 | ||||||
International Flavors & Fragrances, Inc.1 | 807 | 104,119 | ||||||
FMC Corp. | 1,009 | 100,718 | ||||||
CF Industries Holdings, Inc. | 1,885 | 89,990 | ||||||
Eastman Chemical Co. | 1,133 | 89,802 | ||||||
RPM International, Inc. | 1,139 | 87,430 | ||||||
Westlake Chemical Corp. | 1,190 | 83,478 | ||||||
Mosaic Co. | 3,757 | 81,301 | ||||||
Albemarle Corp. | 1,066 | 77,861 | ||||||
Axalta Coating Systems Ltd.* | 2,432 | 73,933 | ||||||
Huntsman Corp. | 2,645 | 63,903 | ||||||
WR Grace & Co. | 854 | 59,652 | ||||||
Ashland Global Holdings, Inc. | 774 | 59,234 | ||||||
Valvoline, Inc. | 2,554 | 54,681 | ||||||
Nutrien Ltd.1 | 1,121 | 53,707 | ||||||
Ingevity Corp.* | 600 | 52,428 | ||||||
Balchem Corp. | 493 | 50,104 | ||||||
Element Solutions, Inc.* | 3,983 | 46,521 | ||||||
Olin Corp. | 2,627 | 45,316 | ||||||
Chemours Co. | 2,473 | 44,737 | ||||||
PolyOne Corp. | 1,210 | 44,516 | ||||||
Innospec, Inc. | 430 | 44,479 | ||||||
Total Chemicals | 2,948,754 | |||||||
Mining - 18.2% | ||||||||
Newmont Goldcorp Corp. | 3,899 | 169,412 | ||||||
Barrick Gold Corp. | 7,648 | 142,176 | ||||||
Freeport-McMoRan, Inc. | 9,184 | 120,494 | ||||||
Royal Gold, Inc. | 661 | 80,807 | ||||||
Rio Tinto plc ADR | 1,280 | 75,981 | ||||||
Agnico Eagle Mines Ltd.1 | 1,219 | 75,103 | ||||||
BHP Group Ltd. ADR1 | 1,256 | 68,716 | ||||||
Wheaton Precious Metals Corp. | 2,244 | 66,759 | ||||||
AngloGold Ashanti Ltd. ADR | 2,925 | 65,345 | ||||||
Franco-Nevada Corp. | 611 | 63,116 | ||||||
Pan American Silver Corp. | 2,555 | 60,528 | ||||||
Teck Resources Ltd. — Class B | 3,325 | 57,755 | ||||||
Alcoa Corp.* | 2,527 | 54,356 | ||||||
Kirkland Lake Gold Ltd. | 1,230 | 54,206 | ||||||
Kaiser Aluminum Corp. | 323 | 35,817 | ||||||
Total Mining | 1,190,571 | |||||||
Packaging & Containers - 12.5% | ||||||||
Ball Corp. | 1,983 | 128,241 | ||||||
Westrock Co. | 2,145 | 92,042 | ||||||
Packaging Corporation of America | 803 | 89,928 | ||||||
Crown Holdings, Inc.* | 1,209 | 87,701 | ||||||
Berry Global Group, Inc.* | 1,459 | 69,288 | ||||||
Sonoco Products Co. | 1,107 | 68,324 | ||||||
Sealed Air Corp. | 1,690 | 67,313 | ||||||
Amcor plc | 6,072 | 65,820 | ||||||
Graphic Packaging Holding Co. | 3,650 | 60,772 | ||||||
Silgan Holdings, Inc. | 1,667 | 51,810 | ||||||
O-I Glass, Inc. | 3,176 | 37,890 | ||||||
Total Packaging & Containers | 819,129 | |||||||
Iron & Steel - 9.3% | ||||||||
Vale S.A. ADR | 10,086 | 133,135 | ||||||
Nucor Corp. | 2,020 | 113,686 | ||||||
Reliance Steel & Aluminum Co. | 647 | 77,485 | ||||||
Steel Dynamics, Inc. | 2,175 | 74,037 | ||||||
Commercial Metals Co. | 2,039 | 45,409 | ||||||
Allegheny Technologies, Inc.* | 2,175 | 44,935 | ||||||
ArcelorMittal S.A. | 2,538 | 44,517 | ||||||
Carpenter Technology Corp. | 849 | 42,263 | ||||||
United States Steel Corp.1 | 3,130 | 35,713 | ||||||
Total Iron & Steel | 611,180 | |||||||
Building Materials - 5.9% | ||||||||
Vulcan Materials Co. | 849 | 122,248 | ||||||
Martin Marietta Materials, Inc. | 417 | 116,610 | ||||||
Eagle Materials, Inc. | 590 | 53,489 | ||||||
Louisiana-Pacific Corp. | 1,703 | 50,528 | ||||||
Summit Materials, Inc. — Class A* | 1,871 | 44,717 | ||||||
Total Building Materials | 387,592 | |||||||
Forest Products & Paper - 2.4% | ||||||||
International Paper Co. | 2,551 | 117,473 | ||||||
Domtar Corp. | 1,053 | 40,267 | ||||||
Total Forest Products & Paper | 157,740 | |||||||
Biotechnology - 2.0% | ||||||||
Corteva, Inc. | 4,529 | 133,877 | ||||||
Household Products & Housewares - 1.4% | ||||||||
Avery Dennison Corp. | 687 | 89,873 | ||||||
Miscellaneous Manufacturing - 1.2% | ||||||||
AptarGroup, Inc. | 654 | 75,615 | ||||||
Housewares - 1.0% | ||||||||
Scotts Miracle-Gro Co. — Class A | 640 | 67,955 | ||||||
Coal - 0.5% | ||||||||
Warrior Met Coal, Inc. | 1,375 | 29,054 | ||||||
Total Common Stocks | ||||||||
(Cost $3,428,045) | 6,511,340 |
16 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
BASIC MATERIALS FUND |
Face Amount | Value | |||||||
REPURCHASE AGREEMENTS††,2 - 0.7% | ||||||||
J.P. Morgan Securities LLC issued 12/31/19 at 1.53% due 01/02/20 | $ | 27,603 | $ | 27,603 | ||||
Barclays Capital, Inc. issued 12/31/19 at 1.40% due 01/02/20 | 8,901 | 8,901 | ||||||
BofA Securities, Inc. issued 12/31/19 at 1.50% due 01/02/20 | 8,901 | 8,901 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $45,405) | 45,405 |
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3- 3.7% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.47%4 | 243,907 | 243,907 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $243,907) | 243,907 | |||||||
Total Investments - 103.8% | ||||||||
(Cost $3,717,357) | $ | 6,800,652 | ||||||
Other Assets & Liabilities, net - (3.8)% | (251,085 | ) | ||||||
Total Net Assets - 100.0% | $ | 6,549,567 |
* | 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, 2019 — 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, 2019. |
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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 6,511,340 | $ | — | $ | — | $ | 6,511,340 | ||||||||
Repurchase Agreements | — | 45,405 | — | 45,405 | ||||||||||||
Securities Lending Collateral | 243,907 | — | — | 243,907 | ||||||||||||
Total Assets | $ | 6,755,247 | $ | 45,405 | $ | — | $ | 6,800,652 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 17 |
BASIC MATERIALS FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value - including $239,752 of securities loaned (cost $3,671,952) | $ | 6,755,247 | ||
Repurchase agreements, at value (cost $45,405) | 45,405 | |||
Cash | 419 | |||
Receivables: | ||||
Fund shares sold | 344,246 | |||
Dividends | 9,619 | |||
Securities lending income | 13 | |||
Interest | 2 | |||
Total assets | 7,154,951 | |||
Liabilities: | ||||
Payable for: | ||||
Securities purchased | 319,616 | |||
Return of securities lending collateral | 243,907 | |||
Deferred foreign capital gain taxes | 19,017 | |||
Management fees | 4,241 | |||
Transfer agent and administrative fees | 1,247 | |||
Investor service fees | 1,247 | |||
Portfolio accounting fees | 499 | |||
Fund shares redeemed | 336 | |||
Trustees’ fees* | 105 | |||
Miscellaneous | 15,169 | |||
Total liabilities | 605,384 | |||
Commitments and contingent liabilities (Note 10) | �� | — | ||
Net assets | $ | 6,549,567 | ||
Net assets consist of: | ||||
Paid in capital | $ | 4,185,687 | ||
Total distributable earnings (loss) | 2,363,880 | |||
Net assets | $ | 6,549,567 | ||
Capital shares outstanding | 86,185 | |||
Net asset value per share | $ | 75.99 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $1,134) | $ | 143,350 | ||
Interest | 1,263 | |||
Income from securities lending, net | 1,432 | |||
Total investment income | 146,045 | |||
Expenses: | ||||
Management fees | 53,619 | |||
Investor service fees | 15,770 | |||
Transfer agent and administrative fees | 15,770 | |||
Professional fees | 11,622 | |||
Portfolio accounting fees | 6,308 | |||
Trustees’ fees* | 1,765 | |||
Custodian fees | 1,544 | |||
Line of credit fees | 3 | |||
Miscellaneous | 8,535 | |||
Total expenses | 114,936 | |||
Net investment income | 31,109 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 374,167 | |||
Net realized gain | 374,167 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 758,223 | |||
Net change in unrealized appreciation (depreciation) | 758,223 | |||
Net realized and unrealized gain | 1,132,390 | |||
Net increase in net assets resulting from operations | $ | 1,163,499 |
* | 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 | $ | 31,109 | $ | 5,877 | ||||
Net realized gain on investments | 374,167 | 1,250,769 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 758,223 | (3,002,408 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 1,163,499 | (1,745,762 | ) | |||||
Distributions to shareholders | (299,363 | ) | (209,047 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 6,035,444 | 9,436,602 | ||||||
Distributions reinvested | 299,363 | 209,047 | ||||||
Cost of shares redeemed | (6,817,453 | ) | (18,590,190 | ) | ||||
Net decrease from capital share transactions | (482,646 | ) | (8,944,541 | ) | ||||
Net increase (decrease) in net assets | 381,490 | (10,899,350 | ) | |||||
Net assets: | ||||||||
Beginning of year | 6,168,077 | 17,067,427 | ||||||
End of year | $ | 6,549,567 | $ | 6,168,077 | ||||
Capital share activity: | ||||||||
Shares sold | 82,680 | 119,254 | ||||||
Shares issued from reinvestment of distributions | 4,086 | 2,686 | ||||||
Shares redeemed | (94,867 | ) | (237,662 | ) | ||||
Net decrease in shares | (8,101 | ) | (115,722 | ) |
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 | $ | 65.42 | $ | 81.27 | $ | 67.61 | $ | 52.52 | $ | 63.47 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .35 | .05 | (.07 | ) | .02 | .18 | ||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 13.55 | (13.91 | ) | 14.47 | 15.43 | (11.13 | ) | |||||||||||||
Total from investment operations | 13.90 | (13.86 | ) | 14.40 | 15.45 | (10.95 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | — | (.42 | ) | (.50 | ) | — | — | |||||||||||||
Net realized gains | (3.33 | ) | (1.57 | ) | (.24 | ) | (.36 | ) | — | |||||||||||
Total distributions | (3.33 | ) | (1.99 | ) | (.74 | ) | (.36 | ) | — | |||||||||||
Net asset value, end of period | $ | 75.99 | $ | 65.42 | $ | 81.27 | $ | 67.61 | $ | 52.52 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 21.43 | % | (17.44 | %) | 21.43 | % | 30.86 | % | (17.30 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 6,550 | $ | 6,168 | $ | 17,067 | $ | 15,229 | $ | 5,084 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.49 | % | 0.06 | % | (0.10 | %) | 0.08 | % | 0.27 | % | ||||||||||
Total expenses | 1.82 | % | 1.73 | % | 1.70 | % | 1.66 | % | 1.59 | % | ||||||||||
Portfolio turnover rate | 88 | % | 83 | % | 181 | % | 266 | % | 228 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Reverse share split — Per share amounts for the years 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, 2019 |
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, 2019, Biotechnology Fund returned 24.67%, compared with the S&P 500 Index, which returned 31.49%. The S&P 500 Health Care Index returned 20.82%.
Companies in the biotechnology industry contributed the most to return, followed by the life sciences tools & services industry and the pharmaceuticals industry. The only industry that detracted from return was the health care services industry.
The best-performing holdings in the Fund were Celgene Corp., Array BioPharma, Inc., and Medicines Co. The worst-performing holdings in the Fund included Nektar Therapeutics, Alkermes plc, and Ligand Pharmaceuticals, Inc. — Class B.
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) | |
Amgen, Inc. | 7.6% |
AbbVie, Inc. | 7.3% |
Gilead Sciences, Inc. | 5.8% |
Vertex Pharmaceuticals, Inc. | 4.8% |
Biogen, Inc. | 4.7% |
Illumina, Inc. | 4.5% |
Regeneron Pharmaceuticals, Inc. | 4.1% |
Alexion Pharmaceuticals, Inc. | 3.0% |
Seattle Genetics, Inc. | 2.8% |
Incyte Corp. | 2.7% |
Top Ten Total | 47.3% |
“Ten Largest Holdings” excludes any temporary cash investments.
THE RYDEX FUNDS ANNUAL REPORT | 21 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Biotechnology Fund | 24.67% | 4.95% | 15.81% |
S&P 500 Health Care Index | 20.82% | 10.31% | 14.76% |
S&P 500 Index | 31.49% | 11.70% | 13.56% |
* | 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 Health Care Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
22 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
BIOTECHNOLOGY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.1% | ||||||||
Biotechnology - 74.5% | ||||||||
Amgen, Inc. | 6,858 | $ | 1,653,258 | |||||
Gilead Sciences, Inc. | 19,310 | 1,254,764 | ||||||
Vertex Pharmaceuticals, Inc.* | 4,770 | 1,044,391 | ||||||
Biogen, Inc.* | 3,399 | 1,008,585 | ||||||
Illumina, Inc.* | 2,940 | 975,316 | ||||||
Regeneron Pharmaceuticals, Inc.* | 2,371 | 890,263 | ||||||
Alexion Pharmaceuticals, Inc.* | 6,112 | 661,013 | ||||||
Seattle Genetics, Inc.* | 5,294 | 604,892 | ||||||
Incyte Corp.* | 6,726 | 587,314 | ||||||
BioMarin Pharmaceutical, Inc.* | 6,349 | 536,808 | ||||||
Exact Sciences Corp.* | 5,268 | 487,185 | ||||||
Alnylam Pharmaceuticals, Inc.* | 4,209 | 484,751 | ||||||
Ionis Pharmaceuticals, Inc.* | 6,631 | 400,579 | ||||||
Guardant Health, Inc.* | 4,651 | 363,429 | ||||||
Medicines Co.* | 4,225 | 358,871 | ||||||
ACADIA Pharmaceuticals, Inc.* | 8,200 | 350,796 | ||||||
Arrowhead Pharmaceuticals, Inc.* | 5,274 | 334,530 | ||||||
Amarin Corporation plc ADR*,1 | 15,405 | 330,283 | ||||||
Mirati Therapeutics, Inc.* | 2,511 | 323,567 | ||||||
Exelixis, Inc.* | 17,549 | 309,213 | ||||||
Immunomedics, Inc.* | 14,163 | 299,689 | ||||||
Bluebird Bio, Inc.* | 3,411 | 299,315 | ||||||
Intercept Pharmaceuticals, Inc.* | 2,309 | 286,131 | ||||||
Blueprint Medicines Corp.* | 3,479 | 278,703 | ||||||
United Therapeutics Corp.* | 3,067 | 270,141 | ||||||
Nektar Therapeutics* | 12,378 | 267,179 | ||||||
FibroGen, Inc.* | 5,983 | 256,611 | ||||||
BeiGene Ltd. ADR* | 1,484 | 245,988 | ||||||
PTC Therapeutics, Inc.* | 4,919 | 236,260 | ||||||
Ultragenyx Pharmaceutical, Inc.* | 5,160 | 220,384 | ||||||
Myriad Genetics, Inc.* | 7,172 | 195,294 | ||||||
Ligand Pharmaceuticals, Inc. — Class B* | 1,744 | 181,882 | ||||||
Sage Therapeutics, Inc.* | 2,204 | 159,107 | ||||||
Total Biotechnology | 16,156,492 | |||||||
Pharmaceuticals - 21.2% | ||||||||
AbbVie, Inc. | 17,907 | 1,585,486 | ||||||
Mylan N.V.* | 22,272 | 447,667 | ||||||
Sarepta Therapeutics, Inc.* | 3,391 | 437,575 | ||||||
Neurocrine Biosciences, Inc.* | 4,061 | 436,517 | ||||||
PRA Health Sciences, Inc.* | 3,315 | 368,462 | ||||||
Jazz Pharmaceuticals plc* | 2,180 | 325,430 | ||||||
Global Blood Therapeutics, Inc.* | 3,889 | 309,137 | ||||||
Alkermes plc* | 12,501 | 255,020 | ||||||
Agios Pharmaceuticals, Inc.* | 5,184 | 247,536 | ||||||
Portola Pharmaceuticals, Inc.* | 7,462 | 178,193 | ||||||
Total Pharmaceuticals | 4,591,023 | |||||||
Healthcare-Products - 1.8% | ||||||||
Bio-Techne Corp. | 1,832 | 402,142 | ||||||
Healthcare-Services - 1.6% | ||||||||
Syneos Health, Inc.* | 5,807 | 345,371 | ||||||
Total Common Stocks | ||||||||
(Cost $9,173,895) | 21,495,028 | |||||||
RIGHTS††† - 0.0% | ||||||||
Biotechnology - 0.0% | ||||||||
Clinical Data, Inc.*,2 | 4,730 | — | ||||||
Total Rights | ||||||||
(Cost $—) | — | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,3 - 0.8% | ||||||||
J.P. Morgan Securities LLC | $ | 111,189 | 111,189 | |||||
Barclays Capital, Inc. | 35,852 | 35,852 | ||||||
BofA Securities, Inc. | 35,853 | 35,853 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $182,894) | 182,894 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,4 - 1.1% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.47%5 | 233,942 | 233,942 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $233,942) | 233,942 | |||||||
Total Investments - 101.0% | ||||||||
(Cost $9,590,731) | $ | 21,911,864 | ||||||
Other Assets & Liabilities, net - (1.0)% | (225,158 | ) | ||||||
Total Net Assets - 100.0% | $ | 21,686,706 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 23 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
BIOTECHNOLOGY FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
††† | Value determined based on Level 3 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2019 — See Note 7. |
2 | Security was fair valued by the Valuation Committee at December 31, 2019. 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, 2019. |
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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 21,495,028 | $ | — | $ | — | $ | 21,495,028 | ||||||||
Rights | — | — | — | * | — | |||||||||||
Repurchase Agreements | — | 182,894 | — | 182,894 | ||||||||||||
Securities Lending Collateral | 233,942 | — | — | 233,942 | ||||||||||||
Total Assets | $ | 21,728,970 | $ | 182,894 | $ | — | $ | 21,911,864 |
* | Security has a market value of $0. |
24 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
BIOTECHNOLOGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value - including $233,289 of securities loaned (cost $9,407,837) | $ | 21,728,970 | ||
Repurchase agreements, at value (cost $182,894) | 182,894 | |||
Receivables: | ||||
Fund shares sold | 82,781 | |||
Securities lending income | 6,533 | |||
Interest | 8 | |||
Total assets | 22,001,186 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 233,942 | |||
Management fees | 16,013 | |||
Transfer agent and administrative fees | 4,710 | |||
Investor service fees | 4,710 | |||
Portfolio accounting fees | 1,884 | |||
Trustees’ fees* | 362 | |||
Fund shares redeemed | 162 | |||
Miscellaneous | 52,697 | |||
Total liabilities | 314,480 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 21,686,706 | ||
Net assets consist of: | ||||
Paid in capital | $ | 9,221,955 | ||
Total distributable earnings (loss) | 12,464,751 | |||
Net assets | $ | 21,686,706 | ||
Capital shares outstanding | 228,660 | |||
Net asset value per share | $ | 94.84 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends | $ | 179,085 | ||
Interest | 3,118 | |||
Income from securities lending, net | 7,998 | |||
Total investment income | 190,201 | |||
Expenses: | ||||
Management fees | 184,933 | |||
Investor service fees | 54,392 | |||
Transfer agent and administrative fees | 54,392 | |||
Professional fees | 39,114 | |||
Portfolio accounting fees | 21,756 | |||
Trustees’ fees* | 5,733 | |||
Custodian fees | 4,357 | |||
Line of credit fees | 626 | |||
Miscellaneous | 31,644 | |||
Total expenses | 396,947 | |||
Net investment loss | (206,746 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 3,097,358 | |||
Net realized gain | 3,097,358 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 1,789,927 | |||
Net change in unrealized appreciation (depreciation) | 1,789,927 | |||
Net realized and unrealized gain | 4,887,285 | |||
Net increase in net assets resulting from operations | $ | 4,680,539 |
* | 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 | $ | (206,746 | ) | $ | (282,823 | ) | ||
Net realized gain on investments | 3,097,358 | 1,936,319 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 1,789,927 | (4,235,879 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 4,680,539 | (2,582,383 | ) | |||||
Distributions to shareholders | (553,949 | ) | (71,198 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 21,705,706 | 26,330,050 | ||||||
Distributions reinvested | 553,949 | 71,198 | ||||||
Cost of shares redeemed | (25,699,255 | ) | (32,020,031 | ) | ||||
Net decrease from capital share transactions | (3,439,600 | ) | (5,618,783 | ) | ||||
Net increase (decrease) in net assets | 686,990 | (8,272,364 | ) | |||||
Net assets: | ||||||||
Beginning of year | 20,999,716 | 29,272,080 | ||||||
End of year | $ | 21,686,706 | $ | 20,999,716 | ||||
Capital share activity: | ||||||||
Shares sold | 246,464 | 290,934 | ||||||
Shares issued from reinvestment of distributions | 6,606 | 751 | ||||||
Shares redeemed | (293,073 | ) | (361,313 | ) | ||||
Net decrease in shares | (40,003 | ) | (69,628 | ) |
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 | $ | 78.16 | $ | 86.53 | $ | 66.86 | $ | 83.22 | $ | 76.71 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.83 | ) | (.96 | ) | (.79 | ) | (.80 | ) | (1.02 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 19.81 | (7.17 | ) | 20.46 | (15.56 | ) | 7.53 | |||||||||||||
Total from investment operations | 18.98 | (8.13 | ) | 19.67 | (16.36 | ) | 6.51 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (2.30 | ) | (.24 | ) | — | — | — | |||||||||||||
Total distributions | (2.30 | ) | (.24 | ) | — | — | — | |||||||||||||
Net asset value, end of period | $ | 94.84 | $ | 78.16 | $ | 86.53 | $ | 66.86 | $ | 83.22 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 24.67 | % | (9.44 | %) | 29.44 | % | (19.66 | %) | 8.47 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 21,687 | $ | 21,000 | $ | 29,272 | $ | 22,231 | $ | 42,005 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.95 | %) | (1.08 | %) | (0.99 | %) | (1.16 | %) | (1.17 | %) | ||||||||||
Total expenses | 1.82 | % | 1.72 | % | 1.70 | % | 1.66 | % | 1.60 | % | ||||||||||
Portfolio turnover rate | 105 | % | 109 | % | 137 | % | 127 | % | 161 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 27 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, Consumer Products Fund returned 22.33%, compared with a return of 31.49% for the S&P 500 Index. The S&P 500 Consumer Staples Index returned 27.61%.
The packaged foods & meats industry was the largest contributor to the Fund’s return for the period, followed by the household products industry and the soft drinks industry. No industry detracted from return.
Fund performance for the year got the biggest boost from Procter & Gamble Co., Philip Morris International, Inc., and Estee Lauder Companies, Inc. — Class A. The Fund’s weakest performers during the year were Kraft Heinz Co., Beyond Meat, Inc., and Herbalife Nutrition Ltd.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 29, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Procter & Gamble Co. | 6.8% |
Coca-Cola Co. | 6.0% |
PepsiCo, Inc. | 5.4% |
Philip Morris International, Inc. | 4.4% |
Altria Group, Inc. | 3.7% |
Mondelez International, Inc. — Class A | 3.4% |
Estee Lauder Companies, Inc. — Class A | 3.4% |
Colgate-Palmolive Co. | 3.0% |
Kimberly-Clark Corp. | 2.7% |
Sysco Corp. | 2.6% |
Top Ten Total | 41.4% |
“Ten Largest Holdings” excludes any temporary cash investments.
28 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Consumer Products Fund | 22.33% | 6.07% | 10.93% |
S&P 500 Consumer Staples Index | 27.61% | 8.31% | 12.13% |
S&P 500 Index | 31.49% | 11.70% | 13.56% |
* | 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 Staples Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 29 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
CONSUMER PRODUCTS FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.0% | ||||||||
Food - 37.5% | ||||||||
Mondelez International, Inc. — Class A | 11,603 | $ | 639,093 | |||||
Sysco Corp. | 5,599 | 478,939 | ||||||
Kraft Heinz Co. | 14,098 | 452,969 | ||||||
Tyson Foods, Inc. — Class A | 4,585 | 417,418 | ||||||
General Mills, Inc. | 7,699 | 412,359 | ||||||
Hershey Co. | 2,717 | 399,345 | ||||||
Kellogg Co. | 5,150 | 356,174 | ||||||
Hormel Foods Corp. | 7,874 | 355,196 | ||||||
Kroger Co. | 11,959 | 346,691 | ||||||
McCormick & Company, Inc. | 2,025 | 343,703 | ||||||
Campbell Soup Co. | 5,712 | 282,287 | ||||||
Conagra Brands, Inc. | 8,068 | 276,248 | ||||||
Lamb Weston Holdings, Inc. | 3,008 | 258,778 | ||||||
JM Smucker Co. | 2,370 | 246,788 | ||||||
US Foods Holding Corp.* | 5,316 | 222,687 | ||||||
Pilgrim’s Pride Corp.* | 6,240 | 204,142 | ||||||
Post Holdings, Inc.* | 1,843 | 201,071 | ||||||
Ingredion, Inc. | 1,952 | 181,438 | ||||||
Beyond Meat, Inc.*,1 | 2,036 | 153,922 | ||||||
Lancaster Colony Corp. | 939 | 150,334 | ||||||
Sanderson Farms, Inc. | 809 | 142,562 | ||||||
Simply Good Foods Co.* | 4,222 | 120,496 | ||||||
Hain Celestial Group, Inc.* | 4,576 | 118,770 | ||||||
Sprouts Farmers Market, Inc.* | 5,568 | 107,741 | ||||||
Hostess Brands, Inc.* | 6,837 | 99,410 | ||||||
Total Food | 6,968,561 | |||||||
Beverages - 25.6% | ||||||||
Coca-Cola Co. | 20,206 | 1,118,402 | ||||||
PepsiCo, Inc. | 7,288 | 996,051 | ||||||
Keurig Dr Pepper, Inc. | 16,048 | 464,590 | ||||||
Constellation Brands, Inc. — Class A | 2,306 | 437,563 | ||||||
Monster Beverage Corp.* | 6,616 | 420,447 | ||||||
Brown-Forman Corp. — Class B | 6,081 | 411,076 | ||||||
Molson Coors Beverage Co. — Class B | 4,615 | 248,748 | ||||||
Anheuser-Busch InBev S.A. ADR1 | 2,416 | 198,209 | ||||||
Coca-Cola European Partners plc | 3,731 | 189,833 | ||||||
Boston Beer Company, Inc. — Class A* | 413 | 156,052 | ||||||
National Beverage Corp.* | 2,208 | 112,652 | ||||||
Total Beverages | 4,753,623 | |||||||
Cosmetics & Personal Care - 15.2% | ||||||||
Procter & Gamble Co. | 10,168 | 1,269,983 | ||||||
Estee Lauder Companies, Inc. — Class A | 3,028 | 625,403 | ||||||
Colgate-Palmolive Co. | 8,084 | 556,503 | ||||||
Coty, Inc. — Class A | 18,338 | 206,302 | ||||||
Unilever N.V. — Class Y1 | 2,867 | 164,738 | ||||||
Total Cosmetics & Personal Care | 2,822,929 | |||||||
Agriculture - 12.1% | ||||||||
Philip Morris International, Inc. | 9,699 | 825,288 | ||||||
Altria Group, Inc. | 13,928 | 695,147 | ||||||
Archer-Daniels-Midland Co. | 7,947 | 368,343 | ||||||
Bunge Ltd. | 3,638 | 209,367 | ||||||
British American Tobacco plc ADR | 3,789 | 160,881 | ||||||
Total Agriculture | 2,259,026 | |||||||
Household Products & Housewares - 6.0% | ||||||||
Kimberly-Clark Corp. | 3,596 | 494,630 | ||||||
Clorox Co. | 2,067 | 317,367 | ||||||
Church & Dwight Company, Inc. | 4,264 | 299,930 | ||||||
Total Household Products & Housewares | 1,111,927 | |||||||
Pharmaceuticals - 1.0% | ||||||||
Herbalife Nutrition Ltd.* | 4,005 | 190,918 | ||||||
Retail — 0.9% | ||||||||
Casey’s General Stores, Inc. | 1,099 | 174,730 | ||||||
Electrical Components & Equipment - 0.7% | ||||||||
Energizer Holdings, Inc. | 2,663 | 133,736 | ||||||
Total Common Stocks | ||||||||
(Cost $11,216,703) | 18,415,450 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.6% | ||||||||
J.P. Morgan Securities LLC | $ | 70,987 | 70,987 | |||||
Barclays Capital, Inc. | 22,889 | 22,889 | ||||||
BofA Securities, Inc. | 22,889 | 22,889 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $116,765) | 116,765 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 1.8% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.47%4 | 336,925 | 336,925 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $336,925) | 336,925 | |||||||
Total Investments - 101.4% | ||||||||
(Cost $11,670,393) | $ | 18,869,140 | ||||||
Other Assets & Liabilities, net - (1.4)% | (263,286 | ) | ||||||
Total Net Assets - 100.0% | $ | 18,605,854 |
30 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
CONSUMER PRODUCTS 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, 2019 — 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, 2019. |
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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 18,415,450 | $ | — | $ | — | $ | 18,415,450 | ||||||||
Repurchase Agreements | — | 116,765 | — | 116,765 | ||||||||||||
Securities Lending Collateral | 336,925 | — | — | 336,925 | ||||||||||||
Total Assets | $ | 18,752,375 | $ | 116,765 | $ | — | $ | 18,869,140 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 31 |
CONSUMER PRODUCTS FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value - including $330,218 of securities loaned (cost $11,553,628) | $ | 18,752,375 | ||
Repurchase agreements, at value (cost $116,765) | 116,765 | |||
Receivables: | ||||
Fund shares sold | 92,300 | |||
Dividends | 43,396 | |||
Foreign tax reclaims | 1,413 | |||
Securities lending income | 95 | |||
Interest | 5 | |||
Total assets | 19,006,349 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 336,925 | |||
Management fees | 12,895 | |||
Transfer agent and administrative fees | 3,793 | |||
Investor service fees | 3,793 | |||
Portfolio accounting fees | 1,517 | |||
Fund shares redeemed | 309 | |||
Trustees’ fees* | 283 | |||
Miscellaneous | 40,980 | |||
Total liabilities | 400,495 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 18,605,854 | ||
Net assets consist of: | ||||
Paid in capital | $ | 12,555,734 | ||
Total distributable earnings (loss) | 6,050,120 | |||
Net assets | $ | 18,605,854 | ||
Capital shares outstanding | 275,915 | |||
Net asset value per share | $ | 67.43 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $90) | $ | 432,452 | ||
Interest | 2,069 | |||
Income from securities lending, net | 14,476 | |||
Total investment income | 448,997 | |||
Expenses: | ||||
Management fees | 141,439 | |||
Investor service fees | 41,599 | |||
Transfer agent and administrative fees | 41,599 | |||
Professional fees | 29,578 | |||
Portfolio accounting fees | 16,640 | |||
Trustees’ fees* | 3,543 | |||
Custodian fees | 3,049 | |||
Line of credit fees | 17 | |||
Miscellaneous | 24,827 | |||
Total expenses | 302,291 | |||
Net investment income | 146,706 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (171,518 | ) | ||
Net realized loss | (171,518 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 3,086,914 | |||
Net change in unrealized appreciation (depreciation) | 3,086,914 | |||
Net realized and unrealized gain | 2,915,396 | |||
Net increase in net assets resulting from operations | $ | 3,062,102 |
* | 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 | $ | 146,706 | $ | 154,297 | ||||
Net realized gain (loss) on investments | (171,518 | ) | 227,545 | |||||
Net change in unrealized appreciation (depreciation) on investments | 3,086,914 | (2,430,390 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 3,062,102 | (2,048,548 | ) | |||||
Distributions to shareholders | (191,931 | ) | (517,916 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 31,752,552 | 24,322,968 | ||||||
Distributions reinvested | 191,931 | 517,916 | ||||||
Cost of shares redeemed | (29,329,889 | ) | (25,177,014 | ) | ||||
Net increase (decrease) from capital share transactions | 2,614,594 | (336,130 | ) | |||||
Net increase (decrease) in net assets | 5,484,765 | (2,902,594 | ) | |||||
Net assets: | ||||||||
Beginning of year | 13,121,089 | 16,023,683 | ||||||
End of year | $ | 18,605,854 | $ | 13,121,089 | ||||
Capital share activity: | ||||||||
Shares sold | 505,783 | 397,494 | ||||||
Shares issued from reinvestment of distributions | 3,006 | 8,554 | ||||||
Shares redeemed | (468,116 | ) | (412,473 | ) | ||||
Net increase (decrease) in shares | 40,673 | (6,425 | ) |
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 | $ | 55.78 | $ | 66.30 | $ | 61.79 | $ | 61.56 | $ | 60.19 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .56 | .70 | .17 | .44 | .58 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 11.84 | (8.51 | ) | 6.79 | 3.10 | 3.14 | ||||||||||||||
Total from investment operations | 12.40 | (7.81 | ) | 6.96 | 3.54 | 3.72 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.60 | ) | (.45 | ) | (.64 | ) | (.42 | ) | (.34 | ) | ||||||||||
Net realized gains | (.15 | ) | (2.26 | ) | (1.81 | ) | (2.89 | ) | (2.01 | ) | ||||||||||
Total distributions | (.75 | ) | (2.71 | ) | (2.45 | ) | (3.31 | ) | (2.35 | ) | ||||||||||
Net asset value, end of period | $ | 67.43 | $ | 55.78 | $ | 66.30 | $ | 61.79 | $ | 61.56 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 22.33 | % | (12.12 | %) | 11.53 | % | 5.42 | % | 6.22 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 18,606 | $ | 13,121 | $ | 16,024 | $ | 18,410 | $ | 32,481 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.88 | % | 1.14 | % | 0.27 | % | 0.68 | % | 0.95 | % | ||||||||||
Total expenses | 1.82 | % | 1.72 | % | 1.70 | % | 1.65 | % | 1.61 | % | ||||||||||
Portfolio turnover rate | 177 | % | 176 | % | 133 | % | 161 | % | 225 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
34 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, Electronics Fund returned 59.28%, compared with a return of 31.49% for the S&P 500 Index. The S&P 500 Information Technology Index returned 50.29%.
The semiconductors group was the largest contributor to return, followed by the semiconductor equipment industry. The electrical components & equipment industry was the only detractor from return.
Fund performance got the biggest boost from NVIDIA Corp., Advanced Micro Devices, Inc., and Lam Research Corp. Holdings detracting the most from the Fund’s performance for the period were SunPower Corp., Enphase Energy, Inc., and Xperi 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: August 3, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Intel Corp. | 8.2% |
NVIDIA Corp. | 6.0% |
Broadcom, Inc. | 5.6% |
Texas Instruments, Inc. | 5.6% |
QUALCOMM, Inc. | 5.0% |
Micron Technology, Inc. | 3.8% |
Applied Materials, Inc. | 3.8% |
Advanced Micro Devices, Inc. | 3.7% |
Analog Devices, Inc. | 3.3% |
Lam Research Corp. | 3.2% |
Top Ten Total | 48.2% |
“Ten Largest Holdings” excludes any temporary cash investments.
THE RYDEX FUNDS ANNUAL REPORT | 35 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Electronics Fund | 59.28% | 18.26% | 13.58% |
S&P 500 Information Technology Index | 50.29% | 20.20% | 17.50% |
S&P 500 Index | 31.49% | 11.70% | 13.56% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
36 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
ELECTRONICS FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.1% | ||||||||
Semiconductors - 93.2% | ||||||||
Intel Corp. | 15,465 | $ | 925,580 | |||||
NVIDIA Corp. | 2,861 | 673,193 | ||||||
Broadcom, Inc. | 1,999 | 631,724 | ||||||
Texas Instruments, Inc. | 4,887 | 626,953 | ||||||
QUALCOMM, Inc. | 6,438 | 568,025 | ||||||
Micron Technology, Inc.* | 7,992 | 429,810 | ||||||
Applied Materials, Inc. | 6,965 | 425,144 | ||||||
Advanced Micro Devices, Inc.* | 9,109 | 417,739 | ||||||
Analog Devices, Inc. | 3,143 | 373,514 | ||||||
Lam Research Corp. | 1,253 | 366,377 | ||||||
KLA Corp. | 1,703 | 303,423 | ||||||
NXP Semiconductor N.V. | 2,371 | 301,733 | ||||||
Microchip Technology, Inc. | 2,740 | 286,933 | ||||||
Xilinx, Inc. | 2,915 | 285,000 | ||||||
Skyworks Solutions, Inc. | 2,144 | 259,167 | ||||||
Marvell Technology Group Ltd. | 9,038 | 240,049 | ||||||
Maxim Integrated Products, Inc. | 3,753 | 230,847 | ||||||
Taiwan Semiconductor Manufacturing Company Ltd. ADR | 3,898 | 226,474 | ||||||
Qorvo, Inc.* | 1,774 | 206,192 | ||||||
Teradyne, Inc. | 2,807 | 191,409 | ||||||
ON Semiconductor Corp.* | 7,443 | 181,460 | ||||||
ASML Holding N.V. — Class G | 606 | 179,340 | ||||||
Cypress Semiconductor Corp. | 7,139 | 166,553 | ||||||
Monolithic Power Systems, Inc. | 881 | 156,836 | ||||||
Entegris, Inc. | 2,918 | 146,163 | ||||||
MKS Instruments, Inc. | 1,252 | 137,732 | ||||||
Mellanox Technologies Ltd.* | 1,137 | 133,234 | ||||||
Silicon Laboratories, Inc.* | 1,091 | 126,534 | ||||||
STMicroelectronics N.V. — Class Y1 | 4,673 | 125,750 | ||||||
Cree, Inc.* | 2,679 | 123,636 | ||||||
Cirrus Logic, Inc.* | 1,492 | 122,956 | ||||||
Cabot Microelectronics Corp. | 798 | 115,167 | ||||||
Semtech Corp.* | 2,044 | 108,128 | ||||||
Inphi Corp.* | 1,398 | 103,480 | ||||||
Diodes, Inc.* | 1,767 | 99,606 | ||||||
Power Integrations, Inc. | 1,002 | 99,108 | ||||||
Brooks Automation, Inc. | 2,347 | 98,480 | ||||||
Lattice Semiconductor Corp.* | 4,681 | 89,594 | ||||||
Ambarella, Inc.* | 1,367 | 82,785 | ||||||
Synaptics, Inc.* | 1,226 | 80,634 | ||||||
MACOM Technology Solutions Holdings, Inc.* | 2,851 | 75,837 | ||||||
Total Semiconductors | 10,522,299 | |||||||
Energy-Alternate Sources - 3.5% | ||||||||
SolarEdge Technologies, Inc.* | 1,615 | 153,570 | ||||||
First Solar, Inc.* | 2,431 | 136,039 | ||||||
Enphase Energy, Inc.*,1 | 3,887 | 101,567 | ||||||
Total Energy-Alternate Sources | 391,176 | |||||||
Electrical Components & Equipment - 1.6% | ||||||||
Universal Display Corp. | 868 | 178,869 | ||||||
Electronics - 0.8% | ||||||||
Advanced Energy Industries, Inc.* | 1,325 | 94,340 | ||||||
Total Common Stocks | ||||||||
(Cost $5,603,868) | 11,186,684 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.7% | ||||||||
J.P. Morgan Securities LLC | $ | 50,338 | 50,338 | |||||
Barclays Capital, Inc. | 16,231 | 16,231 | ||||||
BofA Securities, Inc. | 16,231 | 16,231 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $82,800) | 82,800 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 1.4% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.47%4 | 154,463 | 154,463 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $154,463) | 154,463 | |||||||
Total Investments - 101.2% | ||||||||
(Cost $5,841,131) | $ | 11,423,947 | ||||||
Other Assets & Liabilities, net - (1.2)% | (130,606 | ) | ||||||
Total Net Assets - 100.0% | $ | 11,293,341 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 37 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
ELECTRONICS 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, 2019 — 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, 2019. |
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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 11,186,684 | $ | — | $ | — | $ | 11,186,684 | ||||||||
Repurchase Agreements | — | 82,800 | — | 82,800 | ||||||||||||
Securities Lending Collateral | 154,463 | — | — | 154,463 | ||||||||||||
Total Assets | $ | 11,341,147 | $ | 82,800 | $ | — | $ | 11,423,947 |
38 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
ELECTRONICS FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value - including $153,105 of securities loaned (cost $5,758,331) | $ | 11,341,147 | ||
Repurchase agreements, at value (cost $82,800) | 82,800 | |||
Receivables: | ||||
Fund shares sold | 61,352 | |||
Dividends | 5,419 | |||
Securities lending income | 53 | |||
Interest | 3 | |||
Total assets | 11,490,774 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 154,463 | |||
Fund shares redeemed | 11,020 | |||
Management fees | 7,433 | |||
Transfer agent and administrative fees | 2,186 | |||
Investor service fees | 2,186 | |||
Portfolio accounting fees | 875 | |||
Trustees’ fees* | 132 | |||
Miscellaneous | 19,138 | |||
Total liabilities | 197,433 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 11,293,341 | ||
Net assets consist of: | ||||
Paid in capital | $ | 6,566,637 | ||
Total distributable earnings (loss) | 4,726,704 | |||
Net assets | $ | 11,293,341 | ||
Capital shares outstanding | 106,700 | |||
Net asset value per share | $ | 105.84 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $423) | $ | 119,988 | ||
Interest | 1,133 | |||
Income from securities lending, net | 237 | |||
Total investment income | 121,358 | |||
Expenses: | ||||
Management fees | 64,789 | |||
Investor service fees | 19,056 | |||
Transfer agent and administrative fees | 19,055 | |||
Professional fees | 13,561 | |||
Portfolio accounting fees | 7,622 | |||
Trustees’ fees* | 1,710 | |||
Custodian fees | 1,613 | |||
Line of credit fees | 12 | |||
Miscellaneous | 11,196 | |||
Total expenses | 138,614 | |||
Net investment loss | (17,256 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 118,036 | |||
Net realized gain | 118,036 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 3,133,221 | |||
Net change in unrealized appreciation (depreciation) | 3,133,221 | |||
Net realized and unrealized gain | 3,251,257 | |||
Net increase in net assets resulting from operations | $ | 3,234,001 |
* | 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 | $ | (17,256 | ) | $ | (7,149 | ) | ||
Net realized gain on investments | 118,036 | 1,317,537 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 3,133,221 | (2,100,923 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 3,234,001 | (790,535 | ) | |||||
Distributions to shareholders | (94,380 | ) | (242,664 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 19,375,763 | 21,819,055 | ||||||
Distributions reinvested | 94,380 | 242,664 | ||||||
Cost of shares redeemed | (16,176,082 | ) | (27,404,421 | ) | ||||
Net increase (decrease) from capital share transactions | 3,294,061 | (5,342,702 | ) | |||||
Net increase (decrease) in net assets | 6,433,682 | (6,375,901 | ) | |||||
Net assets: | ||||||||
Beginning of year | 4,859,659 | 11,235,560 | ||||||
End of year | $ | 11,293,341 | $ | 4,859,659 | ||||
Capital share activity: | ||||||||
Shares sold | 218,456 | 262,533 | ||||||
Shares issued from reinvestment of distributions | 1,043 | 2,952 | ||||||
Shares redeemed | (185,011 | ) | (333,916 | ) | ||||
Net increase (decrease) in shares | 34,488 | (68,431 | ) |
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 | $ | 67.30 | $ | 79.89 | $ | 60.95 | $ | 49.03 | $ | 48.01 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.20 | ) | (.07 | ) | (.34 | ) | (.07 | ) | (.15 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 39.89 | (9.54 | ) | 19.28 | 11.99 | 1.17 | ||||||||||||||
Total from investment operations | 39.69 | (9.61 | ) | 18.94 | 11.92 | 1.02 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (1.15 | ) | (2.98 | ) | — | — | — | |||||||||||||
Total distributions | (1.15 | ) | (2.98 | ) | — | — | — | |||||||||||||
Net asset value, end of period | $ | 105.84 | $ | 67.30 | $ | 79.89 | $ | 60.95 | $ | 49.03 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 59.28 | % | (12.71 | %) | 31.06 | % | 24.34 | % | 2.10 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 11,293 | $ | 4,860 | $ | 11,236 | $ | 8,709 | $ | 5,374 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.23 | %) | (0.09 | %) | (0.48 | %) | (0.14 | %) | �� | (0.31 | %) | |||||||||
Total expenses | 1.82 | % | 1.71 | % | 1.70 | % | 1.66 | % | 1.59 | % | ||||||||||
Portfolio turnover rate | 208 | % | 248 | % | 327 | % | 362 | % | 351 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 41 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, Energy Fund returned 6.81%, compared with the 31.49% return of the S&P 500 Index. The S&P 500 Energy Index returned 11.81%.
The oil & gas storage & transportation industry contributed the most to return, followed by the oil & gas refining & marketing industry and the integrated oil & gas industry. The oil & consumable fuels industry was the only detractor from return.
Anadarko Petroleum Corp., Kinder Morgan, Inc., and Phillips 66 contributed the most to the Fund’s return for the year. Holdings detracting the most from performance were Occidental Petroleum Corp., Peabody Energy Corp., and Whiting Petroleum Corp.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 29, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Exxon Mobil Corp. | 7.9% |
Chevron Corp. | 7.0% |
ConocoPhillips | 3.9% |
Schlumberger Ltd. | 3.4% |
EOG Resources, Inc. | 3.2% |
Phillips 66 | 3.2% |
Kinder Morgan, Inc. | 3.2% |
Occidental Petroleum Corp. | 2.9% |
Marathon Petroleum Corp. | 2.8% |
Valero Energy Corp. | 2.8% |
Top Ten Total | 40.3% |
“Ten Largest Holdings” excludes any temporary cash investments.
42 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Energy Fund | 6.81% | (7.32%) | (2.35%) |
S&P 500 Energy Index | 11.81% | (1.85%) | 3.32% |
S&P 500 Index | 31.49% | 11.70% | 13.56% |
* | 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 Energy index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 43 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
ENERGY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.5% | ||||||||
Oil & Gas - 70.2% | ||||||||
Exxon Mobil Corp. | 11,070 | $ | 772,465 | |||||
Chevron Corp. | 5,660 | 682,087 | ||||||
ConocoPhillips | 5,886 | 382,767 | ||||||
EOG Resources, Inc. | 3,762 | 315,105 | ||||||
Phillips 66 | 2,809 | 312,951 | ||||||
Occidental Petroleum Corp. | 6,791 | 279,857 | ||||||
Marathon Petroleum Corp. | 4,596 | 276,909 | ||||||
Valero Energy Corp. | 2,947 | 275,987 | ||||||
Pioneer Natural Resources Co. | 1,495 | 226,298 | ||||||
BP plc ADR | 5,665 | 213,797 | ||||||
Hess Corp. | 3,128 | 208,982 | ||||||
Concho Resources, Inc. | 2,193 | 192,041 | ||||||
Petroleo Brasileiro S.A. ADR | 11,263 | 179,532 | ||||||
Diamondback Energy, Inc. | 1,913 | 177,641 | ||||||
Continental Resources, Inc. | 4,692 | 160,936 | ||||||
Noble Energy, Inc. | 6,357 | 157,908 | ||||||
Marathon Oil Corp. | 11,109 | 150,860 | ||||||
Apache Corp. | 5,750 | 147,143 | ||||||
Devon Energy Corp. | 5,480 | 142,316 | ||||||
HollyFrontier Corp. | 2,510 | 127,282 | ||||||
Cabot Oil & Gas Corp. — Class A | 6,889 | 119,937 | ||||||
Royal Dutch Shell plc — Class A ADR | 1,889 | 111,413 | ||||||
Parsley Energy, Inc. — Class A | 5,828 | 110,207 | ||||||
WPX Energy, Inc.* | 7,899 | 108,532 | ||||||
Cimarex Energy Co. | 1,988 | 104,350 | ||||||
Helmerich & Payne, Inc. | 2,235 | 101,536 | ||||||
Suncor Energy, Inc. | 2,874 | 94,267 | ||||||
Murphy Oil Corp. | 3,511 | 94,095 | ||||||
CVR Energy, Inc. | 2,220 | 89,755 | ||||||
PBF Energy, Inc. — Class A | 2,766 | 86,769 | ||||||
Canadian Natural Resources Ltd. | 2,421 | 78,319 | ||||||
Equities Corp. | 6,747 | 73,542 | ||||||
Delek US Holdings, Inc. | 2,065 | 69,239 | ||||||
Matador Resources Co.* | 3,640 | 65,411 | ||||||
PDC Energy, Inc.* | 2,141 | 56,030 | ||||||
Equinor ASA ADR | 2,690 | 53,558 | ||||||
SM Energy Co. | 4,537 | 50,996 | ||||||
Total Oil & Gas | 6,850,820 | |||||||
Pipelines - 15.1% | ||||||||
Kinder Morgan, Inc. | 14,727 | 311,771 | ||||||
ONEOK, Inc. | 3,337 | 252,511 | ||||||
Williams Companies, Inc. | 10,141 | 240,545 | ||||||
Cheniere Energy, Inc.* | 2,878 | 175,759 | ||||||
Targa Resources Corp. | 3,444 | 140,618 | ||||||
Enbridge, Inc. | 2,643 | 105,112 | ||||||
Equitrans Midstream Corp. | 6,530 | 87,241 | ||||||
Plains GP Holdings, LP — Class A* | 4,384 | 83,077 | ||||||
TC Energy Corp. | 1,475 | 78,632 | ||||||
Total Pipelines | 1,475,266 | |||||||
Oil & Gas Services - 13.0% | ||||||||
Schlumberger Ltd. | 8,357 | 335,951 | ||||||
Baker Hughes Co. | 9,016 | 231,080 | ||||||
Halliburton Co. | 8,475 | 207,383 | ||||||
National Oilwell Varco, Inc. | 5,551 | 139,053 | ||||||
TechnipFMC plc | 5,733 | 122,915 | ||||||
Apergy Corp.* | 2,120 | 71,614 | ||||||
Patterson-UTI Energy, Inc. | 6,202 | 65,121 | ||||||
Oceaneering International, Inc.* | 3,611 | 53,840 | ||||||
Core Laboratories N.V. | 1,102 | 41,512 | ||||||
Total Oil & Gas Services | 1,268,469 | |||||||
Metal Fabricate & Hardware - 0.7% | ||||||||
Tenaris S.A. ADR | 3,045 | 68,939 | ||||||
Transportation - 0.5% | ||||||||
Golar LNG Ltd. | 3,680 | 52,330 | ||||||
Total Common Stocks | ||||||||
(Cost $5,704,284) | 9,715,824 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,1 - 0.7% | ||||||||
J.P. Morgan Securities LLC | $ | 40,646 | 40,646 | |||||
Barclays Capital, Inc. | 13,106 | 13,106 | ||||||
BofA Securities, Inc. | 13,106 | 13,106 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $66,858) | 66,858 | |||||||
Total Investments - 100.2% | ||||||||
(Cost $5,771,142) | $ | 9,782,682 | ||||||
Other Assets & Liabilities, net - (0.2)% | (17,134 | ) | ||||||
Total Net Assets - 100.0% | $ | 9,765,548 |
44 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
ENERGY 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 | Repurchase Agreements — See Note 6. |
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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 9,715,824 | $ | — | $ | — | $ | 9,715,824 | ||||||||
Repurchase Agreements | — | 66,858 | — | 66,858 | ||||||||||||
Total Assets | $ | 9,715,824 | $ | 66,858 | $ | — | $ | 9,782,682 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 45 |
ENERGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value (cost $5,704,284) | $ | 9,715,824 | ||
Repurchase agreements, at value (cost $66,858) | 66,858 | |||
Receivables: | ||||
Dividends | 10,526 | |||
Fund shares sold | 4,807 | |||
Securities lending income | 50 | |||
Interest | 3 | |||
Total assets | 9,798,068 | |||
Liabilities: | ||||
Payable for: | ||||
Professional fees | 12,977 | |||
Management fees | 6,168 | |||
Printing fees | 4,141 | |||
Transfer agent and administrative fees | 1,814 | |||
Investor service fees | 1,814 | |||
Portfolio accounting fees | 726 | |||
Fund shares redeemed | 443 | |||
Trustees’ fees* | 147 | |||
Miscellaneous | 4,290 | |||
Total liabilities | 32,520 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 9,765,548 | ||
Net assets consist of: | ||||
Paid in capital | $ | 15,153,941 | ||
Total distributable earnings (loss) | (5,388,393 | ) | ||
Net assets | $ | 9,765,548 | ||
Capital shares outstanding | 165,614 | |||
Net asset value per share | $ | 58.97 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $3,614) | $ | 248,252 | ||
Interest | 1,151 | |||
Income from securities lending, net | 190 | |||
Total investment income | 249,593 | |||
Expenses: | ||||
Management fees | 75,932 | |||
Investor service fees | 22,333 | |||
Transfer agent and administrative fees | 22,333 | |||
Professional fees | 16,822 | |||
Portfolio accounting fees | 8,933 | |||
Trustees’ fees* | 2,898 | |||
Custodian fees | 2,201 | |||
Line of credit fees | 23 | |||
Miscellaneous | 11,676 | |||
Total expenses | 163,151 | |||
Net investment income | 86,442 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 556,001 | |||
Net realized gain | 556,001 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 158,152 | |||
Net change in unrealized appreciation (depreciation) | 158,152 | |||
Net realized and unrealized gain | 714,153 | |||
Net increase in net assets resulting from operations | $ | 800,595 |
* | 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 | $ | 86,442 | $ | 9,956 | ||||
Net realized gain on investments | 556,001 | 342,155 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 158,152 | (4,513,930 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 800,595 | (4,161,819 | ) | |||||
Distributions to shareholders | (18,218 | ) | (100,740 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 10,611,542 | 79,229,795 | ||||||
Distributions reinvested | 18,218 | 100,740 | ||||||
Cost of shares redeemed | (11,318,712 | ) | (82,713,811 | ) | ||||
Net decrease from capital share transactions | (688,952 | ) | (3,383,276 | ) | ||||
Net increase (decrease) in net assets | 93,425 | (7,645,835 | ) | |||||
Net assets: | ||||||||
Beginning of year | 9,672,123 | 17,317,958 | ||||||
End of year | $ | 9,765,548 | $ | 9,672,123 | ||||
Capital share activity: | ||||||||
Shares sold | 180,869 | 1,057,017 | ||||||
Shares issued from reinvestment of distributions | 307 | 1,272 | ||||||
Shares redeemed | (190,397 | ) | (1,115,672 | ) | ||||
Net decrease in shares | (9,221 | ) | (57,383 | ) |
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 | $ | 55.32 | $ | 74.58 | $ | 80.09 | $ | 61.43 | $ | 90.41 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .57 | .04 | .53 | .08 | .76 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 3.21 | (18.95 | ) | (5.61 | ) | 18.72 | (27.58 | ) | ||||||||||||
Total from investment operations | 3.78 | (18.91 | ) | (5.08 | ) | 18.80 | (26.82 | ) | ||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.13 | ) | (.35 | ) | (.43 | ) | (.14 | ) | (.36 | ) | ||||||||||
Net realized gains | — | — | — | — | (1.80 | ) | ||||||||||||||
Total distributions | (.13 | ) | (.35 | ) | (.43 | ) | (.14 | ) | (2.16 | ) | ||||||||||
Net asset value, end of period | $ | 58.97 | $ | 55.32 | $ | 74.58 | $ | 80.09 | $ | 61.43 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 6.81 | % | (25.49 | %) | (6.26 | %) | 31.37 | % | (30.22 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 9,766 | $ | 9,672 | $ | 17,318 | $ | 28,117 | $ | 19,682 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.97 | % | 0.06 | % | 0.75 | % | 0.42 | % | 0.91 | % | ||||||||||
Total expenses | 1.83 | % | 1.72 | % | 1.70 | % | 1.66 | % | 1.60 | % | ||||||||||
Portfolio turnover rate | 114 | % | 490 | % | 573 | % | 293 | % | 121 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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, 2019 |
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, 2019, Energy Services Fund returned -0.07%, compared with the S&P 500 Index, which returned 31.49%. The S&P 500 Energy Index returned 11.81%.
The oil & gas equipment & services industry contributed the most to return, followed by the industrial machinery industry. The oil & gas drilling industry was the only detractor from return.
Schlumberger Ltd., Baker Hughes Co., and Dril-Quip, Inc. were the Fund’s best-performing holdings for the year. The Fund’s worst-performing holdings included RPC, Inc., McDermott International, Inc., and Mammoth Energy Services, 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) | |
Schlumberger Ltd. | 15.0% |
Baker Hughes Co. | 10.3% |
Halliburton Co. | 7.7% |
National Oilwell Varco, Inc. | 6.2% |
TechnipFMC plc | 5.0% |
Helmerich & Payne, Inc. | 4.5% |
Transocean Ltd. | 3.6% |
Apergy Corp. | 3.2% |
Cactus, Inc. — Class A | 3.2% |
Tenaris S.A. ADR | 3.2% |
Top Ten Total | 61.9% |
“Ten Largest Holdings” excludes any temporary cash investments.
THE RYDEX FUNDS ANNUAL REPORT | 49 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Energy Services Fund | (0.07%) | (17.96%) | (9.38%) |
S&P 500 Energy Index | 11.81% | (1.85%) | 3.32% |
S&P 500 Index | 31.49% | 11.70% | 13.56% |
* | 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 Energy Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
50 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
ENERGY SERVICES FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.4% | ||||||||
Oil & Gas Services - 79.3% | ||||||||
Schlumberger Ltd. | 12,105 | $ | 486,621 | |||||
Baker Hughes Co. | 13,069 | 334,958 | ||||||
Halliburton Co. | 10,229 | 250,304 | ||||||
National Oilwell Varco, Inc. | 8,045 | 201,527 | ||||||
TechnipFMC plc | 7,530 | 161,443 | ||||||
Apergy Corp.* | 3,070 | 103,705 | ||||||
Patterson-UTI Energy, Inc. | 8,986 | 94,353 | ||||||
Dril-Quip, Inc.* | 1,762 | 82,655 | ||||||
Archrock, Inc. | 8,098 | 81,304 | ||||||
Oceaneering International, Inc.* | 5,239 | 78,113 | ||||||
Helix Energy Solutions Group, Inc.* | 8,093 | 77,936 | ||||||
NexTier Oilfield Solutions, Inc.* | 11,451 | 76,722 | ||||||
Liberty Oilfield Services, Inc. — Class A | 6,572 | 73,081 | ||||||
RPC, Inc.1 | 13,329 | 69,844 | ||||||
ProPetro Holding Corp.* | 6,186 | 69,593 | ||||||
Core Laboratories N.V. | 1,817 | 68,446 | ||||||
Oil States International, Inc.* | 3,857 | 62,908 | ||||||
DMC Global, Inc. | 1,155 | 51,906 | ||||||
Solaris Oilfield Infrastructure, Inc. — Class A | 3,677 | 51,478 | ||||||
Matrix Service Co.* | 2,190 | 50,107 | ||||||
US Silica Holdings, Inc. | 7,503 | 46,143 | ||||||
Total Oil & Gas Services | 2,573,147 | |||||||
Oil & Gas - 10.1% | ||||||||
Helmerich & Payne, Inc. | 3,232 | 146,830 | ||||||
Transocean Ltd.* | 16,975 | 116,788 | ||||||
Diamond Offshore Drilling, Inc.*,1 | 9,161 | 65,867 | ||||||
Total Oil & Gas | 329,485 | |||||||
Transportation - 3.6% | ||||||||
SEACOR Holdings, Inc.* | 1,427 | 61,575 | ||||||
Tidewater, Inc.* | 2,918 | 56,259 | ||||||
Total Transportation | 117,834 | |||||||
Machinery-Diversified - 3.2% | ||||||||
Cactus, Inc. — Class A | 3,017 | 103,543 | ||||||
Metal Fabricate & Hardware - 3.2% | ||||||||
Tenaris S.A. ADR | 4,562 | 103,284 | ||||||
Total Common Stocks | ||||||||
(Cost $2,258,679) | 3,227,293 |
Face Amount | ||||||||
REPURCHASE AGREEMENTS††,2- 0.9% | ||||||||
J.P. Morgan Securities LLC issued 12/31/19 at 1.53% due 01/02/20 | $ | 18,449 | $ | 18,449 | ||||
Barclays Capital, Inc. issued 12/31/19 at 1.40% due 01/02/20 | 5,949 | 5,949 | ||||||
BofA Securities, Inc. issued 12/31/19 at 1.50% due 01/02/20 | 5,949 | 5,949 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $30,347) | 30,347 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3- 3.3% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.47%4 | 105,953 | 105,953 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $105,953) | 105,953 | |||||||
Total Investments - 103.6% | ||||||||
(Cost $2,394,979) | $ | 3,363,593 | ||||||
Other Assets & Liabilities, net - (3.6)% | (118,251 | ) | ||||||
Total Net Assets - 100.0% | $ | 3,245,342 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 51 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
ENERGY SERVICES 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, 2019 — 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, 2019. |
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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 3,227,293 | $ | — | $ | — | $ | 3,227,293 | ||||||||
Repurchase Agreements | — | 30,347 | — | 30,347 | ||||||||||||
Securities Lending Collateral | 105,953 | — | — | 105,953 | ||||||||||||
Total Assets | $ | 3,333,246 | $ | 30,347 | $ | — | $ | 3,363,593 |
52 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
ENERGY SERVICES FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value - including $101,250 of securities loaned (cost $2,364,632) | $ | 3,333,246 | ||
Repurchase agreements, at value (cost $30,347) | 30,347 | |||
Receivables: | ||||
Dividends | 7,091 | |||
Fund shares sold | 22 | |||
Securities lending income | 11 | |||
Total assets | 3,370,717 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 105,953 | |||
Fund shares redeemed | 5,389 | |||
Management fees | 2,823 | |||
Transfer agent and administrative fees | 830 | |||
Investor service fees | 830 | |||
Portfolio accounting fees | 332 | |||
Trustees’ fees* | 63 | |||
Miscellaneous | 9,155 | |||
Total liabilities | 125,375 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 3,245,342 | ||
Net assets consist of: | ||||
Paid in capital | $ | 12,381,725 | ||
Total distributable earnings (loss) | (9,136,383 | ) | ||
Net assets | $ | 3,245,342 | ||
Capital shares outstanding | 107,134 | |||
Net asset value per share | $ | 30.29 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $620) | $ | 87,236 | ||
Interest | 569 | |||
Income from securities lending, net | 251 | |||
Total investment income | 88,056 | |||
Expenses: | ||||
Management fees | 32,735 | |||
Investor service fees | 9,628 | |||
Transfer agent and administrative fees | 9,628 | |||
Professional fees | 8,261 | |||
Portfolio accounting fees | 3,851 | |||
Trustees’ fees* | 1,287 | |||
Custodian fees | 1,080 | |||
Line of credit fees | 21 | |||
Miscellaneous | 4,062 | |||
Total expenses | 70,553 | |||
Net investment income | 17,503 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (684,717 | ) | ||
Net realized loss | (684,717 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 617,252 | |||
Net change in unrealized appreciation (depreciation) | 617,252 | |||
Net realized and unrealized loss | (67,465 | ) | ||
Net decrease in net assets resulting from operations | $ | (49,962 | ) |
* | 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) | $ | 17,503 | $ | (9,036 | ) | |||
Net realized loss on investments | (684,717 | ) | (139,979 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | 617,252 | (3,076,408 | ) | |||||
Net decrease in net assets resulting from operations | (49,962 | ) | (3,225,423 | ) | ||||
Distributions to shareholders | — | (203,149 | ) | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 17,158,557 | 23,622,688 | ||||||
Distributions reinvested | — | 203,149 | ||||||
Cost of shares redeemed | (17,355,257 | ) | (25,952,063 | ) | ||||
Net decrease from capital share transactions | (196,700 | ) | (2,126,226 | ) | ||||
Net decrease in net assets | (246,662 | ) | (5,554,798 | ) | ||||
Net assets: | ||||||||
Beginning of year | 3,492,004 | 9,046,802 | ||||||
End of year | $ | 3,245,342 | $ | 3,492,004 | ||||
Capital share activity: | ||||||||
Shares sold | 551,564 | 441,752 | ||||||
Shares issued from reinvestment of distributions | — | 3,791 | ||||||
Shares redeemed | (559,637 | ) | (487,404 | ) | ||||
Net decrease in shares | (8,073 | ) | (41,861 | ) |
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 | $ | 30.31 | $ | 57.60 | $ | 70.80 | $ | 58.00 | $ | 85.24 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .15 | (.07 | ) | 1.11 | (.03 | ) | .66 | |||||||||||||
Net gain (loss) on investments (realized and unrealized) | (.17 | ) | (25.46 | ) | (14.31 | ) | 12.92 | (27.60 | ) | |||||||||||
Total from investment operations | (.02 | ) | (25.53 | ) | (13.20 | ) | 12.89 | (26.94 | ) | |||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | — | (1.76 | ) | — | (.09 | ) | (.30 | ) | ||||||||||||
Total distributions | — | (1.76 | ) | — | (.09 | ) | (.30 | ) | ||||||||||||
Net asset value, end of period | $ | 30.29 | $ | 30.31 | $ | 57.60 | $ | 70.80 | $ | 58.00 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (0.07 | %) | (45.65 | %) | (18.64 | %) | 23.15 | % | (31.70 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 3,245 | $ | 3,492 | $ | 9,047 | $ | 13,770 | $ | 11,475 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.45 | % | (0.13 | %) | 1.92 | % | (0.26 | %) | 0.85 | % | ||||||||||
Total expenses | 1.83 | % | 1.71 | % | 1.70 | % | 1.66 | % | 1.60 | % | ||||||||||
Portfolio turnover rate | 423 | % | 331 | % | 338 | % | 291 | % | 175 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Reverse Share Split — Per share amounts for the years 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, 2019 |
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, 2019, Financial Services Fund returned 28.08%, while the S&P 500 Index returned 31.49% over the same period. The S&P 500 Financials Index returned 32.12%.
The diversified banks industry was the largest contributor to return, followed by the regional bank industry and the specialized real estate investment trusts industry. There were no detractors from return.
JPMorgan Chase & Co., Bank of America Corp., and Citigroup, Inc. were the holdings that contributed the most to the Fund’s return for the period. Macerich Co., Interactive Brokers Group, Inc. — Class A, and Uniti Group, 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: July 20, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Berkshire Hathaway, Inc. — Class B | 3.3% |
JPMorgan Chase & Co. | 2.9% |
Bank of America Corp. | 2.5% |
Wells Fargo & Co. | 2.1% |
Citigroup, Inc. | 1.9% |
American Tower Corp. — Class A | 1.4% |
American Express Co. | 1.4% |
U.S. Bancorp | 1.3% |
Goldman Sachs Group, Inc. | 1.3% |
Morgan Stanley | 1.3% |
Top Ten Total | 19.4% |
“Ten Largest Holdings” excludes any temporary cash investments.
56 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Financial Services Fund | 28.08% | 7.63% | 9.49% |
S&P 500 Financials Index | 32.12% | 11.17% | 12.26% |
S&P 500 Index | 31.49% | 11.70% | 13.56% |
* | 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 Financials Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 57 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
FINANCIAL SERVICES FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.5% | ||||||||
Banks - 28.7% | ||||||||
JPMorgan Chase & Co. | 2,398 | $ | 334,281 | |||||
Bank of America Corp. | 8,030 | 282,817 | ||||||
Wells Fargo & Co. | 4,437 | 238,711 | ||||||
Citigroup, Inc. | 2,634 | 210,430 | ||||||
U.S. Bancorp | 2,548 | 151,071 | ||||||
Goldman Sachs Group, Inc. | 639 | 146,925 | ||||||
Morgan Stanley | 2,808 | 143,545 | ||||||
Truist Financial Corp. | 2,446 | 137,759 | ||||||
PNC Financial Services Group, Inc. | 816 | 130,258 | ||||||
Bank of New York Mellon Corp. | 2,126 | 107,001 | ||||||
State Street Corp. | 1,073 | 84,874 | ||||||
Northern Trust Corp. | 695 | 73,837 | ||||||
Fifth Third Bancorp | 2,398 | 73,714 | ||||||
M&T Bank Corp. | 431 | 73,162 | ||||||
KeyCorp | 3,497 | 70,779 | ||||||
First Republic Bank | 588 | 69,061 | ||||||
Citizens Financial Group, Inc. | 1,639 | 66,560 | ||||||
Regions Financial Corp. | 3,730 | 64,007 | ||||||
Huntington Bancshares, Inc. | 4,140 | 62,431 | ||||||
ICICI Bank Ltd. ADR | 4,021 | 60,677 | ||||||
HDFC Bank Ltd. ADR | 954 | 60,455 | ||||||
HSBC Holdings plc ADR | 1,470 | 57,462 | ||||||
Popular, Inc. | 957 | 56,224 | ||||||
SVB Financial Group* | 219 | 54,978 | ||||||
Comerica, Inc. | 701 | 50,297 | ||||||
Zions Bancorp North America | 911 | 47,299 | ||||||
Commerce Bancshares, Inc. | 648 | 44,018 | ||||||
Signature Bank | 311 | 42,486 | ||||||
East West Bancorp, Inc. | 867 | 42,223 | ||||||
TCF Financial Corp. | 900 | 42,120 | ||||||
Synovus Financial Corp. | 981 | 38,455 | ||||||
First Horizon National Corp. | 2,155 | 35,687 | ||||||
PacWest Bancorp | 876 | 33,524 | ||||||
Wintrust Financial Corp. | 443 | 31,409 | ||||||
Texas Capital Bancshares, Inc.* | 453 | 25,717 | ||||||
Total Banks | 3,244,254 | |||||||
REITs - 28.0% | ||||||||
American Tower Corp. — Class A | 696 | 159,955 | ||||||
Crown Castle International Corp. | 841 | 119,548 | ||||||
Prologis, Inc. | 1,341 | 119,537 | ||||||
Equinix, Inc. | 186 | 108,568 | ||||||
Simon Property Group, Inc. | 720 | 107,251 | ||||||
Public Storage | 451 | 96,045 | ||||||
Welltower, Inc. | 1,129 | 92,330 | ||||||
Equity Residential | 1,059 | 85,694 | ||||||
AvalonBay Communities, Inc. | 404 | 84,719 | ||||||
SBA Communications Corp. | 338 | 81,455 | ||||||
Digital Realty Trust, Inc. | 658 | 78,789 | ||||||
Realty Income Corp. | 1,056 | 77,753 | ||||||
Weyerhaeuser Co. | 2,480 | 74,896 | ||||||
Ventas, Inc. | 1,269 | 73,272 | ||||||
Boston Properties, Inc. | 528 | 72,790 | ||||||
Essex Property Trust, Inc. | 233 | 70,100 | ||||||
Healthpeak Properties, Inc. | 1,957 | 67,458 | ||||||
Alexandria Real Estate Equities, Inc. | 411 | 66,409 | ||||||
Invitation Homes, Inc. | 2,126 | 63,716 | ||||||
Mid-America Apartment Communities, Inc. | 463 | 61,051 | ||||||
UDR, Inc. | 1,257 | 58,702 | ||||||
Sun Communities, Inc. | 390 | 58,539 | ||||||
WP Carey, Inc. | 730 | 58,429 | ||||||
Extra Space Storage, Inc. | 553 | 58,408 | ||||||
Host Hotels & Resorts, Inc. | 3,081 | 57,153 | ||||||
Duke Realty Corp. | 1,638 | 56,790 | ||||||
Vornado Realty Trust | 824 | 54,796 | ||||||
VICI Properties, Inc. | 2,115 | 54,038 | ||||||
Medical Properties Trust, Inc. | 2,500 | 52,775 | ||||||
Regency Centers Corp. | 805 | 50,787 | ||||||
AGNC Investment Corp. | 2,764 | 48,868 | ||||||
Omega Healthcare Investors, Inc. | 1,143 | 48,406 | ||||||
Gaming and Leisure Properties, Inc. | 1,110 | 47,786 | ||||||
Lamar Advertising Co. — Class A | 535 | 47,754 | ||||||
Iron Mountain, Inc. | 1,495 | 47,646 | ||||||
Kimco Realty Corp. | 2,268 | 46,970 | ||||||
STORE Capital Corp. | 1,256 | 46,773 | ||||||
American Homes 4 Rent — Class A | 1,705 | 44,688 | ||||||
Apartment Investment & Management Co. — Class A | 842 | 43,489 | ||||||
CyrusOne, Inc. | 663 | 43,380 | ||||||
Douglas Emmett, Inc. | 982 | 43,110 | ||||||
SL Green Realty Corp. | 468 | 43,000 | ||||||
Americold Realty Trust | 1,180 | 41,371 | ||||||
Brixmor Property Group, Inc. | 1,861 | 40,216 | ||||||
Park Hotels & Resorts, Inc. | 1,514 | 39,167 | ||||||
Cousins Properties, Inc. | 950 | 39,140 | ||||||
CubeSmart | 1,242 | 39,098 | ||||||
STAG Industrial, Inc. | 1,040 | 32,833 | ||||||
Sabra Health Care REIT, Inc. | 1,532 | 32,693 | ||||||
Macerich Co.1 | 1,108 | 29,827 | ||||||
Total REITs | 3,167,968 | |||||||
Insurance - 21.2% | ||||||||
Berkshire Hathaway, Inc. — Class B* | 1,647 | 373,046 | ||||||
Marsh & McLennan Companies, Inc. | 1,042 | 116,089 | ||||||
Chubb Ltd. | 701 | 109,118 | ||||||
MetLife, Inc. | 2,128 | 108,464 | ||||||
American International Group, Inc. | 2,044 | 104,919 | ||||||
Progressive Corp. | 1,430 | 103,518 | ||||||
Aflac, Inc. | 1,862 | 98,500 | ||||||
Prudential Financial, Inc. | 1,037 | 97,208 | ||||||
Allstate Corp. | 835 | 93,896 | ||||||
Travelers Companies, Inc. | 676 | 92,578 | ||||||
Willis Towers Watson plc | 406 | 81,988 | ||||||
Hartford Financial Services Group, Inc. | 1,219 | 74,079 | ||||||
Arch Capital Group Ltd.* | 1,625 | 69,696 | ||||||
Arthur J Gallagher & Co. | 701 | 66,756 | ||||||
Cincinnati Financial Corp. | 623 | 65,508 | ||||||
Aon plc | 309 | 64,362 | ||||||
Loews Corp. | 1,200 | 62,988 | ||||||
Principal Financial Group, Inc. | 1,120 | 61,600 | ||||||
Everest Re Group Ltd. | 204 | 56,475 |
58 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
FINANCIAL SERVICES FUND |
| Shares | Value | ||||||
Fidelity National Financial, Inc. | 1,234 | $ | 55,962 | |||||
Athene Holding Ltd. — Class A* | 1,163 | 54,696 | ||||||
Lincoln National Corp. | 913 | 53,876 | ||||||
AXA Equitable Holdings, Inc. | 2,136 | 52,930 | ||||||
Brown & Brown, Inc. | 1,330 | 52,508 | ||||||
Erie Indemnity Co. — Class A | 270 | 44,820 | ||||||
Voya Financial, Inc. | 727 | 44,332 | ||||||
Assurant, Inc. | 330 | 43,256 | ||||||
Unum Group | 1,331 | 38,812 | ||||||
Brighthouse Financial, Inc.* | 794 | 31,149 | ||||||
eHealth, Inc.* | 240 | 23,059 | ||||||
Total Insurance | 2,396,188 | |||||||
Diversified Financial Services - 14.4% | ||||||||
American Express Co. | 1,281 | 159,472 | ||||||
BlackRock, Inc. — Class A | 271 | 136,232 | ||||||
CME Group, Inc. — Class A | 648 | 130,067 | ||||||
Charles Schwab Corp. | 2,596 | 123,466 | ||||||
Intercontinental Exchange, Inc. | 1,202 | 111,245 | ||||||
Capital One Financial Corp. | 1,062 | 109,290 | ||||||
T. Rowe Price Group, Inc. | 680 | 82,851 | ||||||
TD Ameritrade Holding Corp. | 1,650 | 82,005 | ||||||
Discover Financial Services | 949 | 80,494 | ||||||
Synchrony Financial | 2,113 | 76,089 | ||||||
Ameriprise Financial, Inc. | 430 | 71,629 | ||||||
Nasdaq, Inc. | 606 | 64,903 | ||||||
Cboe Global Markets, Inc. | 490 | 58,800 | ||||||
Franklin Resources, Inc. | 2,182 | 56,688 | ||||||
Raymond James Financial, Inc. | 606 | 54,213 | ||||||
Ally Financial, Inc. | 1,734 | 52,991 | ||||||
E*TRADE Financial Corp. | 1,099 | 49,862 | ||||||
SEI Investments Co. | 738 | 48,324 | ||||||
Invesco Ltd. | 2,472 | 44,447 | ||||||
LPL Financial Holdings, Inc. | 453 | 41,789 | ||||||
Total Diversified Financial Services | 1,634,857 | |||||||
Private Equity - 2.9% | ||||||||
Blackstone Group, Inc. — Class A | 2,290 | 128,103 | ||||||
KKR & Company, Inc. — Class A | 2,640 | 77,009 | ||||||
Apollo Global Management, Inc. | 1,497 | 71,422 | ||||||
Brookfield Asset Management, Inc. — Class A | 980 | 56,644 | ||||||
Total Private Equity | 333,178 | |||||||
Commercial Services - 2.5% | ||||||||
S&P Global, Inc. | 461 | 125,876 | ||||||
Moody’s Corp. | 441 | 104,698 | ||||||
MarketAxess Holdings, Inc. | 149 | 56,487 | ||||||
Total Commercial Services | 287,061 | |||||||
Savings & Loans - 0.7% | ||||||||
People’s United Financial, Inc. | 2,562 | 43,298 | ||||||
New York Community Bancorp, Inc. | 3,120 | 37,502 | ||||||
Total Savings & Loans | 80,800 | |||||||
Software - 0.7% | ||||||||
MSCI, Inc. — Class A | 281 | 72,549 | ||||||
Media - 0.4% | ||||||||
FactSet Research Systems, Inc. | 180 | 48,294 | ||||||
Total Common Stocks | ||||||||
(Cost $6,466,469) | 11,265,149 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 1.0% | ||||||||
J.P. Morgan Securities LLC | $ | 68,890 | 68,890 | |||||
Barclays Capital, Inc. | 22,213 | 22,213 | ||||||
BofA Securities, Inc. | 22,213 | 22,213 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $113,316) | 113,316 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 0.2% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.47%4 | 22,437 | 22,437 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $22,437) | 22,437 | |||||||
Total Investments - 100.7% | ||||||||
(Cost $6,602,222) | $ | 11,400,902 | ||||||
Other Assets & Liabilities, net - (0.7)% | (73,967 | ) | ||||||
Total Net Assets - 100.0% | $ | 11,326,935 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 59 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
FINANCIAL SERVICES 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, 2019 — 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, 2019. |
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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 11,265,149 | $ | — | $ | — | $ | 11,265,149 | ||||||||
Repurchase Agreements | — | 113,316 | — | 113,316 | ||||||||||||
Securities Lending Collateral | 22,437 | — | — | 22,437 | ||||||||||||
Total Assets | $ | 11,287,586 | $ | 113,316 | $ | — | $ | 11,400,902 |
60 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
FINANCIAL SERVICES FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value - including $22,371 of securities loaned (cost $6,488,906) | $ | 11,287,586 | ||
Repurchase agreements, at value (cost $113,316) | 113,316 | |||
Receivables: | ||||
Fund shares sold | 103,001 | |||
Dividends | 24,203 | |||
Interest | 6 | |||
Total assets | 11,528,112 | |||
Liabilities: | ||||
Payable for: | ||||
Securities purchased | 138,238 | |||
Return of securities lending collateral | 22,437 | |||
Management fees | 7,776 | |||
Fund shares redeemed | 2,922 | |||
Transfer agent and administrative fees | 2,287 | |||
Investor service fees | 2,287 | |||
Portfolio accounting fees | 914 | |||
Trustees’ fees* | 167 | |||
Miscellaneous | 24,149 | |||
Total liabilities | 201,177 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 11,326,935 | ||
Net assets consist of: | ||||
Paid in capital | $ | 7,726,420 | ||
Total distributable earnings (loss) | 3,600,515 | |||
Net assets | $ | 11,326,935 | ||
Capital shares outstanding | 126,148 | |||
Net asset value per share | $ | 89.79 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $724) | $ | 257,179 | ||
Interest | 1,209 | |||
Income from securities lending, net | 12 | |||
Total investment income | 258,400 | |||
Expenses: | ||||
Management fees | 82,816 | |||
Investor service fees | 24,358 | |||
Transfer agent and administrative fees | 24,358 | |||
Professional fees | 22,474 | |||
Portfolio accounting fees | 9,743 | |||
Trustees’ fees* | 2,567 | |||
Custodian fees | 2,206 | |||
Line of credit fees | 52 | |||
Miscellaneous | 8,511 | |||
Total expenses | 177,085 | |||
Net investment income | 81,315 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 348,506 | |||
Net realized gain | 348,506 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 1,713,291 | |||
Net change in unrealized appreciation (depreciation) | 1,713,291 | |||
Net realized and unrealized gain | 2,061,797 | |||
Net increase in net assets resulting from operations | $ | 2,143,112 |
* | 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 | $ | 81,315 | $ | 61,540 | ||||
Net realized gain on investments | 348,506 | 914,802 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 1,713,291 | (2,021,689 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 2,143,112 | (1,045,347 | ) | |||||
Distributions to shareholders | (507,612 | ) | (80,650 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 25,665,558 | 48,162,381 | ||||||
Distributions reinvested | 507,612 | 80,650 | ||||||
Cost of shares redeemed | (23,580,143 | ) | (56,375,926 | ) | ||||
Net increase (decrease) from capital share transactions | 2,593,027 | (8,132,895 | ) | |||||
Net increase (decrease) in net assets | 4,228,527 | (9,258,892 | ) | |||||
Net assets: | ||||||||
Beginning of year | 7,098,408 | 16,357,300 | ||||||
End of year | $ | 11,326,935 | $ | 7,098,408 | ||||
Capital share activity: | ||||||||
Shares sold | 302,628 | 576,992 | ||||||
Shares issued from reinvestment of distributions | 6,012 | 963 | ||||||
Shares redeemed | (279,122 | ) | (674,978 | ) | ||||
Net increase (decrease) in shares | 29,518 | (97,023 | ) |
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 | $ | 73.46 | $ | 84.47 | $ | 73.42 | $ | 64.46 | $ | 67.34 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .70 | .45 | .77 | — | b | .72 | ||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 19.67 | (10.74 | ) | 10.63 | 9.32 | (3.36 | ) | |||||||||||||
Total from investment operations | 20.37 | (10.29 | ) | 11.40 | 9.32 | (2.64 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.71 | ) | (.72 | ) | (.35 | ) | (.36 | ) | (.24 | ) | ||||||||||
Net realized gains | (3.33 | ) | — | — | — | — | ||||||||||||||
Total distributions | (4.04 | ) | (.72 | ) | (.35 | ) | (.36 | ) | (.24 | ) | ||||||||||
Net asset value, end of period | $ | 89.79 | $ | 73.46 | $ | 84.47 | $ | 73.42 | $ | 64.46 | ||||||||||
| ||||||||||||||||||||
Total Returnc | 28.08 | % | (12.28 | %) | 15.57 | % | 15.83 | % | (3.99 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 11,327 | $ | 7,098 | $ | 16,357 | $ | 16,230 | $ | 13,963 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.83 | % | 0.54 | % | 1.00 | % | — | e | 1.09 | % | ||||||||||
Total expenses | 1.82 | % | 1.72 | % | 1.70 | % | 1.66 | % | 1.60 | % | ||||||||||
Portfolio turnover rate | 218 | % | 403 | % | 364 | % | 329 | % | 213 | % |
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 take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
d | Reverse share split — Per share amounts for the years 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, 2019 |
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, 2019, Health Care Fund returned 22.57%, compared with a 31.49% return for the S&P 500 Index. The S&P 500 Health Care Index returned 20.82%.
The health care equipment industry was the largest contributor to the Fund, followed by the biotechnology industry and the pharmaceuticals industry. No industry detracted from performance.
The best-performing holdings in the Fund were Celgene Corp., Thermo Fisher Scientific, Inc., and Danaher Corp. The worst-performing holdings in the Fund included Tilray, Inc., Abiomed, Inc., and Mallinckrodt plc.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: June 19, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Johnson & Johnson | 3.5% |
UnitedHealth Group, Inc. | 3.0% |
Merck & Company, Inc. | 2.7% |
Pfizer, Inc. | 2.7% |
Bristol-Myers Squibb Co. | 2.2% |
Abbott Laboratories | 2.2% |
Amgen, Inc. | 2.2% |
AbbVie, Inc. | 2.1% |
Thermo Fisher Scientific, Inc. | 2.0% |
Eli Lilly & Co. | 2.0% |
Top Ten Total | 24.6% |
“Ten Largest Holdings” excludes any temporary cash investments.
64 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Health Care Fund | 22.57% | 7.55% | 12.79% |
S&P 500 Health Care Index | 20.82% | 10.31% | 14.76% |
S&P 500 Index | 31.49% | 11.70% | 13.56% |
* | 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 Health Care Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 65 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
HEALTH CARE FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.6% | ||||||||
Pharmaceuticals - 34.7% | ||||||||
Johnson & Johnson | 4,586 | $ | 668,960 | |||||
Merck & Company, Inc. | 5,761 | 523,963 | ||||||
Pfizer, Inc. | 12,923 | 506,323 | ||||||
Bristol-Myers Squibb Co. | 6,640 | 426,222 | ||||||
AbbVie, Inc. | 4,443 | 393,383 | ||||||
Eli Lilly & Co. | 2,925 | 384,433 | ||||||
CVS Health Corp. | 4,523 | 336,014 | ||||||
Cigna Corp. | 1,486 | 303,872 | ||||||
Becton Dickinson and Co. | 1,090 | 296,447 | ||||||
Zoetis, Inc. | 2,074 | 274,494 | ||||||
Allergan plc | 1,431 | 273,564 | ||||||
McKesson Corp. | 1,258 | 174,007 | ||||||
DexCom, Inc.* | 710 | 155,305 | ||||||
AmerisourceBergen Corp. — Class A | 1,699 | 144,449 | ||||||
Cardinal Health, Inc. | 2,621 | 132,570 | ||||||
AstraZeneca plc ADR | 2,516 | 125,448 | ||||||
Jazz Pharmaceuticals plc* | 818 | 122,111 | ||||||
Novartis AG ADR | 1,243 | 117,700 | ||||||
Canopy Growth Corp.*,1 | 5,456 | 115,067 | ||||||
Elanco Animal Health, Inc.* | 3,845 | 113,235 | ||||||
GlaxoSmithKline plc ADR | 2,396 | 112,588 | ||||||
Mylan N.V.* | 5,528 | 111,113 | ||||||
Bausch Health Companies, Inc.* | 3,663 | 109,597 | ||||||
GW Pharmaceuticals plc ADR* | 1,040 | 108,742 | ||||||
Sarepta Therapeutics, Inc.* | 842 | 108,652 | ||||||
Neurocrine Biosciences, Inc.* | 1,006 | 108,135 | ||||||
Alkermes plc* | 5,153 | 105,121 | ||||||
PRA Health Sciences, Inc.* | 823 | 91,476 | ||||||
Horizon Therapeutics plc* | 2,472 | 89,486 | ||||||
Global Blood Therapeutics, Inc.* | 965 | 76,708 | ||||||
Total Pharmaceuticals | 6,609,185 | |||||||
Healthcare-Products - 27.1% | ||||||||
Abbott Laboratories | 4,872 | 423,182 | ||||||
Thermo Fisher Scientific, Inc. | 1,203 | 390,819 | ||||||
Danaher Corp. | 2,368 | 363,441 | ||||||
Medtronic plc | 2,759 | 313,009 | ||||||
Stryker Corp. | 1,458 | 306,093 | ||||||
Intuitive Surgical, Inc.* | 482 | 284,934 | ||||||
Boston Scientific Corp.* | 6,047 | 273,445 | ||||||
Edwards Lifesciences Corp.* | 1,031 | 240,522 | ||||||
Baxter International, Inc. | 2,729 | 228,199 | ||||||
Zimmer Biomet Holdings, Inc. | 1,277 | 191,141 | ||||||
IDEXX Laboratories, Inc.* | 625 | 163,206 | ||||||
Align Technology, Inc.* | 582 | 162,401 | ||||||
ResMed, Inc. | 1,042 | 161,479 | ||||||
Teleflex, Inc. | 382 | 143,800 | ||||||
Cooper Companies, Inc. | 427 | 137,191 | ||||||
Hologic, Inc.* | 2,469 | 128,906 | ||||||
Wright Medical Group N.V.* | 4,157 | 126,705 | ||||||
STERIS plc | 823 | 125,442 | ||||||
Varian Medical Systems, Inc.* | 868 | 123,265 | ||||||
Dentsply Sirona, Inc. | 2,134 | 120,763 | ||||||
Novocure Ltd.* | 1,341 | 113,006 | ||||||
Insulet Corp.* | 657 | 112,478 | ||||||
Henry Schein, Inc.* | 1,575 | 105,084 | ||||||
Masimo Corp.* | 636 | 100,526 | ||||||
Abiomed, Inc.* | 572 | 97,577 | ||||||
Repligen Corp.* | 819 | 75,758 | ||||||
NuVasive, Inc.* | 897 | 69,374 | ||||||
Tandem Diabetes Care, Inc.* | 1,101 | 65,631 | ||||||
Total Healthcare-Products | 5,147,377 | |||||||
Biotechnology - 19.5% | ||||||||
Amgen, Inc. | 1,701 | 410,060 | ||||||
Gilead Sciences, Inc. | 4,793 | 311,449 | ||||||
Vertex Pharmaceuticals, Inc.* | 1,184 | 259,237 | ||||||
Biogen, Inc.* | 844 | 250,440 | ||||||
Illumina, Inc.* | 729 | 241,838 | ||||||
Regeneron Pharmaceuticals, Inc.* | 589 | 221,158 | ||||||
Alexion Pharmaceuticals, Inc.* | 1,516 | 163,955 | ||||||
Seattle Genetics, Inc.* | 1,314 | 150,138 | ||||||
Incyte Corp.* | 1,669 | 145,737 | ||||||
BioMarin Pharmaceutical, Inc.* | 1,575 | 133,166 | ||||||
Amarin Corporation plc ADR*,1 | 5,809 | 124,545 | ||||||
Exact Sciences Corp.* | 1,307 | 120,871 | ||||||
Alnylam Pharmaceuticals, Inc.* | 1,044 | 120,238 | ||||||
Ionis Pharmaceuticals, Inc.* | 1,646 | 99,435 | ||||||
Guardant Health, Inc.* | 1,154 | 90,174 | ||||||
Medicines Co.* | 1,048 | 89,017 | ||||||
ACADIA Pharmaceuticals, Inc.* | 2,036 | 87,100 | ||||||
Arrowhead Pharmaceuticals, Inc.* | 1,309 | 83,030 | ||||||
Mirati Therapeutics, Inc.* | 623 | 80,280 | ||||||
Exelixis, Inc.* | 4,355 | 76,735 | ||||||
Immunomedics, Inc.* | 3,514 | 74,356 | ||||||
Bluebird Bio, Inc.* | 846 | 74,237 | ||||||
Intercept Pharmaceuticals, Inc.* | 572 | 70,882 | ||||||
Blueprint Medicines Corp.* | 863 | 69,135 | ||||||
United Therapeutics Corp.* | 761 | 67,029 | ||||||
Nektar Therapeutics* | 3,072 | 66,309 | ||||||
Sage Therapeutics, Inc.* | 534 | 38,549 | ||||||
Total Biotechnology | 3,719,100 | |||||||
Healthcare-Services - 13.8% | ||||||||
UnitedHealth Group, Inc. | 1,942 | 570,909 | ||||||
Anthem, Inc. | 993 | 299,916 | ||||||
HCA Healthcare, Inc. | 1,650 | 243,887 | ||||||
Humana, Inc. | 655 | 240,071 | ||||||
IQVIA Holdings, Inc.* | 1,226 | 189,429 | ||||||
Centene Corp.* | 2,772 | 174,276 | ||||||
WellCare Health Plans, Inc.* | 423 | 139,679 | ||||||
Laboratory Corporation of America Holdings* | 819 | 138,550 | ||||||
Quest Diagnostics, Inc. | 1,209 | 129,109 | ||||||
Universal Health Services, Inc. — Class B | 840 | 120,506 | ||||||
DaVita, Inc.* | 1,428 | 107,143 | ||||||
Molina Healthcare, Inc.* | 735 | 99,732 | ||||||
Teladoc Health, Inc.*,1 | 1,004 | 84,055 | ||||||
Amedisys, Inc.* | 484 | 80,789 | ||||||
Total Healthcare-Services | 2,618,051 |
66 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
HEALTH CARE FUND |
| Shares | Value | ||||||
Electronics - 2.4% | ||||||||
Agilent Technologies, Inc. | 2,062 | $ | 175,909 | |||||
Mettler-Toledo International, Inc.* | 189 | 149,930 | ||||||
Waters Corp.* | 569 | 132,947 | ||||||
Total Electronics | 458,786 | |||||||
Software - 1.7% | ||||||||
Cerner Corp. | 2,272 | 166,742 | ||||||
Veeva Systems, Inc. — Class A* | 1,139 | 160,212 | ||||||
Total Software | 326,954 | |||||||
Commercial Services - 0.4% | ||||||||
HealthEquity, Inc.* | 1,042 | 77,181 | ||||||
Total Common Stocks | ||||||||
(Cost $7,597,483) | 18,956,634 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.7% | ||||||||
J.P. Morgan Securities LLC | $ | 85,769 | 85,769 | |||||
Barclays Capital, Inc. | 27,656 | 27,656 | ||||||
BofA Securities, Inc. | 27,656 | 27,656 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $141,081) | 141,081 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 1.2% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.47%4 | 234,645 | 234,645 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $234,645) | 234,645 | |||||||
Total Investments - 101.5% | ||||||||
(Cost $7,973,209) | $ | 19,332,360 | ||||||
Other Assets & Liabilities, net - (1.5)% | (289,989 | ) | ||||||
Total Net Assets - 100.0% | $ | 19,042,371 |
* | 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, 2019 — 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, 2019. |
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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 18,956,634 | $ | — | $ | — | $ | 18,956,634 | ||||||||
Repurchase Agreements | — | 141,081 | — | 141,081 | ||||||||||||
Securities Lending Collateral | 234,645 | — | — | 234,645 | ||||||||||||
Total Assets | $ | 19,191,279 | $ | 141,081 | $ | — | $ | 19,332,360 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 67 |
HEALTH CARE FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value - including $240,976 of securities loaned (cost $7,832,128) | $ | 19,191,279 | ||
Repurchase agreements, at value (cost $141,081) | 141,081 | |||
Receivables: | ||||
Fund shares sold | 15,365 | |||
Dividends | 10,332 | |||
Securities lending income | 2,643 | |||
Foreign tax reclaims | 1,306 | |||
Interest | 6 | |||
Total assets | 19,362,012 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 234,645 | |||
Fund shares redeemed | 15,851 | |||
Management fees | 13,207 | |||
Transfer agent and administrative fees | 3,884 | |||
Investor service fees | 3,884 | |||
Portfolio accounting fees | 1,554 | |||
Trustees’ fees* | 318 | |||
Miscellaneous | 46,298 | |||
Total liabilities | 319,641 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 19,042,371 | ||
Net assets consist of: | ||||
Paid in capital | $ | 8,619,405 | ||
Total distributable earnings (loss) | 10,422,966 | |||
Net assets | $ | 19,042,371 | ||
Capital shares outstanding | 254,320 | |||
Net asset value per share | $ | 74.88 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $701) | $ | 213,136 | ||
Interest | 2,639 | |||
Income from securities lending, net | 24,771 | |||
Total investment income | 240,546 | |||
Expenses: | ||||
Management fees | 164,590 | |||
Investor service fees | 48,409 | |||
Transfer agent and administrative fees | 48,409 | |||
Professional fees | 37,639 | |||
Portfolio accounting fees | 19,363 | |||
Trustees’ fees* | 5,515 | |||
Custodian fees | 4,023 | |||
Line of credit fees | 57 | |||
Miscellaneous | 25,106 | |||
Total expenses | 353,111 | |||
Net investment loss | (112,565 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 2,731,701 | |||
Net realized gain | 2,731,701 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 1,229,445 | |||
Net change in unrealized appreciation (depreciation) | 1,229,445 | |||
Net realized and unrealized gain | 3,961,146 | |||
Net increase in net assets resulting from operations | $ | 3,848,581 |
* | 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 | $ | (112,565 | ) | $ | (173,935 | ) | ||
Net realized gain on investments | 2,731,701 | 1,244,879 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 1,229,445 | (1,637,146 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 3,848,581 | (566,202 | ) | |||||
Distributions to shareholders | (408,723 | ) | (331,012 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 29,242,516 | 48,533,376 | ||||||
Distributions reinvested | 408,723 | 331,012 | ||||||
Cost of shares redeemed | (34,485,945 | ) | (50,187,301 | ) | ||||
Net decrease from capital share transactions | (4,834,706 | ) | (1,322,913 | ) | ||||
Net decrease in net assets | (1,394,848 | ) | (2,220,127 | ) | ||||
Net assets: | ||||||||
Beginning of year | 20,437,219 | 22,657,346 | ||||||
End of year | $ | 19,042,371 | $ | 20,437,219 | ||||
Capital share activity: | ||||||||
Shares sold | 427,219 | 720,012 | ||||||
Shares issued from reinvestment of distributions | 5,979 | 4,840 | ||||||
Shares redeemed | (506,488 | ) | (760,178 | ) | ||||
Net decrease in shares | (73,290 | ) | (35,326 | ) |
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 | $ | 62.38 | $ | 62.43 | $ | 52.62 | $ | 60.47 | $ | 58.82 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.40 | ) | (.48 | ) | (.44 | ) | (.37 | ) | (.30 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 14.35 | 1.33 | c | 12.39 | (5.36 | ) | 3.11 | |||||||||||||
Total from investment operations | 13.95 | .85 | 11.95 | (5.73 | ) | 2.81 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (1.45 | ) | (.90 | ) | (2.14 | ) | (2.12 | ) | (1.16 | ) | ||||||||||
Total distributions | (1.45 | ) | (.90 | ) | (2.14 | ) | (2.12 | ) | (1.16 | ) | ||||||||||
Net asset value, end of period | $ | 74.88 | $ | 62.38 | $ | 62.43 | $ | 52.62 | $ | 60.47 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 22.57 | % | 1.25 | % | 22.86 | % | (9.70 | %) | 4.53 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 19,042 | $ | 20,437 | $ | 22,657 | $ | 18,778 | $ | 36,849 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.58 | %) | (0.72 | %) | (0.73 | %) | (0.67 | %) | (0.47 | %) | ||||||||||
Total expenses | 1.82 | % | 1.72 | % | 1.70 | % | 1.66 | % | 1.59 | % | ||||||||||
Portfolio turnover rate | 150 | % | 194 | % | 156 | % | 146 | % | 154 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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, 2019 |
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, 2019, Internet Fund returned 25.48%, compared with a return of 31.49% for the S&P 500 Index. The S&P 500 Information Technology Index returned 50.29%.
The internet & direct marketing retail industry contributed the most to return, followed by the interactive media & services industry and the internet services & infrastructure industry. The leading detractors were the trucking industry, the electronics components industry, and the asset management & custody banks industry.
Facebook, Inc. — Class A, Alphabet, Inc. — Class A, and Amazon.com, Inc. added the most to Fund performance for the year. Qurate Retail, Inc. — Class A, Pinterest, Inc. Class A, and Grubhub, Inc. detracted the most from the Fund’s return for the period.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 24, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Amazon.com, Inc. | 7.9% |
Alphabet, Inc. — Class A | 7.7% |
Facebook, Inc. — Class A | 6.1% |
Cisco Systems, Inc. | 3.6% |
Alibaba Group Holding Ltd. ADR | 3.4% |
salesforce.com, Inc. | 3.1% |
Netflix, Inc. | 3.0% |
PayPal Holdings, Inc. | 2.9% |
Booking Holdings, Inc. | 2.4% |
Uber Technologies, Inc. | 1.8% |
Top Ten Total | 41.9% |
“Ten Largest Holdings” excludes any temporary cash investments.
THE RYDEX FUNDS ANNUAL REPORT | 71 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Internet Fund | 25.48% | 12.98% | 13.68% |
S&P 500 Information Technology Index | 50.29% | 20.20% | 17.50% |
S&P 500 Index | 31.49% | 11.70% | 13.56% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
72 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
INTERNET FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.4% | ||||||||
Internet - 60.3% | ||||||||
Amazon.com, Inc.* | 355 | $ | 655,983 | |||||
Alphabet, Inc. — Class A* | 482 | 645,586 | ||||||
Facebook, Inc. — Class A* | 2,498 | 512,714 | ||||||
Alibaba Group Holding Ltd. ADR* | 1,320 | 279,972 | ||||||
Netflix, Inc.* | 765 | 247,531 | ||||||
Booking Holdings, Inc.* | 98 | 201,265 | ||||||
Uber Technologies, Inc.* | 5,121 | 152,298 | ||||||
eBay, Inc. | 3,201 | 115,588 | ||||||
JD.com, Inc. ADR* | 3,168 | 111,609 | ||||||
Baidu, Inc. ADR* | 850 | 107,440 | ||||||
Twitter, Inc.* | 3,317 | 106,310 | ||||||
Snap, Inc. — Class A* | 6,374 | 104,087 | ||||||
VeriSign, Inc.* | 532 | 102,506 | ||||||
Match Group, Inc.*,1 | 1,237 | 101,570 | ||||||
IAC/InterActiveCorp* | 389 | 96,904 | ||||||
Shopify, Inc. — Class A* | 232 | 92,239 | ||||||
Expedia Group, Inc. | 785 | 84,890 | ||||||
Okta, Inc.* | 693 | 79,951 | ||||||
MercadoLibre, Inc.* | 138 | 78,928 | ||||||
Trip.com Group Ltd. ADR* | 2,231 | 74,828 | ||||||
Pinduoduo, Inc. ADR* | 1,957 | 74,014 | ||||||
Chewy, Inc. — Class A*,1 | 2,502 | 72,558 | ||||||
GoDaddy, Inc. — Class A* | 1,067 | 72,471 | ||||||
Pinterest, Inc. — Class A* | 3,609 | 67,272 | ||||||
Zillow Group, Inc. — Class C* | 1,442 | 66,245 | ||||||
Spotify Technology S.A.* | 432 | 64,606 | ||||||
Wayfair, Inc. — Class A*,1 | 707 | 63,892 | ||||||
F5 Networks, Inc.* | 436 | 60,887 | ||||||
Weibo Corp. ADR*,1 | 1,291 | 59,838 | ||||||
Anaplan, Inc.* | 1,074 | 56,278 | ||||||
Wix.com Ltd.* | 450 | 55,071 | ||||||
Momo, Inc. ADR | 1,639 | 54,906 | ||||||
Autohome, Inc. ADR* | 625 | 50,006 | ||||||
JOYY, Inc. ADR* | 938 | 49,517 | ||||||
Baozun, Inc. ADR*,1 | 1,487 | 49,249 | ||||||
Etsy, Inc.* | 1,092 | 48,376 | ||||||
TripAdvisor, Inc. | 1,441 | 43,778 | ||||||
Cargurus, Inc.* | 1,171 | 41,196 | ||||||
Stitch Fix, Inc. — Class A*,1 | 1,302 | 33,409 | ||||||
Total Internet | 5,035,768 | |||||||
Software - 20.9% | ||||||||
salesforce.com, Inc.* | 1,570 | 255,345 | ||||||
Activision Blizzard, Inc. | 2,440 | 144,985 | ||||||
Electronic Arts, Inc.* | 1,116 | 119,981 | ||||||
Veeva Systems, Inc. — Class A* | 710 | 99,869 | ||||||
Akamai Technologies, Inc.* | 939 | 81,111 | ||||||
Citrix Systems, Inc. | 729 | 80,846 | ||||||
Take-Two Interactive Software, Inc.* | 655 | 80,192 | ||||||
DocuSign, Inc.* | 1,060 | 78,557 | ||||||
NetEase, Inc. ADR | 253 | 77,580 | ||||||
Twilio, Inc. — Class A* | 788 | 77,445 | ||||||
Coupa Software, Inc.* | 443 | 64,789 | ||||||
MongoDB, Inc.* | 443 | 58,303 | ||||||
Sea Ltd. ADR* | 1,440 | 57,917 | ||||||
Dropbox, Inc. — Class A* | 3,153 | 56,470 | ||||||
HubSpot, Inc.* | 349 | 55,316 | ||||||
Nutanix, Inc. — Class A* | 1,675 | 52,360 | ||||||
HUYA, Inc. ADR*,1 | 2,908 | 52,199 | ||||||
Smartsheet, Inc. — Class A* | 1,123 | 50,445 | ||||||
j2 Global, Inc. | 489 | 45,824 | ||||||
Five9, Inc.* | 640 | 41,971 | ||||||
New Relic, Inc.* | 629 | 41,331 | ||||||
Cornerstone OnDemand, Inc.* | 693 | 40,575 | ||||||
Pluralsight, Inc. — Class A* | 1,927 | 33,164 | ||||||
Total Software | 1,746,575 | |||||||
Telecommunications - 9.3% | ||||||||
Cisco Systems, Inc. | 6,294 | 301,860 | ||||||
Motorola Solutions, Inc. | 695 | 111,992 | ||||||
Arista Networks, Inc.* | 411 | 83,598 | ||||||
Juniper Networks, Inc. | 2,497 | 61,501 | ||||||
Ciena Corp.* | 1,296 | 55,326 | ||||||
ViaSat, Inc.* | 623 | 45,601 | ||||||
LogMeIn, Inc. | 508 | 43,556 | ||||||
Viavi Solutions, Inc.* | 2,570 | 38,550 | ||||||
CommScope Holding Company, Inc.* | 2,511 | 35,631 | ||||||
Total Telecommunications | 777,615 | |||||||
Commercial Services - 4.4% | ||||||||
PayPal Holdings, Inc.* | 2,214 | 239,488 | ||||||
CoStar Group, Inc.* | 168 | 100,515 | ||||||
2U, Inc.* | 1,072 | 25,717 | ||||||
Total Commercial Services | 365,720 | |||||||
Diversified Financial Services - 2.2% | ||||||||
TD Ameritrade Holding Corp. | 2,239 | 111,278 | ||||||
E*TRADE Financial Corp. | 1,499 | 68,010 | ||||||
Total Diversified Financial Services | 179,288 | |||||||
Banks - 1.2% | ||||||||
Northern Trust Corp. | 957 | 101,672 | ||||||
Computers - 0.6% | ||||||||
Lumentum Holdings, Inc.* | 662 | 52,496 | ||||||
Food Service - 0.5% | ||||||||
Grubhub, Inc.* | 910 | 44,262 | ||||||
Total Common Stocks | ||||||||
(Cost $3,630,181) | 8,303,396 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 73 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
INTERNET FUND |
Face Amount | Value | |||||||
REPURCHASE AGREEMENTS††,2 - 0.9% | ||||||||
J.P. Morgan Securities LLC issued 12/31/19 at 1.53% due 01/02/20 | $ | 43,485 | $ | 43,485 | ||||
Barclays Capital, Inc. issued 12/31/19 at 1.40% due 01/02/20 | 14,022 | 14,022 | ||||||
BofA Securities, Inc. issued 12/31/19 at 1.50% due 01/02/20 | 14,022 | 14,022 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $71,529) | 71,529 |
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 3.5% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.47%4 | 291,492 | 291,492 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $291,492) | 291,492 | |||||||
Total Investments - 103.8% | ||||||||
(Cost $3,993,202) | $ | 8,666,417 | ||||||
Other Assets & Liabilities, net - (3.8)% | (319,441 | ) | ||||||
Total Net Assets - 100.0% | $ | 8,346,976 |
* | 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, 2019 — 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, 2019. |
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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 8,303,396 | $ | — | $ | — | $ | 8,303,396 | ||||||||
Repurchase Agreements | — | 71,529 | — | 71,529 | ||||||||||||
Securities Lending Collateral | 291,492 | — | — | 291,492 | ||||||||||||
Total Assets | $ | 8,594,888 | $ | 71,529 | $ | — | $ | 8,666,417 |
74 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INTERNET FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value - including $284,182 of securities loaned (cost $3,921,673) | $ | 8,594,888 | ||
Repurchase agreements, at value (cost $71,529) | 71,529 | |||
Receivables: | ||||
Fund shares sold | 107,795 | |||
Dividends | 425 | |||
Securities lending income | 370 | |||
Interest | 3 | |||
Total assets | 8,775,010 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 291,492 | |||
Securities purchased | 103,286 | |||
Management fees | 5,946 | |||
Transfer agent and administrative fees | 1,749 | |||
Investor service fees | 1,749 | |||
Portfolio accounting fees | 699 | |||
Trustees’ fees* | 158 | |||
Fund shares redeemed | 12 | |||
Miscellaneous | 22,943 | |||
Total liabilities | 428,034 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 8,346,976 | ||
Net assets consist of: | ||||
Paid in capital | $ | 4,270,315 | ||
Total distributable earnings (loss) | 4,076,661 | |||
Net assets | $ | 8,346,976 | ||
Capital shares outstanding | 80,247 | |||
Net asset value per share | $ | 104.02 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $638) | $ | 34,982 | ||
Interest | 1,528 | |||
Income from securities lending, net | 2,578 | |||
Total investment income | 39,088 | |||
Expenses: | ||||
Management fees | 81,956 | |||
Investor service fees | 24,105 | |||
Transfer agent and administrative fees | 24,105 | |||
Professional fees | 17,051 | |||
Portfolio accounting fees | 9,642 | |||
Trustees’ fees* | 2,515 | |||
Custodian fees | 2,031 | |||
Line of credit fees | 25 | |||
Miscellaneous | 14,445 | |||
Total expenses | 175,875 | |||
Net investment loss | (136,787 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 905,118 | |||
Net realized gain | 905,118 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 1,132,812 | |||
Net change in unrealized appreciation (depreciation) | 1,132,812 | |||
Net realized and unrealized gain | 2,037,930 | |||
Net increase in net assets resulting from operations | $ | 1,901,143 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 75 |
INTERNET FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (136,787 | ) | $ | (149,392 | ) | ||
Net realized gain on investments | 905,118 | 304,663 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 1,132,812 | (880,860 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 1,901,143 | (725,589 | ) | |||||
Distributions to shareholders | — | (206,047 | ) | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 32,250,493 | 53,056,598 | ||||||
Distributions reinvested | — | 206,047 | ||||||
Cost of shares redeemed | (33,904,028 | ) | (53,174,599 | ) | ||||
Net increase (decrease) from capital share transactions | (1,653,535 | ) | 88,046 | |||||
Net increase (decrease) in net assets | 247,608 | (843,590 | ) | |||||
Net assets: | ||||||||
Beginning of year | 8,099,368 | 8,942,958 | ||||||
End of year | $ | 8,346,976 | $ | 8,099,368 | ||||
Capital share activity: | ||||||||
Shares sold | 323,776 | 541,673 | ||||||
Shares issued from reinvestment of distributions | — | 1,959 | ||||||
Shares redeemed | (341,225 | ) | (548,920 | ) | ||||
Net decrease in shares | (17,449 | ) | (5,288 | ) |
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 | $ | 82.90 | $ | 86.84 | $ | 65.13 | $ | 70.60 | $ | 79.11 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (1.41 | ) | (1.25 | ) | (.79 | ) | (.14 | ) | (.76 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 22.53 | (1.23 | ) | 22.88 | (3.30 | ) | 7.29 | |||||||||||||
Total from investment operations | 21.12 | (2.48 | ) | 22.09 | (3.44 | ) | 6.53 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | — | (1.46 | ) | (.38 | ) | (2.03 | ) | (15.04 | ) | |||||||||||
Total distributions | — | (1.46 | ) | (.38 | ) | (2.03 | ) | (15.04 | ) | |||||||||||
Net asset value, end of period | $ | 104.02 | $ | 82.90 | $ | 86.84 | $ | 65.13 | $ | 70.60 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 25.48 | % | (3.20 | %) | 33.96 | % | 4.44 | % | 8.36 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 8,347 | $ | 8,099 | $ | 8,943 | $ | 8,485 | $ | 13,036 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (1.42 | %) | (1.29 | %) | (1.01 | %) | (0.78 | %) | (1.03 | %) | ||||||||||
Total expenses | 1.82 | % | 1.72 | % | 1.71 | % | 1.66 | % | 1.61 | % | ||||||||||
Portfolio turnover rate | 319 | % | 485 | % | 365 | % | 384 | % | 363 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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 | 77 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, Leisure Fund returned 29.28%, compared with a return of 31.49% for the S&P 500 Index. The S&P 500 Consumer Discretionary Index returned 27.94%.
The cable & satellite industry contributed the most to return, followed by the restaurants industry and the movies & entertainment industry. The consumer electronics industry was the only detractor from return.
Holdings that contributed the most to the Fund’s return were Walt Disney Co., Charter Communications, Inc. — Class A, and Comcast Corp. — Class A. Grupo Televisa, SAB ADR, American Outdoor Brands Corp., and AMC Networks, Inc. — 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. | 4.4% |
Comcast Corp. — Class A | 3.9% |
McDonald’s Corp. | 3.3% |
Netflix, Inc. | 3.2% |
Philip Morris International, Inc. | 3.1% |
Charter Communications, Inc. — Class A | 3.0% |
Starbucks Corp. | 2.8% |
Altria Group, Inc. | 2.6% |
Las Vegas Sands Corp. | 2.0% |
Marriott International, Inc. — Class A | 1.9% |
Top Ten Total | 30.2% |
“Ten Largest Holdings” excludes any temporary cash investments.
78 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Leisure Fund | 29.28% | 8.12% | 13.86% |
S&P 500 Consumer Discretionary Index | 27.94% | 13.12% | 17.18% |
S&P 500 Index | 31.49% | 11.70% | 13.56% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 79 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
LEISURE FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.6% | ||||||||
Media - 23.9% | ||||||||
Walt Disney Co. | 1,982 | $ | 286,657 | |||||
Comcast Corp. — Class A | 5,729 | 257,633 | ||||||
Charter Communications, Inc. — Class A* | 402 | 195,002 | ||||||
ViacomCBS, Inc. — Class B | 2,145 | 90,026 | ||||||
Liberty Broadband Corp. — Class C* | 679 | 85,384 | ||||||
Fox Corp. — Class A | 2,296 | 85,113 | ||||||
Discovery, Inc. — Class A* | 2,546 | 83,356 | ||||||
DISH Network Corp. — Class A* | 2,150 | 76,260 | ||||||
Altice USA, Inc. — Class A* | 2,707 | 74,009 | ||||||
Liberty Global plc — Class C* | 2,960 | 64,513 | ||||||
News Corp. — Class A | 3,700 | 52,318 | ||||||
Nexstar Media Group, Inc. — Class A | 348 | 40,803 | ||||||
New York Times Co. — Class A | 1,264 | 40,663 | ||||||
World Wrestling Entertainment, Inc. — Class A | 619 | 40,154 | ||||||
TEGNA, Inc. | 2,027 | 33,831 | ||||||
Sinclair Broadcast Group, Inc. — Class A | 935 | 31,173 | ||||||
AMC Networks, Inc. — Class A* | 668 | 26,386 | ||||||
Total Media | 1,563,281 | |||||||
Retail - 18.0% | ||||||||
McDonald’s Corp. | 1,099 | 217,173 | ||||||
Starbucks Corp. | 2,054 | 180,588 | ||||||
Yum! Brands, Inc. | 976 | 98,313 | ||||||
Chipotle Mexican Grill, Inc. — Class A* | 103 | 86,222 | ||||||
Darden Restaurants, Inc. | 618 | 67,368 | ||||||
Domino’s Pizza, Inc. | 208 | 61,106 | ||||||
Restaurant Brands International, Inc. | 945 | 60,263 | ||||||
Yum China Holdings, Inc. | 1,191 | 57,180 | ||||||
Dunkin’ Brands Group, Inc. | 600 | 45,324 | ||||||
Wendy’s Co. | 1,815 | 40,311 | ||||||
Texas Roadhouse, Inc. — Class A | 635 | 35,763 | ||||||
Cracker Barrel Old Country Store, Inc.1 | 221 | 33,977 | ||||||
Wingstop, Inc. | 332 | 28,628 | ||||||
Shake Shack, Inc. — Class A* | 434 | 25,853 | ||||||
Papa John’s International, Inc. | 404 | 25,513 | ||||||
Bloomin’ Brands, Inc. | 1,118 | 24,674 | ||||||
Jack in the Box, Inc. | 312 | 24,345 | ||||||
Cheesecake Factory, Inc.1 | 604 | 23,472 | ||||||
Brinker International, Inc. | 535 | 22,470 | ||||||
Dave & Buster’s Entertainment, Inc. | 499 | 20,045 | ||||||
Total Retail | 1,178,588 | |||||||
Lodging - 13.8% | ||||||||
Las Vegas Sands Corp. | 1,877 | 129,588 | ||||||
Marriott International, Inc. — Class A | 831 | 125,838 | ||||||
Hilton Worldwide Holdings, Inc. | 898 | 99,597 | ||||||
MGM Resorts International | 2,220 | 73,859 | ||||||
Wynn Resorts Ltd. | 492 | 68,324 | ||||||
Caesars Entertainment Corp.* | 3,998 | 54,373 | ||||||
Hyatt Hotels Corp. — Class A | 604 | 54,185 | ||||||
Huazhu Group Ltd. ADR | 1,345 | 53,894 | ||||||
Melco Resorts & Entertainment Ltd. ADR | 2,221 | 53,682 | ||||||
Wyndham Hotels & Resorts, Inc. | 701 | 44,030 | ||||||
Choice Hotels International, Inc. | 417 | 43,130 | ||||||
Wyndham Destinations, Inc. | 753 | 38,923 | ||||||
Boyd Gaming Corp. | 1,065 | 31,886 | ||||||
Hilton Grand Vacations, Inc.* | 884 | 30,401 | ||||||
Total Lodging | 901,710 | |||||||
Software - 8.1% | ||||||||
Activision Blizzard, Inc. | 2,032 | 120,742 | ||||||
Electronic Arts, Inc.* | 929 | 99,877 | ||||||
NetEase, Inc. ADR | 249 | 76,353 | ||||||
Take-Two Interactive Software, Inc.* | 546 | 66,847 | ||||||
Sea Ltd. ADR* | 1,478 | 59,445 | ||||||
HUYA, Inc. ADR*,1 | 3,037 | 54,514 | ||||||
Bilibili, Inc. ADR* | 2,829 | 52,676 | ||||||
Total Software | 530,454 | |||||||
Leisure Time - 7.2% | ||||||||
Carnival Corp. | 2,143 | 108,929 | ||||||
Royal Caribbean Cruises Ltd. | 728 | 97,195 | ||||||
Norwegian Cruise Line Holdings Ltd.* | 1,101 | 64,309 | ||||||
Planet Fitness, Inc. — Class A* | 626 | 46,750 | ||||||
Polaris, Inc. | 446 | 45,358 | ||||||
Harley-Davidson, Inc. | 1,153 | 42,880 | ||||||
Brunswick Corp. | 650 | 38,987 | ||||||
Callaway Golf Co. | 1,196 | 25,355 | ||||||
Total Leisure Time | 469,763 | |||||||
Beverages - 6.6% | ||||||||
Constellation Brands, Inc. — Class A | 570 | 108,157 | ||||||
Brown-Forman Corp. — Class B | 1,502 | 101,535 | ||||||
Luckin Coffee, Inc. ADR*,1 | 1,663 | 65,456 | ||||||
Molson Coors Beverage Co. — Class B | 1,140 | 61,446 | ||||||
Anheuser-Busch InBev S.A. ADR1 | 707 | 58,002 | ||||||
Boston Beer Company, Inc. — Class A* | 102 | 38,541 | ||||||
Total Beverages | 433,137 | |||||||
Entertainment - 6.6% | ||||||||
Live Nation Entertainment, Inc.* | 944 | 67,468 | ||||||
Vail Resorts, Inc. | 231 | 55,401 | ||||||
Churchill Downs, Inc. | 304 | 41,709 | ||||||
Marriott Vacations Worldwide Corp. | 322 | 41,461 | ||||||
Eldorado Resorts, Inc.* | 650 | 38,766 | ||||||
Cinemark Holdings, Inc. | 1,033 | 34,967 | ||||||
Six Flags Entertainment Corp. | 767 | 34,599 | ||||||
International Game Technology plc | 2,084 | 31,197 | ||||||
Penn National Gaming, Inc.* | 1,201 | 30,698 | ||||||
Scientific Games Corp. — Class A* | 1,046 | 28,012 | ||||||
SeaWorld Entertainment, Inc.* | 868 | 27,524 | ||||||
Total Entertainment | 431,802 | |||||||
Agriculture - 6.6% | ||||||||
Philip Morris International, Inc. | 2,395 | 203,791 | ||||||
Altria Group, Inc. | 3,440 | 171,690 | ||||||
British American Tobacco plc ADR | 1,224 | 51,971 | ||||||
Total Agriculture | 427,452 | |||||||
80 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
LEISURE FUND |
| Shares | Value | ||||||
Internet - 6.2% | ||||||||
Netflix, Inc.* | 637 | $ | 206,114 | |||||
Roku, Inc.* | 516 | 69,093 | ||||||
Spotify Technology S.A.* | 435 | 65,054 | ||||||
iQIYI, Inc. ADR*,1 | 2,910 | 61,430 | ||||||
Total Internet | 401,691 | |||||||
Toys, Games & Hobbies - 1.7% | ||||||||
Hasbro, Inc. | 643 | 67,907 | ||||||
Mattel, Inc.*,1 | 2,910 | 39,431 | ||||||
Total Toys, Games & Hobbies | 107,338 | |||||||
Food Service - 0.9% | ||||||||
Aramark | 1,347 | 58,460 | ||||||
Total Common Stocks | ||||||||
(Cost $4,279,618) | 6,503,676 | |||||||
RIGHTS††† - 0.0% | ||||||||
Media - 0.0% | ||||||||
Nexstar Media Group, Inc.*,2 | 1,910 | — | ||||||
Total Rights | ||||||||
(Cost $—) | — |
Face Amount | ||||||||
REPURCHASE AGREEMENTS††,3 - 0.6% | ||||||||
J.P. Morgan Securities LLC issued 12/31/19 at 1.53% due 01/02/20 | $ | 25,497 | 25,497 | |||||
Barclays Capital, Inc. issued 12/31/19 at 1.40% due 01/02/20 | 8,222 | 8,222 | ||||||
BofA Securities, Inc. issued 12/31/19 at 1.50% due 01/02/20 | 8,221 | 8,221 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $41,940) | 41,940 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,4 - 3.2% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.47%5 | 211,960 | 211,960 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $211,960) | 211,960 | |||||||
Total Investments - 103.4% | ||||||||
(Cost $4,533,518) | $ | 6,757,576 | ||||||
Other Assets & Liabilities, net - (3.4)% | (222,006 | ) | ||||||
Total Net Assets - 100.0% | $ | 6,535,570 |
* | 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, 2019 — See Note 7. |
2 | Security was fair valued by the Valuation Committee at December 31, 2019. 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, 2019. |
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, 2019 |
LEISURE FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 6,503,676 | $ | — | $ | — | $ | 6,503,676 | ||||||||
Rights | — | — | — | * | — | |||||||||||
Repurchase Agreements | — | 41,940 | — | 41,940 | ||||||||||||
Securities Lending Collateral | 211,960 | — | — | 211,960 | ||||||||||||
Total Assets | $ | 6,715,636 | $ | 41,940 | $ | — | $ | 6,757,576 |
* | Security has a market value of $0. |
82 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
LEISURE FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value - including $206,518 of securities loaned (cost $4,491,578) | $ | 6,715,636 | ||
Repurchase agreements, at value (cost $41,940) | 41,940 | |||
Receivables: | ||||
Fund shares sold | 357,238 | |||
Dividends | 10,899 | |||
Foreign tax reclaims | 610 | |||
Securities lending income | 53 | |||
Interest | 2 | |||
Total assets | 7,126,378 | |||
Liabilities: | ||||
Payable for: | ||||
Securities purchased | 356,232 | |||
Return of securities lending collateral | 211,960 | |||
Management fees | 4,389 | |||
Transfer agent and administrative fees | 1,291 | |||
Investor service fees | 1,291 | |||
Fund shares redeemed | 590 | |||
Portfolio accounting fees | 516 | |||
Trustees’ fees* | 99 | |||
Miscellaneous | 14,440 | |||
Total liabilities | 590,808 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 6,535,570 | ||
Net assets consist of: | ||||
Paid in capital | $ | 4,508,007 | ||
Total distributable earnings (loss) | 2,027,563 | |||
Net assets | $ | 6,535,570 | ||
Capital shares outstanding | 61,636 | |||
Net asset value per share | $ | 106.03 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $581) | $ | 104,005 | ||
Interest | 833 | |||
Income from securities lending, net | 478 | |||
Total investment income | 105,316 | |||
Expenses: | ||||
Management fees | 51,497 | |||
Investor service fees | 15,146 | |||
Transfer agent and administrative fees | 15,146 | |||
Professional fees | 11,187 | |||
Portfolio accounting fees | 6,058 | |||
Trustees’ fees* | 1,654 | |||
Custodian fees | 1,386 | |||
Line of credit fees | 36 | |||
Miscellaneous | 8,686 | |||
Total expenses | 110,796 | |||
Net investment loss | (5,480 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 694,051 | |||
Net realized gain | 694,051 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 789,745 | |||
Net change in unrealized appreciation (depreciation) | 789,745 | |||
Net realized and unrealized gain | 1,483,796 | |||
Net increase in net assets resulting from operations | $ | 1,478,316 |
* | 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 (loss) | $ | (5,480 | ) | $ | 18,335 | |||
Net realized gain on investments | 694,051 | 235,639 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 789,745 | (1,077,539 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 1,478,316 | (823,565 | ) | |||||
Distributions to shareholders | (66,975 | ) | (238,213 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 14,129,615 | 17,293,584 | ||||||
Distributions reinvested | 66,975 | 238,213 | ||||||
Cost of shares redeemed | (12,636,946 | ) | (22,331,989 | ) | ||||
Net increase (decrease) from capital share transactions | 1,559,644 | (4,800,192 | ) | |||||
Net increase (decrease) in net assets | 2,970,985 | (5,861,970 | ) | |||||
Net assets: | ||||||||
Beginning of year | 3,564,585 | 9,426,555 | ||||||
End of year | $ | 6,535,570 | $ | 3,564,585 | ||||
Capital share activity: | ||||||||
Shares sold | 145,839 | 176,365 | ||||||
Shares issued from reinvestment of distributions | 664 | 2,434 | ||||||
Shares redeemed | (127,808 | ) | (231,728 | ) | ||||
Net increase (decrease) in shares | 18,695 | (52,929 | ) |
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 | $ | 83.01 | $ | 98.33 | $ | 82.21 | $ | 76.44 | $ | 87.81 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.09 | ) | .23 | .24 | .18 | .28 | ||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 24.33 | (13.07 | ) | 16.28 | 7.07 | .87 | ||||||||||||||
Total from investment operations | 24.24 | (12.84 | ) | 16.52 | 7.25 | 1.15 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.24 | ) | (.26 | ) | (.22 | ) | (.37 | ) | (.07 | ) | ||||||||||
Net realized gains | (.98 | ) | (2.22 | ) | (.18 | ) | (1.11 | ) | (12.45 | ) | ||||||||||
Total distributions | (1.22 | ) | (2.48 | ) | (.40 | ) | (1.48 | ) | (12.52 | ) | ||||||||||
Net asset value, end of period | $ | 106.03 | $ | 83.01 | $ | 98.33 | $ | 82.21 | $ | 76.44 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 29.28 | % | (13.44 | %) | 20.11 | % | 9.56 | % | 0.30 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 6,536 | $ | 3,565 | $ | 9,427 | $ | 8,791 | $ | 13,764 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.09 | %) | 0.24 | % | 0.26 | % | 0.23 | % | 0.34 | % | ||||||||||
Total expenses | 1.83 | % | 1.71 | % | 1.70 | % | 1.66 | % | 1.60 | % | ||||||||||
Portfolio turnover rate | 224 | % | 239 | % | 303 | % | 530 | % | 288 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 85 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, Precious Metals Fund returned 52.24%, compared with the 31.49% return of the S&P 500 Index. The S&P 500 Materials Index returned 24.58%.
The gold, silver, and copper industries contributed the most to return. No industry detracted from return.
Sibanye-Stillwater ADR, Kirkland Lake Gold Ltd., and AngloGold Ashanti Ltd. ADR were the leading contributors to return. IAMGOLD Corp. and Tahoe Resources, 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 Goldcorp Corp. | 7.9% |
Barrick Gold Corp. | 7.6% |
Franco-Nevada Corp. | 5.8% |
Freeport-McMoRan, Inc. | 5.6% |
Agnico Eagle Mines Ltd. | 5.0% |
Wheaton Precious Metals Corp. | 4.8% |
AngloGold Ashanti Ltd. ADR | 4.1% |
VanEck Vectors Junior Gold Miners ETF | 4.0% |
Kirkland Lake Gold Ltd. | 4.0% |
Royal Gold, Inc. | 3.7% |
Top Ten Total | 52.5% |
“Ten Largest Holdings” excludes any temporary cash investments.
86 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Precious Metals Fund | 52.24% | 9.39% | (3.49%) |
S&P 500 Materials Index | 24.58% | 7.07% | 9.13% |
S&P 500 Index | 31.49% | 11.70% | 13.56% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 87 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
PRECIOUS METALS FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 95.6% | ||||||||
Mining - 95.6% | ||||||||
Newmont Goldcorp Corp. | 44,978 | $ | 1,954,294 | |||||
Barrick Gold Corp. | 101,121 | 1,879,840 | ||||||
Franco-Nevada Corp. | 13,915 | 1,437,420 | ||||||
Freeport-McMoRan, Inc. | 105,893 | 1,389,316 | ||||||
Agnico Eagle Mines Ltd. | 20,315 | 1,251,607 | ||||||
Wheaton Precious Metals Corp. | 39,940 | 1,188,215 | ||||||
AngloGold Ashanti Ltd. ADR | 45,156 | 1,008,785 | ||||||
Kirkland Lake Gold Ltd. | 22,556 | 994,043 | ||||||
Royal Gold, Inc. | 7,580 | 926,655 | ||||||
Sibanye Gold Ltd. ADR* | 83,028 | 824,468 | ||||||
Kinross Gold Corp.* | 170,661 | 808,933 | ||||||
Gold Fields Ltd. ADR | 117,102 | 772,873 | ||||||
Pan American Silver Corp. | 31,032 | 735,148 | ||||||
B2Gold Corp. | 168,838 | 677,040 | ||||||
Yamana Gold, Inc.1 | 163,661 | 646,461 | ||||||
Novagold Resources, Inc.* | 65,991 | 591,279 | ||||||
First Majestic Silver Corp.* | 43,597 | 534,499 | ||||||
SSR Mining, Inc.* | 27,096 | 521,869 | ||||||
Alamos Gold, Inc. — Class A | 86,329 | 519,701 | ||||||
Coeur Mining, Inc.* | 58,540 | 473,003 | ||||||
Pretium Resources, Inc.* | 42,407 | 471,990 | ||||||
Harmony Gold Mining Company Ltd. ADR* | 127,140 | 461,518 | ||||||
IAMGOLD Corp.* | 118,561 | 442,233 | ||||||
Hecla Mining Co. | 130,157 | 441,232 | ||||||
Osisko Gold Royalties Ltd.1 | 41,793 | 405,810 | ||||||
Eldorado Gold Corp.* | 47,377 | 380,437 | ||||||
Sandstorm Gold Ltd.* | 50,173 | 373,789 | ||||||
MAG Silver Corp.* | 28,881 | 341,951 | ||||||
Silvercorp Metals, Inc.1 | 58,160 | 329,767 | ||||||
Seabridge Gold, Inc.*,1 | 22,352 | 308,905 | ||||||
Fortuna Silver Mines, Inc.*,1 | 69,572 | 283,854 | ||||||
Gold Resource Corp. | 36,243 | 200,786 | ||||||
Endeavour Silver Corp.* | 80,360 | 193,668 | ||||||
Total Mining | 23,771,389 | |||||||
Total Common Stocks | ||||||||
(Cost $10,980,154) | 23,771,389 | |||||||
RIGHTS††† - 0.0% | ||||||||
Mining - 0.0% | ||||||||
Pan American Silver Corp.*,2 | 80,321 | — | ||||||
Total Rights | ||||||||
(Cost $—) | — | |||||||
EXCHANGE-TRADED FUNDS† - 4.0% | ||||||||
VanEck Vectors Junior Gold Miners ETF | 23,697 | 1,001,435 | ||||||
Total Exchange-Traded Funds | ||||||||
(Cost $554,645) | 1,001,435 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,3 - 0.8% | ||||||||
J.P. Morgan Securities LLC | $ | 122,710 | 122,710 | |||||
Barclays Capital, Inc. | 39,568 | 39,568 | ||||||
BofA Securities, Inc. | 39,567 | 39,567 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $201,845) | 201,845 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,4 - 4.9% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.47%5 | 1,229,801 | 1,229,801 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $1,229,801) | 1,229,801 | |||||||
Total Investments - 105.3% | ||||||||
(Cost $12,966,445) | $ | 26,204,470 | ||||||
Other Assets & Liabilities, net - (5.3)% | (1,322,367 | ) | ||||||
Total Net Assets - 100.0% | $ | 24,882,103 |
88 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
PRECIOUS METALS FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
††† | Value determined based on Level 3 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2019 — See Note 7. |
2 | Security was fair valued by the Valuation Committee at December 31, 2019. 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, 2019. |
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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 23,771,389 | $ | — | $ | — | $ | 23,771,389 | ||||||||
Rights | — | — | — | * | — | |||||||||||
Exchange-Traded Funds | 1,001,435 | — | — | 1,001,435 | ||||||||||||
Repurchase Agreements | — | 201,845 | — | 201,845 | ||||||||||||
Securities Lending Collateral | 1,229,801 | — | — | 1,229,801 | ||||||||||||
Total Assets | $ | 26,002,625 | $ | 201,845 | $ | — | $ | 26,204,470 |
* | Security has a market value of $0. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 89 |
PRECIOUS METALS FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value - including $1,164,416 of securities loaned (cost $12,764,600) | $ | 26,002,625 | ||
Repurchase agreements, at value (cost $201,845) | 201,845 | |||
Receivables: | ||||
Fund shares sold | 862,432 | |||
Dividends | 3,778 | |||
Foreign tax reclaims | 1,572 | |||
Securities lending income | 231 | |||
Interest | 9 | |||
Total assets | 27,072,492 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 1,229,801 | |||
Securities purchased | 785,467 | |||
Deferred foreign capital gain taxes | 86,192 | |||
Fund shares redeemed | 18,820 | |||
Management fees | 13,540 | |||
Transfer agent and administrative fees | 4,513 | |||
Investor service fees | 4,513 | |||
Portfolio accounting fees | 1,805 | |||
Trustees’ fees* | 314 | |||
Miscellaneous | 45,424 | |||
Total liabilities | 2,190,389 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 24,882,103 | ||
Net assets consist of: | ||||
Paid in capital | $ | 34,701,812 | ||
Total distributable earnings (loss) | (9,819,709 | ) | ||
Net assets | $ | 24,882,103 | ||
Capital shares outstanding | 677,143 | |||
Net asset value per share | $ | 36.75 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $11,819) | $ | 183,260 | ||
Interest | 4,616 | |||
Income from securities lending, net | 3,432 | |||
Total investment income | 191,308 | |||
Expenses: | ||||
Management fees | 139,316 | |||
Investor service fees | 46,439 | |||
Transfer agent and administrative fees | 46,439 | |||
Professional fees | 32,973 | |||
Portfolio accounting fees | 18,575 | |||
Trustees’ fees* | 4,229 | |||
Custodian fees | 3,541 | |||
Line of credit fees | 4 | |||
Miscellaneous | 27,212 | |||
Total expenses | 318,728 | |||
Net investment loss | (127,420 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 1,970,211 | |||
Net realized gain | 1,970,211 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 6,254,702 | |||
Net change in unrealized appreciation (depreciation) | 6,254,702 | |||
Net realized and unrealized gain | 8,224,913 | |||
Net increase in net assets resulting from operations | $ | 8,097,493 |
* | 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 | $ | (127,420 | ) | $ | (161,031 | ) | ||
Net realized gain (loss) on investments | 1,970,211 | (1,276,942 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 6,254,702 | (3,405,828 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 8,097,493 | (4,843,801 | ) | |||||
Distributions to shareholders | — | (860,699 | ) | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 40,583,255 | 130,118,052 | ||||||
Distributions reinvested | — | 860,699 | ||||||
Cost of shares redeemed | (40,430,808 | ) | (138,843,308 | ) | ||||
Net increase (decrease) from capital share transactions | 152,447 | (7,864,557 | ) | |||||
Net increase (decrease) in net assets | 8,249,940 | (13,569,057 | ) | |||||
Net assets: | ||||||||
Beginning of year | 16,632,163 | 30,201,220 | ||||||
End of year | $ | 24,882,103 | $ | 16,632,163 | ||||
Capital share activity: | ||||||||
Shares sold | 1,383,313 | 4,824,749 | ||||||
Shares issued from reinvestment of distributions | — | 32,068 | ||||||
Shares redeemed | (1,395,240 | ) | (5,164,558 | ) | ||||
Net decrease in shares | (11,927 | ) | (307,741 | ) |
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 | $ | 24.14 | $ | 30.30 | $ | 29.72 | $ | 17.95 | $ | 27.60 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.20 | ) | (.23 | ) | (.29 | ) | (.29 | ) | (.12 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 12.81 | (4.68 | ) | 2.29 | 12.06 | (8.01 | ) | |||||||||||||
Total from investment operations | 12.61 | (4.91 | ) | 2.00 | 11.77 | (8.13 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | — | (1.25 | ) | (1.42 | ) | — | (1.52 | ) | ||||||||||||
Total distributions | — | (1.25 | ) | (1.42 | ) | — | (1.52 | ) | ||||||||||||
Net asset value, end of period | $ | 36.75 | $ | 24.14 | $ | 30.30 | $ | 29.72 | $ | 17.95 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 52.24 | % | (16.61 | %) | 7.08 | % | 65.52 | % | (30.37 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 24,882 | $ | 16,632 | $ | 30,201 | $ | 22,672 | $ | 16,201 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.69 | %) | (0.87 | %) | (0.93 | %) | (0.90 | %) | (0.50 | %) | ||||||||||
Total expensesc | 1.72 | % | 1.67 | % | 1.61 | % | 1.56 | % | 1.50 | % | ||||||||||
Portfolio turnover rate | 180 | % | 639 | % | 691 | % | 298 | % | 203 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
92 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, Real Estate Fund returned 24.43%, compared to a return of 31.49% for the S&P 500 Index. The MSCI U.S. REIT Index returned 25.84%.
Specialized REITs were the leading contributor to return, followed by residential REITs and office REITs. The automotive retail industry was the only detractor from return.
American Tower Corp. — Class A, Equinix, Inc., and Prologis, Inc. were the best-performing holdings in the Fund for the year. The worst-performing holdings for the period were Macerich Co., Uniti Group, Inc., and Taubman Centers, Inc.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: October 1, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
American Tower Corp. — Class A | 3.1% |
Crown Castle International Corp. | 2.4% |
Prologis, Inc. | 2.3% |
Equinix, Inc. | 2.2% |
Simon Property Group, Inc. | 2.1% |
Public Storage | 1.9% |
Welltower, Inc. | 1.8% |
Equity Residential | 1.7% |
AvalonBay Communities, Inc. | 1.7% |
SBA Communications Corp. | 1.6% |
Top Ten Total | 20.8% |
“Ten Largest Holdings” excludes any temporary cash investments.
THE RYDEX FUNDS ANNUAL REPORT | 93 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Real Estate Fund | 24.43% | 5.72% | 9.64% |
MSCI U.S. REIT Index | 25.84% | 7.03% | 11.93% |
S&P 500 Index | 31.49% | 11.70% | 13.56% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the MSCI U.S. REIT Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
94 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
REAL ESTATE FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 98.7% | ||||||||
REITs - 94.9% | ||||||||
REITs-Diversified - 22.0% | ||||||||
American Tower Corp. — Class A | 1,653 | $ | 379,892 | |||||
Crown Castle International Corp. | 2,038 | 289,702 | ||||||
Equinix, Inc. | 458 | 267,335 | ||||||
SBA Communications Corp. | 817 | 196,889 | ||||||
Digital Realty Trust, Inc. | 1,604 | 192,063 | ||||||
Weyerhaeuser Co. | 5,936 | 179,267 | ||||||
WP Carey, Inc. | 1,771 | 141,751 | ||||||
Duke Realty Corp. | 3,912 | 135,629 | ||||||
Vornado Realty Trust | 2,002 | 133,133 | ||||||
VICI Properties, Inc. | 5,069 | 129,513 | ||||||
Gaming and Leisure Properties, Inc. | 2,654 | 114,255 | ||||||
Lamar Advertising Co. — Class A | 1,264 | 112,825 | ||||||
New Residential Investment Corp. | 5,965 | 96,096 | ||||||
EPR Properties | 1,253 | 88,512 | ||||||
CoreSite Realty Corp. | 773 | 86,669 | ||||||
Outfront Media, Inc. | 2,821 | 75,659 | ||||||
PotlatchDeltic Corp. | 1,463 | 63,304 | ||||||
Total REITs-Diversified | 2,682,494 | |||||||
REITs-Apartments - 11.9% | ||||||||
Equity Residential | 2,564 | 207,479 | ||||||
AvalonBay Communities, Inc. | 984 | 206,345 | ||||||
Essex Property Trust, Inc. | 562 | 169,083 | ||||||
Invitation Homes, Inc. | 5,095 | 152,697 | ||||||
Mid-America Apartment Communities, Inc. | 1,129 | 148,870 | ||||||
UDR, Inc. | 3,005 | 140,333 | ||||||
Camden Property Trust | 1,145 | 121,484 | ||||||
American Homes 4 Rent — Class A | 4,078 | 106,884 | ||||||
Apartment Investment & Management Co. — Class A | 2,048 | 105,779 | ||||||
American Campus Communities, Inc. | 2,067 | 97,211 | ||||||
Total REITs-Apartments | 1,456,165 | |||||||
REITs-Office Property - 10.0% | ||||||||
Boston Properties, Inc. | 1,276 | 175,909 | ||||||
Alexandria Real Estate Equities, Inc. | 1,014 | 163,842 | ||||||
Kilroy Realty Corp. | 1,352 | 113,433 | ||||||
Douglas Emmett, Inc. | 2,379 | 104,438 | ||||||
SL Green Realty Corp. | 1,132 | 104,008 | ||||||
Cousins Properties, Inc. | 2,292 | 94,430 | ||||||
Hudson Pacific Properties, Inc. | 2,485 | 93,560 | ||||||
JBG SMITH Properties | 2,177 | 86,841 | ||||||
Highwoods Properties, Inc. | 1,759 | 86,033 | ||||||
Paramount Group, Inc. | 4,837 | 67,331 | ||||||
Brandywine Realty Trust | 4,001 | 63,016 | ||||||
Empire State Realty Trust, Inc. — Class A | 4,301 | 60,042 | ||||||
Total REITs-Office Property | 1,212,883 | |||||||
REITs-Health Care - 9.5% | ||||||||
Welltower, Inc. | 2,700 | 220,806 | ||||||
Ventas, Inc. | 3,050 | 176,107 | ||||||
Healthpeak Properties, Inc. | 4,676 | 161,182 | ||||||
Medical Properties Trust, Inc. | 5,988 | 126,407 | ||||||
Omega Healthcare Investors, Inc. | 2,721 | 115,234 | ||||||
Healthcare Trust of America, Inc. — Class A | 3,131 | 94,807 | ||||||
Healthcare Realty Trust, Inc. | 2,398 | 80,021 | ||||||
Sabra Health Care REIT, Inc. | 3,666 | 78,232 | ||||||
Physicians Realty Trust | 3,761 | 71,233 | ||||||
CareTrust REIT, Inc. | 2,557 | 52,751 | ||||||
Total REITs-Health Care | 1,176,780 | |||||||
REITs-Warehouse/Industries - 8.5% | ||||||||
Prologis, Inc. | 3,213 | 286,407 | ||||||
Liberty Property Trust | 1,952 | 117,218 | ||||||
CyrusOne, Inc. | 1,578 | 103,249 | ||||||
Americold Realty Trust | 2,820 | 98,869 | ||||||
First Industrial Realty Trust, Inc. | 2,107 | 87,462 | ||||||
EastGroup Properties, Inc. | 658 | 87,297 | ||||||
Rexford Industrial Realty, Inc. | 1,875 | 85,631 | ||||||
STAG Industrial, Inc. | 2,482 | 78,357 | ||||||
QTS Realty Trust, Inc. — Class A | 1,247 | 67,675 | ||||||
Innovative Industrial Properties, Inc. | 480 | 36,418 | ||||||
Total REITs-Warehouse/Industries | 1,048,583 | |||||||
REITs-Hotels - 6.9% | ||||||||
Host Hotels & Resorts, Inc. | 7,389 | 137,066 | ||||||
MGM Growth Properties LLC — Class A | 3,836 | 118,801 | ||||||
Park Hotels & Resorts, Inc. | 3,621 | 93,675 | ||||||
Ryman Hospitality Properties, Inc. | 955 | 82,760 | ||||||
Service Properties Trust | 3,134 | 76,250 | ||||||
Apple Hospitality REIT, Inc. | 4,445 | 72,231 | ||||||
Pebblebrook Hotel Trust | 2,593 | 69,518 | ||||||
Sunstone Hotel Investors, Inc. | 4,751 | 66,134 | ||||||
RLJ Lodging Trust | 3,671 | 65,050 | ||||||
DiamondRock Hospitality Co. | 4,992 | 55,311 | ||||||
Total REITs-Hotels | 836,796 | |||||||
REITs-Shopping Centers - 5.7% | ||||||||
Regency Centers Corp. | 1,955 | 123,341 | ||||||
Federal Realty Investment Trust | 923 | 118,818 | ||||||
Kimco Realty Corp. | 5,426 | 112,372 | ||||||
Brixmor Property Group, Inc. | 4,445 | 96,056 | ||||||
Weingarten Realty Investors | 2,440 | 76,226 | ||||||
Retail Properties of America, Inc. — Class A | 4,753 | 63,690 | ||||||
Urban Edge Properties | 3,028 | 58,077 | ||||||
Retail Opportunity Investments Corp. | 3,093 | 54,622 | ||||||
Total REITs-Shopping Centers | 703,202 | |||||||
REITs-Storage - 5.4% | ||||||||
Public Storage | 1,087 | 231,487 | ||||||
Extra Space Storage, Inc. | 1,334 | 140,897 | ||||||
Iron Mountain, Inc. | 3,579 | 114,063 | ||||||
CubeSmart | 2,961 | 93,212 | ||||||
Life Storage, Inc. | 795 | 86,083 | ||||||
Total REITs-Storage | 665,742 | |||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 95 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
REAL ESTATE FUND |
| Shares | Value | ||||||
REITs-Mortgage - 4.8% | ||||||||
Annaly Capital Management, Inc. | 14,635 | $ | 137,862 | |||||
AGNC Investment Corp. | 6,604 | 116,759 | ||||||
Starwood Property Trust, Inc. | 4,002 | 99,490 | ||||||
Blackstone Mortgage Trust, Inc. — Class A | 2,261 | 84,154 | ||||||
Two Harbors Investment Corp. | 5,106 | 74,650 | ||||||
Chimera Investment Corp. | 3,551 | 73,009 | ||||||
Total REITs-Mortgage | 585,924 | |||||||
REITs-Single Tenant - 4.5% | ||||||||
Realty Income Corp. | 2,531 | 186,358 | ||||||
National Retail Properties, Inc. | 2,165 | 116,087 | ||||||
STORE Capital Corp. | 3,013 | 112,204 | ||||||
Spirit Realty Capital, Inc. | 1,707 | 83,950 | ||||||
Essential Properties Realty Trust, Inc. | 2,180 | 54,086 | ||||||
Total REITs-Single Tenant | 552,685 | |||||||
REITs-Regional Malls - 3.4% | ||||||||
Simon Property Group, Inc. | 1,730 | 257,701 | ||||||
Macerich Co.1 | 2,685 | 72,280 | ||||||
Tanger Factory Outlet Centers, Inc.1 | 2,997 | 44,146 | ||||||
Brookfield Property REIT, Inc. — Class A | 2,254 | 41,575 | ||||||
Total REITs-Regional Malls | 415,702 | |||||||
REITs-Manufactured Homes - 2.3% | ||||||||
Sun Communities, Inc. | 951 | 142,745 | ||||||
Equity LifeStyle Properties, Inc. | 1,951 | 137,331 | ||||||
Total REITs-Manufactured Homes | 280,076 | |||||||
Total REITs | 11,617,032 | |||||||
Real Estate - 3.8% | ||||||||
Real Estate Management/Services - 3.1% | ||||||||
CBRE Group, Inc. — Class A* | 2,830 | 173,451 | ||||||
Jones Lang LaSalle, Inc. | 659 | 114,725 | ||||||
Redfin Corp.*,1 | 2,491 | 52,660 | ||||||
Realogy Holdings Corp.1 | 4,103 | 39,717 | ||||||
Total Real Estate Management/Services | 380,553 | |||||||
Real Estate Operations/Development - 0.7% | ||||||||
Howard Hughes Corp.* | 704 | 89,267 | ||||||
Total Real Estate | 469,820 | |||||||
Total Common Stocks | ||||||||
(Cost $6,292,003) | 12,086,852 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.6% | ||||||||
J.P. Morgan Securities LLC | $ | 45,793 | 45,793 | |||||
Barclays Capital, Inc. | 14,765 | 14,765 | ||||||
BofA Securities, Inc. | 14,766 | 14,766 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $75,324) | 75,324 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 1.0% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.47%4 | 120,799 | 120,799 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $120,799) | 120,799 | |||||||
Total Investments - 100.3% | ||||||||
(Cost $6,488,126) | $ | 12,282,975 | ||||||
Other Assets & Liabilities, net - (0.3)% | (34,033 | ) | ||||||
Total Net Assets - 100.0% | $ | 12,248,942 |
* | 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, 2019 — 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, 2019. |
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, 2019 |
REAL ESTATE FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 12,086,852 | $ | — | $ | — | $ | 12,086,852 | ||||||||
Repurchase Agreements | — | 75,324 | — | 75,324 | ||||||||||||
Securities Lending Collateral | 120,799 | — | — | 120,799 | ||||||||||||
Total Assets | $ | 12,207,651 | $ | 75,324 | $ | — | $ | 12,282,975 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 97 |
REAL ESTATE FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value - including $119,412 of securities loaned (cost $6,412,802) | $ | 12,207,651 | ||
Repurchase agreements, at value (cost $75,324) | 75,324 | |||
Receivables: | ||||
Securities sold | 131,043 | |||
Dividends | 79,070 | |||
Fund shares sold | 46,597 | |||
Securities lending income | 52 | |||
Interest | 3 | |||
Total assets | 12,539,740 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 120,799 | |||
Fund shares redeemed | 118,403 | |||
Management fees | 9,557 | |||
Transfer agent and administrative fees | 2,811 | |||
Investor service fees | 2,811 | |||
Portfolio accounting fees | 1,124 | |||
Trustees’ fees* | 242 | |||
Miscellaneous | 35,051 | |||
Total liabilities | 290,798 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 12,248,942 | ||
Net assets consist of: | ||||
Paid in capital | $ | 8,235,524 | ||
Total distributable earnings (loss) | 4,013,418 | |||
Net assets | $ | 12,248,942 | ||
Capital shares outstanding | 281,855 | |||
Net asset value per share | $ | 43.46 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends | $ | 492,728 | ||
Interest | 1,719 | |||
Income from securities lending, net | 570 | |||
Total investment income | 495,017 | |||
Expenses: | ||||
Management fees | 122,240 | |||
Investor service fees | 35,953 | |||
Transfer agent and administrative fees | 35,953 | |||
Professional fees | 26,093 | |||
Portfolio accounting fees | 14,381 | |||
Trustees’ fees* | 3,270 | |||
Custodian fees | 2,541 | |||
Line of credit fees | 159 | |||
Miscellaneous | 20,794 | |||
Total expenses | 261,384 | |||
Net investment income | 233,633 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 364,242 | |||
Net realized gain | 364,242 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 2,250,263 | |||
Net change in unrealized appreciation (depreciation) | 2,250,263 | |||
Net realized and unrealized gain | 2,614,505 | |||
Net increase in net assets resulting from operations | $ | 2,848,138 |
* | 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 | $ | 233,633 | $ | 209,706 | ||||
Net realized gain (loss) on investments | 364,242 | (78,459 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 2,250,263 | (1,301,738 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 2,848,138 | (1,170,491 | ) | |||||
Distributions to shareholders | (392,655 | ) | (127,066 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 36,309,780 | 44,849,856 | ||||||
Distributions reinvested | 392,655 | 127,066 | ||||||
Cost of shares redeemed | (39,616,537 | ) | (41,232,363 | ) | ||||
Net increase (decrease) from capital share transactions | (2,914,102 | ) | 3,744,559 | |||||
Net increase (decrease) in net assets | (458,619 | ) | 2,447,002 | |||||
Net assets: | ||||||||
Beginning of year | 12,707,561 | 10,260,559 | ||||||
End of year | $ | 12,248,942 | $ | 12,707,561 | ||||
Capital share activity: | ||||||||
Shares sold | 875,959 | 1,183,879 | ||||||
Shares issued from reinvestment of distributions | 9,631 | 3,246 | ||||||
Shares redeemed | (956,810 | ) | (1,095,657 | ) | ||||
Net increase (decrease) in shares | (71,220 | ) | 91,468 |
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 | $ | 35.99 | $ | 39.22 | $ | 37.72 | $ | 34.50 | $ | 36.41 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .68 | .64 | .36 | .63 | .53 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 8.03 | (3.48 | ) | 2.11 | 2.88 | (1.44 | ) | |||||||||||||
Total from investment operations | 8.71 | (2.84 | ) | 2.47 | 3.51 | (.91 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.83 | ) | (.39 | ) | (.97 | ) | (.29 | ) | (1.00 | ) | ||||||||||
Net realized gains | (.41 | ) | — | — | — | — | ||||||||||||||
Total distributions | (1.24 | ) | (.39 | ) | (.97 | ) | (.29 | ) | (1.00 | ) | ||||||||||
Net asset value, end of period | $ | 43.46 | $ | 35.99 | $ | 39.22 | $ | 37.72 | $ | 34.50 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 24.43 | % | (7.33 | %) | 6.65 | % | 10.15 | % | (2.52 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 12,249 | $ | 12,708 | $ | 10,261 | $ | 11,509 | $ | 16,324 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.62 | % | 1.67 | % | 0.93 | % | 1.73 | % | 1.46 | % | ||||||||||
Total expenses | 1.82 | % | 1.73 | % | 1.70 | % | 1.65 | % | 1.60 | % | ||||||||||
Portfolio turnover rate | 225 | % | 313 | % | 331 | % | 279 | % | 259 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
100 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, Retailing Fund returned 24.49%, compared with a return of 31.49% for the S&P 500 Index. The S&P 500 Consumer Discretionary Index returned 27.94%.
The internet & direct marketing retail industry contributed the most to the Fund’s return for the period, followed by the automotive retail industry and the hypermarkets & super centers industry. The department stores industry, drug retail industry, and health care services industry detracted the most from return.
Fund performance for the year benefited most from Amazon.com, Inc., Alibaba Group Holding Ltd. ADR, and Target Corp. Qurate Retail, Inc. — Class A, Macy’s, Inc., and Grubhub, 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. | 10.1% |
Walmart, Inc. | 6.3% |
Home Depot, Inc. | 5.3% |
Alibaba Group Holding Ltd. ADR | 4.5% |
Costco Wholesale Corp. | 4.0% |
Booking Holdings, Inc. | 3.3% |
Lowe’s Companies, Inc. | 3.3% |
TJX Companies, Inc. | 3.0% |
Target Corp. | 2.8% |
Walgreens Boots Alliance, Inc. | 2.5% |
Top Ten Total | 45.1% |
“Ten Largest Holdings” excludes any temporary cash investments.
THE RYDEX FUNDS ANNUAL REPORT | 101 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Retailing Fund | 24.49% | 6.11% | 11.81% |
S&P 500 Consumer Discretionary Index | 27.94% | 13.12% | 17.18% |
S&P 500 Index | 31.49% | 11.70% | 13.56% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
102 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
RETAILING FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 98.9% | ||||||||
Retail - 63.2% | ||||||||
Walmart, Inc. | 1,927 | $ | 229,005 | |||||
Home Depot, Inc. | 873 | 190,646 | ||||||
Costco Wholesale Corp. | 488 | 143,433 | ||||||
Lowe’s Companies, Inc. | 993 | 118,922 | ||||||
TJX Companies, Inc. | 1,776 | 108,443 | ||||||
Target Corp. | 779 | 99,876 | ||||||
Walgreens Boots Alliance, Inc. | 1,557 | 91,801 | ||||||
Ross Stores, Inc. | 699 | 81,378 | ||||||
Dollar General Corp. | 505 | 78,770 | ||||||
Carvana Co.* | 799 | 73,548 | ||||||
O’Reilly Automotive, Inc.* | 164 | 71,875 | ||||||
AutoZone, Inc.* | 56 | 66,713 | ||||||
Best Buy Company, Inc. | 675 | 59,265 | ||||||
Dollar Tree, Inc.* | 628 | 59,063 | ||||||
Tiffany & Co. | 368 | 49,183 | ||||||
Burlington Stores, Inc.* | 215 | 49,026 | ||||||
Genuine Parts Co. | 460 | 48,866 | ||||||
Ulta Beauty, Inc.* | 190 | 48,097 | ||||||
CarMax, Inc.* | 514 | 45,062 | ||||||
Advance Auto Parts, Inc. | 267 | 42,763 | ||||||
Tractor Supply Co. | 456 | 42,609 | ||||||
Kohl’s Corp. | 705 | 35,920 | ||||||
Five Below, Inc.* | 265 | 33,883 | ||||||
Gap, Inc. | 1,813 | 32,054 | ||||||
Nordstrom, Inc. | 776 | 31,762 | ||||||
Williams-Sonoma, Inc. | 410 | 30,110 | ||||||
Macy’s, Inc. | 1,762 | 29,954 | ||||||
Floor & Decor Holdings, Inc. — Class A* | 564 | 28,657 | ||||||
L Brands, Inc. | 1,540 | 27,905 | ||||||
Dick’s Sporting Goods, Inc. | 544 | 26,922 | ||||||
Foot Locker, Inc. | 648 | 25,265 | ||||||
Ollie’s Bargain Outlet Holdings, Inc.* | 381 | 24,883 | ||||||
RH* | 116 | 24,766 | ||||||
BJ’s Wholesale Club Holdings, Inc.* | 980 | 22,285 | ||||||
Urban Outfitters, Inc.* | 755 | 20,966 | ||||||
National Vision Holdings, Inc.* | 615 | 19,944 | ||||||
American Eagle Outfitters, Inc. | 1,339 | 19,683 | ||||||
Bed Bath & Beyond, Inc. | 1,098 | 18,995 | ||||||
Signet Jewelers Ltd. | 635 | 13,805 | ||||||
Abercrombie & Fitch Co. — Class A | 767 | 13,261 | ||||||
Children’s Place, Inc.1 | 194 | 12,129 | ||||||
Total Retail | 2,291,493 | |||||||
Internet - 31.7% | ||||||||
Amazon.com, Inc.* | 199 | 367,720 | ||||||
Alibaba Group Holding Ltd. ADR* | 773 | 163,953 | ||||||
Booking Holdings, Inc.* | 58 | 119,116 | ||||||
eBay, Inc. | 1,874 | 67,670 | ||||||
JD.com, Inc. ADR* | 1,892 | 66,655 | ||||||
Expedia Group, Inc. | 463 | 50,069 | ||||||
MercadoLibre, Inc.* | 84 | 48,043 | ||||||
Trip.com Group Ltd. ADR* | 1,365 | 45,782 | ||||||
Pinduoduo, Inc. ADR* | 1,190 | 45,006 | ||||||
Chewy, Inc. — Class A*,1 | 1,473 | 42,717 | ||||||
Wayfair, Inc. — Class A*,1 | 416 | 37,594 | ||||||
Baozun, Inc. ADR*,1 | 937 | 31,034 | ||||||
Etsy, Inc.* | 643 | 28,485 | ||||||
Stitch Fix, Inc. — Class A*,1 | 756 | 19,399 | ||||||
Stamps.com, Inc.* | 175 | 14,616 | ||||||
Total Internet | 1,147,859 | |||||||
Distribution & Wholesale - 2.1% | ||||||||
LKQ Corp.* | 1,167 | 41,662 | ||||||
Pool Corp. | 172 | 36,529 | ||||||
Total Distribution & Wholesale | 78,191 | |||||||
Commercial Services - 1.2% | ||||||||
Aaron’s, Inc. | 426 | 24,329 | ||||||
Monro, Inc. | 258 | 20,176 | ||||||
Total Commercial Services | 44,505 | |||||||
Food Service - 0.7% | ||||||||
Grubhub, Inc.* | 536 | 26,071 | ||||||
Total Common Stocks | ||||||||
(Cost $2,123,899) | 3,588,119 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 1.3% | ||||||||
J.P. Morgan Securities LLC | $ | 28,553 | 28,553 | |||||
Barclays Capital, Inc. | 9,207 | 9,207 | ||||||
BofA Securities, Inc. | 9,207 | 9,207 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $46,967) | 46,967 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 103 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
RETAILING FUND |
| Shares | Value | ||||||
SECURITIES LENDING COLLATERAL†,3 - 2.0% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.47%4 | 70,870 | $ | 70,870 | |||||
Total Securities Lending Collateral | ||||||||
(Cost $70,870) | 70,870 | |||||||
Total Investments - 102.2% | ||||||||
(Cost $2,241,736) | $ | 3,705,956 | ||||||
Other Assets & Liabilities, net - (2.2)% | (80,764 | ) | ||||||
Total Net Assets - 100.0% | $ | 3,625,192 |
* | 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, 2019 — 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, 2019. |
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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 3,588,119 | $ | — | $ | — | $ | 3,588,119 | ||||||||
Repurchase Agreements | — | 46,967 | — | 46,967 | ||||||||||||
Securities Lending Collateral | 70,870 | — | — | 70,870 | ||||||||||||
Total Assets | $ | 3,658,989 | $ | 46,967 | $ | — | $ | 3,705,956 |
104 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RETAILING FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value including $69,836 of securities loaned (cost $2,194,769) | $ | 3,658,989 | ||
Repurchase agreements, at value (cost $46,967) | 46,967 | |||
Receivables: | ||||
Fund shares sold | 3,467 | |||
Dividends | 3,104 | |||
Securities lending income | 317 | |||
Interest | 2 | |||
Total assets | 3,712,846 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 70,870 | |||
Management fees | 2,492 | |||
Transfer agent and administrative fees | 733 | |||
Investor service fees | 733 | |||
Portfolio accounting fees | 293 | |||
Fund shares redeemed | 218 | |||
Trustees’ fees* | 84 | |||
Miscellaneous | 12,231 | |||
Total liabilities | 87,654 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 3,625,192 | ||
Net assets consist of: | ||||
Paid in capital | $ | 2,840,382 | ||
Total distributable earnings (loss) | 784,810 | |||
Net assets | $ | 3,625,192 | ||
Capital shares outstanding | 40,475 | |||
Net asset value per share | $ | 89.57 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $130) | $ | 61,181 | ||
Interest | 778 | |||
Income from securities lending, net | 4,475 | |||
Total investment income | 66,434 | |||
Expenses: | ||||
Management fees | 43,879 | |||
Investor service fees | 12,906 | |||
Transfer agent and administrative fees | 12,906 | |||
Professional fees | 8,749 | |||
Portfolio accounting fees | 5,162 | |||
Trustees’ fees* | 1,681 | |||
Custodian fees | 1,123 | |||
Line of credit fees | 75 | |||
Miscellaneous | 7,862 | |||
Total expenses | 94,343 | |||
Net investment loss | (27,909 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 739,136 | |||
Net realized gain | 739,136 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 364,817 | |||
Net change in unrealized appreciation (depreciation) | 364,817 | |||
Net realized and unrealized gain | 1,103,953 | |||
Net increase in net assets resulting from operations | $ | 1,076,044 |
* | 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 loss | $ | (27,909 | ) | $ | (36,385 | ) | ||
Net realized gain (loss) on investments | 739,136 | (198,522 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 364,817 | (160,691 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 1,076,044 | (395,598 | ) | |||||
Distributions to shareholders | — | (1,360 | ) | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 8,919,934 | 25,331,798 | ||||||
Distributions reinvested | — | 1,360 | ||||||
Cost of shares redeemed | (13,159,008 | ) | (25,996,766 | ) | ||||
Net decrease from capital share transactions | (4,239,074 | ) | (663,608 | ) | ||||
Net decrease in net assets | (3,163,030 | ) | (1,060,566 | ) | ||||
Net assets: | ||||||||
Beginning of year | 6,788,222 | 7,848,788 | ||||||
End of year | $ | 3,625,192 | $ | 6,788,222 | ||||
Capital share activity: | ||||||||
Shares sold | 105,149 | 313,528 | ||||||
Shares issued from reinvestment of distributions | — | 16 | ||||||
Shares redeemed | (159,017 | ) | (324,743 | ) | ||||
Net decrease in shares | (53,868 | ) | (11,199 | ) |
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 | $ | 71.95 | $ | 74.37 | $ | 65.91 | $ | 69.96 | $ | 77.68 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.45 | ) | (.30 | ) | .02 | (.05 | ) | (.16 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | 18.07 | (2.11 | ) | 8.44 | (2.93 | ) | (.20 | ) | ||||||||||||
Total from investment operations | 17.62 | (2.41 | ) | 8.46 | (2.98 | ) | (.36 | ) | ||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | — | (.01 | ) | — | — | — | ||||||||||||||
Net realized gains | — | — | — | (1.07 | ) | (7.36 | ) | |||||||||||||
Total distributions | — | (.01 | ) | — | (1.07 | ) | (7.36 | ) | ||||||||||||
Net asset value, end of period | $ | 89.57 | $ | 71.95 | $ | 74.37 | $ | 65.91 | $ | 69.96 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 24.49 | % | (3.23 | %) | 12.82 | % | 0.30 | % | (1.33 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 3,625 | $ | 6,788 | $ | 7,849 | $ | 5,278 | $ | 8,328 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.54 | %) | (0.37 | %) | 0.03 | % | (0.25 | %) | (0.19 | %) | ||||||||||
Total expenses | 1.83 | % | 1.72 | % | 1.70 | % | 1.66 | % | 1.60 | % | ||||||||||
Portfolio turnover rate | 173 | % | 260 | % | 447 | % | 668 | % | 225 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Reverse share split — Per share amounts for the years 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, 2019 |
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, 2019, Technology Fund returned 39.75%, compared with a return of 31.49% for the S&P 500 Index. The S&P 500 Information Technology Index returned 50.29%.
The semiconductors industry contributed the most to the Fund’s performance for the period, followed by the data processing & outsourced services industry and the application software industry. No industry detracted from performance for the period.
Top-contributing holdings were Apple, Inc., Microsoft Corp., and Facebook, Inc. — Class A. Baidu, Inc. ADR Class A, TripAdvisor, Inc., and DXC Technology Co. 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. | 4.8% |
Microsoft Corp. | 4.5% |
Alphabet, Inc. — Class A | 3.9% |
Facebook, Inc. — Class A | 3.1% |
Visa, Inc. — Class A | 2.5% |
Mastercard, Inc. — Class A | 2.2% |
Intel Corp. | 2.1% |
Cisco Systems, Inc. | 1.8% |
Oracle Corp. | 1.7% |
Adobe, Inc. | 1.6% |
Top Ten Total | 28.2% |
“Ten Largest Holdings” excludes any temporary cash investments.
108 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Technology Fund | 39.75% | 15.44% | 13.30% |
S&P 500 Information Technology Index | 50.29% | 20.20% | 17.50% |
S&P 500 Index | 31.49% | 11.70% | 13.56% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 109 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
TECHNOLOGY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.4% | ||||||||
Software - 28.8% | ||||||||
Microsoft Corp. | 6,404 | $ | 1,009,911 | |||||
Oracle Corp. | 7,142 | 378,383 | ||||||
Adobe, Inc.* | 1,111 | 366,419 | ||||||
salesforce.com, Inc.* | 2,129 | 346,261 | ||||||
Fidelity National Information Services, Inc. | 1,936 | 269,278 | ||||||
Fiserv, Inc.* | 2,213 | 255,889 | ||||||
Intuit, Inc. | 911 | 238,618 | ||||||
VMware, Inc. — Class A* | 1,528 | 231,935 | ||||||
ServiceNow, Inc.* | 754 | 212,869 | ||||||
Activision Blizzard, Inc. | 3,308 | 196,561 | ||||||
Autodesk, Inc.* | 1,004 | 184,194 | ||||||
Workday, Inc. — Class A* | 1,095 | 180,073 | ||||||
Electronic Arts, Inc.* | 1,514 | 162,770 | ||||||
Paychex, Inc. | 1,885 | 160,338 | ||||||
Splunk, Inc.* | 929 | 139,136 | ||||||
ANSYS, Inc.* | 526 | 135,398 | ||||||
NetEase, Inc. ADR | 435 | 133,388 | ||||||
Synopsys, Inc.* | 949 | 132,101 | ||||||
Atlassian Corporation plc — Class A* | 1,067 | 128,403 | ||||||
Cadence Design Systems, Inc.* | 1,847 | 128,108 | ||||||
Zoom Video Communications, Inc. — Class A* | 1,843 | 125,398 | ||||||
SS&C Technologies Holdings, Inc. | 1,871 | 114,880 | ||||||
Paycom Software, Inc.* | 432 | 114,376 | ||||||
Akamai Technologies, Inc.* | 1,273 | 109,962 | ||||||
Citrix Systems, Inc. | 989 | 109,680 | ||||||
Take-Two Interactive Software, Inc.* | 889 | 108,840 | ||||||
DocuSign, Inc.* | 1,439 | 106,644 | ||||||
Twilio, Inc. — Class A* | 1,069 | 105,061 | ||||||
Jack Henry & Associates, Inc. | 665 | 96,871 | ||||||
Coupa Software, Inc.* | 601 | 87,896 | ||||||
PTC, Inc.* | 1,142 | 85,524 | ||||||
MongoDB, Inc.* | 601 | 79,098 | ||||||
Dropbox, Inc. — Class A* | 4,277 | 76,601 | ||||||
Alteryx, Inc. — Class A* | 741 | 74,152 | ||||||
Nutanix, Inc. — Class A* | 2,271 | 70,992 | ||||||
Total Software | 6,456,008 | |||||||
Semiconductors - 20.4% | ||||||||
Intel Corp. | 7,905 | 473,114 | ||||||
NVIDIA Corp. | 1,463 | 344,244 | ||||||
Broadcom, Inc. | 1,022 | 322,972 | ||||||
Texas Instruments, Inc. | 2,499 | 320,597 | ||||||
QUALCOMM, Inc. | 3,291 | 290,365 | ||||||
Micron Technology, Inc.* | 4,084 | 219,638 | ||||||
Applied Materials, Inc. | 3,561 | 217,363 | ||||||
Advanced Micro Devices, Inc.* | 4,656 | 213,524 | ||||||
Analog Devices, Inc. | 1,608 | 191,095 | ||||||
Lam Research Corp. | 641 | 187,428 | ||||||
NXP Semiconductor N.V. | 1,395 | 177,528 | ||||||
KLA Corp. | 871 | 155,186 | ||||||
Microchip Technology, Inc.1 | 1,401 | 146,713 | ||||||
Xilinx, Inc. | 1,490 | 145,677 | ||||||
Taiwan Semiconductor Manufacturing Company Ltd. ADR | 2,472 | 143,623 | ||||||
Skyworks Solutions, Inc. | 1,095 | 132,364 | ||||||
ASML Holding N.V. — Class G | 417 | 123,407 | ||||||
Marvell Technology Group Ltd. | 4,621 | 122,734 | ||||||
Maxim Integrated Products, Inc. | 1,918 | 117,976 | ||||||
Qorvo, Inc.* | 907 | 105,421 | ||||||
Teradyne, Inc. | 1,435 | 97,853 | ||||||
ON Semiconductor Corp.* | 3,805 | 92,766 | ||||||
Cypress Semiconductor Corp. | 3,650 | 85,155 | ||||||
IPG Photonics Corp.* | 557 | 80,720 | ||||||
Cree, Inc.* | 1,370 | 63,225 | ||||||
Total Semiconductors | 4,570,688 | |||||||
Internet - 16.8% | ||||||||
Alphabet, Inc. — Class A* | 654 | 875,961 | ||||||
Facebook, Inc. — Class A* | 3,388 | 695,387 | ||||||
Baidu, Inc. ADR* | 1,310 | 165,584 | ||||||
Shopify, Inc. — Class A* | 377 | 149,888 | ||||||
Twitter, Inc.* | 4,499 | 144,193 | ||||||
Snap, Inc. — Class A* | 8,643 | 141,140 | ||||||
VeriSign, Inc.* | 723 | 139,308 | ||||||
Palo Alto Networks, Inc.* | 601 | 138,981 | ||||||
Match Group, Inc.*,1 | 1,679 | 137,863 | ||||||
IAC/InterActiveCorp* | 528 | 131,530 | ||||||
CDW Corp. | 918 | 131,127 | ||||||
NortonLifeLock, Inc. | 4,492 | 114,636 | ||||||
Weibo Corp. ADR*,1 | 2,443 | 113,233 | ||||||
Okta, Inc.* | 938 | 108,217 | ||||||
Momo, Inc. ADR | 3,155 | 105,693 | ||||||
Pinterest, Inc. — Class A* | 4,896 | 91,261 | ||||||
Zillow Group, Inc. — Class C*,1 | 1,956 | 89,859 | ||||||
Zendesk, Inc.* | 1,115 | 85,442 | ||||||
F5 Networks, Inc.* | 590 | 82,394 | ||||||
Proofpoint, Inc.* | 630 | 72,311 | ||||||
TripAdvisor, Inc. | 1,956 | 59,423 | ||||||
Total Internet | 3,773,431 | |||||||
Computers - 14.1% | ||||||||
Apple, Inc. | 3,659 | 1,074,465 | ||||||
International Business Machines Corp. | 2,355 | 315,664 | ||||||
Accenture plc — Class A | 1,064 | 224,047 | ||||||
Dell Technologies, Inc. — Class C* | 3,519 | 180,841 | ||||||
Cognizant Technology Solutions Corp. — Class A | 2,707 | 167,888 | ||||||
HP, Inc. | 7,781 | 159,900 | ||||||
Hewlett Packard Enterprise Co. | 8,373 | 132,796 | ||||||
Western Digital Corp. | 2,040 | 129,479 | ||||||
Fortinet, Inc.* | 1,140 | 121,706 | ||||||
Check Point Software Technologies Ltd.* | 1,051 | 116,619 | ||||||
Seagate Technology plc | 1,953 | 116,204 | ||||||
NetApp, Inc. | 1,743 | 108,502 | ||||||
Crowdstrike Holdings, Inc. — Class A* | 1,885 | 94,005 | ||||||
DXC Technology Co. | 2,388 | 89,765 | ||||||
Lumentum Holdings, Inc.* | 898 | 71,211 | ||||||
Zscaler, Inc.* | 1,490 | 69,285 | ||||||
Total Computers | 3,172,377 |
110 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
TECHNOLOGY FUND |
| Shares | Value | ||||||
Commercial Services - 5.2% | ||||||||
PayPal Holdings, Inc.* | 3,002 | $ | 324,726 | |||||
Automatic Data Processing, Inc. | 1,466 | 249,953 | ||||||
Global Payments, Inc. | 1,169 | 213,413 | ||||||
Square, Inc. — Class A* | 2,381 | 148,955 | ||||||
FleetCor Technologies, Inc.* | 510 | 146,737 | ||||||
Euronet Worldwide, Inc.* | 532 | 83,822 | ||||||
Total Commercial Services | 1,167,606 | |||||||
Diversified Financial Services - 5.2% | ||||||||
Visa, Inc. — Class A | 2,971 | 558,251 | ||||||
Mastercard, Inc. — Class A | 1,683 | 502,527 | ||||||
Western Union Co. | 3,590 | 96,140 | ||||||
Total Diversified Financial Services | 1,156,918 | |||||||
Telecommunications - 4.0% | ||||||||
Cisco Systems, Inc. | 8,537 | 409,434 | ||||||
Motorola Solutions, Inc. | 942 | 151,794 | ||||||
Corning, Inc. | 4,687 | 136,439 | ||||||
Arista Networks, Inc.* | 557 | 113,294 | ||||||
Juniper Networks, Inc. | 3,386 | 83,397 | ||||||
Total Telecommunications | 894,358 | |||||||
Electronics - 2.6% | ||||||||
Amphenol Corp. — Class A | 1,523 | 164,834 | ||||||
Keysight Technologies, Inc.* | 1,237 | 126,953 | ||||||
TE Connectivity Ltd. | 1,215 | 116,446 | ||||||
Trimble, Inc.* | 2,237 | 93,261 | ||||||
FLIR Systems, Inc. | 1,468 | 76,439 | ||||||
Total Electronics | 577,933 | |||||||
Energy-Alternate Sources - 1.0% | ||||||||
SolarEdge Technologies, Inc.* | 1,177 | 111,921 | ||||||
First Solar, Inc.* | 1,242 | 69,503 | ||||||
Enphase Energy, Inc.*,1 | 1,987 | 51,920 | ||||||
Total Energy-Alternate Sources | 233,344 | |||||||
Office & Business Equipment - 0.5% | ||||||||
Zebra Technologies Corp. — Class A* | 426 | 108,817 | ||||||
Advertising - 0.4% | ||||||||
Trade Desk, Inc. — Class A* | 375 | 97,417 | ||||||
Electrical Components & Equipment - 0.4% | ||||||||
Universal Display Corp. | 443 | 91,289 | ||||||
Total Common Stocks | ||||||||
(Cost $9,819,438) | 22,300,186 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.7% | ||||||||
J.P. Morgan Securities LLC | $ | 95,463 | 95,463 | |||||
Barclays Capital, Inc. | 30,781 | 30,781 | ||||||
BofA Securities, Inc. | 30,782 | 30,782 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $157,026) | 157,026 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 1.7% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.47%4 | 388,440 | 388,440 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $388,440) | 388,440 | |||||||
Total Investments - 101.8% | ||||||||
(Cost $10,364,904) | $ | 22,845,652 | ||||||
Other Assets & Liabilities, net - (1.8)% | (406,859 | ) | ||||||
Total Net Assets - 100.0% | $ | 22,438,793 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 111 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
TECHNOLOGY 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, 2019 — 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, 2019. |
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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 22,300,186 | $ | — | $ | — | $ | 22,300,186 | ||||||||
Repurchase Agreements | — | 157,026 | — | 157,026 | ||||||||||||
Securities Lending Collateral | 388,440 | — | — | 388,440 | ||||||||||||
Total Assets | $ | 22,688,626 | $ | 157,026 | $ | — | $ | 22,845,652 |
112 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
TECHNOLOGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value - including $379,909 of securities loaned (cost $10,207,878) | $ | 22,688,626 | ||
Repurchase agreements, at value (cost $157,026) | 157,026 | |||
Receivables: | ||||
Fund shares sold | 52,581 | |||
Dividends | 9,747 | |||
Foreign tax reclaims | 496 | |||
Securities lending income | 181 | |||
Interest | 6 | |||
Total assets | 22,908,663 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 388,440 | |||
Management fees | 15,697 | |||
Transfer agent and administrative fees | 4,617 | |||
Investor service fees | 4,617 | |||
Portfolio accounting fees | 1,847 | |||
Fund shares redeemed | 1,584 | |||
Trustees’ fees* | 364 | |||
Miscellaneous | 52,704 | |||
Total liabilities | 469,870 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 22,438,793 | ||
Net assets consist of: | ||||
Paid in capital | $ | 10,815,783 | ||
Total distributable earnings (loss) | 11,623,010 | |||
Net assets | $ | 22,438,793 | ||
Capital shares outstanding | 178,255 | |||
Net asset value per share | $ | 125.88 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $609) | $ | 221,290 | ||
Interest | 3,160 | |||
Income from securities lending, net | 632 | |||
Total investment income | 225,082 | |||
Expenses: | ||||
Management fees | 186,024 | |||
Investor service fees | 54,713 | |||
Transfer agent and administrative fees | 54,713 | |||
Professional fees | 41,110 | |||
Portfolio accounting fees | 21,885 | |||
Trustees’ fees* | 5,360 | |||
Custodian fees | 4,278 | |||
Line of credit fees | 18 | |||
Miscellaneous | 29,887 | |||
Total expenses | 397,988 | |||
Net investment loss | (172,906 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 1,446,636 | |||
Net realized gain | 1,446,636 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 5,145,477 | |||
Net change in unrealized appreciation (depreciation) | 5,145,477 | |||
Net realized and unrealized gain | 6,592,113 | |||
Net increase in net assets resulting from operations | $ | 6,419,207 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 113 |
TECHNOLOGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (172,906 | ) | $ | (146,979 | ) | ||
Net realized gain on investments | 1,446,636 | 1,605,280 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 5,145,477 | (1,731,288 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 6,419,207 | (272,987 | ) | |||||
Distributions to shareholders | (782,667 | ) | (660,584 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 42,992,140 | 41,595,282 | ||||||
Distributions reinvested | 782,667 | 660,584 | ||||||
Cost of shares redeemed | (43,033,120 | ) | (48,201,267 | ) | ||||
Net increase (decrease) from capital share transactions | 741,687 | (5,945,401 | ) | |||||
Net increase (decrease) in net assets | 6,378,227 | (6,878,972 | ) | |||||
Net assets: | ||||||||
Beginning of year | 16,060,566 | 22,939,538 | ||||||
End of year | $ | 22,438,793 | $ | 16,060,566 | ||||
Capital share activity: | ||||||||
Shares sold | 379,634 | 392,507 | ||||||
Shares issued from reinvestment of distributions | 6,598 | 6,013 | ||||||
Shares redeemed | (380,533 | ) | (463,173 | ) | ||||
Net increase (decrease) in shares | 5,699 | (64,653 | ) |
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 | $ | 93.07 | $ | 96.71 | $ | 74.88 | $ | 71.70 | $ | 71.28 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.90 | ) | (.63 | ) | (.56 | ) | (.21 | ) | (.32 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 37.66 | (.43 | ) | 24.71 | 7.78 | 1.13 | ||||||||||||||
Total from investment operations | 36.76 | (1.06 | ) | 24.15 | 7.57 | .81 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (3.95 | ) | (2.58 | ) | (2.32 | ) | (4.39 | ) | (.39 | ) | ||||||||||
Total distributions | (3.95 | ) | (2.58 | ) | (2.32 | ) | (4.39 | ) | (.39 | ) | ||||||||||
Net asset value, end of period | $ | 125.88 | $ | 93.07 | $ | 96.71 | $ | 74.88 | $ | 71.70 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 39.75 | % | (1.49 | %) | 32.63 | % | 11.07 | % | 1.11 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 22,439 | $ | 16,061 | $ | 22,940 | $ | 18,156 | $ | 19,042 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.79 | %) | (0.60 | %) | (0.64 | %) | (0.29 | %) | (0.45 | %) | ||||||||||
Total expenses | 1.82 | % | 1.72 | % | 1.70 | % | 1.66 | % | 1.60 | % | ||||||||||
Portfolio turnover rate | 188 | % | 178 | % | 200 | % | 321 | % | 142 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 115 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, Telecommunications Fund returned 13.21%, compared with a return of 31.49% for the S&P 500 Index. The S&P 500 Telecommunications Services Index returned 32.69%.
The industries contributing the most were the communications equipment industry, the integrated telecommunication services industry, and the wireless telecommunication services industry. The electronic equipment & instruments industry was the largest detractor from return, followed by the electronic components industry.
AT&T, Inc., Ubiquiti, Inc., and Verizon Communications, Inc. were the strongest performers for the year. Intelstat SA, Vonage Holdings Corp., and Casa Systems, Inc. detracted the most from performance during the year.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: July 27, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
AT&T, Inc. | 13.1% |
Verizon Communications, Inc. | 12.5% |
Cisco Systems, Inc. | 11.0% |
T-Mobile US, Inc. | 6.4% |
Motorola Solutions, Inc. | 4.1% |
Sprint Corp. | 3.6% |
Arista Networks, Inc. | 3.0% |
CenturyLink, Inc. | 2.9% |
Ubiquiti, Inc. | 2.7% |
Juniper Networks, Inc. | 2.2% |
Top Ten Total | 61.5% |
“Ten Largest Holdings” excludes any temporary cash investments.
116 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Telecommunications Fund | 13.21% | 4.44% | 4.41% |
S&P 500 Telecommunication Services Index | 32.69% | 7.91% | 9.65% |
S&P 500 Index | 31.49% | 11.70% | 13.56% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 117 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
TELECOMMUNICATIONS FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.6% | ||||||||
Telecommunications - 91.6% | ||||||||
AT&T, Inc. | 10,934 | $ | 427,301 | |||||
Verizon Communications, Inc. | 6,603 | 405,424 | ||||||
Cisco Systems, Inc. | 7,434 | 356,535 | ||||||
T-Mobile US, Inc.* | 2,647 | 207,578 | ||||||
Motorola Solutions, Inc. | 821 | 132,296 | ||||||
Sprint Corp.* | 22,211 | 115,719 | ||||||
Arista Networks, Inc.* | 485 | 98,649 | ||||||
CenturyLink, Inc. | 7,212 | 95,271 | ||||||
Ubiquiti, Inc. | 464 | 87,687 | ||||||
Juniper Networks, Inc. | 2,949 | 72,634 | ||||||
Zayo Group Holdings, Inc.* | 2,091 | 72,453 | ||||||
GCI Liberty, Inc. — Class A* | 982 | 69,575 | ||||||
Ciena Corp.* | 1,531 | 65,358 | ||||||
ViaSat, Inc.* | 736 | 53,872 | ||||||
EchoStar Corp. — Class A* | 1,205 | 52,189 | ||||||
Vodafone Group plc ADR | 2,463 | 47,610 | ||||||
Viavi Solutions, Inc.* | 3,035 | 45,525 | ||||||
Iridium Communications, Inc.* | 1,838 | 45,288 | ||||||
America Movil SAB de CV — Class L ADR | 2,798 | 44,768 | ||||||
China Mobile Ltd. ADR | 1,041 | 44,003 | ||||||
Telephone & Data Systems, Inc. | 1,704 | 43,333 | ||||||
Acacia Communications, Inc.* | 625 | 42,381 | ||||||
CommScope Holding Company, Inc.* | 2,965 | 42,073 | ||||||
BCE, Inc. | 903 | 41,854 | ||||||
Telefonica Brasil S.A. ADR | 2,789 | 39,938 | ||||||
Rogers Communications, Inc. — Class B | 769 | 38,196 | ||||||
TELUS Corp. | 986 | 38,188 | ||||||
Shenandoah Telecommunications Co. | 899 | 37,407 | ||||||
Vonage Holdings Corp.* | 4,511 | 33,427 | ||||||
InterDigital, Inc. | 600 | 32,694 | ||||||
Plantronics, Inc. | 960 | 26,246 | ||||||
NETGEAR, Inc.* | 889 | 21,789 | ||||||
Total Telecommunications | 2,977,261 | |||||||
Internet - 4.1% | ||||||||
F5 Networks, Inc.* | 514 | 71,780 | ||||||
Cogent Communications Holdings, Inc. | 677 | 44,553 | ||||||
Boingo Wireless, Inc.* | 1,584 | 17,345 | ||||||
Total Internet | 133,678 | |||||||
Computers - 2.9% | ||||||||
Lumentum Holdings, Inc.* | 781 | 61,934 | ||||||
NetScout Systems, Inc.* | 1,387 | 33,385 | ||||||
Total Computers | 95,319 | |||||||
Software - 1.0% | ||||||||
Bandwidth, Inc. — Class A* | 486 | 31,128 | ||||||
Total Common Stocks | ||||||||
(Cost $2,356,984) | 3,237,386 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,1 - 0.7% | ||||||||
J.P. Morgan Securities LLC | $ | 12,733 | 12,733 | |||||
Barclays Capital, Inc. | 4,106 | 4,106 | ||||||
BofA Securities, Inc. | 4,106 | 4,106 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $20,945) | 20,945 | |||||||
Total Investments - 100.3% | ||||||||
(Cost $2,377,929) | $ | 3,258,331 | ||||||
Other Assets & Liabilities, net - (0.3)% | (8,287 | ) | ||||||
Total Net Assets - 100.0% | $ | 3,250,044 |
* | 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. |
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, 2019 |
TELECOMMUNICATIONS FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 3,237,386 | $ | — | $ | — | $ | 3,237,386 | ||||||||
Repurchase Agreements | — | 20,945 | — | 20,945 | ||||||||||||
Total Assets | $ | 3,237,386 | $ | 20,945 | $ | — | $ | 3,258,331 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 119 |
TELECOMMUNICATIONS FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value (cost $2,356,984) | $ | 3,237,386 | ||
Repurchase agreements, at value (cost $20,945) | 20,945 | |||
Receivables: | ||||
Dividends | 3,755 | |||
Fund shares sold | 1,234 | |||
Securities lending income | 21 | |||
Total assets | 3,263,341 | |||
Liabilities: | ||||
Payable for: | ||||
Professional fees | 4,656 | |||
Management fees | 2,239 | |||
Fund shares redeemed | 1,625 | |||
Printing fees | 1,496 | |||
Transfer agent and administrative fees | 658 | |||
Investor service fees | 658 | |||
Portfolio accounting fees | 264 | |||
Trustees’ fees* | 54 | |||
Miscellaneous | 1,647 | |||
Total liabilities | 13,297 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 3,250,044 | ||
Net assets consist of: | ||||
Paid in capital | $ | 3,036,912 | ||
Total distributable earnings (loss) | 213,132 | |||
Net assets | $ | 3,250,044 | ||
Capital shares outstanding | 53,413 | |||
Net asset value per share | $ | 60.85 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $894) | $ | 78,125 | ||
Interest | 422 | |||
Income from securities lending, net | 142 | |||
Total investment income | 78,689 | |||
Expenses: | ||||
Management fees | 27,243 | |||
Investor service fees | 8,013 | |||
Transfer agent and administrative fees | 8,013 | |||
Professional fees | 6,059 | |||
Portfolio accounting fees | 3,205 | |||
Trustees’ fees* | 777 | |||
Custodian fees | 766 | |||
Line of credit fees | 9 | |||
Miscellaneous | 4,390 | |||
Total expenses | 58,475 | |||
Net investment income | 20,214 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (59,780 | ) | ||
Net realized loss | (59,780 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 402,401 | |||
Net change in unrealized appreciation (depreciation) | 402,401 | |||
Net realized and unrealized gain | 342,621 | |||
Net increase in net assets resulting from operations | $ | 362,835 |
* | 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 | $ | 20,214 | $ | 28,775 | ||||
Net realized loss on investments | (59,780 | ) | (74,284 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | 402,401 | (300,467 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 362,835 | (345,976 | ) | |||||
Distributions to shareholders | — | (73,940 | ) | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 8,496,767 | 11,508,223 | ||||||
Distributions reinvested | — | 73,940 | ||||||
Cost of shares redeemed | (8,839,102 | ) | (11,446,388 | ) | ||||
Net increase (decrease) from capital share transactions | (342,335 | ) | 135,775 | |||||
Net increase (decrease) in net assets | 20,500 | (284,141 | ) | |||||
Net assets: | ||||||||
Beginning of year | 3,229,544 | 3,513,685 | ||||||
End of year | $ | 3,250,044 | $ | 3,229,544 | ||||
Capital share activity: | ||||||||
Shares sold | 143,164 | 193,484 | ||||||
Shares issued from reinvestment of distributions | — | 1,260 | ||||||
Shares redeemed | (149,841 | ) | (194,735 | ) | ||||
Net increase (decrease) in shares | (6,677 | ) | 9 |
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 | $ | 53.75 | $ | 58.48 | $ | 57.03 | $ | 48.71 | $ | 53.12 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .37 | .57 | .37 | .45 | .42 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 6.73 | (3.51 | ) | 2.86 | 8.03 | (3.94 | ) | |||||||||||||
Total from investment operations | 7.10 | (2.94 | ) | 3.23 | 8.48 | (3.52 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | — | (.47 | ) | (.77 | ) | (.16 | ) | (.89 | ) | |||||||||||
Net realized gains | — | (1.32 | ) | (1.01 | ) | — | — | |||||||||||||
Total distributions | — | (1.79 | ) | (1.78 | ) | (.16 | ) | (.89 | ) | |||||||||||
Net asset value, end of period | $ | 60.85 | $ | 53.75 | $ | 58.48 | $ | 57.03 | $ | 48.71 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 13.21 | % | (5.29 | %) | 5.85 | % | 17.40 | % | (6.73 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 3,250 | $ | 3,230 | $ | 3,514 | $ | 5,384 | $ | 2,329 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.63 | % | 0.97 | % | 0.65 | % | 0.86 | % | 0.80 | % | ||||||||||
Total expenses | 1.82 | % | 1.73 | % | 1.70 | % | 1.66 | % | 1.60 | % | ||||||||||
Portfolio turnover rate | 263 | % | 365 | % | 372 | % | 410 | % | 232 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
122 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, Transportation Fund returned 22.24%, compared with a return of 31.49% for the S&P 500 Index. The S&P 500 Industrials Index returned 29.37%.
The railroads industry was the largest contributor to the Fund’s return for the period, followed by the automobile manufacturers industry and the auto parts & equipment industry. The tires & rubber industry was the only detractor from return.
Union Pacific Corp., Tesla, Inc., and United Parcel Services, Inc. — Class B were the biggest contributors to performance for the year. Tenneco, Inc. — Class A, Spirit Airlines, Inc., and Goodyear Tire & Rubber Co. 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. | 5.9% |
United Parcel Service, Inc. — Class B | 5.2% |
Tesla, Inc. | 4.6% |
CSX Corp. | 3.9% |
General Motors Co. | 3.8% |
Norfolk Southern Corp. | 3.7% |
Uber Technologies, Inc. | 3.7% |
FedEx Corp. | 3.3% |
Delta Air Lines, Inc. | 3.2% |
Ford Motor Co. | 3.2% |
Top Ten Total | 40.5% |
“Ten Largest Holdings” excludes any temporary cash investments.
THE RYDEX FUNDS ANNUAL REPORT | 123 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Transportation Fund | 22.24% | 3.41% | 10.99% |
S&P 500 Industrials Index | 29.37% | 9.48% | 13.45% |
S&P 500 Index | 31.49% | 11.70% | 13.56% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Industrials Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
124 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
TRANSPORTATION FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.5% | ||||||||
Transportation - 43.5% | ||||||||
Union Pacific Corp. | 1,547 | $ | 279,682 | |||||
United Parcel Service, Inc. — Class B | 2,094 | 245,124 | ||||||
CSX Corp. | 2,569 | 185,893 | ||||||
Norfolk Southern Corp. | 911 | 176,852 | ||||||
FedEx Corp. | 1,040 | 157,258 | ||||||
Old Dominion Freight Line, Inc. | 511 | 96,978 | ||||||
Kansas City Southern | 630 | 96,491 | ||||||
Expeditors International of Washington, Inc. | 1,166 | 90,971 | ||||||
J.B. Hunt Transport Services, Inc. | 750 | 87,585 | ||||||
CH Robinson Worldwide, Inc. | 1,043 | 81,563 | ||||||
XPO Logistics, Inc.* | 856 | 68,223 | ||||||
Knight-Swift Transportation Holdings, Inc. | 1,715 | 61,466 | ||||||
Canadian Pacific Railway Ltd. | 229 | 58,384 | ||||||
Kirby Corp.* | 634 | 56,762 | ||||||
Canadian National Railway Co. | 610 | 55,174 | ||||||
Landstar System, Inc. | 464 | 52,836 | ||||||
ZTO Express Cayman, Inc. ADR | 2,150 | 50,202 | ||||||
Ryder System, Inc. | 784 | 42,579 | ||||||
Werner Enterprises, Inc. | 1,082 | 39,374 | ||||||
Saia, Inc.* | 420 | 39,110 | ||||||
Hub Group, Inc. — Class A* | 637 | 32,672 | ||||||
Total Transportation | 2,055,179 | |||||||
Airlines - 18.0% | ||||||||
Delta Air Lines, Inc. | 2,569 | 150,235 | ||||||
Southwest Airlines Co. | 2,424 | 130,848 | ||||||
United Airlines Holdings, Inc.* | 1,312 | 115,574 | ||||||
American Airlines Group, Inc. | 3,028 | 86,843 | ||||||
Alaska Air Group, Inc. | 1,040 | 70,460 | ||||||
JetBlue Airways Corp.* | 3,043 | 56,965 | ||||||
SkyWest, Inc. | 686 | 44,336 | ||||||
Ryanair Holdings plc ADR* | 505 | 44,243 | ||||||
Copa Holdings S.A. — Class A | 397 | 42,908 | ||||||
Allegiant Travel Co. — Class A | 235 | 40,899 | ||||||
Spirit Airlines, Inc.* | 994 | 40,068 | ||||||
Hawaiian Holdings, Inc. | 969 | 28,382 | ||||||
Total Airlines | 851,761 | |||||||
Auto Manufacturers - 13.4% | ||||||||
Tesla, Inc.* | 514 | 215,022 | ||||||
General Motors Co. | 4,837 | 177,034 | ||||||
Ford Motor Co. | 16,134 | 150,046 | ||||||
Fiat Chrysler Automobiles N.V. | 3,059 | 44,937 | ||||||
Ferrari N.V. | 271 | 44,861 | ||||||
Total Auto Manufacturers | 631,900 | |||||||
Auto Parts & Equipment - 11.4% | ||||||||
BorgWarner, Inc. | 1,679 | 72,835 | ||||||
Aptiv plc | 743 | 70,563 | ||||||
Lear Corp. | 508 | 69,698 | ||||||
Goodyear Tire & Rubber Co. | 3,051 | 47,458 | ||||||
Magna International, Inc. | 808 | 44,311 | ||||||
Autoliv, Inc. | 523 | 44,146 | ||||||
Delphi Technologies plc* | 3,140 | 40,286 | ||||||
Dana, Inc. | 2,175 | 39,585 | ||||||
Dorman Products, Inc.* | 521 | 39,450 | ||||||
Visteon Corp.* | 434 | 37,580 | ||||||
Adient plc* | 1,596 | 33,915 | ||||||
Total Auto Parts & Equipment | 539,827 | |||||||
Internet - 5.6% | ||||||||
Uber Technologies, Inc.* | 5,901 | 175,495 | ||||||
Lyft, Inc. — Class A* | 1,995 | 85,825 | ||||||
Total Internet | 261,320 | |||||||
Commercial Services - 3.0% | ||||||||
AMERCO | 179 | 67,272 | ||||||
Avis Budget Group, Inc.* | 1,181 | 38,075 | ||||||
Hertz Global Holdings, Inc.* | 2,334 | 36,761 | ||||||
Total Commercial Services | 142,108 | |||||||
Leisure Time - 2.1% | ||||||||
Harley-Davidson, Inc. | 1,596 | 59,355 | ||||||
Fox Factory Holding Corp.* | 589 | 40,977 | ||||||
Total Leisure Time | 100,332 | |||||||
Electronics - 1.4% | ||||||||
Gentex Corp. | 2,303 | 66,741 | ||||||
Home Builders - 1.1% | ||||||||
Thor Industries, Inc. | 674 | 50,072 | ||||||
Total Common Stocks | ||||||||
(Cost $2,361,971) | 4,699,240 | |||||||
Total Investments - 99.5% | ||||||||
(Cost $2,361,971) | $ | 4,699,240 | ||||||
Other Assets & Liabilities, net - 0.5% | 23,879 | |||||||
Total Net Assets - 100.0% | $ | 4,723,119 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 125 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
TRANSPORTATION FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — 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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 4,699,240 | $ | — | $ | — | $ | 4,699,240 |
126 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
TRANSPORTATION FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value (cost $2,361,971) | $ | 4,699,240 | ||
Cash | 74,264 | |||
Receivables: | ||||
Securities sold | 349,900 | |||
Dividends | 2,057 | |||
Foreign tax reclaims | 81 | |||
Fund shares sold | 8 | |||
Total assets | 5,125,550 | |||
Liabilities: | ||||
Line of Credit | 26,000 | |||
Payable for: | ||||
Fund shares redeemed | 360,093 | |||
Management fees | 3,472 | |||
Transfer agent and administrative fees | 1,021 | |||
Investor service fees | 1,021 | |||
Portfolio accounting fees | 409 | |||
Trustees’ fees* | 71 | |||
Miscellaneous | 10,344 | |||
Total liabilities | 402,431 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 4,723,119 | ||
Net assets consist of: | ||||
Paid in capital | $ | 2,570,644 | ||
Total distributable earnings (loss) | 2,152,475 | |||
Net assets | $ | 4,723,119 | ||
Capital shares outstanding | 58,550 | |||
Net asset value per share | $ | 80.67 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $584) | $ | 81,355 | ||
Interest | 631 | |||
Income from securities lending, net | 128 | |||
Total investment income | 82,114 | |||
Expenses: | ||||
Management fees | 35,994 | |||
Investor service fees | 10,586 | |||
Transfer agent and administrative fees | 10,586 | |||
Professional fees | 9,055 | |||
Portfolio accounting fees | 4,235 | |||
Trustees’ fees* | 1,270 | |||
Custodian fees | 1,132 | |||
Line of credit fees | 41 | |||
Miscellaneous | 4,395 | |||
Total expenses | 77,294 | |||
Net investment income | 4,820 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 609,353 | |||
Net realized gain | 609,353 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 55,879 | |||
Net change in unrealized appreciation (depreciation) | 55,879 | |||
Net realized and unrealized gain | 665,232 | |||
Net increase in net assets resulting from operations | $ | 670,052 |
* | 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 income (loss) | $ | 4,820 | $ | (13,086 | ) | |||
Net realized gain on investments | 609,353 | 983,030 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 55,879 | (2,177,203 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 670,052 | (1,207,259 | ) | |||||
Distributions to shareholders | (2,551 | ) | (238,586 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 11,677,900 | 17,105,443 | ||||||
Distributions reinvested | 2,551 | 238,586 | ||||||
Cost of shares redeemed | (11,792,273 | ) | (23,469,276 | ) | ||||
Net decrease from capital share transactions | (111,822 | ) | (6,125,247 | ) | ||||
Net increase (decrease) in net assets | 555,679 | (7,571,092 | ) | |||||
Net assets: | ||||||||
Beginning of year | 4,167,440 | 11,738,532 | ||||||
End of year | $ | 4,723,119 | $ | 4,167,440 | ||||
Capital share activity: | ||||||||
Shares sold | 151,678 | 208,178 | ||||||
Shares issued from reinvestment of distributions | 33 | 3,009 | ||||||
Shares redeemed | (156,293 | ) | (284,315 | ) | ||||
Net decrease in shares | (4,582 | ) | (73,128 | ) |
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 | $ | 66.01 | $ | 86.15 | $ | 70.81 | $ | 100.87 | $ | 121.73 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .09 | (.16 | ) | (.43 | ) | .16 | (.08 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | 14.60 | (16.55 | ) | 15.99 | (20.23 | ) | (16.78 | ) | ||||||||||||
Total from investment operations | 14.69 | (16.71 | ) | 15.56 | (20.07 | ) | (16.86 | ) | ||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | — | — | (.22 | ) | — | — | ||||||||||||||
Net realized gains | (.03 | ) | (3.43 | ) | — | (9.99 | ) | (4.00 | ) | |||||||||||
Total distributions | (.03 | ) | (3.43 | ) | (.22 | ) | (9.99 | ) | (4.00 | ) | ||||||||||
Net asset value, end of period | $ | 80.67 | $ | 66.01 | $ | 86.15 | $ | 70.81 | $ | 100.87 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 22.24 | % | (20.05 | %) | 22.02 | % | 15.43 | % | (14.09 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 4,723 | $ | 4,167 | $ | 11,739 | $ | 12,883 | $ | 6,810 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.11 | % | (0.19 | %) | (0.56 | %) | 0.73 | % | (0.06 | %) | ||||||||||
Total expenses | 1.83 | % | 1.72 | % | 1.70 | % | 1.66 | % | 1.60 | % | ||||||||||
Portfolio turnover rate | 277 | % | 237 | % | 308 | % | 174 | % | 99 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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, 2019 |
UTILITIES FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that operate public utilities (“Utilities Companies”).
For the year ended December 31, 2019, Utilities Fund returned 19.01%, compared with a return of 31.49% for the S&P 500 Index. The S&P 500 Utilities Index returned 26.35%.
The electric utilities industry was the largest contributor to return for the period, followed by the multi-utilities industry and the water utilities industry. No industry detracted from return.
NextEra Energy, Inc., Southern Co., and Sempra Energy were the best-performing holdings over the one year period. PG&E Corp., UGI Corp., and Southwest Gas Holdings, 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. | 5.5% |
Dominion Energy, Inc. | 4.2% |
Southern Co. | 4.2% |
Duke Energy Corp. | 4.2% |
American Electric Power Company, Inc. | 3.5% |
Exelon Corp. | 3.4% |
Sempra Energy | 3.2% |
Xcel Energy, Inc. | 2.9% |
Public Service Enterprise Group, Inc. | 2.8% |
Consolidated Edison, Inc. | 2.8% |
Top Ten Total | 36.7% |
“Ten Largest Holdings” excludes any temporary cash investments.
130 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Utilities Fund | 19.01% | 8.12% | 10.00% |
S&P 500 Utilities Index | 26.35% | 10.29% | 11.80% |
S&P 500 Index | 31.49% | 11.70% | 13.56% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 131 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
UTILITIES FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.8% | ||||||||
Electric - 82.6% | ||||||||
NextEra Energy, Inc. | 3,638 | $ | 880,978 | |||||
Dominion Energy, Inc. | 8,093 | 670,262 | ||||||
Southern Co. | 10,479 | 667,512 | ||||||
Duke Energy Corp. | 7,309 | 666,654 | ||||||
American Electric Power Company, Inc. | 5,858 | 553,640 | ||||||
Exelon Corp. | 11,926 | 543,706 | ||||||
Sempra Energy | 3,430 | 519,576 | ||||||
Xcel Energy, Inc. | 7,330 | 465,382 | ||||||
Public Service Enterprise Group, Inc. | 7,549 | 445,769 | ||||||
Consolidated Edison, Inc. | 4,909 | 444,117 | ||||||
WEC Energy Group, Inc. | 4,722 | 435,510 | ||||||
Edison International | 5,681 | 428,404 | ||||||
Eversource Energy | 5,019 | 426,966 | ||||||
PPL Corp. | 11,544 | 414,199 | ||||||
FirstEnergy Corp. | 8,501 | 413,149 | ||||||
DTE Energy Co. | 3,106 | 403,376 | ||||||
Entergy Corp. | 3,307 | 396,179 | ||||||
Ameren Corp. | 4,636 | 356,045 | ||||||
CMS Energy Corp. | 5,452 | 342,604 | ||||||
Avangrid, Inc. | 6,304 | 322,513 | ||||||
Evergy, Inc. | 4,844 | 315,296 | ||||||
CenterPoint Energy, Inc. | 11,075 | 302,015 | ||||||
Alliant Energy Corp. | 5,430 | 297,130 | ||||||
AES Corp. | 14,762 | 293,764 | ||||||
Vistra Energy Corp. | 11,390 | 261,856 | ||||||
Pinnacle West Capital Corp. | 2,856 | 256,840 | ||||||
NRG Energy, Inc. | 6,348 | 252,333 | ||||||
OGE Energy Corp. | 5,441 | 241,961 | ||||||
PG&E Corp.* | 18,120 | 196,964 | ||||||
IDACORP, Inc. | 1,755 | 187,434 | ||||||
Portland General Electric Co. | 3,219 | 179,588 | ||||||
Black Hills Corp. | 2,265 | 177,893 | ||||||
ALLETE, Inc. | 2,033 | 165,019 | ||||||
PNM Resources, Inc. | 3,192 | 161,866 | ||||||
NorthWestern Corp. | 2,133 | 152,872 | ||||||
Total Electric | 13,239,372 | |||||||
Gas - 10.2% | ||||||||
Atmos Energy Corp. | 2,645 | 295,870 | ||||||
NiSource, Inc. | 9,399 | 261,668 | ||||||
UGI Corp. | 5,497 | 248,244 | ||||||
ONE Gas, Inc. | 1,905 | 178,251 | ||||||
New Jersey Resources Corp. | 3,752 | 167,227 | ||||||
Spire, Inc. | 1,990 | 165,787 | ||||||
Southwest Gas Holdings, Inc. | 2,150 | 163,335 | ||||||
National Fuel Gas Co. | 3,452 | 160,656 | ||||||
Total Gas | 1,641,038 | |||||||
Water - 4.0% | ||||||||
American Water Works Company, Inc. | 3,113 | 382,432 | ||||||
Aqua America, Inc. | 5,528 | 259,484 | ||||||
Total Water | 641,916 | |||||||
Energy-Alternate Sources - 1.8% | ||||||||
TerraForm Power, Inc. — Class A | 9,910 | 152,515 | ||||||
Pattern Energy Group, Inc. — Class A | 4,863 | 130,110 | ||||||
Total Energy-Alternate Sources | 282,625 | |||||||
Building Materials - 1.2% | ||||||||
MDU Resources Group, Inc. | 6,688 | 198,701 | ||||||
Total Common Stocks | ||||||||
(Cost $8,002,452) | 16,003,652 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,1 - 1.8% | ||||||||
J.P. Morgan Securities LLC | $ | 173,536 | 173,536 | |||||
Barclays Capital, Inc. | 55,956 | 55,956 | ||||||
BofA Securities, Inc. | 55,956 | 55,956 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $285,448) | 285,448 | |||||||
Total Investments - 101.6% | ||||||||
(Cost $8,287,900) | $ | 16,289,100 | ||||||
Other Assets & Liabilities, net - (1.6)% | (254,171 | ) | ||||||
Total Net Assets - 100.0% | $ | 16,034,929 |
* | 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. |
See Sector Classification in Other Information section. |
132 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
UTILITIES FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 16,003,652 | $ | — | $ | — | $ | 16,003,652 | ||||||||
Repurchase Agreements | — | 285,448 | — | 285,448 | ||||||||||||
Total Assets | $ | 16,003,652 | $ | 285,448 | $ | — | $ | 16,289,100 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 133 |
UTILITIES FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value (cost $8,002,452) | $ | 16,003,652 | ||
Repurchase agreements, at value (cost $285,448) | 285,448 | |||
Receivables: | ||||
Dividends | 31,487 | |||
Fund shares sold | 17,256 | |||
Foreign tax reclaims | 123 | |||
Interest | 12 | |||
Total assets | 16,337,978 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 232,539 | |||
Management fees | 11,661 | |||
Transfer agent and administrative fees | 3,430 | |||
Investor service fees | 3,430 | |||
Portfolio accounting fees | 1,372 | |||
Trustees’ fees* | 347 | |||
Miscellaneous | 50,270 | |||
Total liabilities | 303,049 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 16,034,929 | ||
Net assets consist of: | ||||
Paid in capital | $ | 8,992,741 | ||
Total distributable earnings (loss) | 7,042,188 | |||
Net assets | $ | 16,034,929 | ||
Capital shares outstanding | 475,007 | |||
Net asset value per share | $ | 33.76 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $47) | $ | 628,089 | ||
Interest | 2,534 | |||
Income from securities lending, net | 31 | |||
Total investment income | 630,654 | |||
Expenses: | ||||
Management fees | 176,806 | |||
Investor service fees | 52,002 | |||
Transfer agent and administrative fees | 52,002 | |||
Professional fees | 38,492 | |||
Portfolio accounting fees | 20,800 | |||
Trustees’ fees* | 4,569 | |||
Custodian fees | 3,585 | |||
Line of credit fees | 74 | |||
Miscellaneous | 29,449 | |||
Total expenses | 377,779 | |||
Net investment income | 252,875 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 700,342 | |||
Net realized gain | 700,342 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 2,213,251 | |||
Net change in unrealized appreciation (depreciation) | 2,213,251 | |||
Net realized and unrealized gain | 2,913,593 | |||
Net increase in net assets resulting from operations | $ | 3,166,468 |
* | 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 | $ | 252,875 | $ | 239,868 | ||||
Net realized gain on investments | 700,342 | 70,434 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 2,213,251 | (467,247 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 3,166,468 | (156,945 | ) | |||||
Distributions to shareholders | (49,561 | ) | (360,629 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 37,710,438 | 57,547,298 | ||||||
Distributions reinvested | 49,561 | 360,629 | ||||||
Cost of shares redeemed | (44,162,382 | ) | (52,739,822 | ) | ||||
Net increase (decrease) from capital share transactions | (6,402,383 | ) | 5,168,105 | |||||
Net increase (decrease) in net assets | (3,285,476 | ) | 4,650,531 | |||||
Net assets: | ||||||||
Beginning of year | 19,320,405 | 14,669,874 | ||||||
End of year | $ | 16,034,929 | $ | 19,320,405 | ||||
Capital share activity: | ||||||||
Shares sold | 1,193,047 | 2,027,789 | ||||||
Shares issued from reinvestment of distributions | 1,558 | 12,884 | ||||||
Shares redeemed | (1,399,094 | ) | (1,885,612 | ) | ||||
Net increase (decrease) in shares | (204,489 | ) | 155,061 |
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 | $ | 28.43 | $ | 27.97 | $ | 26.24 | $ | 22.86 | $ | 25.35 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .39 | .43 | .42 | .36 | .39 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 5.01 | .62 | c | 2.42 | 3.38 | (2.24 | ) | |||||||||||||
Total from investment operations | 5.40 | 1.05 | 2.84 | 3.74 | (1.85 | ) | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.07 | ) | (.46 | ) | (.55 | ) | (.17 | ) | (.64 | ) | ||||||||||
Net realized gains | — | (.13 | ) | (.56 | ) | (.19 | ) | — | ||||||||||||
Total distributions | (.07 | ) | (.59 | ) | (1.11 | ) | (.36 | ) | (.64 | ) | ||||||||||
Net asset value, end of period | $ | 33.76 | $ | 28.43 | $ | 27.97 | $ | 26.24 | $ | 22.86 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 19.01 | % | 3.78 | % | 11.02 | % | 16.34 | % | (7.36 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 16,035 | $ | 19,320 | $ | 14,670 | $ | 15,242 | $ | 17,064 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.22 | % | 1.54 | % | 1.48 | % | 1.39 | % | 1.66 | % | ||||||||||
Total expenses | 1.82 | % | 1.73 | % | 1.70 | % | 1.65 | % | 1.61 | % | ||||||||||
Portfolio turnover rate | 144 | % | 299 | % | 183 | % | 234 | % | 312 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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 (each a “Fund”). The Trust is authorized to issue an unlimited number of no par value shares. The Trust accounts for the assets of each Fund separately. At December 31, 2019, 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 following funds (collectively, the “Funds”):
Fund Name | Investment |
Banking Fund | Diversified |
Basic Materials Fund | Diversified |
Biotechnology Fund | Non-diversified |
Consumer Products Fund | Diversified |
Electronics Fund | Non-diversified |
Energy Fund | Diversified |
Energy Services Fund | Non-diversified |
Financial Services Fund | Diversified |
Health Care Fund | Diversified |
Internet Fund | Diversified |
Leisure Fund | Diversified |
Precious Metals Fund | Non-diversified |
Real Estate Fund | Diversified |
Retailing Fund | Diversified |
Technology Fund | Diversified |
Telecommunications Fund | Non-diversified |
Transportation Fund | Diversified |
Utilities Fund | Diversified |
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 and other assets 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.
THE RYDEX FUNDS ANNUAL REPORT | 137 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Equity securities listed or traded on a recognized U.S. securities exchange or the National Association of Securities Dealers Automated Quotations (“NASDAQ”) National Market System shall generally be valued on the basis of the last sale price on the primary U.S. exchange or market on which the security is listed or traded; provided, however, that securities listed on NASDAQ will be valued at the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If there is no sale on the valuation date, exchange-traded U.S. equity securities will be valued on the basis of the last bid price.
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.
Repurchase agreements are generally 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) 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, 2019, if any, are disclosed in the Funds’ Statement of Assets and Liabilities.
(c) 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 a reduction to cost if the securities are still held and as realized gains if no longer held 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.
(d) Distributions
Distributions of net investment income and net realized gains, if any, are declared and paid at least annually. Normally, all 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 U.S. federal income tax regulations which may differ from U.S. GAAP.
(e) Cash
The Funds may leave cash overnight in their cash account with the custodian. Periodically, a Fund may have cash due to the custodian bank as an overdraft balance. A fee is incurred on this overdraft, calculated by multiplying the overdraft by a rate based on the federal funds rate, which was 1.55% at December 31, 2019.
(f) 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.
138 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
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 pays operating expenses on behalf of the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, among others, on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.
The Board 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 trustees and 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 maintains 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 – 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 U.S. 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’ U.S. federal income tax returns are subject to examination by the Internal Revenue Service (“IRS”) for a period of three years after they are filed.
THE RYDEX FUNDS ANNUAL REPORT | 139 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The tax character of distributions paid during the year ended December 31, 2019 was as follows:
Fund | Ordinary | Long-Term | Total | |||||||||
Banking Fund | $ | 40,316 | $ | — | $ | 40,316 | ||||||
Basic Materials Fund | 15,290 | 284,073 | 299,363 | |||||||||
Biotechnology Fund | — | 553,949 | 553,949 | |||||||||
Consumer Products Fund | 154,589 | 37,342 | 191,931 | |||||||||
Electronics Fund | — | 94,380 | 94,380 | |||||||||
Energy Fund | 18,218 | — | 18,218 | |||||||||
Financial Services Fund | 89,472 | 418,140 | 507,612 | |||||||||
Health Care Fund | — | 408,723 | 408,723 | |||||||||
Leisure Fund | 23,728 | 43,247 | 66,975 | |||||||||
Real Estate Fund | 262,927 | 129,728 | 392,655 | |||||||||
Technology Fund | — | 782,667 | 782,667 | |||||||||
Transportation Fund | — | 2,551 | 2,551 | |||||||||
Utilities Fund | 49,561 | — | 49,561 |
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 |
Note: For U.S. federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
140 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
The tax components of distributable earnings/(loss) as of December 31, 2019 were as follows:
Fund | Undistributed | Undistributed | Net Unrealized | Accumulated | Other | Total | ||||||||||||||||||
Banking Fund | $ | 50,080 | $ | — | $ | 1,489,654 | $ | (574,690 | ) | $ | — | $ | 965,044 | |||||||||||
Basic Materials Fund | 118,312 | 4,970 | 2,240,598 | — | — | 2,363,880 | ||||||||||||||||||
Biotechnology Fund | 497,628 | 1,317,400 | 10,649,723 | — | — | 12,464,751 | ||||||||||||||||||
Consumer Products Fund | 361,621 | 23,338 | 5,665,161 | — | — | 6,050,120 | ||||||||||||||||||
Electronics Fund | 143,071 | — | 4,583,633 | — | — | 4,726,704 | ||||||||||||||||||
Energy Fund | 109,063 | — | 2,301,408 | (7,798,864 | ) | — | (5,388,393 | ) | ||||||||||||||||
Energy Services Fund | 20,199 | — | (820,469 | ) | (8,336,113 | ) | — | (9,136,383 | ) | |||||||||||||||
Financial Services Fund | 274,439 | 73,626 | 3,248,429 | — | 4,021 | 3,600,515 | ||||||||||||||||||
Health Care Fund | — | 517,189 | 9,905,777 | — | — | 10,422,966 | ||||||||||||||||||
Internet Fund | 3,907 | 203,727 | 3,869,027 | — | — | 4,076,661 | ||||||||||||||||||
Leisure Fund | 176,407 | — | 1,851,156 | — | — | 2,027,563 | ||||||||||||||||||
Precious Metals Fund | 1,145,954 | — | 4,132,752 | (15,012,223 | ) | (86,192 | ) | (9,819,709 | ) | |||||||||||||||
Real Estate Fund | 442,260 | — | 3,548,426 | — | 22,732 | 4,013,418 | ||||||||||||||||||
Retailing Fund | — | — | 895,568 | (110,758 | ) | — | 784,810 | |||||||||||||||||
Technology Fund | 299,686 | 156,434 | 11,166,890 | — | — | 11,623,010 | ||||||||||||||||||
Telecommunications Fund | 20,932 | — | 374,173 | (181,973 | ) | — | 213,132 | |||||||||||||||||
Transportation Fund | 6,788 | 129,800 | 2,015,887 | — | — | 2,152,475 | ||||||||||||||||||
Utilities Fund | 252,875 | 223,169 | 6,566,144 | — | — | 7,042,188 |
For U.S. 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, 2019, capital loss carryforwards for the Funds were as follows:
Unlimited | Total | |||||||||||
Fund | Short-Term | Long-Term | Carryforward | |||||||||
Banking Fund | $ | (574,690 | ) | $ | — | $ | (574,690 | ) | ||||
Energy Fund | (869,285 | ) | (6,929,579 | ) | (7,798,864 | ) | ||||||
Energy Services Fund | (1,288,826 | ) | (7,047,287 | ) | (8,336,113 | ) | ||||||
Precious Metals Fund | (3,335,107 | ) | (11,677,116 | ) | (15,012,223 | ) | ||||||
Retailing Fund | (41,425 | ) | (69,333 | ) | (110,758 | ) | ||||||
Telecommunications Fund* | (69,627 | ) | (112,346 | ) | (181,973 | ) |
* | 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, 2019, the following capital loss carryforward amounts were utilized:
Fund | Utilized | |||
Banking Fund | $ | 300,677 | ||
Precious Metals Fund | 614,311 | |||
Retailing Fund | 225,534 |
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, losses deferred due to wash sales, distributions in connection with redemption of fund shares, return of capital distributions received, and the “mark-to-market,” recharacterization, or disposition of certain Passive Foreign Investment Companies (PFICs). Additional differences may result from the tax
THE RYDEX FUNDS ANNUAL REPORT | 141 |
NOTES TO FINANCIAL STATEMENTS (continued) |
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, 2019 for permanent book/tax differences:
Fund | Paid In | Total | ||||||
Basic Materials Fund | $ | 170,308 | $ | (170,308 | ) | |||
Biotechnology Fund | 971,740 | (971,740 | ) | |||||
Consumer Products Fund | (2 | ) | 2 | |||||
Electronics Fund | 136,707 | (136,707 | ) | |||||
Energy Services Fund | (2,696 | ) | 2,696 | |||||
Financial Services Fund | (8,791 | ) | 8,791 | |||||
Health Care Fund | 849,875 | (849,875 | ) | |||||
Internet Fund | 295,472 | (295,472 | ) | |||||
Leisure Fund | 250,986 | (250,986 | ) | |||||
Real Estate Fund | (8 | ) | 8 | |||||
Retailing Fund | (27,909 | ) | 27,909 | |||||
Technology Fund | 682,321 | (682,321 | ) | |||||
Telecommunications Fund | (468 | ) | 468 | |||||
Transportation Fund | 335,579 | (335,579 | ) | |||||
Utilities Fund | 112,360 | (112,360 | ) |
At December 31, 2019, the cost of investments for U.S. federal income tax purposes, the aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost and the aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value, were as follows:
Fund | Tax | Tax | Tax | Net Unrealized | ||||||||||||
Banking Fund | $ | 4,398,835 | $ | 1,491,164 | $ | (1,510 | ) | $ | 1,489,654 | |||||||
Basic Materials Fund | 4,560,054 | 2,247,501 | (6,903 | ) | 2,240,598 | |||||||||||
Biotechnology Fund | 11,262,141 | 10,686,869 | (37,146 | ) | 10,649,723 | |||||||||||
Consumer Products Fund | 13,203,979 | 5,791,869 | (126,708 | ) | 5,665,161 | |||||||||||
Electronics Fund | 6,840,314 | 4,584,916 | (1,283 | ) | 4,583,633 | |||||||||||
Energy Fund | 7,481,274 | 2,321,054 | (19,646 | ) | 2,301,408 | |||||||||||
Energy Services Fund | 4,184,062 | — | (820,469 | ) | (820,469 | ) | ||||||||||
Financial Services Fund | 8,152,473 | 3,256,575 | (8,146 | ) | 3,248,429 | |||||||||||
Health Care Fund | 9,426,583 | 9,940,584 | (34,807 | ) | 9,905,777 | |||||||||||
Internet Fund | 4,797,390 | 3,906,554 | (37,527 | ) | 3,869,027 | |||||||||||
Leisure Fund | 4,906,420 | 1,864,155 | (12,999 | ) | 1,851,156 | |||||||||||
Precious Metals Fund | 22,071,718 | 4,132,752 | — | 4,132,752 | ||||||||||||
Real Estate Fund | 8,734,549 | 3,551,014 | (2,588 | ) | 3,548,426 | |||||||||||
Retailing Fund | 2,810,388 | 908,621 | (13,053 | ) | 895,568 | |||||||||||
Technology Fund | 11,678,762 | 11,203,925 | (37,035 | ) | 11,166,890 | |||||||||||
Telecommunications Fund | 2,884,158 | 407,591 | (33,418 | ) | 374,173 | |||||||||||
Transportation Fund | 2,683,353 | 2,026,911 | (11,024 | ) | 2,015,887 | |||||||||||
Utilities Fund | 9,722,956 | 6,644,316 | (78,172 | ) | 6,566,144 |
142 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 4 – Fair Value Measurement
In accordance with U.S. GAAP, fair value is defined as the price that the Funds would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. U.S. GAAP establishes a three-tier fair value hierarchy based on the types of inputs used to value assets and liabilities and requires corresponding disclosure. The hierarchy and the corresponding inputs are summarized below:
Level 1 — | quoted prices in active markets for identical assets or liabilities. |
Level 2 — | significant other observable inputs (for example quoted prices for securities that are similar based on characteristics such as interest rates, prepayment speeds, credit risk, etc.). |
Level 3 — | significant unobservable inputs based on the best information available under the circumstances, to the extent observable inputs are not available, which may include assumptions. |
The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly, fair value determinations for Level 3 securities require the greatest amount of judgment.
The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The suitability of the techniques and sources employed to determine fair valuation are regularly monitored and subject to change.
Note 5 – Securities Transactions
For the year ended December 31, 2019, 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 | $ | 11,729,814 | $ | 12,679,767 | ||||
Basic Materials Fund | 5,622,415 | 6,386,177 | ||||||
Biotechnology Fund | 22,590,735 | 26,900,881 | ||||||
Consumer Products Fund | 31,187,471 | 28,741,852 | ||||||
Electronics Fund | 18,917,064 | 15,817,705 | ||||||
Energy Fund | 10,094,991 | 10,594,495 | ||||||
Energy Services Fund | 15,491,299 | 15,660,506 | ||||||
Financial Services Fund | 22,999,489 | 20,846,054 | ||||||
Health Care Fund | 29,165,854 | 34,484,211 | ||||||
Internet Fund | 30,163,457 | 32,125,618 | ||||||
Leisure Fund | 14,580,394 | 13,114,680 | ||||||
Precious Metals Fund | 33,582,824 | 33,609,547 | ||||||
Real Estate Fund | 31,797,036 | 34,746,422 | ||||||
Retailing Fund | 8,939,860 | 13,201,749 | ||||||
Technology Fund | 40,474,506 | 40,684,607 | ||||||
Telecommunications Fund | 8,474,828 | 8,785,622 | ||||||
Transportation Fund | 11,591,588 | 11,687,721 | ||||||
Utilities Fund | 29,480,403 | 35,537,694 |
THE RYDEX FUNDS ANNUAL REPORT | 143 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The Funds are permitted to purchase or sell securities from or to certain affiliated funds under specified conditions outlined in procedures adopted by the Board. 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, 2019, 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 | $ | 2,489,402 | $ | 2,564,184 | $ | 55,580 | ||||||
Basic Materials Fund | 1,114,420 | 935,463 | 35,926 | |||||||||
Biotechnology Fund | 3,965,255 | 3,472,883 | (69,907 | ) | ||||||||
Consumer Products Fund | 5,338,400 | 5,509,031 | (118,358 | ) | ||||||||
Electronics Fund | 3,048,937 | 3,476,225 | (12,247 | ) | ||||||||
Energy Fund | 1,962,037 | 2,438,385 | 49,276 | |||||||||
Energy Services Fund | 3,369,193 | 4,467,608 | (283,043 | ) | ||||||||
Financial Services Fund | 5,673,198 | 4,487,720 | 79,605 | |||||||||
Health Care Fund | 7,172,446 | 6,769,380 | 267,341 | |||||||||
Internet Fund | 9,034,285 | 9,104,889 | 177,804 | |||||||||
Leisure Fund | 2,395,319 | 3,541,936 | 275,937 | |||||||||
Precious Metals Fund | 9,971,093 | 9,916,543 | 246,488 | |||||||||
Real Estate Fund | 6,091,823 | 5,620,660 | (40,156 | ) | ||||||||
Retailing Fund | 2,099,587 | 1,378,502 | 29,117 | |||||||||
Technology Fund | 11,286,634 | 12,120,597 | 16,229 | |||||||||
Telecommunications Fund | 1,948,110 | 2,129,282 | (12,067 | ) | ||||||||
Transportation Fund | 2,197,893 | 1,763,812 | 144,064 | |||||||||
Utilities Fund | 4,902,921 | 8,129,596 | 20,316 |
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.
144 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
At December 31, 2019, the repurchase agreements in the joint account were as follows:
Counterparty and | Face Value | Repurchase Price |
| Collateral | Par Value | Fair Value | ||||||||||||
J.P. Morgan Securities LLC | U.S. Treasury Inflation Indexed Bonds | |||||||||||||||||
1.53% | 0.38% - 3.38% | |||||||||||||||||
Due 01/02/20 | $ | 52,221,118 | $ | 52,225,557 | 07/15/25 - 04/15/32 | $ | 29,508,166 | $ | 30,293,286 | |||||||||
U.S. Treasury Notes | ||||||||||||||||||
1.38% - 2.50% | ||||||||||||||||||
02/28/21 - 10/31/26 | 16,685,500 | 17,041,602 | ||||||||||||||||
U.S. Treasury Bond | ||||||||||||||||||
6.25% | ||||||||||||||||||
08/15/23 | 3,032,900 | 3,592,802 | ||||||||||||||||
U.S. Treasury Floating Rate Note | ||||||||||||||||||
1.61% | ||||||||||||||||||
10/31/20 | 2,332,000 | 2,337,154 | ||||||||||||||||
U.S. Treasury Bills | ||||||||||||||||||
0.00% | ||||||||||||||||||
01/02/20 - 08/13/20 | 700 | 697 | ||||||||||||||||
51,559,266 | 53,265,541 | |||||||||||||||||
BofA Securities, Inc. | U.S. Treasury Note | |||||||||||||||||
1.50% | 2.00% | |||||||||||||||||
Due 01/02/20 | 16,838,493 | 16,839,896 | 10/31/22 | 16,936,000 | 17,175,334 | |||||||||||||
Barclays Capital, Inc. | U.S. Treasury Inflation Indexed Bond | |||||||||||||||||
1.40% | 0.13% | |||||||||||||||||
Due 01/02/20 | 16,838,493 | 16,839,803 | 10/15/24 | 17,030,300 | 17,175,300 |
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 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 | 145 |
NOTES TO FINANCIAL STATEMENTS (continued) |
At December 31, 2019, 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 | |||||||||||||||||||
Banking Fund | $ | 40,560 | $ | (40,560 | ) | $ | — | $ | 41,285 | $ | — | $ | 41,285 | ||||||||||||
Basic Materials Fund | 239,752 | (239,752 | ) | — | 243,907 | — | 243,907 | ||||||||||||||||||
Biotechnology Fund | 233,289 | (233,289 | ) | — | 233,942 | — | 233,942 | ||||||||||||||||||
Consumer Products Fund | 330,218 | (330,218 | ) | — | 336,925 | — | 336,925 | ||||||||||||||||||
Electronics Fund | 153,105 | (153,105 | ) | — | 154,463 | — | 154,463 | ||||||||||||||||||
Energy Services Fund | 101,250 | (101,250 | ) | — | 105,953 | — | 105,953 | ||||||||||||||||||
Financial Services Fund | 22,371 | (22,371 | ) | — | 22,437 | — | 22,437 | ||||||||||||||||||
Health Care Fund | 240,976 | (234,645 | ) | 6,331 | 234,645 | * | — | 234,645 | |||||||||||||||||
Internet Fund | 284,182 | (284,182 | ) | — | 291,492 | — | 291,492 | ||||||||||||||||||
Leisure Fund | 206,518 | (206,518 | ) | — | 211,960 | — | 211,960 | ||||||||||||||||||
Precious Metals Fund | 1,164,416 | (1,164,416 | ) | — | 1,229,801 | — | 1,229,801 | ||||||||||||||||||
Real Estate Fund | 119,412 | (119,412 | ) | — | 120,799 | — | 120,799 | ||||||||||||||||||
Retailing Fund | 69,836 | (69,836 | ) | — | 70,870 | — | 70,870 | ||||||||||||||||||
Technology Fund | 379,909 | (379,909 | ) | — | 388,440 | — | 388,440 |
(a) | Actual collateral received by the Fund is generally greater than the amount shown due to overcollateralization. |
* | Subsequent to December 31, 2019, additional collateral was received. |
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 – 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 8, 2020. 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 3.28% for the year ended December 31, 2019. On December 31, 2019, the Transportation Fund borrowed $26,000 under this agreement. The remaining funds did not have any borrowings outstanding under this agreement at December 31, 2019.
146 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
The average daily balances borrowed for the year ended December 31, 2019, were as follows:
Fund | Average Daily Balance | |||
Banking Fund | $ | 219 | ||
Basic Materials Fund | 68 | |||
Biotechnology Fund | 18,460 | |||
Consumer Products Fund | 482 | |||
Electronics Fund | 340 | |||
Energy Fund | 668 | |||
Energy Services Fund | 658 | |||
Financial Services Fund | 1,471 | |||
Health Care Fund | 1,647 | |||
Internet Fund | 718 | |||
Leisure Fund | 1,025 | |||
Precious Metals Fund | 129 | |||
Real Estate Fund | 4,638 | |||
Retailing Fund | 2,545 | |||
Technology Fund | 586 | |||
Telecommunications Fund | 277 | |||
Transportation Fund | 1,164 | |||
Utilities Fund | 2,173 |
Note 9 – 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 “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. Early adoption is permitted. As of December 31, 2019, the Funds have fully adopted the provisions of the 2018 ASU, 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.
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-2296 (S.D.N.Y.) (the “MDL Proceeding”).
THE RYDEX FUNDS ANNUAL REPORT | 147 |
NOTES TO FINANCIAL STATEMENTS (continued) |
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 December 19, 2019, the Second Circuit issued an amended opinion that again affirmed the district court’s ruling on the basis that plaintiffs’ claims were preempted by Section 546(e) of the Bankruptcy Code. Plaintiffs filed a motion for rehearing and rehearing en banc on January 2, 2020.
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 intended to permit an interlocutory appeal of the dismissal order, but would wait to do so until it has resolved outstanding motions to dismiss filed by other defendants.
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 mediation did not result in a settlement of the claims against the shareholder defendants.
On April 4, 2019, plaintiff filed a motion to amend the Fifth Amended Complaint to assert a federal constructive fraudulent transfer claim against certain shareholder defendants. On April 10, 2019, the shareholder defendants filed a brief in opposition to plaintiff’s motion to amend. On April 12, 2019, the plaintiff filed a reply brief. On April 23, 2019, the court denied the plaintiff’s motion to amend. On June 13, 2019, the court entered judgment pursuant to Rule 54(b). On July 12, 2019, the Plaintiff filed a notice of appeal with respect to the dismissal of his claims and the District Court’s denial of his motion for leave to amend. Plaintiff filed an appellate brief on January 7, 2020. The shareholder defendants’ brief is currently due April 6, 2020.
148 | THE RYDEX FUNDS ANNUAL REPORT |
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 – Subsequent Events
The Funds evaluated subsequent events through the date the financial statements were available for issue and determined there were no material events that would require adjustment to or disclosure in the Funds’ financial statements.
THE RYDEX FUNDS ANNUAL REPORT | 149 |
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, 2019, 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, 2019, 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, 2019, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Guggenheim investment companies since 1979.
Tysons, Virginia
February 27, 2020
150 | 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 2020, 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 2019.
The Funds’ investment income (dividend income plus short-term capital gains, if any) qualifies as follows:
Of the taxable ordinary income distributions paid during the fiscal year ending December 31, 2019, the following Funds had the corresponding percentages qualify for the dividends received deduction for corporations.
Fund | Dividend | |||
Banking Fund | 100.00 | % | ||
Basic Materials Fund | 100.00 | % | ||
Consumer Products Fund | 100.00 | % | ||
Energy Fund | 100.00 | % | ||
Financial Services Fund | 100.00 | % | ||
Leisure Fund | 100.00 | % | ||
Real Estate Fund | 1.04 | % | ||
Utilities Fund | 100.00 | % |
With respect to the taxable year ended December 31, 2019, 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 | ||||||
Basic Materials Fund | $ | 284,073 | $ | 170,308 | ||||
Biotechnology Fund | 553,949 | 971,740 | ||||||
Consumer Products Fund | 37,342 | — | ||||||
Electronics Fund | 94,380 | 119,444 | ||||||
Financial Services Fund | 418,140 | — | ||||||
Health Care Fund | 408,723 | 963,118 | ||||||
Internet Fund | — | 295,472 | ||||||
Leisure Fund | 43,247 | 109,059 | ||||||
Real Estate Fund | 129,728 | — | ||||||
Technology Fund | 782,667 | 694,928 | ||||||
Transportation Fund | 2,551 | 337,548 | ||||||
Utilities Fund | — | 112,360 |
Proxy Voting Information
A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to securities held in the Funds’ portfolios is available, without charge and upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
THE RYDEX FUNDS ANNUAL REPORT | 151 |
OTHER INFORMATION (Unaudited)(concluded) |
Special Meeting of Shareholders — Voting Results
A joint special meeting of shareholders of the Trust was held on October 24, 2019 to elect the following ten nominees to the Board of Trustees of the Trust: Randall C. Barnes, Angela Brock-Kyle, Donald A. Chubb, Jr., Jerry B. Farley, Roman Friedrich III, Thomas F. Lydon, Jr., Ronald A. Nyberg, Sandra G. Sponem, Ronald E. Toupin, Jr. and Amy J. Lee. At the meeting, the following votes were recorded:
Nominee | Shares For | Shares Withheld | ||||||
Randall C. Barnes | 80,976,563 | 3,278,383 | ||||||
Angela Brock-Kyle | 80,976,448 | 3,278,498 | ||||||
Donald A. Chubb, Jr. | 80,889,189 | 3,365,757 | ||||||
Jerry B. Farley | 80,698,759 | 3,556,187 | ||||||
Roman Friedrich III | 80,706,634 | 3,548,312 | ||||||
Thomas F. Lydon, Jr. | 80,699,239 | 3,555,707 | ||||||
Ronald A. Nyberg | 80,694,478 | 3,560,468 | ||||||
Sandra G. Sponem | 80,774,487 | 3,480,459 | ||||||
Ronald E. Toupin, Jr. | 80,771,319 | 3,483,627 | ||||||
Amy J. Lee | 80,977,346 | 3,277,600 |
Corey A. Colehour and J. Kenneth Dalton resigned from the Board of Trustees of the Trust effective as of the conclusion of the quarterly meeting of the Board of Trustees of the Trust held on November 11, 2019.
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 as an exhibit to its reports on Form N-PORT, and for reporting periods ended prior to March 31, 2019, filed such information on Form N-Q. The Funds’ Forms N-PORT and N-Q are available on the SEC’s website at https://www.sec.gov. The Funds’ Forms N-PORT and 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.
152 | 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* | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other |
INDEPENDENT TRUSTEES | |||||
Randall C. Barnes (1951) | Trustee | Since 2019 | Current: Private Investor (2001-present). | 157 | Current: Purpose Investments Funds (2013-present). |
Angela Brock-Kyle (1959) | Trustee | Since 2016 | Current: Founder and Chief Executive Officer, B.O.A.R.D.S. (2013-present). | 156 | Current: Hunt Companies, Inc. (2019-present). |
Donald A. Chubb, Jr. (1946) | Trustee and Chairman of the Valuation Oversight Committee | Since 2019 | Current: Retired | 156 | Former: Midland Care, Inc. (2011-2016). |
Jerry B. Farley (1946) | Trustee | Since 2019 | Current: President, Washburn University (1997-present). | 156 | Current: CoreFirst Bank & Trust (2000-present). |
Roman Friedrich III (1946) | Trustee and Chairman of the Contracts Review Committee | Since 2019 | Current: Founder and Managing Partner, Roman Friedrich & Company (1998-present). | 156 | Former: Zincore Metals, Inc. (2009-2019). |
Thomas F. Lydon, Jr. (1960) | Trustee and Vice Chairman of the Contracts Review Committee | Since 2005 (Trustee)
Since 2019 (Vice Chairman of the Contracts Review Committee) | Current: President, Global Trends Investments (1996-present); Co-Chief Executive Officer, ETF Flows, LLC (2019-present); Chief Executive Officer, Lydon Media (2016-present). | 156 | Current: US Global Investors (GROW) (1995-present). |
THE RYDEX FUNDS ANNUAL REPORT | 153 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other |
INDEPENDENT TRUSTEES - concluded | |||||
Ronald A. Nyberg (1953) | Trustee and Chairman of the Nominating and Governance Committee | Since 2019 | Current: Partner, Momkus LLC (2016-present). | 157 | Current: PPM Funds (9) (2018 - present); Edward-Elmhurst Healthcare System (2012-present); Western Asset Inflation-Linked Opportunities & Income Fund (2004-present); Western Asset Inflation-Linked Income Fund (2003-present). |
Sandra G. Sponem (1958) | Trustee and Chair of the Audit Committee | Since 2016 (Trustee)
Since 2019 (Chair of the Audit Committee) | Current: Retired. | 156 | Current: SPDR Series Trust (78) (2018-present); SPDR Index Shares Funds (31) (2018-present); SSGA Active Trust (12) (2018-present); and SSGA Master Trust (1) (2018-present). |
Ronald E. Toupin, Jr. (1958) | Trustee and Chairman of the Board and Chairman of the Executive Committee | Since 2019 | Current: Portfolio Consultant (2010-present); Member, Governing Council, Independent Directors Council (2013-present); Governor, Board of Governors, Investment Company Institute (2018-present). | 156 | Current: Western Asset Inflation-Linked Opportunities & Income Fund (2004-present); Western Asset Inflation-Linked Income Fund (2003-present). |
154 | THE RYDEX FUNDS ANNUAL REPORT |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other |
INTERESTED TRUSTEE |
|
|
|
| |
Amy J. Lee*** (1961) | Trustee, Vice President and Chief Legal Officer | Since 2018 (Trustee)
Since 2019 (Vice President and Chief Legal Officer) | Current: Interested Trustee, certain other funds in the Fund Complex (2018-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). | 156 | None. |
* | The business address of each Trustee is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each Trustee serves an indefinite term, until his or her successor is elected and qualified. Time served includes time served in the respective position for the Predecessor Corporation. |
*** | This Trustee is deemed to be an “interested person” of the Funds under the 1940 Act by reason of her position with the Funds’ Investment Manager and/or the parent of the Investment Manager. |
THE RYDEX FUNDS ANNUAL REPORT | 155 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) |
OFFICERS | |||
Brian E. Binder (1972) | President and Chief Executive Officer | Since 2019 | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2018-present); President, Chief Executive Officer and Chairman of the Board of Managers, Guggenheim Funds Investment Advisors, LLC (2018-present); President and Chief Executive Officer, Security Investors, LLC (2018-present); Board Member of Guggenheim Partners Fund Management (Europe) Limited (2018-present); Senior Managing Director and Chief Administrative Officer, Guggenheim Investments (2018-present). |
James M. Howley (1972) | Assistant Treasurer | Since 2016 | Current: Managing Director, Guggenheim Investments (2004-present); Assistant Treasurer, certain other funds in the Fund Complex (2006-present). |
Mark E. Mathiasen (1978) | Secretary | Since 2017 | Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present). |
Glenn McWhinnie (1969) | Assistant Treasurer | Since 2016 | Current: Vice President, Guggenheim Investments (2009-present); Assistant Treasurer, certain other funds in the Fund Complex (2016-present). |
Michael P. Megaris (1984) | Assistant Secretary | Since 2018 | Current: Assistant Secretary, certain other funds in the Fund Complex (2014-present); Director, Guggenheim Investments (2012-present). |
Elisabeth Miller (1968) | Chief Compliance Officer | Since 2012 | Current: Chief Compliance Officer, certain other funds in the Fund Complex (2012-present); Senior Managing Director, Guggenheim Investments (2012-present); Vice President, Guggenheim Funds Distributors, LLC (2014-present). |
Margaux Misantone (1978) | AML Officer | Since 2017 | 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). |
William Rehder (1967) | Assistant Vice President | Since 2018 | Current: Managing Director, Guggenheim Investments (2002-present). |
156 | THE RYDEX FUNDS ANNUAL REPORT |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(concluded) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) |
OFFICERS - concluded | |||
Kimberly J. Scott (1974) | Assistant Treasurer | Since 2016 | Current: Director, Guggenheim Investments (2012-present); Assistant Treasurer, certain other funds in the Fund Complex (2012-present). |
Bryan Stone (1979) | Vice President | Since 2019 | Current: Vice President, certain other funds in the Fund Complex (2014-present); Managing Director, Guggenheim Investments (2013-present). |
John L. Sullivan (1955) | Chief Financial Officer, Chief Accounting Officer and Treasurer | Since 2016 | 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). |
Jon Szafran (1989) | Assistant Treasurer | Since 2017 | Current: Vice President, Guggenheim Investments (2017-present); Assistant Treasurer, certain other funds in the Fund Complex (2017-present). |
* | The business address of each officer is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each officer serves an indefinite term, until his or her successor is duly elected and qualified. |
THE RYDEX FUNDS ANNUAL REPORT | 157 |
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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12.31.2019
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 may no longer be sent by mail, unless you specifically request paper copies of the reports from the insurance company that offers your contract 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. Instructions for requesting paper copies will be provided by your insurance company.
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 the insurance company electronically by following the instructions provided by the insurance company.
You may elect to receive all future shareholder reports in paper free of charge. You can inform the insurance company that you wish to receive paper copies of reports by following the instructions provided by the insurance company. Your election to receive reports in paper will apply to all portfolio companies available under your contract.
GuggenheimInvestments.com | RVATB1-ANN-2-1219x1220 |
TABLE OF CONTENTS |
DEAR SHAREHOLDER | 2 |
ECONOMIC AND MARKET OVERVIEW | 4 |
A BRIEF NOTE ON THE COMPOUNDING OF RETURNS | 6 |
ABOUT SHAREHOLDERS’ FUND EXPENSES | 7 |
NOVA FUND | 9 |
INVERSE S&P 500® STRATEGY FUND | 21 |
NASDAQ-100® FUND | 28 |
INVERSE NASDAQ-100® STRATEGY FUND | 37 |
S&P 500® 2x STRATEGY FUND | 44 |
NASDAQ-100® 2x STRATEGY FUND | 56 |
MID-CAP 1.5x STRATEGY FUND | 65 |
INVERSE MID-CAP STRATEGY FUND | 77 |
RUSSELL 2000® 2x STRATEGY FUND | 84 |
RUSSELL 2000® 1.5x STRATEGY FUND | 92 |
INVERSE RUSSELL 2000® STRATEGY FUND | 100 |
DOW 2x STRATEGY FUND | 108 |
INVERSE DOW 2x STRATEGY FUND | 116 |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND | 123 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND | 130 |
HIGH YIELD STRATEGY FUND | 138 |
U.S. GOVERNMENT MONEY MARKET FUND | 146 |
NOTES TO FINANCIAL STATEMENTS | 152 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 173 |
OTHER INFORMATION | 174 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS | 176 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE | 182 |
THE RYDEX FUNDS ANNUAL REPORT | 1 |
| December 31, 2019 |
Dear Shareholder:
Security Investors, LLC (the “Investment Adviser”) is pleased to present the annual shareholder report for a selection of our Funds (the “Fund” or “Funds”) that are part of the Rydex Variable Trust. This report covers performance of the Funds for the annual period ended December 31, 2019.
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, 2020
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, 2019 |
The Nasdaq-100® Fund may not be suitable for all investors. ● Investing in the 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 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. ● 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. ● For more on these and other risks, please read the prospectus.
THE RYDEX FUNDS ANNUAL REPORT | 3 |
ECONOMIC AND MARKET OVERVIEW (Unaudited) | December 31, 2019 |
Recent U.S. economic data demonstrates that the expansion is being helped by lower interest rates. New home sales have risen at a double-digit, year-over-year pace for four consecutive months since August, spurred by lower mortgage rates but also base effects. Manufacturing production rose in both November and December, corroborating the signal seen in improving manufacturing surveys. Monthly non-farm payroll gains averaged 184,000 jobs in the fourth quarter of 2019, above underlying labor force growth. Income gains and a positive wealth effect are also flowing through into retail sales, where “core” sales recovered in December after three months of declines.
The latest evidence suggests that the U.S. Federal Reserve’s (the “Fed”) easing efforts have given the U.S. economy the extra gas it needs to extend the cycle. Furthermore, the new year kicks off with some clarity on U.S.-China trade policy. The eleventh-hour phase one U.S.-China trade agreement may give U.S. companies some comfort that they can expect tariffs on either side to remain where they are for now. This should help support U.S. manufacturing activity, especially if China steps up purchases of U.S. goods as promised.
Over the next several months, we expect the Fed will stay on hold as it watches incoming data to ensure that the current level of fed funds remains appropriate. Monetary policy acts on the economy with a timing lag, so the effects of the last rate cut in October 2019 might not be apparent until mid-2020. More economic data improvements may come as low rates flow through to consumers and to the credit markets.
While the Fed successfully pushed off a recession in 2019, 2020 arrives with several risks worth watching, including the U.S. presidential election, U.S.-Europe trade negotiations, the potential for a military conflict between the U.S. and Iran, and rising corporate and local government defaults in China.
For the 12 months ended December 31, 2019, the Standard & Poor’s 500® (“S&P 500®”) Index* returned 31.49%. The MSCI Europe-Australasia-Far East (“EAFE”) Index* returned 22.01%. The return of the MSCI Emerging Markets Index* was 18.42%.
In the bond market, the Bloomberg Barclays U.S. Aggregate Bond Index* posted a 8.72% return for the period, while the Bloomberg Barclays U.S. Corporate High Yield Index* returned 14.32%. The return of the ICE Bank of America (“BofA”) Merrill Lynch 3-Month U.S. Treasury Bill Index* was 2.28% 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.
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.
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.
4 | THE RYDEX FUNDS ANNUAL REPORT |
ECONOMIC AND MARKET OVERVIEW (Unaudited)(concluded) | December 31, 2019 |
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 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, 2019 and ending December 31, 2019.
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 | 1.62% | 14.64% | $ 1,000.00 | $ 1,146.40 | $ 8.76 |
Inverse S&P 500® Strategy Fund | 1.78% | (9.34%) | 1,000.00 | 906.60 | 8.55 |
NASDAQ-100® Fund | 1.66% | 13.31% | 1,000.00 | 1,133.10 | 8.93 |
Inverse NASDAQ-100® Strategy Fund | 1.81% | (12.46%) | 1,000.00 | 875.40 | 8.56 |
S&P 500® 2x Strategy Fund | 1.77% | 19.34% | 1,000.00 | 1,193.40 | 9.79 |
NASDAQ-100® 2x Strategy Fund | 1.81% | 26.48% | 1,000.00 | 1,264.80 | 10.33 |
Mid-Cap 1.5x Strategy Fund | 1.77% | 8.42% | 1,000.00 | 1,084.20 | 9.30 |
Inverse Mid-Cap Strategy Fund | 1.78% | (6.35%) | 1,000.00 | 936.50 | 8.69 |
Russell 2000® 2x Strategy Fund | 1.82% | 11.36% | 1,000.00 | 1,113.60 | 9.70 |
Russell 2000® 1.5x Strategy Fund | 1.81% | 9.13% | 1,000.00 | 1,091.30 | 9.54 |
Inverse Russell 2000® Strategy Fund | 1.81% | (7.03%) | 1,000.00 | 929.70 | 8.80 |
Dow 2x Strategy Fund | 1.80% | 14.41% | 1,000.00 | 1,144.10 | 9.73 |
Inverse Dow 2x Strategy Fund | 1.81% | (15.21%) | 1,000.00 | 847.90 | 8.43 |
Government Long Bond 1.2x Strategy Fund | 1.34% | 3.16% | 1,000.00 | 1,031.60 | 6.86 |
Inverse Government Long Bond Strategy Fund | 3.08% | (4.04%) | 1,000.00 | 959.60 | 15.21 |
High Yield Strategy Fund | 1.62% | 3.33% | 1,000.00 | 1,033.30 | 8.30 |
U.S. Government Money Market Fund | 1.39% | 0.35% | 1,000.00 | 1,003.50 | 7.02 |
| |||||
Table 2. Based on hypothetical 5% return (before expenses) | |||||
Nova Fund | 1.62% | 5.00% | $ 1,000.00 | $ 1,017.04 | $ 8.24 |
Inverse S&P 500® Strategy Fund | 1.78% | 5.00% | 1,000.00 | 1,016.23 | 9.05 |
NASDAQ-100® Fund | 1.66% | 5.00% | 1,000.00 | 1,016.84 | 8.44 |
Inverse NASDAQ-100® Strategy Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
S&P 500® 2x Strategy Fund | 1.77% | 5.00% | 1,000.00 | 1,016.28 | 9.00 |
NASDAQ-100® 2x Strategy Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
Mid-Cap 1.5x Strategy Fund | 1.77% | 5.00% | 1,000.00 | 1,016.28 | 9.00 |
Inverse Mid-Cap Strategy Fund | 1.78% | 5.00% | 1,000.00 | 1,016.23 | 9.05 |
Russell 2000® 2x Strategy Fund | 1.82% | 5.00% | 1,000.00 | 1,016.03 | 9.25 |
Russell 2000® 1.5x Strategy Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
Inverse Russell 2000® Strategy Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
Dow 2x Strategy Fund | 1.80% | 5.00% | 1,000.00 | 1,016.13 | 9.15 |
Inverse Dow 2x Strategy Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
Government Long Bond 1.2x Strategy Fund | 1.34% | 5.00% | 1,000.00 | 1,018.45 | 6.82 |
Inverse Government Long Bond Strategy Fund | 3.08% | 5.00% | 1,000.00 | 1,009.68 | 15.60 |
High Yield Strategy Fund | 1.62% | 5.00% | 1,000.00 | 1,017.04 | 8.24 |
U.S. Government Money Market Fund | 1.39% | 5.00% | 1,000.00 | 1,018.20 | 7.07 |
1 | This ratio represents annualized Net Expenses, which includes 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 1.76%. 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, 2019 to December 31, 2019. |
8 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, 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 45.04%, while the S&P 500 Index returned 31.49% over the same time period.
The sectors contributing the most to the performance of the underlying index for the period were Information Technology, Financials, and Communications Services. No sector detracted from return of the underlying index for the period.
Apple, Inc., Microsoft Corp., and Facebook, Inc. Class A contributed the most to performance of the underlying index for 2019. Pfizer, Inc., Occidental Petroleum Corp., and PG&E Corp. detracted the most from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes. 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.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but that fee is waived by the respective investee fund. For the one-year period ended December 31, 2019, investment in the Short Term Investment Vehicles benefited Fund performance.
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, 2019 |
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 | 32.0% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 26.5% |
Apple, Inc. | 0.8% |
Microsoft Corp. | 0.8% |
Amazon.com, Inc. | 0.5% |
Facebook, Inc. — Class A | 0.3% |
Berkshire Hathaway, Inc. — Class B | 0.3% |
JPMorgan Chase & Co. | 0.3% |
Alphabet, Inc. — Class C | 0.3% |
Alphabet, Inc. — Class A | 0.3% |
Top Ten Total | 62.1% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Nova Fund | 45.04% | 14.52% | 17.56% |
S&P 500 Index | 31.49% | 11.70% | 13.56% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
10 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
NOVA FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 17.6% | ||||||||
Consumer, Non-cyclical - 3.8% | ||||||||
Johnson & Johnson | 632 | $ | 92,190 | |||||
Procter & Gamble Co. | 599 | 74,815 | ||||||
UnitedHealth Group, Inc. | 227 | 66,733 | ||||||
Merck & Company, Inc. | 612 | 55,661 | ||||||
Pfizer, Inc. | 1,329 | 52,070 | ||||||
Coca-Cola Co. | 926 | 51,254 | ||||||
PepsiCo, Inc. | 335 | 45,784 | ||||||
Abbott Laboratories | 425 | 36,916 | ||||||
Medtronic plc | 322 | 36,531 | ||||||
Bristol-Myers Squibb Co. | 563 | 36,139 | ||||||
Amgen, Inc. | 143 | 34,473 | ||||||
Philip Morris International, Inc. | 374 | 31,824 | ||||||
AbbVie, Inc. | 355 | 31,432 | ||||||
Thermo Fisher Scientific, Inc. | 96 | 31,188 | ||||||
PayPal Holdings, Inc.* | 282 | 30,504 | ||||||
Eli Lilly & Co. | 203 | 26,680 | ||||||
Danaher Corp. | 154 | 23,636 | ||||||
CVS Health Corp. | 313 | 23,253 | ||||||
Altria Group, Inc. | 449 | 22,409 | ||||||
Gilead Sciences, Inc. | 304 | 19,754 | ||||||
Mondelez International, Inc. — Class A | 346 | 19,058 | ||||||
Anthem, Inc. | 61 | 18,424 | ||||||
Cigna Corp. | 90 | 18,404 | ||||||
Automatic Data Processing, Inc. | 104 | 17,732 | ||||||
Becton Dickinson and Co. | 65 | 17,678 | ||||||
Intuitive Surgical, Inc.* | 28 | 16,552 | ||||||
Stryker Corp. | 77 | 16,165 | ||||||
S&P Global, Inc. | 58 | 15,837 | ||||||
Boston Scientific Corp.* | 335 | 15,149 | ||||||
Allergan plc | 79 | 15,102 | ||||||
Zoetis, Inc. | 114 | 15,088 | ||||||
Colgate-Palmolive Co. | 206 | 14,181 | ||||||
Vertex Pharmaceuticals, Inc.* | 62 | 13,575 | ||||||
Global Payments, Inc. | 72 | 13,144 | ||||||
Biogen, Inc.* | 43 | 12,759 | ||||||
Humana, Inc. | 32 | 11,729 | ||||||
Edwards Lifesciences Corp.* | 50 | 11,665 | ||||||
Illumina, Inc.* | 35 | 11,611 | ||||||
Kimberly-Clark Corp. | 82 | 11,279 | ||||||
Estee Lauder Companies, Inc. — Class A | 53 | 10,947 | ||||||
Sysco Corp. | 123 | 10,521 | ||||||
Baxter International, Inc. | 122 | 10,202 | ||||||
HCA Healthcare, Inc. | 64 | 9,460 | ||||||
Moody’s Corp. | 39 | 9,259 | ||||||
General Mills, Inc. | 145 | 7,766 | ||||||
Constellation Brands, Inc. — Class A | 40 | 7,590 | ||||||
Zimmer Biomet Holdings, Inc. | 49 | 7,334 | ||||||
IHS Markit Ltd.* | 96 | 7,234 | ||||||
Regeneron Pharmaceuticals, Inc.* | 19 | 7,134 | ||||||
IQVIA Holdings, Inc.* | 42 | 6,489 | ||||||
Tyson Foods, Inc. — Class A | 71 | 6,464 | ||||||
Centene Corp.* | 99 | 6,224 | ||||||
Archer-Daniels-Midland Co. | 134 | 6,211 | ||||||
McKesson Corp. | 43 | 5,948 | ||||||
Monster Beverage Corp.* | 92 | 5,847 | ||||||
Verisk Analytics, Inc. — Class A | 39 | 5,824 | ||||||
FleetCor Technologies, Inc.* | 20 | 5,754 | ||||||
Alexion Pharmaceuticals, Inc.* | 53 | 5,732 | ||||||
Kroger Co. | 193 | 5,595 | ||||||
IDEXX Laboratories, Inc.* | 21 | 5,484 | ||||||
Cintas Corp. | 20 | 5,382 | ||||||
Corteva, Inc. | 180 | 5,321 | ||||||
Hershey Co. | 36 | 5,291 | ||||||
ResMed, Inc. | 34 | 5,269 | ||||||
McCormick & Company, Inc. | 30 | 5,092 | ||||||
Kraft Heinz Co. | 150 | 4,819 | ||||||
Align Technology, Inc.* | 17 | 4,744 | ||||||
Clorox Co. | 30 | 4,606 | ||||||
Church & Dwight Company, Inc. | 59 | 4,150 | ||||||
Kellogg Co. | 60 | 4,150 | ||||||
Teleflex, Inc. | 11 | 4,141 | ||||||
Equifax, Inc. | 29 | 4,063 | ||||||
Conagra Brands, Inc. | 117 | 4,006 | ||||||
Laboratory Corporation of America Holdings* | 23 | 3,891 | ||||||
Cooper Companies, Inc. | 12 | 3,855 | ||||||
Incyte Corp.* | 43 | 3,755 | ||||||
WellCare Health Plans, Inc.* | 11 | 3,632 | ||||||
Cardinal Health, Inc. | 70 | 3,541 | ||||||
Quest Diagnostics, Inc. | 32 | 3,417 | ||||||
MarketAxess Holdings, Inc. | 9 | 3,412 | ||||||
Hologic, Inc.* | 64 | 3,341 | ||||||
Varian Medical Systems, Inc.* | 22 | 3,124 | ||||||
Gartner, Inc.* | 20 | 3,082 | ||||||
AmerisourceBergen Corp. — Class A | 36 | 3,061 | ||||||
STERIS plc | 20 | 3,048 | ||||||
Hormel Foods Corp. | 67 | 3,022 | ||||||
Lamb Weston Holdings, Inc. | 35 | 3,011 | ||||||
Dentsply Sirona, Inc. | 53 | 2,999 | ||||||
Brown-Forman Corp. — Class B | 43 | 2,907 | ||||||
United Rentals, Inc.* | 17 | 2,835 | ||||||
JM Smucker Co. | 27 | 2,812 | ||||||
Universal Health Services, Inc. — Class B | 19 | 2,726 | ||||||
Avery Dennison Corp. | 20 | 2,617 | ||||||
Mylan N.V.* | 124 | 2,492 | ||||||
Molson Coors Beverage Co. — Class B | 44 | 2,372 | ||||||
Henry Schein, Inc.* | 35 | 2,335 | ||||||
Campbell Soup Co. | 40 | 1,977 | ||||||
ABIOMED, Inc.* | 11 | 1,876 | ||||||
Robert Half International, Inc. | 28 | 1,768 | ||||||
Nielsen Holdings plc | 85 | 1,726 | ||||||
Perrigo Company plc | 32 | 1,653 | ||||||
DaVita, Inc.* | 20 | 1,501 | ||||||
Quanta Services, Inc. | 34 | 1,384 | ||||||
Rollins, Inc. | 34 | 1,127 | ||||||
H&R Block, Inc. | 47 | 1,104 | ||||||
Coty, Inc. — Class A | 71 | 799 | ||||||
Total Consumer, Non-cyclical | 1,408,633 | |||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 11 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
NOVA FUND |
| Shares | Value | ||||||
Technology - 3.3% | ||||||||
Apple, Inc. | 1,003 | $ | 294,531 | |||||
Microsoft Corp. | 1,833 | 289,064 | ||||||
Intel Corp. | 1,045 | 62,543 | ||||||
Adobe, Inc.* | 116 | 38,258 | ||||||
salesforce.com, Inc.* | 213 | 34,642 | ||||||
NVIDIA Corp. | 147 | 34,589 | ||||||
Accenture plc — Class A | 153 | 32,217 | ||||||
Broadcom, Inc. | 95 | 30,022 | ||||||
Texas Instruments, Inc. | 225 | 28,865 | ||||||
International Business Machines Corp. | 213 | 28,551 | ||||||
Oracle Corp. | 520 | 27,550 | ||||||
QUALCOMM, Inc. | 274 | 24,175 | ||||||
Fidelity National Information Services, Inc. | 148 | 20,585 | ||||||
Intuit, Inc. | 63 | 16,502 | ||||||
Fiserv, Inc.* | 137 | 15,841 | ||||||
Micron Technology, Inc.* | 266 | 14,306 | ||||||
Applied Materials, Inc. | 222 | 13,551 | ||||||
ServiceNow, Inc.* | 45 | 12,704 | ||||||
Advanced Micro Devices, Inc.* | 268 | 12,291 | ||||||
Activision Blizzard, Inc. | 185 | 10,993 | ||||||
Analog Devices, Inc. | 88 | 10,458 | ||||||
Lam Research Corp. | 35 | 10,234 | ||||||
Autodesk, Inc.* | 53 | 9,723 | ||||||
Cognizant Technology Solutions Corp. — Class A | 132 | 8,187 | ||||||
Electronic Arts, Inc.* | 70 | 7,526 | ||||||
HP, Inc. | 356 | 7,316 | ||||||
KLA Corp. | 38 | 6,771 | ||||||
Paychex, Inc. | 76 | 6,465 | ||||||
Microchip Technology, Inc. | 57 | 5,969 | ||||||
Xilinx, Inc. | 60 | 5,866 | ||||||
Cerner Corp. | 75 | 5,504 | ||||||
ANSYS, Inc.* | 21 | 5,406 | ||||||
MSCI, Inc. — Class A | 20 | 5,164 | ||||||
Synopsys, Inc.* | 36 | 5,011 | ||||||
Skyworks Solutions, Inc. | 41 | 4,956 | ||||||
Hewlett Packard Enterprise Co. | 311 | 4,932 | ||||||
Cadence Design Systems, Inc.* | 67 | 4,647 | ||||||
Western Digital Corp. | 71 | 4,506 | ||||||
Maxim Integrated Products, Inc. | 65 | 3,998 | ||||||
Fortinet, Inc.* | 34 | 3,630 | ||||||
Broadridge Financial Solutions, Inc. | 28 | 3,459 | ||||||
NetApp, Inc. | 55 | 3,424 | ||||||
Akamai Technologies, Inc.* | 39 | 3,369 | ||||||
Seagate Technology plc | 56 | 3,332 | ||||||
Take-Two Interactive Software, Inc.* | 27 | 3,306 | ||||||
Qorvo, Inc.* | 28 | 3,254 | ||||||
Citrix Systems, Inc. | 29 | 3,216 | ||||||
Leidos Holdings, Inc. | 32 | 3,132 | ||||||
Zebra Technologies Corp. — Class A* | 12 | 3,065 | ||||||
Jack Henry & Associates, Inc. | 17 | 2,476 | ||||||
DXC Technology Co. | 61 | 2,293 | ||||||
Xerox Holdings Corp. | 45 | 1,659 | ||||||
IPG Photonics Corp.* | 9 | 1,304 | ||||||
Total Technology | 1,205,338 | |||||||
Financial - 3.1% | ||||||||
Berkshire Hathaway, Inc. — Class B* | 470 | 106,455 | ||||||
JPMorgan Chase & Co. | 753 | 104,968 | ||||||
Visa, Inc. — Class A | 411 | 77,227 | ||||||
Bank of America Corp. | 1,945 | 68,503 | ||||||
Mastercard, Inc. — Class A | 213 | 63,600 | ||||||
Wells Fargo & Co. | 925 | 49,765 | ||||||
Citigroup, Inc. | 524 | 41,862 | ||||||
American Tower Corp. — Class A REIT | 106 | 24,361 | ||||||
U.S. Bancorp | 341 | 20,218 | ||||||
American Express Co. | 161 | 20,043 | ||||||
Truist Financial Corp. | 322 | 18,135 | ||||||
Goldman Sachs Group, Inc. | 77 | 17,705 | ||||||
CME Group, Inc. — Class A | 86 | 17,262 | ||||||
Chubb Ltd. | 109 | 16,967 | ||||||
PNC Financial Services Group, Inc. | 105 | 16,761 | ||||||
Morgan Stanley | 296 | 15,132 | ||||||
Crown Castle International Corp. REIT | 100 | 14,215 | ||||||
BlackRock, Inc. — Class A | 28 | 14,076 | ||||||
Prologis, Inc. REIT | 152 | 13,549 | ||||||
Marsh & McLennan Companies, Inc. | 121 | 13,481 | ||||||
Charles Schwab Corp. | 275 | 13,079 | ||||||
Intercontinental Exchange, Inc. | 134 | 12,402 | ||||||
Equinix, Inc. REIT | 20 | 11,674 | ||||||
Aon plc | 56 | 11,664 | ||||||
Capital One Financial Corp. | 112 | 11,526 | ||||||
Simon Property Group, Inc. REIT | 74 | 11,023 | ||||||
American International Group, Inc. | 209 | 10,728 | ||||||
Progressive Corp. | 140 | 10,135 | ||||||
Bank of New York Mellon Corp. | 201 | 10,116 | ||||||
MetLife, Inc. | 188 | 9,582 | ||||||
Aflac, Inc. | 176 | 9,310 | ||||||
Prudential Financial, Inc. | 96 | 8,999 | ||||||
Allstate Corp. | 77 | 8,659 | ||||||
Travelers Companies, Inc. | 61 | 8,354 | ||||||
Welltower, Inc. REIT | 97 | 7,933 | ||||||
Public Storage REIT | 36 | 7,666 | ||||||
AvalonBay Communities, Inc. REIT | 33 | 6,920 | ||||||
State Street Corp. | 87 | 6,882 | ||||||
T. Rowe Price Group, Inc. | 56 | 6,823 | ||||||
Equity Residential REIT | 84 | 6,797 | ||||||
SBA Communications Corp. REIT | 27 | 6,507 | ||||||
Discover Financial Services | 75 | 6,361 | ||||||
Willis Towers Watson plc | 31 | 6,260 | ||||||
Digital Realty Trust, Inc. REIT | 50 | 5,987 | ||||||
Realty Income Corp. REIT | 78 | 5,743 | ||||||
M&T Bank Corp. | 32 | 5,432 | ||||||
Northern Trust Corp. | 51 | 5,418 | ||||||
Weyerhaeuser Co. REIT | 179 | 5,406 | ||||||
Hartford Financial Services Group, Inc. | 87 | 5,287 | ||||||
Fifth Third Bancorp | 170 | 5,226 | ||||||
Ventas, Inc. REIT | 90 | 5,197 | ||||||
Synchrony Financial | 143 | 5,149 | ||||||
Ameriprise Financial, Inc. | 30 | 4,997 | ||||||
CBRE Group, Inc. — Class A* | 80 | 4,903 | ||||||
KeyCorp | 237 | 4,797 |
12 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
NOVA FUND |
| Shares | Value | ||||||
First Republic Bank | 40 | $ | 4,698 | |||||
Boston Properties, Inc. REIT | 34 | 4,687 | ||||||
Essex Property Trust, Inc. REIT | 15 | 4,513 | ||||||
Alexandria Real Estate Equities, Inc. REIT | 27 | 4,363 | ||||||
Arthur J Gallagher & Co. | 45 | 4,285 | ||||||
Citizens Financial Group, Inc. | 104 | 4,223 | ||||||
Healthpeak Properties, Inc. REIT | 119 | 4,102 | ||||||
Regions Financial Corp. | 232 | 3,981 | ||||||
Cincinnati Financial Corp. | 36 | 3,785 | ||||||
Huntington Bancshares, Inc. | 248 | 3,740 | ||||||
Mid-America Apartment Communities, Inc. REIT | 27 | 3,560 | ||||||
Principal Financial Group, Inc. | 62 | 3,410 | ||||||
Extra Space Storage, Inc. REIT | 31 | 3,274 | ||||||
UDR, Inc. REIT | 70 | 3,269 | ||||||
Loews Corp. | 61 | 3,202 | ||||||
Host Hotels & Resorts, Inc. REIT | 172 | 3,191 | ||||||
Cboe Global Markets, Inc. | 26 | 3,120 | ||||||
Duke Realty Corp. REIT | 87 | 3,016 | ||||||
SVB Financial Group* | 12 | 3,013 | ||||||
Nasdaq, Inc. | 27 | 2,892 | ||||||
Lincoln National Corp. | 48 | 2,832 | ||||||
Western Union Co. | 101 | 2,705 | ||||||
Raymond James Financial, Inc. | 29 | 2,594 | ||||||
Vornado Realty Trust REIT | 38 | 2,527 | ||||||
Globe Life, Inc. | 24 | 2,526 | ||||||
Comerica, Inc. | 35 | 2,511 | ||||||
Everest Re Group Ltd. | 9 | 2,492 | ||||||
Regency Centers Corp. REIT | 39 | 2,460 | ||||||
E*TRADE Financial Corp. | 54 | 2,450 | ||||||
WR Berkley Corp. | 35 | 2,419 | ||||||
Iron Mountain, Inc. REIT | 69 | 2,199 | ||||||
Federal Realty Investment Trust REIT | 17 | 2,188 | ||||||
Zions Bancorp North America | 41 | 2,129 | ||||||
Kimco Realty Corp. REIT | 101 | 2,092 | ||||||
Assurant, Inc. | 15 | 1,966 | ||||||
People’s United Financial, Inc. | 107 | 1,808 | ||||||
Apartment Investment & Management Co. — Class A REIT | 35 | 1,808 | ||||||
SL Green Realty Corp. REIT | 19 | 1,746 | ||||||
Franklin Resources, Inc. | 67 | 1,741 | ||||||
Invesco Ltd. | 89 | 1,600 | ||||||
Unum Group | 49 | 1,429 | ||||||
Alliance Data Systems Corp. | 9 | 1,010 | ||||||
Total Financial | 1,128,783 | |||||||
Communications - 2.6% | ||||||||
Amazon.com, Inc.* | 100 | 184,784 | ||||||
Facebook, Inc. — Class A* | 578 | 118,634 | ||||||
Alphabet, Inc. — Class C* | 72 | 96,265 | ||||||
Alphabet, Inc. — Class A* | 71 | 95,097 | ||||||
AT&T, Inc. | 1,755 | 68,585 | ||||||
Walt Disney Co. | 433 | 62,625 | ||||||
Verizon Communications, Inc. | 994 | 61,032 | ||||||
Comcast Corp. — Class A | 1,091 | 49,062 | ||||||
Cisco Systems, Inc. | 1,019 | 48,871 | ||||||
Netflix, Inc.* | 105 | 33,975 | ||||||
Booking Holdings, Inc.* | 9 | 18,484 | ||||||
Charter Communications, Inc. — Class A* | 38 | 18,433 | ||||||
eBay, Inc. | 184 | 6,644 | ||||||
Motorola Solutions, Inc. | 41 | 6,607 | ||||||
Twitter, Inc.* | 186 | 5,961 | ||||||
T-Mobile US, Inc.* | 76 | 5,960 | ||||||
ViacomCBS, Inc. — Class B | 130 | 5,456 | ||||||
Corning, Inc. | 185 | 5,385 | ||||||
CDW Corp. | 34 | 4,857 | ||||||
VeriSign, Inc.* | 25 | 4,817 | ||||||
Omnicom Group, Inc. | 52 | 4,213 | ||||||
Expedia Group, Inc. | 34 | 3,677 | ||||||
NortonLifeLock, Inc. | 137 | 3,496 | ||||||
Fox Corp. — Class A | 85 | 3,151 | ||||||
CenturyLink, Inc. | 236 | 3,118 | ||||||
Discovery, Inc. — Class C* | 81 | 2,470 | ||||||
Arista Networks, Inc.* | 12 | 2,441 | ||||||
DISH Network Corp. — Class A* | 62 | 2,199 | ||||||
Interpublic Group of Companies, Inc. | 93 | 2,148 | ||||||
Juniper Networks, Inc. | 80 | 1,970 | ||||||
F5 Networks, Inc.* | 14 | 1,955 | ||||||
Fox Corp. — Class B | 39 | 1,420 | ||||||
News Corp. — Class A | 93 | 1,315 | ||||||
Discovery, Inc. — Class A*,1 | 38 | 1,244 | ||||||
News Corp. — Class B | 29 | 421 | ||||||
Total Communications | 936,772 | |||||||
Industrial - 1.5% | ||||||||
Boeing Co. | 128 | 41,697 | ||||||
Honeywell International, Inc. | 171 | 30,267 | ||||||
Union Pacific Corp. | 167 | 30,192 | ||||||
United Technologies Corp. | 195 | 29,203 | ||||||
3M Co. | 138 | 24,346 | ||||||
General Electric Co. | 2,098 | 23,414 | ||||||
Lockheed Martin Corp. | 60 | 23,363 | ||||||
United Parcel Service, Inc. — Class B | 168 | 19,666 | ||||||
Caterpillar, Inc. | 133 | 19,641 | ||||||
Raytheon Co. | 67 | 14,722 | ||||||
CSX Corp. | 187 | 13,531 | ||||||
Deere & Co. | 76 | 13,168 | ||||||
Northrop Grumman Corp. | 38 | 13,071 | ||||||
Illinois Tool Works, Inc. | 70 | 12,574 | ||||||
Norfolk Southern Corp. | 63 | 12,230 | ||||||
Emerson Electric Co. | 146 | 11,134 | ||||||
Waste Management, Inc. | 94 | 10,712 | ||||||
L3Harris Technologies, Inc. | 53 | 10,487 | ||||||
General Dynamics Corp. | 56 | 9,876 | ||||||
Eaton Corporation plc | 99 | 9,377 | ||||||
FedEx Corp. | 58 | 8,770 | ||||||
Roper Technologies, Inc. | 24 | 8,502 | ||||||
Ingersoll-Rand plc | 58 | 7,709 | ||||||
Amphenol Corp. — Class A | 71 | 7,684 | ||||||
TE Connectivity Ltd. | 79 | 7,571 | ||||||
Johnson Controls International plc | 185 | 7,531 | ||||||
TransDigm Group, Inc. | 12 | 6,720 | ||||||
Agilent Technologies, Inc. | 74 | 6,313 | ||||||
Parker-Hannifin Corp. | 30 | 6,175 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 13 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
NOVA FUND |
| Shares | Value | ||||||
Stanley Black & Decker, Inc. | 36 | $ | 5,967 | |||||
Rockwell Automation, Inc. | 28 | 5,675 | ||||||
Fortive Corp. | 71 | 5,424 | ||||||
AMETEK, Inc. | 54 | 5,386 | ||||||
Ball Corp. | 79 | 5,109 | ||||||
Keysight Technologies, Inc.* | 45 | 4,618 | ||||||
Vulcan Materials Co. | 32 | 4,608 | ||||||
Republic Services, Inc. — Class A | 51 | 4,571 | ||||||
Amcor plc | 389 | 4,217 | ||||||
Dover Corp. | 35 | 4,034 | ||||||
Martin Marietta Materials, Inc. | 14 | 3,915 | ||||||
Kansas City Southern | 24 | 3,676 | ||||||
Waters Corp.* | 15 | 3,505 | ||||||
Westinghouse Air Brake Technologies Corp. | 44 | 3,423 | ||||||
Xylem, Inc. | 43 | 3,388 | ||||||
Garmin Ltd. | 34 | 3,317 | ||||||
Masco Corp. | 68 | 3,263 | ||||||
Expeditors International of Washington, Inc. | 41 | 3,199 | ||||||
Mettler-Toledo International, Inc.* | 4 | 3,173 | ||||||
IDEX Corp. | 18 | 3,096 | ||||||
Jacobs Engineering Group, Inc. | 33 | 2,964 | ||||||
Arconic, Inc. | 93 | 2,862 | ||||||
Old Dominion Freight Line, Inc. | 15 | 2,847 | ||||||
Allegion plc | 22 | 2,740 | ||||||
Westrock Co. | 62 | 2,660 | ||||||
PerkinElmer, Inc. | 26 | 2,525 | ||||||
Huntington Ingalls Industries, Inc. | 10 | 2,509 | ||||||
CH Robinson Worldwide, Inc. | 32 | 2,502 | ||||||
Packaging Corporation of America | 22 | 2,464 | ||||||
Textron, Inc. | 55 | 2,453 | ||||||
J.B. Hunt Transport Services, Inc. | 20 | 2,336 | ||||||
Snap-on, Inc. | 13 | 2,202 | ||||||
Fortune Brands Home & Security, Inc. | 33 | 2,156 | ||||||
Pentair plc | 40 | 1,835 | ||||||
FLIR Systems, Inc. | 32 | 1,666 | ||||||
AO Smith Corp. | 33 | 1,572 | ||||||
Flowserve Corp. | 31 | 1,543 | ||||||
Sealed Air Corp. | 37 | 1,474 | ||||||
Total Industrial | 564,520 | |||||||
Consumer, Cyclical - 1.5% | ||||||||
Home Depot, Inc. | 262 | 57,216 | ||||||
Walmart, Inc. | 341 | 40,524 | ||||||
McDonald’s Corp. | 181 | 35,767 | ||||||
Costco Wholesale Corp. | 106 | 31,156 | ||||||
NIKE, Inc. — Class B | 299 | 30,292 | ||||||
Starbucks Corp. | 284 | 24,969 | ||||||
Lowe’s Companies, Inc. | 184 | 22,036 | ||||||
TJX Companies, Inc. | 291 | 17,768 | ||||||
Target Corp. | 122 | 15,642 | ||||||
General Motors Co. | 302 | 11,053 | ||||||
Walgreens Boots Alliance, Inc. | 180 | 10,613 | ||||||
Ross Stores, Inc. | 87 | 10,129 | ||||||
Marriott International, Inc. — Class A | 65 | 9,843 | ||||||
Dollar General Corp. | 61 | 9,515 | ||||||
Ford Motor Co. | 935 | 8,696 | ||||||
Delta Air Lines, Inc. | 138 | 8,070 | ||||||
VF Corp. | 79 | 7,873 | ||||||
Hilton Worldwide Holdings, Inc. | 68 | 7,542 | ||||||
O’Reilly Automotive, Inc.* | 17 | 7,450 | ||||||
Yum! Brands, Inc. | 73 | 7,353 | ||||||
AutoZone, Inc.* | 6 | 7,148 | ||||||
Cummins, Inc. | 37 | 6,622 | ||||||
PACCAR, Inc. | 83 | 6,565 | ||||||
Southwest Airlines Co. | 114 | 6,154 | ||||||
Aptiv plc | 61 | 5,793 | ||||||
Las Vegas Sands Corp. | 81 | 5,592 | ||||||
Royal Caribbean Cruises Ltd. | 41 | 5,474 | ||||||
Dollar Tree, Inc.* | 57 | 5,361 | ||||||
Fastenal Co. | 138 | 5,099 | ||||||
Chipotle Mexican Grill, Inc. — Class A* | 6 | 5,023 | ||||||
Carnival Corp. | 96 | 4,880 | ||||||
Best Buy Company, Inc. | 54 | 4,741 | ||||||
United Airlines Holdings, Inc.* | 52 | 4,581 | ||||||
Copart, Inc.* | 49 | 4,456 | ||||||
DR Horton, Inc. | 81 | 4,272 | ||||||
MGM Resorts International | 123 | 4,092 | ||||||
Lennar Corp. — Class A | 67 | 3,738 | ||||||
Genuine Parts Co. | 35 | 3,718 | ||||||
Ulta Beauty, Inc.* | 14 | 3,544 | ||||||
Tiffany & Co. | 26 | 3,475 | ||||||
CarMax, Inc.* | 39 | 3,419 | ||||||
WW Grainger, Inc. | 10 | 3,385 | ||||||
Hasbro, Inc. | 31 | 3,274 | ||||||
Darden Restaurants, Inc. | 29 | 3,161 | ||||||
Wynn Resorts Ltd. | 22 | 3,055 | ||||||
Norwegian Cruise Line Holdings Ltd.* | 51 | 2,979 | ||||||
Advance Auto Parts, Inc. | 17 | 2,723 | ||||||
American Airlines Group, Inc. | 94 | 2,696 | ||||||
LKQ Corp.* | 74 | 2,642 | ||||||
Tractor Supply Co. | 28 | 2,616 | ||||||
Live Nation Entertainment, Inc.* | 34 | 2,430 | ||||||
PulteGroup, Inc. | 61 | 2,367 | ||||||
Whirlpool Corp. | 15 | 2,213 | ||||||
BorgWarner, Inc. | 49 | 2,126 | ||||||
Alaska Air Group, Inc. | 30 | 2,032 | ||||||
Kohl’s Corp. | 38 | 1,936 | ||||||
Mohawk Industries, Inc.* | 14 | 1,909 | ||||||
PVH Corp. | 17 | 1,788 | ||||||
Newell Brands, Inc. | 92 | 1,768 | ||||||
Tapestry, Inc. | 65 | 1,753 | ||||||
Leggett & Platt, Inc. | 32 | 1,627 | ||||||
Harley-Davidson, Inc. | 37 | 1,376 | ||||||
Capri Holdings Ltd.* | 36 | 1,373 | ||||||
Ralph Lauren Corp. — Class A | 11 | 1,289 | ||||||
Hanesbrands, Inc. | 86 | 1,277 | ||||||
Macy’s, Inc. | 74 | 1,258 | ||||||
Nordstrom, Inc. | 26 | 1,064 | ||||||
L Brands, Inc. | 56 | 1,015 | ||||||
Under Armour, Inc. — Class A* | 44 | 950 | ||||||
Gap, Inc. | 51 | 902 |
14 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
NOVA FUND |
| Shares | Value | ||||||
Under Armour, Inc. — Class C* | 47 | $ | 902 | |||||
Total Consumer, Cyclical | 537,140 | |||||||
Energy - 0.8% | ||||||||
Exxon Mobil Corp. | 1,016 | 70,897 | ||||||
Chevron Corp. | 454 | 54,712 | ||||||
ConocoPhillips | 264 | 17,168 | ||||||
Schlumberger Ltd. | 333 | 13,387 | ||||||
Phillips 66 | 107 | 11,921 | ||||||
EOG Resources, Inc. | 140 | 11,726 | ||||||
Kinder Morgan, Inc. | 468 | 9,908 | ||||||
Marathon Petroleum Corp. | 156 | 9,399 | ||||||
Valero Energy Corp. | 99 | 9,271 | ||||||
Occidental Petroleum Corp. | 214 | 8,819 | ||||||
ONEOK, Inc. | 99 | 7,491 | ||||||
Williams Companies, Inc. | 291 | 6,902 | ||||||
Pioneer Natural Resources Co. | 40 | 6,055 | ||||||
Halliburton Co. | 211 | 5,163 | ||||||
Concho Resources, Inc. | 48 | 4,203 | ||||||
Hess Corp. | 62 | 4,142 | ||||||
Baker Hughes Co. | 156 | 3,998 | ||||||
Diamondback Energy, Inc. | 39 | 3,622 | ||||||
Noble Energy, Inc. | 114 | 2,832 | ||||||
Marathon Oil Corp. | 192 | 2,607 | ||||||
Devon Energy Corp. | 93 | 2,415 | ||||||
National Oilwell Varco, Inc. | 92 | 2,305 | ||||||
Apache Corp. | 90 | 2,303 | ||||||
TechnipFMC plc | 101 | 2,165 | ||||||
HollyFrontier Corp. | 36 | 1,826 | ||||||
Cabot Oil & Gas Corp. — Class A | 98 | 1,706 | ||||||
Cimarex Energy Co. | 24 | 1,260 | ||||||
Helmerich & Payne, Inc. | 26 | 1,181 | ||||||
Total Energy | 279,384 | |||||||
Utilities - 0.6% | ||||||||
NextEra Energy, Inc. | 117 | 28,333 | ||||||
Dominion Energy, Inc. | 198 | 16,398 | ||||||
Southern Co. | 252 | 16,052 | ||||||
Duke Energy Corp. | 175 | 15,962 | ||||||
American Electric Power Company, Inc. | 118 | 11,152 | ||||||
Exelon Corp. | 233 | 10,623 | ||||||
Sempra Energy | 67 | 10,149 | ||||||
Xcel Energy, Inc. | 126 | 8,000 | ||||||
Consolidated Edison, Inc. | 80 | 7,238 | ||||||
Public Service Enterprise Group, Inc. | 121 | 7,145 | ||||||
WEC Energy Group, Inc. | 75 | 6,917 | ||||||
Eversource Energy | 77 | 6,550 | ||||||
Edison International | 86 | 6,485 | ||||||
FirstEnergy Corp. | 130 | 6,318 | ||||||
PPL Corp. | 174 | 6,243 | ||||||
DTE Energy Co. | 46 | 5,974 | ||||||
Entergy Corp. | 47 | 5,631 | ||||||
American Water Works Company, Inc. | 43 | 5,282 | ||||||
Ameren Corp. | 59 | 4,531 | ||||||
CMS Energy Corp. | 68 | 4,273 | ||||||
Evergy, Inc. | 54 | 3,515 | ||||||
CenterPoint Energy, Inc. | 121 | 3,300 | ||||||
Alliant Energy Corp. | 58 | 3,174 | ||||||
AES Corp. | 159 | 3,164 | ||||||
Atmos Energy Corp. | 28 | 3,132 | ||||||
NiSource, Inc. | 90 | 2,506 | ||||||
Pinnacle West Capital Corp. | 27 | 2,428 | ||||||
NRG Energy, Inc. | 60 | 2,385 | ||||||
Total Utilities | 212,860 | |||||||
Basic Materials - 0.4% | ||||||||
Linde plc | 129 | 27,464 | ||||||
Air Products & Chemicals, Inc. | 53 | 12,454 | ||||||
Ecolab, Inc. | 60 | 11,579 | ||||||
DuPont de Nemours, Inc. | 178 | 11,428 | ||||||
Sherwin-Williams Co. | 19 | 11,087 | ||||||
Dow, Inc. | 178 | 9,742 | ||||||
Newmont Goldcorp Corp. | 197 | 8,559 | ||||||
PPG Industries, Inc. | 57 | 7,609 | ||||||
LyondellBasell Industries N.V. — Class A | 62 | 5,858 | ||||||
Freeport-McMoRan, Inc. | 349 | 4,579 | ||||||
International Paper Co. | 94 | 4,329 | ||||||
Nucor Corp. | 72 | 4,052 | ||||||
Celanese Corp. — Class A | 29 | 3,570 | ||||||
International Flavors & Fragrances, Inc.1 | 26 | 3,355 | ||||||
FMC Corp. | 30 | 2,995 | ||||||
Eastman Chemical Co. | 32 | 2,536 | ||||||
CF Industries Holdings, Inc. | 52 | 2,483 | ||||||
Albemarle Corp. | 25 | 1,826 | ||||||
Mosaic Co. | 84 | 1,818 | ||||||
Total Basic Materials | 137,323 | |||||||
Total Common Stocks | ||||||||
(Cost $5,799,001) | 6,410,753 | |||||||
MUTUAL FUNDS† - 58.5% | ||||||||
Guggenheim Strategy Fund II2 | 472,701 | 11,694,627 | ||||||
Guggenheim Ultra Short Duration Fund — Institutional Class2 | 973,911 | 9,690,414 | ||||||
Total Mutual Funds | ||||||||
(Cost $21,408,597) | 21,385,041 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 4.4% | ||||||||
U.S. Treasury Bills | ||||||||
1.50% due 01/14/203,4 | $ | 703,000 | 702,656 | |||||
1.47% due 02/04/203 | 635,000 | 634,089 | ||||||
1.54% due 01/14/203,4 | 275,000 | 274,866 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $1,611,560) | 1,611,611 | |||||||
FEDERAL AGENCY NOTES†† - 2.8% | ||||||||
Federal Farm Credit Bank | ||||||||
1.90% (U.S. Prime Rate - 2.85%, Rate Floor: 0.00%) due 08/30/225 | 1,000,000 | 999,480 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $1,000,000) | 999,480 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 15 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
NOVA FUND |
Face Amount | Value | |||||||
REPURCHASE AGREEMENTS††, 6 - 19.0% | ||||||||
J.P. Morgan Securities LLC | $ | 4,230,755 | $ | 4,230,755 | ||||
Barclays Capital, Inc. | 1,364,191 | 1,364,191 | ||||||
BofA Securities, Inc. | 1,364,190 | 1,364,190 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $6,959,136) | 6,959,136 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,7 - 0.0% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.47%8 | 1,798 | 1,798 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $1,798) | 1,798 | |||||||
Total Investments - 102.3% | ||||||||
(Cost $36,780,092) | $ | 37,367,819 | ||||||
Other Assets & Liabilities, net - (2.3)% | (822,388 | ) | ||||||
Total Net Assets - 100.0% | $ | 36,545,431 |
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 | 2.05% (1 Week USD LIBOR + 0.45%) | At Maturity | 01/31/20 | 2,986 | $ | 9,647,787 | $ | 28,339 | ||||||||||
BNP Paribas | S&P 500 Index | 2.35% (1 Month USD LIBOR + 0.55%) | At Maturity | 01/28/20 | 601 | 1,941,231 | (5,485 | ) | |||||||||||
Goldman Sachs International | S&P 500 Index | 2.05% (1 Week USD LIBOR + 0.45%) | At Maturity | 01/28/20 | 11,408 | 36,856,067 | (97,371 | ) | |||||||||||
$ | 48,445,085 | $ | (74,517 | ) |
* | 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, 2019 — See Note 7. |
2 | Affiliated issuer. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2019. |
5 | Variable rate security. Rate indicated is the rate effective at December 31, 2019. 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. |
6 | Repurchase Agreements — See Note 6. |
7 | Securities lending collateral — See Note 7. |
8 | Rate indicated is the 7-day yield as of December 31, 2019. |
plc — Public Limited Company | |
LIBOR — London Interbank Offered Rate | |
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, 2019 |
NOVA FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 6,410,753 | $ | — | $ | — | $ | 6,410,753 | ||||||||
Mutual Funds | 21,385,041 | — | — | 21,385,041 | ||||||||||||
U.S. Treasury Bills | — | 1,611,611 | — | 1,611,611 | ||||||||||||
Federal Agency Notes | — | 999,480 | — | 999,480 | ||||||||||||
Repurchase Agreements | — | 6,959,136 | — | 6,959,136 | ||||||||||||
Securities Lending Collateral | 1,798 | — | — | 1,798 | ||||||||||||
Equity Index Swap Agreements** | — | 28,339 | — | 28,339 | ||||||||||||
Total Assets | $ | 27,797,592 | $ | 9,598,566 | $ | — | $ | 37,396,158 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Index Swap Agreements** | $ | — | $ | 102,856 | $ | — | $ | 102,856 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
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 “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, 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/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 10,405,341 | $ | 15,138,464 | $ | (13,800,000 | ) | $ | (38,498 | ) | $ | (10,680 | ) | $ | 11,694,627 | 472,701 | $ | 288,714 | ||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 6,167,022 | 18,237,461 | (14,700,000 | ) | (3,730 | ) | (10,339 | ) | 9,690,414 | 973,911 | 237,658 | |||||||||||||||||||||
$ | 16,572,363 | $ | 33,375,925 | $ | (28,500,000 | ) | $ | (42,228 | ) | $ | (21,019 | ) | $ | 21,385,041 | $ | 526,372 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 17 |
NOVA FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $1,781 of securities loaned (cost $8,412,359) | $ | 9,023,642 | ||
Investments in affiliated issuers, at value (cost $21,408,597) | 21,385,041 | |||
Repurchase agreements, at value (cost $6,959,136) | 6,959,136 | |||
Cash | 27 | |||
Unrealized appreciation on OTC swap agreements | 28,339 | |||
Receivables: | ||||
Fund shares sold | 3,548,450 | |||
Dividends | 54,908 | |||
Interest | 1,979 | |||
Securities lending income | 7 | |||
Total assets | 41,001,529 | |||
Liabilities: | ||||
Unrealized depreciation on OTC swap agreements | 102,856 | |||
Payable for: | ||||
Securities purchased | 4,044,160 | |||
Fund shares redeemed | 126,561 | |||
Swap settlement | 40,967 | |||
Management fees | 25,724 | |||
Transfer agent and administrative fees | 9,618 | |||
Investor service fees | 9,618 | |||
Portfolio accounting fees | 3,847 | |||
Return of securities lending collateral | 1,798 | |||
Trustees’ fees* | 619 | |||
Miscellaneous | 90,330 | |||
Total liabilities | 4,456,098 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 36,545,431 | ||
Net assets consist of: | ||||
Paid in capital | $ | 32,926,052 | ||
Total distributable earnings (loss) | 3,619,379 | |||
Net assets | $ | 36,545,431 | ||
Capital shares outstanding | 269,350 | |||
Net asset value per share | $ | 135.68 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 183,866 | ||
Dividends from securities of affiliated issuers | 526,372 | |||
Interest | 180,391 | |||
Income from securities lending, net | 492 | |||
Total investment income | 891,121 | |||
Expenses: | ||||
Management fees | 275,275 | |||
Investor service fees | 91,758 | |||
Transfer agent and administrative fees | 91,758 | |||
Professional fees | 60,931 | |||
Portfolio accounting fees | 36,703 | |||
Trustees’ fees* | 8,311 | |||
Custodian fees | 6,888 | |||
Line of credit fees | 124 | |||
Miscellaneous | 60,977 | |||
Total expenses | 632,725 | |||
Less: | ||||
Expenses waived by Adviser | (23,937 | ) | ||
Net expenses | 608,788 | |||
Net investment income | 282,333 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 1,116,336 | |||
Investments in affiliated issuers | (42,228 | ) | ||
Swap agreements | 7,896,833 | |||
Futures contracts | 2,051,315 | |||
Net realized gain | 11,022,256 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (102,203 | ) | ||
Investments in affiliated issuers | (21,019 | ) | ||
Swap agreements | (313,890 | ) | ||
Futures contracts | (2,042 | ) | ||
Net change in unrealized appreciation (depreciation) | (439,154 | ) | ||
Net realized and unrealized gain | 10,583,102 | |||
Net increase in net assets resulting from operations | $ | 10,865,435 |
* | 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 | $ | 282,333 | $ | 298,103 | ||||
Net realized gain (loss) on investments | 11,022,256 | (2,443,077 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | (439,154 | ) | (1,266,035 | ) | ||||
Net increase (decrease) in net assets resulting from operations | 10,865,435 | (3,411,009 | ) | |||||
Distributions to shareholders | (297,044 | ) | (2,952,794 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 152,990,650 | 272,253,605 | ||||||
Distributions reinvested | 297,044 | 2,952,794 | ||||||
Cost of shares redeemed | (159,619,797 | ) | (288,258,460 | ) | ||||
Net decrease from capital share transactions | (6,332,103 | ) | (13,052,061 | ) | ||||
Net increase (decrease) in net assets | 4,236,288 | (19,415,864 | ) | |||||
Net assets: | ||||||||
Beginning of year | 32,309,143 | 51,725,007 | ||||||
End of year | $ | 36,545,431 | $ | 32,309,143 | ||||
Capital share activity: | ||||||||
Shares sold | 1,310,221 | 2,415,472 | ||||||
Shares issued from reinvestment of distributions | 2,415 | 26,030 | ||||||
Shares redeemed | (1,384,986 | ) | (2,557,565 | ) | ||||
Net decrease in shares | (72,350 | ) | (116,063 | ) |
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 | $ | 94.55 | $ | 113.00 | $ | 89.58 | $ | 77.42 | $ | 77.97 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .90 | .83 | .22 | .06 | (.12 | ) | ||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 41.55 | (11.15 | ) | 27.62 | 12.10 | (.43 | ) | |||||||||||||
Total from investment operations | 42.45 | (10.32 | ) | 27.84 | 12.16 | (.55 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (1.32 | ) | (.21 | ) | (.05 | ) | — | — | ||||||||||||
Net realized gains | — | (7.92 | ) | (4.37 | ) | — | — | |||||||||||||
Total distributions | (1.32 | ) | (8.13 | ) | (4.42 | ) | — | — | ||||||||||||
Net asset value, end of period | $ | 135.68 | $ | 94.55 | $ | 113.00 | $ | 89.58 | $ | 77.42 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 45.04 | % | (10.32 | %) | 31.78 | % | 15.72 | % | (0.72 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 36,545 | $ | 32,309 | $ | 51,725 | $ | 38,768 | $ | 30,483 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.77 | % | 0.73 | % | 0.22 | % | 0.04 | % | (0.15 | %) | ||||||||||
Total expensesc | 1.72 | % | 1.62 | % | 1.61 | % | 1.56 | % | 1.51 | % | ||||||||||
Net expensesd | 1.66 | % | 1.61 | % | 1.61 | % | 1.56 | % | 1.51 | % | ||||||||||
Portfolio turnover rate | 336 | % | 604 | % | 412 | % | 636 | % | 342 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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, 2019 |
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, 2019, 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 -22.91%, while the S&P 500 Index returned 31.49% over the same time period.
The sectors contributing the most to the performance of the underlying index for the period were Information Technology, Financials, and Communications Services. No sector detracted from return of the underlying index for the period.
Apple, Inc., Microsoft Corp., and Facebook, Inc. Class A contributed the most to performance of the underlying index for 2019. Pfizer, Inc., Occidental Petroleum Corp., and PG&E Corp. detracted the most from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes. 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.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but that fee is waived by the respective investee fund. For the one-year period ended December 31, 2019, investment in the Short Term Investment Vehicles benefited Fund performance.
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, 2019 |
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: June 9, 1997 |
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 — Institutional Class | 25.8% |
Guggenheim Strategy Fund II | 23.0% |
Total | 48.8% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Inverse S&P 500® Strategy Fund | (22.91%) | (11.04%) | (14.07%) |
S&P 500 Index | 31.49% | 11.70% | 13.56% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
22 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
INVERSE S&P 500® STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 48.8% | ||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 45,661 | $ | 454,324 | |||||
Guggenheim Strategy Fund II1 | 16,330 | 404,003 | ||||||
Total Mutual Funds | ||||||||
(Cost $857,439) | 858,327 | |||||||
Face | ||||||||
FEDERAL AGENCY NOTES†† - 5.7% | ||||||||
Farmer Mac | ||||||||
1.73% (U.S. Prime Rate - 3.02%, Rate Floor: 0.00%) due 09/01/202 | $ | 100,000 | 100,000 | |||||
Total Federal Agency Notes | ||||||||
(Cost $100,000) | 100,000 | |||||||
U.S. TREASURY BILLS†† - 4.4% | ||||||||
U.S. Treasury Bills | ||||||||
1.50% due 01/14/203,5 | 70,000 | 69,966 | ||||||
1.47% due 02/04/203 | 7,000 | 6,990 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $76,951) | 76,956 | |||||||
REPURCHASE AGREEMENTS††, 4 - 47.6% | ||||||||
J.P. Morgan Securities LLC | 509,287 | 509,287 | ||||||
Barclays Capital, Inc. | 164,218 | 164,218 | ||||||
BofA Securities, Inc. | 164,217 | 164,217 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $837,722) | 837,722 | |||||||
Total Investments - 106.5% | ||||||||
(Cost $1,872,112) | $ | 1,873,005 | ||||||
Other Assets & Liabilities, net - (6.5)% | (114,070 | ) | ||||||
Total Net Assets - 100.0% | $ | 1,758,935 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements Sold Short†† | |||||||||||||||||||
Goldman Sachs International | S&P 500 Index | (1.95)% (1 Week USD LIBOR + 0.35%) | At Maturity | 01/28/20 | 231 | $ | 747,377 | $ | 1,392 | ||||||||||
BNP Paribas | S&P 500 Index | (1.85)% (1 Month USD LIBOR + 0.05%) | At Maturity | 01/28/20 | 109 | 351,622 | 994 | ||||||||||||
Barclays Bank plc | S&P 500 Index | (1.90)% (1 Week USD LIBOR + 0.30%) | At Maturity | 01/31/20 | 203 | 656,445 | (1,929 | ) | |||||||||||
$ | 1,755,444 | $ | 457 |
† | 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, 2019. 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 | Repurchase Agreements — See Note 6. |
5 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2019. |
LIBOR — London Interbank Offered Rate | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 23 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
INVERSE S&P 500® STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 858,327 | $ | — | $ | — | $ | 858,327 | ||||||||
Federal Agency Notes | — | 100,000 | — | 100,000 | ||||||||||||
U.S. Treasury Bills | — | 76,956 | — | 76,956 | ||||||||||||
Repurchase Agreements | — | 837,722 | — | 837,722 | ||||||||||||
Equity Index Swap Agreements** | — | 2,386 | — | 2,386 | ||||||||||||
Total Assets | $ | 858,327 | $ | 1,017,064 | $ | — | $ | 1,875,391 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Index Swap Agreements** | $ | — | $ | 1,929 | $ | — | $ | 1,929 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
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 “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, 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/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 1,299,238 | $ | 3,927,339 | $ | (4,820,000 | ) | $ | (3,275 | ) | $ | 701 | $ | 404,003 | 16,330 | $ | 27,464 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 1,185,822 | 4,228,511 | (4,960,000 | ) | (1,364 | ) | 1,355 | 454,324 | 45,661 | 23,615 | ||||||||||||||||||||||
$ | 2,485,060 | $ | 8,155,850 | $ | (9,780,000 | ) | $ | (4,639 | ) | $ | 2,056 | $ | 858,327 | $ | 51,079 |
24 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE S&P 500® STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $176,951) | $ | 176,956 | ||
Investments in affiliated issuers, at value (cost $857,439) | 858,327 | |||
Repurchase agreements, at value (cost $837,722) | 837,722 | |||
Segregated cash with broker | 362 | |||
Unrealized appreciation on OTC swap agreements | 2,386 | |||
Receivables: | ||||
Dividends | 3,013 | |||
Interest | 184 | |||
Swap settlement | 64 | |||
Total assets | 1,879,014 | |||
Liabilities: | ||||
Unrealized depreciation on OTC swap agreements | 1,929 | |||
Payable for: | ||||
Fund shares redeemed | 102,914 | |||
Professional fees | 5,176 | |||
Securities purchased | 3,057 | |||
Management fees | 1,904 | |||
Transfer agent and administrative fees | 580 | |||
Investor service fees | 580 | |||
Variation margin on futures contracts | 368 | |||
Portfolio accounting fees | 232 | |||
Trustees’ fees* | 58 | |||
Miscellaneous | 3,281 | |||
Total liabilities | 120,079 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 1,758,935 | ||
Net assets consist of: | ||||
Paid in capital | $ | 16,472,387 | ||
Total distributable earnings (loss) | (14,713,452 | ) | ||
Net assets | $ | 1,758,935 | ||
Capital shares outstanding | 31,814 | |||
Net asset value per share | $ | 55.29 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 51,079 | ||
Interest | 38,831 | |||
Total investment income | 89,910 | |||
Expenses: | ||||
Management fees | 32,067 | |||
Investor service fees | 8,907 | |||
Transfer agent and administrative fees | 8,907 | |||
Professional fees | 6,542 | |||
Portfolio accounting fees | 3,563 | |||
Trustees’ fees* | 1,024 | |||
Custodian fees | 643 | |||
Line of credit fees | 22 | |||
Miscellaneous | 5,371 | |||
Total expenses | 67,046 | |||
Less: | ||||
Expenses waived by Adviser | (2,340 | ) | ||
Net expenses | 64,706 | |||
Net investment income | 25,204 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 35 | |||
Investments in affiliated issuers | (4,639 | ) | ||
Swap agreements | (813,844 | ) | ||
Futures contracts | (64,604 | ) | ||
Net realized loss | (883,052 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 52 | |||
Investments in affiliated issuers | 2,056 | |||
Swap agreements | 44,352 | |||
Futures contracts | 754 | |||
Net change in unrealized appreciation (depreciation) | 47,214 | |||
Net realized and unrealized loss | (835,838 | ) | ||
Net decrease in net assets resulting from operations | $ | (810,634 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 25 |
INVERSE S&P 500® STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 25,204 | $ | 20,030 | ||||
Net realized gain (loss) on investments | (883,052 | ) | 155,669 | |||||
Net change in unrealized appreciation (depreciation) on investments | 47,214 | (68,480 | ) | |||||
Net increase (decrease) in net assets resulting from operations | (810,634 | ) | 107,219 | |||||
Distributions to shareholders | (23,392 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 111,588,598 | 78,535,789 | ||||||
Distributions reinvested | 23,392 | — | ||||||
Cost of shares redeemed | (113,432,091 | ) | (76,802,880 | ) | ||||
Net increase (decrease) from capital share transactions | (1,820,101 | ) | 1,732,909 | |||||
Net increase (decrease) in net assets | (2,654,127 | ) | 1,840,128 | |||||
Net assets: | ||||||||
Beginning of year | 4,413,062 | 2,572,934 | ||||||
End of year | $ | 1,758,935 | $ | 4,413,062 | ||||
Capital share activity: | ||||||||
Shares sold | 1,815,183 | 1,168,828 | ||||||
Shares issued from reinvestment of distributions | 394 | — | ||||||
Shares redeemed | (1,844,755 | ) | (1,144,802 | ) | ||||
Net increase (decrease) in shares | (29,178 | ) | 24,026 |
26 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE S&P 500® STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 72.35 | $ | 69.60 | $ | 84.21 | $ | 95.71 | $ | 100.13 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .44 | .41 | (.11 | ) | (.11 | ) | (1.32 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | (16.97 | ) | 2.34 | (14.50 | ) | (11.39 | ) | (3.10 | ) | |||||||||||
Total from investment operations | (16.53 | ) | 2.75 | (14.61 | ) | (11.50 | ) | (4.42 | ) | |||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.53 | ) | — | — | — | — | ||||||||||||||
Total distributions | (.53 | ) | — | — | — | — | ||||||||||||||
Net asset value, end of period | $ | 55.29 | $ | 72.35 | $ | 69.60 | $ | 84.21 | $ | 95.71 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (22.91 | %) | 3.95 | % | (17.35 | %) | (12.01 | %) | (4.43 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 1,759 | $ | 4,413 | $ | 2,573 | $ | 4,584 | $ | 9,497 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.71 | % | 0.61 | % | (0.15 | %) | (0.69 | %) | (1.38 | %) | ||||||||||
Total expensesc | 1.88 | % | 1.77 | % | 1.76 | % | 1.71 | % | 1.66 | % | ||||||||||
Net expensesd | 1.82 | % | 1.76 | % | 1.76 | % | 1.71 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 442 | % | 540 | % | 100 | % | 311 | % | 137 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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 | 27 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, 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 36.86%, while the NASDAQ-100 Index returned 39.46% over the same time period.
The Information Technology, Communications Services, and Consumer Discretionary sectors contributed the most to the performance of the underlying index during the year. No sector detracted from the performance of the underlying index for the year.
Apple, Inc., Microsoft Corp., and Amazon.com, Inc. contributed the most to performance of the underlying index for 2019. Kraft Heinz Co., Baidu, Inc. ADR Class A, and Walgreens Boots Alliance, 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.
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 | 29.4% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 26.7% |
Apple, Inc. | 3.6% |
Microsoft Corp. | 3.3% |
Amazon.com, Inc. | 2.5% |
Facebook, Inc. — Class A | 1.4% |
Alphabet, Inc. — Class A | 1.3% |
Alphabet, Inc. — Class C | 1.3% |
Intel Corp. | 0.9% |
Comcast Corp. — Class A | 0.7% |
Top Ten Total | 71.1% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
28 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
NASDAQ-100® Fund | 36.86% | 15.11% | 16.28% |
NASDAQ-100 Index | 39.46% | 16.91% | 18.07% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The NASDAQ-100 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 29 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
NASDAQ-100® FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 31.2% | ||||||||
Technology - 13.7% | ||||||||
Apple, Inc. | 10,674 | $ | 3,134,420 | |||||
Microsoft Corp. | 18,325 | 2,889,853 | ||||||
Intel Corp. | 13,329 | 797,741 | ||||||
Adobe, Inc.* | 1,483 | 489,108 | ||||||
NVIDIA Corp. | 1,875 | 441,188 | ||||||
Broadcom, Inc. | 1,215 | 383,964 | ||||||
Texas Instruments, Inc. | 2,865 | 367,551 | ||||||
QUALCOMM, Inc. | 3,499 | 308,717 | ||||||
Fiserv, Inc.* | 2,083 | 240,857 | ||||||
Intuit, Inc. | 798 | 209,020 | ||||||
Micron Technology, Inc.* | 3,392 | 182,422 | ||||||
Applied Materials, Inc. | 2,830 | 172,743 | ||||||
Advanced Micro Devices, Inc.* | 3,413 | 156,520 | ||||||
Activision Blizzard, Inc. | 2,354 | 139,875 | ||||||
Analog Devices, Inc. | 1,129 | 134,170 | ||||||
Lam Research Corp. | 444 | 129,826 | ||||||
Autodesk, Inc.* | 673 | 123,469 | ||||||
NXP Semiconductor N.V. | 857 | 109,062 | ||||||
Cognizant Technology Solutions Corp. — Class A | 1,677 | 104,008 | ||||||
Electronic Arts, Inc.* | 895 | 96,221 | ||||||
Paychex, Inc. | 1,097 | 93,311 | ||||||
KLA Corp. | 484 | 86,234 | ||||||
Workday, Inc. — Class A* | 503 | 82,718 | ||||||
Microchip Technology, Inc.1 | 732 | 76,655 | ||||||
Xilinx, Inc. | 771 | 75,381 | ||||||
Cerner Corp. | 962 | 70,601 | ||||||
Splunk, Inc.* | 464 | 69,493 | ||||||
NetEase, Inc. ADR | 223 | 68,381 | ||||||
ASML Holding N.V. — Class G | 226 | 66,882 | ||||||
ANSYS, Inc.* | 258 | 66,412 | ||||||
Synopsys, Inc.* | 460 | 64,032 | ||||||
Skyworks Solutions, Inc. | 522 | 63,099 | ||||||
Cadence Design Systems, Inc.* | 860 | 59,650 | ||||||
Western Digital Corp. | 911 | 57,821 | ||||||
Check Point Software Technologies Ltd.* | 466 | 51,707 | ||||||
Maxim Integrated Products, Inc. | 829 | 50,992 | ||||||
Citrix Systems, Inc. | 399 | 44,249 | ||||||
NetApp, Inc. | 699 | 43,513 | ||||||
Take-Two Interactive Software, Inc.* | 347 | 42,483 | ||||||
Total Technology | 11,844,349 | |||||||
Communications - 10.3% | ||||||||
Amazon.com, Inc.* | 1,191 | 2,200,777 | ||||||
Facebook, Inc. — Class A* | 5,781 | 1,186,550 | ||||||
Alphabet, Inc. — Class A* | 825 | 1,104,997 | ||||||
Alphabet, Inc. — Class C* | 825 | 1,103,042 | ||||||
Comcast Corp. — Class A | 13,910 | 625,533 | ||||||
Cisco Systems, Inc. | 12,999 | 623,432 | ||||||
Netflix, Inc.* | 1,343 | 434,555 | ||||||
Charter Communications, Inc. — Class A* | 658 | 319,183 | ||||||
Booking Holdings, Inc.* | 128 | 262,877 | ||||||
T-Mobile US, Inc.* | 2,621 | 205,539 | ||||||
Baidu, Inc. ADR* | 846 | 106,934 | ||||||
JD.com, Inc. ADR* | 2,840 | 100,053 | ||||||
Sirius XM Holdings, Inc.1 | 13,553 | 96,904 | ||||||
eBay, Inc. | 2,493 | 90,022 | ||||||
MercadoLibre, Inc.* | 152 | 86,935 | ||||||
VeriSign, Inc.* | 360 | 69,365 | ||||||
CDW Corp. | 440 | 62,850 | ||||||
Trip.com Group Ltd. ADR* | 1,602 | 53,731 | ||||||
Expedia Group, Inc. | 427 | 46,176 | ||||||
Fox Corp. — Class A | 1,086 | 40,258 | ||||||
Fox Corp. — Class B | 816 | 29,702 | ||||||
Liberty Global plc — Class C* | 1,344 | 29,292 | ||||||
Liberty Global plc — Class A* | 556 | 12,643 | ||||||
Total Communications | 8,891,350 | |||||||
Consumer, Non-cyclical - 4.3% | ||||||||
PepsiCo, Inc. | 4,273 | 583,991 | ||||||
Amgen, Inc. | 1,821 | 438,988 | ||||||
PayPal Holdings, Inc.* | 3,598 | 389,196 | ||||||
Gilead Sciences, Inc. | 3,877 | 251,927 | ||||||
Mondelez International, Inc. — Class A | 4,412 | 243,013 | ||||||
Automatic Data Processing, Inc. | 1,326 | 226,083 | ||||||
Intuitive Surgical, Inc.* | 354 | 209,267 | ||||||
Vertex Pharmaceuticals, Inc.* | 788 | 172,533 | ||||||
Biogen, Inc.* | 553 | 164,092 | ||||||
Illumina, Inc.* | 450 | 149,283 | ||||||
Regeneron Pharmaceuticals, Inc.* | 331 | 124,284 | ||||||
Kraft Heinz Co. | 3,742 | 120,230 | ||||||
Monster Beverage Corp.* | 1,647 | 104,667 | ||||||
Cintas Corp. | 317 | 85,298 | ||||||
Verisk Analytics, Inc. — Class A | 502 | 74,969 | ||||||
Alexion Pharmaceuticals, Inc.* | 677 | 73,218 | ||||||
IDEXX Laboratories, Inc.* | 263 | 68,677 | ||||||
Align Technology, Inc.* | 242 | 67,528 | ||||||
CoStar Group, Inc.* | 112 | 67,009 | ||||||
Seattle Genetics, Inc.* | 525 | 59,986 | ||||||
Incyte Corp.* | 660 | 57,631 | ||||||
BioMarin Pharmaceutical, Inc.* | 550 | 46,503 | ||||||
Total Consumer, Non-cyclical | 3,778,373 | |||||||
Consumer, Cyclical - 2.3% | ||||||||
Costco Wholesale Corp. | 1,354 | 397,968 | ||||||
Starbucks Corp. | 3,619 | 318,182 | ||||||
Tesla, Inc.*,1 | 552 | 230,918 | ||||||
Walgreens Boots Alliance, Inc. | 2,735 | 161,256 | ||||||
Marriott International, Inc. — Class A | 1,002 | 151,733 | ||||||
Ross Stores, Inc. | 1,108 | 128,993 | ||||||
O’Reilly Automotive, Inc.* | 232 | 101,676 | ||||||
Lululemon Athletica, Inc.* | 377 | 87,340 | ||||||
PACCAR, Inc. | 1,060 | 83,846 | ||||||
United Airlines Holdings, Inc.* | 775 | 68,270 | ||||||
Dollar Tree, Inc.* | 725 | 68,186 | ||||||
Fastenal Co. | 1,757 | 64,921 | ||||||
Copart, Inc.* | 711 | 64,659 | ||||||
Ulta Beauty, Inc.* | 180 | 45,565 | ||||||
American Airlines Group, Inc. | 1,342 | 38,488 | ||||||
Total Consumer, Cyclical | 2,012,001 | |||||||
30 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
NASDAQ-100® FUND |
| Shares | Value | ||||||
Utilities - 0.3% | ||||||||
Exelon Corp. | 2,978 | $ | 135,767 | |||||
Xcel Energy, Inc. | 1,643 | 104,314 | ||||||
Total Utilities | 240,081 | |||||||
Industrial - 0.2% | ||||||||
CSX Corp. | 2,397 | 173,447 | ||||||
Financial - 0.1% | ||||||||
Willis Towers Watson plc | 394 | 79,565 | ||||||
Total Common Stocks | ||||||||
(Cost $13,257,500) | 27,019,166 | |||||||
MUTUAL FUNDS† - 56.1% | ||||||||
Guggenheim Strategy Fund II2 | 1,030,115 | 25,485,051 | ||||||
Guggenheim Ultra Short Duration Fund — Institutional Class2 | 2,325,248 | 23,136,219 | ||||||
Total Mutual Funds | ||||||||
(Cost $48,849,634) | 48,621,270 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 3.6% | ||||||||
U.S. Treasury Bills | ||||||||
1.50% due 01/14/203,5 | $ | 1,464,000 | 1,463,284 | |||||
1.47% due 02/04/203,4 | 849,000 | 847,782 | ||||||
1.54% due 01/14/203,5 | 525,000 | 524,743 | ||||||
1.49% due 01/14/203,5 | 325,000 | 324,841 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $3,160,525) | 3,160,650 | |||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 2.9% | ||||||||
Federal Home Loan Bank Discount Notes | ||||||||
1.15% due 01/02/203 | 2,500,000 | 2,499,920 | ||||||
Total Federal Agency Discount Notes | ||||||||
(Cost $2,499,920) | 2,499,920 | |||||||
REPURCHASE AGREEMENTS††,6 - 6.6% | ||||||||
J.P. Morgan Securities LLC | 3,464,423 | 3,464,423 | ||||||
BofA Securities, Inc. | 1,117,090 | 1,117,090 | ||||||
Barclays Capital, Inc. | 1,117,089 | 1,117,089 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $5,698,602) | 5,698,602 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,7 - 0.2% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.47%8 | 154,749 | 154,749 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $154,749) | 154,749 | |||||||
Total Investments - 100.6% | ||||||||
(Cost $73,620,930) | $ | 87,154,357 | ||||||
Other Assets & Liabilities, net - (0.6)% | (531,148 | ) | ||||||
Total Net Assets - 100.0% | $ | 86,623,209 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||||
NASDAQ-100 Index Mini Futures Contracts | 87 | Mar 2020 | $ | 15,221,085 | $ | 552,033 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||
Barclays Bank plc | NASDAQ-100 Index | 2.10% (1 Week USD LIBOR + 0.50%) | At Maturity | 01/31/20 | 2,698 | $ | 23,564,915 | $ | 62,996 | ||||||||||
BNP Paribas | NASDAQ-100 Index | 2.45% (1 Month USD LIBOR + 0.65%) | At Maturity | 01/28/20 | 461 | 4,030,008 | (20,876 | ) | |||||||||||
Goldman Sachs International | NASDAQ-100 Index | 2.15% (1 Week USD LIBOR + 0.55%) | At Maturity | 01/28/20 | 1,933 | 16,877,655 | (50,042 | ) | |||||||||||
$ | 44,472,578 | $ | (7,922 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 31 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
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, 2019 — See Note 7. |
2 | Affiliated issuer. |
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, 2019. |
5 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2019. |
6 | Repurchase Agreements — See Note 6. |
7 | Securities lending collateral — See Note 7. |
8 | Rate indicated is the 7-day yield as of December 31, 2019. |
ADR — American Depositary Receipt | |
LIBOR — London Interbank Offered Rate | |
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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 27,019,166 | $ | — | $ | — | $ | 27,019,166 | ||||||||
Mutual Funds | 48,621,270 | — | — | 48,621,270 | ||||||||||||
U.S. Treasury Bills | — | 3,160,650 | — | 3,160,650 | ||||||||||||
Federal Agency Discount Notes | — | 2,499,920 | — | 2,499,920 | ||||||||||||
Repurchase Agreements | — | 5,698,602 | — | 5,698,602 | ||||||||||||
Securities Lending Collateral | 154,749 | — | — | 154,749 | ||||||||||||
Equity Futures Contracts** | 552,033 | — | — | 552,033 | ||||||||||||
Equity Index Swap Agreements** | — | 62,996 | — | 62,996 | ||||||||||||
Total Assets | $ | 76,347,218 | $ | 11,422,168 | $ | — | $ | 87,769,386 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Index Swap Agreements** | $ | — | $ | 70,918 | $ | — | $ | 70,918 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
32 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
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 “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, 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/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 20,292,487 | $ | 6,611,919 | $ | (1,350,000 | ) | $ | (10,253 | ) | $ | (59,102 | ) | $ | 25,485,051 | 1,030,115 | $ | 612,988 | ||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 11,972,309 | 18,096,643 | (6,900,000 | ) | (32,136 | ) | (597 | ) | 23,136,219 | 2,325,248 | 476,823 | |||||||||||||||||||||
$ | 32,264,796 | $ | 24,708,562 | $ | (8,250,000 | ) | $ | (42,389 | ) | $ | (59,699 | ) | $ | 48,621,270 | $ | 1,089,811 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 33 |
NASDAQ-100® FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $152,385 of securities loaned (cost $19,072,694) | $ | 32,834,485 | ||
Investments in affiliated issuers, at value (cost $48,849,634) | 48,621,270 | |||
Repurchase agreements, at value (cost $5,698,602) | 5,698,602 | |||
Cash | 8 | |||
Unrealized appreciation on OTC swap agreements | 62,996 | |||
Receivables: | ||||
Dividends | 84,986 | |||
Variation margin on futures contracts | 24,360 | |||
Interest | 237 | |||
Fund shares sold | 31 | |||
Securities lending income | 4 | |||
Total assets | 87,326,979 | |||
Liabilities: | ||||
Unrealized depreciation on OTC swap agreements | 70,918 | |||
Payable for: | ||||
Return of securities lending collateral | 154,749 | |||
Fund shares redeemed | 118,259 | |||
Professional fees | 109,730 | |||
Securities purchased | 78,743 | |||
Management fees | 44,401 | |||
Printing fees | 35,019 | |||
Transfer agent and administrative fees | 16,383 | |||
Investor service fees | 16,383 | |||
Portfolio accounting fees | 6,553 | |||
Swap settlement | 5,713 | |||
Trustees’ fees* | 1,259 | |||
Miscellaneous | 45,660 | |||
Total liabilities | 703,770 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 86,623,209 | ||
Net assets consist of: | ||||
Paid in capital | $ | 60,902,785 | ||
Total distributable earnings (loss) | 25,720,424 | |||
Net assets | $ | 86,623,209 | ||
Capital shares outstanding | 1,772,711 | |||
Net asset value per share | $ | 48.86 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $272) | $ | 250,435 | ||
Dividends from securities of affiliated issuers | 1,089,811 | |||
Interest | 249,968 | |||
Income from securities lending, net | 579 | |||
Total investment income | 1,590,793 | |||
Expenses: | ||||
Management fees | 566,529 | |||
Investor service fees | 188,843 | |||
Transfer agent and administrative fees | 188,843 | |||
Professional fees | 134,131 | |||
Portfolio accounting fees | 75,537 | |||
Trustees’ fees* | 18,700 | |||
Custodian fees | 14,450 | |||
Line of credit fees | 109 | |||
Miscellaneous | 142,005 | |||
Total expenses | 1,329,147 | |||
Less: | ||||
Expenses waived by Adviser | (47,280 | ) | ||
Net expenses | 1,281,867 | |||
Net investment income | 308,926 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 6,904,870 | |||
Investments in affiliated issuers | (42,389 | ) | ||
Swap agreements | 11,265,747 | |||
Futures contracts | 3,244,060 | |||
Net realized gain | 21,372,288 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (223,764 | ) | ||
Investments in affiliated issuers | (59,699 | ) | ||
Swap agreements | (240,468 | ) | ||
Futures contracts | 1,233,943 | |||
Net change in unrealized appreciation (depreciation) | 710,012 | |||
Net realized and unrealized gain | 22,082,300 | |||
Net increase in net assets resulting from operations | $ | 22,391,226 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
34 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
NASDAQ-100® FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 308,926 | $ | 93,478 | ||||
Net realized gain on investments | 21,372,288 | 8,703,206 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 710,012 | (9,641,684 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 22,391,226 | (845,000 | ) | |||||
Distributions to shareholders | (1,783,685 | ) | (3,450,545 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 168,074,241 | 288,921,222 | ||||||
Distributions reinvested | 1,783,685 | 3,450,545 | ||||||
Cost of shares redeemed | (164,457,984 | ) | (304,322,331 | ) | ||||
Net increase (decrease) from capital share transactions | 5,399,942 | (11,950,564 | ) | |||||
Net increase (decrease) in net assets | 26,007,483 | (16,246,109 | ) | |||||
Net assets: | ||||||||
Beginning of year | 60,615,726 | 76,861,835 | ||||||
End of year | $ | 86,623,209 | $ | 60,615,726 | ||||
Capital share activity: | ||||||||
Shares sold | 3,917,054 | 7,067,129 | ||||||
Shares issued from reinvestment of distributions | 39,646 | 80,451 | ||||||
Shares redeemed | (3,842,054 | ) | (7,475,603 | ) | ||||
Net increase (decrease) in shares | 114,646 | (328,023 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 35 |
NASDAQ-100® FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 36.56 | $ | 38.70 | $ | 31.89 | $ | 34.16 | $ | 33.70 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .18 | .04 | (.11 | ) | (.11 | ) | (.16 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | 13.20 | (.49 | ) | 9.73 | 1.92 | 2.90 | ||||||||||||||
Total from investment operations | 13.38 | (.45 | ) | 9.62 | 1.81 | 2.74 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.05 | ) | — | — | — | — | ||||||||||||||
Net realized gains | (1.03 | ) | (1.69 | ) | (2.81 | ) | (4.08 | ) | (2.28 | ) | ||||||||||
Total distributions | (1.08 | ) | (1.69 | ) | (2.81 | ) | (4.08 | ) | (2.28 | ) | ||||||||||
Net asset value, end of period | $ | 48.86 | $ | 36.56 | $ | 38.70 | $ | 31.89 | $ | 34.16 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 36.86 | % | (1.81 | %) | 31.12 | % | 5.98 | % | 8.24 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 86,623 | $ | 60,616 | $ | 76,862 | $ | 61,516 | $ | 98,543 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.41 | % | 0.11 | % | (0.30 | %) | (0.34 | %) | (0.47 | %) | ||||||||||
Total expensesc | 1.76 | % | 1.66 | % | 1.64 | % | 1.60 | % | 1.54 | % | ||||||||||
Net expensesd | 1.70 | % | 1.66 | % | 1.64 | % | 1.60 | % | 1.54 | % | ||||||||||
Portfolio turnover rate | 61 | % | 80 | % | 101 | % | 284 | % | 241 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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. |
36 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, with the NASDAQ-100 Index returning 39.46%, the Inverse NASDAQ-100® Strategy Fund returned -28.01%. For the one-year period ended December 31, 2019, Inverse NASDAQ-100® Strategy Fund maintained a daily correlation of over 99% to its benchmark of -100% of the daily price movement of the NASDAQ-100 Index.
The Information Technology, Communications Services, and Consumer Discretionary sectors contributed the most to the performance of the underlying index during the year. No sector detracted from the performance of the underlying index for the year.
Apple, Inc., Microsoft Corp., and Amazon.com, Inc. contributed the most to performance of the underlying index for 2019. Kraft Heinz Co., Baidu, Inc. ADR Class A, and Walgreens Boots Alliance, Inc. detracted the most from performance of the underlying index for the year.
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.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but that fee is waived by the respective investee fund. For the one-year period ended December 31, 2019, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 37 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
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 21, 2001 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 24.0% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 23.2% |
Total | 47.2% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Inverse NASDAQ-100® Strategy Fund | (28.01%) | (16.09%) | (17.95%) |
NASDAQ-100 Index | 39.46% | 16.91% | 18.07% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The NASDAQ-100 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
38 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
INVERSE NASDAQ-100® STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 47.2% | ||||||||
Guggenheim Strategy Fund II1 | 5,746 | $ | 142,166 | |||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 13,824 | 137,548 | ||||||
Total Mutual Funds | ||||||||
(Cost $279,398) | 279,714 | |||||||
Face | ||||||||
FEDERAL AGENCY NOTES†† - 8.5% | ||||||||
Farmer Mac | ||||||||
1.73% (U.S. Prime Rate - 3.02%, Rate Floor: 0.00%) due 09/01/202 | $ | 50,000 | 50,000 | |||||
Total Federal Agency Notes | ||||||||
(Cost $50,000) | 50,000 | |||||||
REPURCHASE AGREEMENTS††,3 - 54.7% | ||||||||
J.P. Morgan Securities LLC | 197,058 | 197,058 | ||||||
Barclays Capital, Inc. | 63,541 | 63,541 | ||||||
BofA Securities, Inc. | 63,540 | 63,540 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $324,139) | 324,139 | |||||||
Total Investments - 110.4% | ||||||||
(Cost $653,537) | $ | 653,853 | ||||||
Other Assets & Liabilities, net - (10.4)% | (61,611 | ) | ||||||
Total Net Assets - 100.0% | $ | 592,242 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements Sold Short†† | |||||||||||||||||||
Goldman Sachs International | NASDAQ-100 Index | (1.85)% (1 Week USD LIBOR + 0.25%) | At Maturity | 01/28/20 | 37 | $ | 324,464 | $ | 1,639 | ||||||||||
BNP Paribas | NASDAQ-100 Index | (1.95)% (1 Month USD LIBOR + 0.15%) | At Maturity | 01/28/20 | 19 | 163,101 | 847 | ||||||||||||
Barclays Bank plc | NASDAQ-100 Index | (1.95)% (1 Week USD LIBOR + 0.35%) | At Maturity | 01/31/20 | 14 | 118,762 | (318 | ) | |||||||||||
$ | 606,327 | $ | 2,168 |
† | 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, 2019. 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 | Repurchase Agreements — See Note 6. |
4 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2019. |
LIBOR — London Interbank Offered Rate | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 39 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
INVERSE NASDAQ-100® STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 279,714 | $ | — | $ | — | $ | 279,714 | ||||||||
Federal Agency Notes | — | 50,000 | — | 50,000 | ||||||||||||
Repurchase Agreements | — | 324,139 | — | 324,139 | ||||||||||||
Equity Index Swap Agreements** | — | 2,486 | — | 2,486 | ||||||||||||
Total Assets | $ | 279,714 | $ | 376,625 | $ | — | $ | 656,339 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Index Swap Agreements** | $ | — | $ | 318 | $ | — | $ | 318 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
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 “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, 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/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 1,919,490 | $ | 1,514,041 | $ | (3,290,000 | ) | $ | (2,530 | ) | $ | 1,165 | $ | 142,166 | 5,746 | $ | 14,308 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 1,924,597 | 2,882,937 | (4,670,000 | ) | (1,277 | ) | 1,291 | 137,548 | 13,824 | 13,095 | ||||||||||||||||||||||
$ | 3,844,087 | $ | 4,396,978 | $ | (7,960,000 | ) | $ | (3,807 | ) | $ | 2,456 | $ | 279,714 | $ | 27,403 |
40 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE NASDAQ-100® STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $50,000) | $ | 50,000 | ||
Investments in affiliated issuers, at value (cost $279,398) | 279,714 | |||
Repurchase agreements, at value (cost $324,139) | 324,139 | |||
Unrealized appreciation on OTC swap agreements | 2,486 | |||
Receivables: | ||||
Securities sold | 20,000 | |||
Dividends | 777 | |||
Interest | 88 | |||
Fund shares sold | 13 | |||
Total assets | 677,217 | |||
Liabilities: | ||||
Unrealized depreciation on OTC swap agreements | 318 | |||
Payable for: | ||||
Fund shares redeemed | 78,464 | |||
Professional fees | 2,521 | |||
Securities purchased | 792 | |||
Management fees | 536 | |||
Transfer agent and administrative fees | 159 | |||
Investor service fees | 159 | |||
Swap settlement | 72 | |||
Portfolio accounting fees | 64 | |||
Trustees’ fees* | 29 | |||
Miscellaneous | 1,861 | |||
Total liabilities | 84,975 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 592,242 | ||
Net assets consist of: | ||||
Paid in capital | $ | 7,571,633 | ||
Total distributable earnings (loss) | (6,979,391 | ) | ||
Net assets | $ | 592,242 | ||
Capital shares outstanding | 14,370 | |||
Net asset value per share | $ | 41.21 |
STATEMENT OF OPERATIONS\ |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 27,403 | ||
Interest | 16,662 | |||
Total investment income | 44,065 | |||
Expenses: | ||||
Management fees | 15,622 | |||
Investor service fees | 4,339 | |||
Transfer agent and administrative fees | 4,339 | |||
Professional fees | 4,348 | |||
Portfolio accounting fees | 1,736 | |||
Printing fees | 1,337 | |||
Trustees’ fees* | 592 | |||
Custodian fees | 343 | |||
Line of credit fees | 1 | |||
Miscellaneous | 591 | |||
Total expenses | 33,248 | |||
Less: | ||||
Expenses waived by Adviser | (1,332 | ) | ||
Net expenses | 31,916 | |||
Net investment income | 12,149 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 5 | |||
Investments in affiliated issuers | (3,807 | ) | ||
Swap agreements | (930,696 | ) | ||
Futures contracts | (46,301 | ) | ||
Net realized loss | (980,799 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 9 | |||
Investments in affiliated issuers | 2,456 | |||
Swap agreements | 78,591 | |||
Futures contracts | (3,438 | ) | ||
Net change in unrealized appreciation (depreciation) | 77,618 | |||
Net realized and unrealized loss | (903,181 | ) | ||
Net decrease in net assets resulting from operations | $ | (891,032 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 41 |
INVERSE NASDAQ-100® STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 12,149 | $ | 7,340 | ||||
Net realized gain (loss) on investments | (980,799 | ) | 182,528 | |||||
Net change in unrealized appreciation (depreciation) on investments | 77,618 | (83,179 | ) | |||||
Net increase (decrease) in net assets resulting from operations | (891,032 | ) | 106,689 | |||||
Distributions to shareholders | (7,340 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 20,383,557 | 37,155,764 | ||||||
Distributions reinvested | 7,340 | — | ||||||
Cost of shares redeemed | (26,715,526 | ) | (30,219,208 | ) | ||||
Net increase (decrease) from capital share transactions | (6,324,629 | ) | 6,936,556 | |||||
Net increase (decrease) in net assets | (7,223,001 | ) | 7,043,245 | |||||
Net assets: | ||||||||
Beginning of year | 7,815,243 | 771,998 | ||||||
End of year | $ | 592,242 | $ | 7,815,243 | ||||
Capital share activity: | ||||||||
Shares sold | 417,235 | 687,240 | ||||||
Shares issued from reinvestment of distributions | 162 | — | ||||||
Shares redeemed | (538,614 | ) | (564,676 | ) | ||||
Net increase (decrease) in shares | (121,217 | ) | 122,564 |
42 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE NASDAQ-100® STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 57.64 | $ | 59.28 | $ | 78.68 | $ | 86.94 | $ | 99.74 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .34 | .32 | (.11 | ) | (.18 | ) | (1.36 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | (16.47 | ) | (1.96 | )f | (19.29 | ) | (8.08 | ) | (11.44 | ) | ||||||||||
Total from investment operations | (16.13 | ) | (1.64 | ) | (19.40 | ) | (8.26 | ) | (12.80 | ) | ||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.30 | ) | — | — | — | — | ||||||||||||||
Total distributions | (.30 | ) | — | — | — | — | ||||||||||||||
Net asset value, end of period | $ | 41.21 | $ | 57.64 | $ | 59.28 | $ | 78.68 | $ | 86.94 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (28.01 | %) | (2.77 | %) | (24.66 | %) | (9.48 | %) | (12.87 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 592 | $ | 7,815 | $ | 772 | $ | 2,652 | $ | 1,527 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.70 | % | 0.58 | % | (0.17 | %) | (0.78 | %) | (1.47 | %) | ||||||||||
Total expensesc | 1.92 | % | 1.83 | % | 1.79 | % | 1.74 | % | 1.70 | % | ||||||||||
Net expensesd | 1.84 | % | 1.83 | % | 1.79 | % | 1.74 | % | 1.70 | % | ||||||||||
Portfolio turnover rate | 418 | % | 136 | % | 119 | % | 382 | % | 406 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 43 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, 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 62.51%, while the S&P 500 Index returned 31.49% over the same time period.
The sectors contributing the most to the performance of the underlying index for the period were Information Technology, Financials, and Communications Services. No sector detracted from performance of the underlying index for the year.
Apple, Inc., Microsoft Corp., and Facebook, Inc.- Class A contributed the most to performance of the underlying index for 2019. Pfizer, Inc., Occidental Petroleum Corp., and PG&E Corp. detracted the most from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes. 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.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but that fee is waived by the respective investee fund. For the one-year period ended December 31, 2019, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
44 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
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: October 1, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Ultra Short Duration Fund — Institutional Class | 28.1% |
Guggenheim Strategy Fund II | 24.4% |
Apple, Inc. | 1.2% |
Microsoft Corp. | 1.1% |
Amazon.com, Inc. | 0.7% |
Facebook, Inc. — Class A | 0.5% |
Berkshire Hathaway, Inc. — Class B | 0.4% |
JPMorgan Chase & Co. | 0.4% |
Alphabet, Inc. — Class A | 0.4% |
Alphabet, Inc. — Class C | 0.4% |
Top Ten Total | 57.6% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
S&P 500® 2x Strategy Fund | 62.51% | 18.49% | 22.58% |
S&P 500 Index | 31.49% | 11.70% | 13.56% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 45 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
S&P 500® 2x STRATEGY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 25.4% | ||||||||
Consumer, Non-cyclical - 5.6% | ||||||||
Johnson & Johnson | 1,351 | $ | 197,070 | |||||
Procter & Gamble Co. | 1,280 | 159,872 | ||||||
UnitedHealth Group, Inc. | 486 | 142,874 | ||||||
Merck & Company, Inc. | 1,307 | 118,872 | ||||||
Pfizer, Inc. | 2,841 | 111,310 | ||||||
Coca-Cola Co. | 1,980 | 109,593 | ||||||
PepsiCo, Inc. | 716 | 97,856 | ||||||
Abbott Laboratories | 907 | 78,782 | ||||||
Medtronic plc | 688 | 78,054 | ||||||
Bristol-Myers Squibb Co. | 1,204 | 77,285 | ||||||
Amgen, Inc. | 305 | 73,526 | ||||||
Philip Morris International, Inc. | 799 | 67,987 | ||||||
AbbVie, Inc. | 759 | 67,202 | ||||||
Thermo Fisher Scientific, Inc. | 206 | 66,923 | ||||||
PayPal Holdings, Inc.* | 603 | 65,227 | ||||||
Eli Lilly & Co. | 434 | 57,041 | ||||||
Danaher Corp. | 328 | 50,341 | ||||||
CVS Health Corp. | 668 | 49,626 | ||||||
Altria Group, Inc. | 959 | 47,864 | ||||||
Gilead Sciences, Inc. | 650 | 42,237 | ||||||
Mondelez International, Inc. — Class A | 739 | 40,704 | ||||||
Anthem, Inc. | 130 | 39,264 | ||||||
Cigna Corp. | 192 | 39,262 | ||||||
Automatic Data Processing, Inc. | 222 | 37,851 | ||||||
Becton Dickinson and Co. | 139 | 37,804 | ||||||
Intuitive Surgical, Inc.* | 59 | 34,878 | ||||||
Stryker Corp. | 165 | 34,640 | ||||||
S&P Global, Inc. | 125 | 34,131 | ||||||
Zoetis, Inc. | 245 | 32,426 | ||||||
Boston Scientific Corp.* | 716 | 32,378 | ||||||
Allergan plc | 169 | 32,308 | ||||||
Colgate-Palmolive Co. | 440 | 30,290 | ||||||
Vertex Pharmaceuticals, Inc.* | 132 | 28,901 | ||||||
Global Payments, Inc. | 154 | 28,114 | ||||||
Biogen, Inc.* | 93 | 27,596 | ||||||
Edwards Lifesciences Corp.* | 107 | 24,962 | ||||||
Humana, Inc. | 68 | 24,923 | ||||||
Illumina, Inc.* | 75 | 24,881 | ||||||
Kimberly-Clark Corp. | 176 | 24,209 | ||||||
Estee Lauder Companies, Inc. — Class A | 114 | 23,545 | ||||||
Sysco Corp. | 262 | 22,411 | ||||||
Baxter International, Inc. | 262 | 21,908 | ||||||
HCA Healthcare, Inc. | 136 | 20,102 | ||||||
Moody’s Corp. | 83 | 19,705 | ||||||
General Mills, Inc. | �� | 310 | 16,604 | |||||
Constellation Brands, Inc. — Class A | 86 | 16,319 | ||||||
Zimmer Biomet Holdings, Inc. | 106 | 15,866 | ||||||
IHS Markit Ltd.* | 206 | 15,522 | ||||||
Regeneron Pharmaceuticals, Inc.* | 41 | 15,395 | ||||||
IQVIA Holdings, Inc.* | 93 | 14,369 | ||||||
Tyson Foods, Inc. — Class A | 152 | 13,838 | ||||||
Centene Corp.* | 212 | 13,328 | ||||||
Archer-Daniels-Midland Co. | 286 | 13,256 | ||||||
FleetCor Technologies, Inc.* | 45 | 12,947 | ||||||
McKesson Corp. | 93 | 12,864 | ||||||
Verisk Analytics, Inc. — Class A | 84 | 12,545 | ||||||
Monster Beverage Corp.* | 196 | 12,456 | ||||||
Alexion Pharmaceuticals, Inc.* | 114 | 12,329 | ||||||
Kroger Co. | 412 | 11,944 | ||||||
Cintas Corp. | 43 | 11,570 | ||||||
IDEXX Laboratories, Inc.* | 44 | 11,490 | ||||||
ResMed, Inc. | 74 | 11,468 | ||||||
Corteva, Inc. | 384 | 11,351 | ||||||
Hershey Co. | 76 | 11,170 | ||||||
McCormick & Company, Inc. | 63 | 10,693 | ||||||
Align Technology, Inc.* | 37 | 10,325 | ||||||
Kraft Heinz Co. | 320 | 10,282 | ||||||
Clorox Co. | 64 | 9,826 | ||||||
Teleflex, Inc. | 24 | 9,035 | ||||||
Church & Dwight Company, Inc. | 126 | 8,863 | ||||||
Kellogg Co. | 128 | 8,852 | ||||||
Equifax, Inc. | 62 | 8,687 | ||||||
WellCare Health Plans, Inc.* | 26 | 8,586 | ||||||
Conagra Brands, Inc. | 250 | 8,560 | ||||||
Laboratory Corporation of America Holdings* | 50 | 8,459 | ||||||
Incyte Corp.* | 92 | 8,033 | ||||||
Cooper Companies, Inc. | 25 | 8,032 | ||||||
Cardinal Health, Inc. | 150 | 7,587 | ||||||
Quest Diagnostics, Inc. | 69 | 7,369 | ||||||
Hologic, Inc.* | 138 | 7,205 | ||||||
MarketAxess Holdings, Inc. | 19 | 7,203 | ||||||
Gartner, Inc.* | 46 | 7,089 | ||||||
STERIS plc | 44 | 6,706 | ||||||
Varian Medical Systems, Inc.* | 47 | 6,674 | ||||||
AmerisourceBergen Corp. — Class A | 77 | 6,546 | ||||||
United Rentals, Inc.* | 39 | 6,504 | ||||||
Lamb Weston Holdings, Inc. | 75 | 6,452 | ||||||
Dentsply Sirona, Inc. | 114 | 6,451 | ||||||
Hormel Foods Corp. | 143 | 6,451 | ||||||
Brown-Forman Corp. — Class B | 94 | 6,354 | ||||||
JM Smucker Co. | 59 | 6,144 | ||||||
Universal Health Services, Inc. — Class B | 41 | 5,882 | ||||||
Avery Dennison Corp. | 43 | 5,625 | ||||||
Mylan N.V.* | 265 | 5,326 | ||||||
Molson Coors Beverage Co. — Class B | 96 | 5,174 | ||||||
Henry Schein, Inc.* | 75 | 5,004 | ||||||
Campbell Soup Co. | 87 | 4,300 | ||||||
ABIOMED, Inc.* | 23 | 3,924 | ||||||
Robert Half International, Inc. | 60 | 3,789 | ||||||
Nielsen Holdings plc | 183 | 3,715 | ||||||
Perrigo Company plc | 70 | 3,616 | ||||||
DaVita, Inc.* | 46 | 3,451 | ||||||
Quanta Services, Inc. | 73 | 2,972 | ||||||
Rollins, Inc. | 72 | 2,388 | ||||||
H&R Block, Inc. | 100 | 2,348 | ||||||
Coty, Inc. — Class A | 152 | 1,710 | ||||||
Total Consumer, Non-cyclical | 3,015,558 | |||||||
46 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
S&P 500® 2x STRATEGY FUND |
| Shares | Value | ||||||
Technology - 4.8% | ||||||||
Apple, Inc. | 2,144 | $ | 629,586 | |||||
Microsoft Corp. | 3,917 | 617,711 | ||||||
Intel Corp. | 2,233 | 133,645 | ||||||
Adobe, Inc.* | 249 | 82,123 | ||||||
salesforce.com, Inc.* | 455 | 74,001 | ||||||
NVIDIA Corp. | 314 | 73,884 | ||||||
Accenture plc — Class A | 326 | 68,646 | ||||||
Broadcom, Inc. | 204 | 64,468 | ||||||
Texas Instruments, Inc. | 480 | 61,579 | ||||||
International Business Machines Corp. | 455 | 60,988 | ||||||
Oracle Corp. | 1,112 | 58,914 | ||||||
QUALCOMM, Inc. | 586 | 51,703 | ||||||
Fidelity National Information Services, Inc. | 316 | 43,952 | ||||||
Intuit, Inc. | 134 | 35,099 | ||||||
Fiserv, Inc.* | 293 | 33,880 | ||||||
Micron Technology, Inc.* | 568 | 30,547 | ||||||
Applied Materials, Inc. | 474 | 28,933 | ||||||
ServiceNow, Inc.* | 97 | 27,385 | ||||||
Advanced Micro Devices, Inc.* | 572 | 26,232 | ||||||
Activision Blizzard, Inc. | 394 | 23,411 | ||||||
Analog Devices, Inc. | 189 | 22,461 | ||||||
Lam Research Corp. | 74 | 21,638 | ||||||
Autodesk, Inc.* | 113 | 20,731 | ||||||
Cognizant Technology Solutions Corp. — Class A | 281 | 17,428 | ||||||
Electronic Arts, Inc.* | 150 | 16,126 | ||||||
HP, Inc. | 761 | 15,639 | ||||||
KLA Corp. | 81 | 14,432 | ||||||
Paychex, Inc. | 164 | 13,950 | ||||||
Microchip Technology, Inc. | 123 | 12,880 | ||||||
Xilinx, Inc. | 129 | 12,612 | ||||||
Cerner Corp. | 161 | 11,816 | ||||||
ANSYS, Inc.* | 44 | 11,326 | ||||||
MSCI, Inc. — Class A | 43 | 11,102 | ||||||
Synopsys, Inc.* | 77 | 10,718 | ||||||
Hewlett Packard Enterprise Co. | 664 | 10,531 | ||||||
Skyworks Solutions, Inc. | 87 | 10,516 | ||||||
Cadence Design Systems, Inc.* | 144 | 9,988 | ||||||
Western Digital Corp. | 153 | 9,711 | ||||||
Maxim Integrated Products, Inc. | 139 | 8,550 | ||||||
Fortinet, Inc.* | 73 | 7,793 | ||||||
Broadridge Financial Solutions, Inc. | 59 | 7,289 | ||||||
NetApp, Inc. | 117 | 7,283 | ||||||
Akamai Technologies, Inc.* | 83 | 7,169 | ||||||
Zebra Technologies Corp. — Class A* | 28 | 7,152 | ||||||
Take-Two Interactive Software, Inc.* | 58 | 7,101 | ||||||
Seagate Technology plc | 119 | 7,080 | ||||||
Citrix Systems, Inc. | 63 | 6,987 | ||||||
Qorvo, Inc.* | 60 | 6,974 | ||||||
Leidos Holdings, Inc. | 68 | 6,657 | ||||||
Jack Henry & Associates, Inc. | 40 | 5,827 | ||||||
DXC Technology Co. | 131 | 4,924 | ||||||
Xerox Holdings Corp. | 95 | 3,503 | ||||||
IPG Photonics Corp.* | 18 | 2,609 | ||||||
Total Technology | 2,577,190 | |||||||
Financial - 4.5% | ||||||||
Berkshire Hathaway, Inc. — Class B* | 1,004 | 227,406 | ||||||
JPMorgan Chase & Co. | 1,610 | 224,434 | ||||||
Visa, Inc. — Class A | 879 | 165,164 | ||||||
Bank of America Corp. | 4,156 | 146,374 | ||||||
Mastercard, Inc. — Class A | 456 | 136,157 | ||||||
Wells Fargo & Co. | 1,976 | 106,309 | ||||||
Citigroup, Inc. | 1,121 | 89,557 | ||||||
American Tower Corp. — Class A REIT | 227 | 52,169 | ||||||
U.S. Bancorp | 730 | 43,282 | ||||||
American Express Co. | 344 | 42,825 | ||||||
Truist Financial Corp. | 689 | 38,804 | ||||||
Goldman Sachs Group, Inc. | 164 | 37,709 | ||||||
CME Group, Inc. — Class A | 184 | 36,932 | ||||||
Chubb Ltd. | 233 | 36,269 | ||||||
PNC Financial Services Group, Inc. | 225 | 35,917 | ||||||
Morgan Stanley | 632 | 32,308 | ||||||
BlackRock, Inc. — Class A | 61 | 30,665 | ||||||
Crown Castle International Corp. REIT | 213 | 30,278 | ||||||
Prologis, Inc. REIT | 324 | 28,881 | ||||||
Marsh & McLennan Companies, Inc. | 259 | 28,855 | ||||||
Charles Schwab Corp. | 587 | 27,918 | ||||||
Intercontinental Exchange, Inc. | 286 | 26,469 | ||||||
Equinix, Inc. REIT | 44 | 25,683 | ||||||
Aon plc | 120 | 24,995 | ||||||
Capital One Financial Corp. | 239 | 24,595 | ||||||
Simon Property Group, Inc. REIT | 158 | 23,536 | ||||||
American International Group, Inc. | 447 | 22,945 | ||||||
Progressive Corp. | 300 | 21,717 | ||||||
Bank of New York Mellon Corp. | 431 | 21,692 | ||||||
MetLife, Inc. | 401 | 20,439 | ||||||
Aflac, Inc. | 377 | 19,943 | ||||||
Prudential Financial, Inc. | 206 | 19,310 | ||||||
Allstate Corp. | 166 | 18,667 | ||||||
Travelers Companies, Inc. | 133 | 18,214 | ||||||
Welltower, Inc. REIT | 208 | 17,010 | ||||||
Public Storage REIT | 77 | 16,398 | ||||||
AvalonBay Communities, Inc. REIT | 72 | 15,098 | ||||||
State Street Corp. | 187 | 14,792 | ||||||
T. Rowe Price Group, Inc. | 120 | 14,621 | ||||||
Equity Residential REIT | 179 | 14,485 | ||||||
SBA Communications Corp. REIT | 58 | 13,978 | ||||||
Discover Financial Services | 161 | 13,656 | ||||||
Willis Towers Watson plc | 66 | 13,328 | ||||||
Digital Realty Trust, Inc. REIT | 107 | 12,812 | ||||||
Realty Income Corp. REIT | 167 | 12,296 | ||||||
Northern Trust Corp. | 109 | 11,580 | ||||||
M&T Bank Corp. | 68 | 11,543 | ||||||
Weyerhaeuser Co. REIT | 382 | 11,537 | ||||||
Hartford Financial Services Group, Inc. | 185 | 11,242 | ||||||
Fifth Third Bancorp | 364 | 11,189 | ||||||
Ventas, Inc. REIT | 191 | 11,028 | ||||||
Synchrony Financial | 305 | 10,983 | ||||||
Ameriprise Financial, Inc. | 65 | 10,828 | ||||||
CBRE Group, Inc. — Class A* | 172 | 10,542 | ||||||
KeyCorp | 506 | 10,241 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 47 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
S&P 500® 2x STRATEGY FUND |
| Shares | Value | ||||||
Essex Property Trust, Inc. REIT | 34 | $ | 10,229 | |||||
First Republic Bank | 87 | 10,218 | ||||||
Boston Properties, Inc. REIT | 74 | 10,202 | ||||||
Alexandria Real Estate Equities, Inc. REIT | 59 | 9,533 | ||||||
Arthur J Gallagher & Co. | 96 | 9,142 | ||||||
Citizens Financial Group, Inc. | 223 | 9,056 | ||||||
Healthpeak Properties, Inc. REIT | 254 | 8,755 | ||||||
Regions Financial Corp. | 495 | 8,494 | ||||||
Cincinnati Financial Corp. | 78 | 8,202 | ||||||
Huntington Bancshares, Inc. | 530 | 7,992 | ||||||
Mid-America Apartment Communities, Inc. REIT | 59 | 7,780 | ||||||
Principal Financial Group, Inc. | 133 | 7,315 | ||||||
UDR, Inc. REIT | 150 | 7,005 | ||||||
Extra Space Storage, Inc. REIT | 66 | 6,971 | ||||||
Loews Corp. | 131 | 6,876 | ||||||
Cboe Global Markets, Inc. | 57 | 6,840 | ||||||
Host Hotels & Resorts, Inc. REIT | 368 | 6,826 | ||||||
Duke Realty Corp. REIT | 189 | 6,553 | ||||||
SVB Financial Group* | 26 | 6,527 | ||||||
Nasdaq, Inc. | 59 | 6,319 | ||||||
Lincoln National Corp. | 102 | 6,019 | ||||||
Everest Re Group Ltd. | 21 | 5,814 | ||||||
Western Union Co. | 215 | 5,758 | ||||||
Raymond James Financial, Inc. | 63 | 5,636 | ||||||
Regency Centers Corp. REIT | 86 | 5,426 | ||||||
Vornado Realty Trust REIT | 81 | 5,387 | ||||||
Globe Life, Inc. | 51 | 5,368 | ||||||
Comerica, Inc. | 74 | 5,310 | ||||||
E*TRADE Financial Corp. | 116 | 5,263 | ||||||
WR Berkley Corp. | 74 | 5,113 | ||||||
Iron Mountain, Inc. REIT | 147 | 4,685 | ||||||
Federal Realty Investment Trust REIT | 36 | 4,634 | ||||||
Zions Bancorp North America | 88 | 4,569 | ||||||
Kimco Realty Corp. REIT | 217 | 4,494 | ||||||
Assurant, Inc. | 31 | 4,064 | ||||||
Apartment Investment & Management Co. — Class A REIT | 76 | 3,925 | ||||||
SL Green Realty Corp. REIT | 42 | 3,859 | ||||||
People’s United Financial, Inc. | 228 | 3,853 | ||||||
Franklin Resources, Inc. | 143 | 3,715 | ||||||
Invesco Ltd. | 191 | 3,434 | ||||||
Unum Group | 106 | 3,091 | ||||||
Alliance Data Systems Corp. | 21 | 2,356 | ||||||
Total Financial | 2,418,213 | |||||||
Communications - 3.7% | ||||||||
Amazon.com, Inc.* | 214 | 395,438 | ||||||
Facebook, Inc. — Class A* | 1,236 | 253,689 | ||||||
Alphabet, Inc. — Class A* | 154 | 206,266 | ||||||
Alphabet, Inc. — Class C* | 153 | 204,564 | ||||||
AT&T, Inc. | 3,750 | 146,550 | ||||||
Walt Disney Co. | 925 | 133,783 | ||||||
Verizon Communications, Inc. | 2,123 | 130,352 | ||||||
Comcast Corp. — Class A | 2,331 | 104,825 | ||||||
Cisco Systems, Inc. | 2,178 | 104,457 | ||||||
Netflix, Inc.* | 225 | 72,803 | ||||||
Booking Holdings, Inc.* | 21 | 43,129 | ||||||
Charter Communications, Inc. — Class A* | 80 | 38,806 | ||||||
eBay, Inc. | 393 | 14,191 | ||||||
Motorola Solutions, Inc. | 88 | 14,180 | ||||||
Twitter, Inc.* | 399 | 12,788 | ||||||
T-Mobile US, Inc.* | 163 | 12,783 | ||||||
ViacomCBS, Inc. — Class B | 277 | 11,626 | ||||||
Corning, Inc. | 395 | 11,499 | ||||||
CDW Corp. | 74 | 10,570 | ||||||
VeriSign, Inc.* | 53 | 10,212 | ||||||
Omnicom Group, Inc. | 112 | 9,074 | ||||||
Expedia Group, Inc. | 72 | 7,786 | ||||||
NortonLifeLock, Inc. | 294 | 7,503 | ||||||
Fox Corp. — Class A | 182 | 6,747 | ||||||
CenturyLink, Inc. | 504 | 6,658 | ||||||
Arista Networks, Inc.* | 28 | 5,695 | ||||||
Discovery, Inc. — Class C* | 172 | 5,244 | ||||||
DISH Network Corp. — Class A* | 131 | 4,646 | ||||||
Interpublic Group of Companies, Inc. | 199 | 4,597 | ||||||
F5 Networks, Inc.* | 31 | 4,329 | ||||||
Juniper Networks, Inc. | 172 | 4,236 | ||||||
Fox Corp. — Class B | 83 | 3,021 | ||||||
News Corp. — Class A | 199 | 2,814 | ||||||
Discovery, Inc. — Class A*,1 | 81 | 2,652 | ||||||
News Corp. — Class B | 63 | 914 | ||||||
Total Communications | 2,008,427 | |||||||
Industrial - 2.2% | ||||||||
Boeing Co. | 274 | 89,258 | ||||||
Honeywell International, Inc. | 367 | 64,959 | ||||||
Union Pacific Corp. | 356 | 64,361 | ||||||
United Technologies Corp. | 417 | 62,450 | ||||||
3M Co. | 295 | 52,044 | ||||||
General Electric Co. | 4,484 | 50,041 | ||||||
Lockheed Martin Corp. | 127 | 49,451 | ||||||
United Parcel Service, Inc. — Class B | 360 | 42,141 | ||||||
Caterpillar, Inc. | 284 | 41,941 | ||||||
Raytheon Co. | 143 | 31,423 | ||||||
CSX Corp. | 399 | 28,872 | ||||||
Deere & Co. | 162 | 28,068 | ||||||
Northrop Grumman Corp. | 80 | 27,518 | ||||||
Illinois Tool Works, Inc. | 150 | 26,945 | ||||||
Norfolk Southern Corp. | 134 | 26,013 | ||||||
Emerson Electric Co. | 313 | 23,869 | ||||||
Waste Management, Inc. | 200 | 22,792 | ||||||
L3Harris Technologies, Inc. | 113 | 22,359 | ||||||
General Dynamics Corp. | 120 | 21,162 | ||||||
Eaton Corporation plc | 212 | 20,081 | ||||||
Roper Technologies, Inc. | 53 | 18,774 | ||||||
FedEx Corp. | 123 | 18,599 | ||||||
TE Connectivity Ltd. | 172 | 16,485 | ||||||
Amphenol Corp. — Class A | 152 | 16,451 | ||||||
Ingersoll-Rand plc | 123 | 16,349 | ||||||
Johnson Controls International plc | 396 | 16,121 | ||||||
TransDigm Group, Inc. | 26 | 14,560 | ||||||
Parker-Hannifin Corp. | 66 | 13,584 | ||||||
Agilent Technologies, Inc. | 159 | 13,564 |
48 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
S&P 500® 2x STRATEGY FUND |
| Shares | Value | ||||||
Stanley Black & Decker, Inc. | 78 | $ | 12,928 | |||||
Rockwell Automation, Inc. | 59 | 11,958 | ||||||
AMETEK, Inc. | 117 | 11,670 | ||||||
Fortive Corp. | 152 | 11,611 | ||||||
Ball Corp. | 168 | 10,865 | ||||||
Mettler-Toledo International, Inc.* | 13 | 10,313 | ||||||
Keysight Technologies, Inc.* | 96 | 9,853 | ||||||
Vulcan Materials Co. | 68 | 9,791 | ||||||
Republic Services, Inc. — Class A | 108 | 9,680 | ||||||
Amcor plc | 832 | 9,019 | ||||||
Martin Marietta Materials, Inc. | 32 | 8,949 | ||||||
Dover Corp. | 75 | 8,644 | ||||||
Kansas City Southern | 51 | 7,811 | ||||||
Waters Corp.* | 33 | 7,710 | ||||||
Xylem, Inc. | 92 | 7,249 | ||||||
Westinghouse Air Brake Technologies Corp. | 93 | 7,235 | ||||||
Garmin Ltd. | 74 | 7,219 | ||||||
Masco Corp. | 146 | 7,007 | ||||||
Expeditors International of Washington, Inc. | 87 | 6,788 | ||||||
IDEX Corp. | 39 | 6,708 | ||||||
Jacobs Engineering Group, Inc. | 70 | 6,288 | ||||||
Old Dominion Freight Line, Inc. | 33 | 6,263 | ||||||
Arconic, Inc. | 199 | 6,123 | ||||||
Allegion plc | 48 | 5,978 | ||||||
Westrock Co. | 132 | 5,664 | ||||||
PerkinElmer, Inc. | 57 | 5,535 | ||||||
Packaging Corporation of America | 49 | 5,487 | ||||||
CH Robinson Worldwide, Inc. | 69 | 5,396 | ||||||
Huntington Ingalls Industries, Inc. | 21 | 5,268 | ||||||
Textron, Inc. | 117 | 5,218 | ||||||
J.B. Hunt Transport Services, Inc. | 44 | 5,138 | ||||||
Snap-on, Inc. | 28 | 4,743 | ||||||
Fortune Brands Home & Security, Inc. | 71 | 4,639 | ||||||
Pentair plc | 86 | 3,945 | ||||||
FLIR Systems, Inc. | 69 | 3,593 | ||||||
AO Smith Corp. | 70 | 3,335 | ||||||
Flowserve Corp. | 67 | 3,335 | ||||||
Sealed Air Corp. | 79 | 3,147 | ||||||
Total Industrial | 1,212,338 | |||||||
Consumer, Cyclical - 2.1% | ||||||||
Home Depot, Inc. | 560 | 122,293 | ||||||
Walmart, Inc. | 728 | 86,516 | ||||||
McDonald’s Corp. | 387 | 76,475 | ||||||
Costco Wholesale Corp. | 227 | 66,720 | ||||||
NIKE, Inc. — Class B | 640 | 64,838 | ||||||
Starbucks Corp. | 606 | 53,280 | ||||||
Lowe’s Companies, Inc. | 394 | 47,185 | ||||||
TJX Companies, Inc. | 623 | 38,040 | ||||||
Target Corp. | 260 | 33,335 | ||||||
General Motors Co. | 646 | 23,643 | ||||||
Walgreens Boots Alliance, Inc. | 385 | 22,700 | ||||||
Ross Stores, Inc. | 186 | 21,654 | ||||||
Marriott International, Inc. — Class A | 139 | 21,049 | ||||||
Dollar General Corp. | 131 | 20,433 | ||||||
Ford Motor Co. | 1,999 | 18,591 | ||||||
Delta Air Lines, Inc. | 296 | 17,310 | ||||||
O’Reilly Automotive, Inc.* | 39 | 17,092 | ||||||
VF Corp. | 168 | 16,743 | ||||||
Hilton Worldwide Holdings, Inc. | 145 | 16,082 | ||||||
Yum! Brands, Inc. | 155 | 15,613 | ||||||
AutoZone, Inc.* | 12 | 14,296 | ||||||
Cummins, Inc. | 79 | 14,138 | ||||||
PACCAR, Inc. | 178 | 14,080 | ||||||
Southwest Airlines Co. | 243 | 13,117 | ||||||
Aptiv plc | 131 | 12,441 | ||||||
Las Vegas Sands Corp. | 174 | 12,013 | ||||||
Royal Caribbean Cruises Ltd. | 88 | 11,749 | ||||||
Dollar Tree, Inc.* | 122 | 11,474 | ||||||
Chipotle Mexican Grill, Inc. — Class A* | 13 | 10,882 | ||||||
Fastenal Co. | 294 | 10,863 | ||||||
Carnival Corp. | 206 | 10,471 | ||||||
Best Buy Company, Inc. | 117 | 10,273 | ||||||
United Airlines Holdings, Inc.* | 112 | 9,866 | ||||||
Copart, Inc.* | 105 | 9,549 | ||||||
DR Horton, Inc. | 172 | 9,073 | ||||||
MGM Resorts International | 264 | 8,783 | ||||||
Lennar Corp. — Class A | 144 | 8,033 | ||||||
Genuine Parts Co. | 75 | 7,967 | ||||||
NVR, Inc.* | 2 | 7,617 | ||||||
WW Grainger, Inc. | 22 | 7,447 | ||||||
CarMax, Inc.* | 84 | 7,364 | ||||||
Tiffany & Co. | 55 | 7,351 | ||||||
Ulta Beauty, Inc.* | 29 | 7,341 | ||||||
Wynn Resorts Ltd. | 50 | 6,943 | ||||||
Darden Restaurants, Inc. | 63 | 6,868 | ||||||
Hasbro, Inc. | 65 | 6,865 | ||||||
Norwegian Cruise Line Holdings Ltd.* | 109 | 6,367 | ||||||
Advance Auto Parts, Inc. | 36 | 5,766 | ||||||
American Airlines Group, Inc. | 200 | 5,736 | ||||||
Tractor Supply Co. | 61 | 5,700 | ||||||
LKQ Corp.* | 157 | 5,605 | ||||||
Live Nation Entertainment, Inc.* | 72 | 5,146 | ||||||
PulteGroup, Inc. | 131 | 5,083 | ||||||
Whirlpool Corp. | 32 | 4,721 | ||||||
BorgWarner, Inc. | 106 | 4,598 | ||||||
Alaska Air Group, Inc. | 63 | 4,269 | ||||||
Mohawk Industries, Inc.* | 31 | 4,228 | ||||||
Kohl’s Corp. | 80 | 4,076 | ||||||
PVH Corp. | 38 | 3,996 | ||||||
Tapestry, Inc. | 142 | 3,830 | ||||||
Newell Brands, Inc. | 196 | 3,767 | ||||||
Leggett & Platt, Inc. | 68 | 3,456 | ||||||
Ralph Lauren Corp. — Class A | 26 | 3,048 | ||||||
Capri Holdings Ltd.* | 78 | 2,975 | ||||||
Harley-Davidson, Inc. | 79 | 2,938 | ||||||
Hanesbrands, Inc. | 186 | 2,762 | ||||||
Macy’s, Inc. | 159 | 2,703 | ||||||
Nordstrom, Inc. | 55 | 2,251 | ||||||
L Brands, Inc. | 119 | 2,156 | ||||||
Under Armour, Inc. — Class A* | 97 | 2,095 | ||||||
Gap, Inc. | 109 | 1,927 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 49 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
S&P 500® 2x STRATEGY FUND |
| Shares | Value | ||||||
Under Armour, Inc. — Class C* | 100 | $ | 1,918 | |||||
Total Consumer, Cyclical | 1,157,573 | |||||||
Energy - 1.1% | ||||||||
Exxon Mobil Corp. | 2,172 | 151,562 | ||||||
Chevron Corp. | 971 | 117,015 | ||||||
ConocoPhillips | 563 | 36,612 | ||||||
Schlumberger Ltd. | 711 | 28,582 | ||||||
Phillips 66 | 228 | 25,402 | ||||||
EOG Resources, Inc. | 299 | 25,044 | ||||||
Kinder Morgan, Inc. | 1,000 | 21,170 | ||||||
Marathon Petroleum Corp. | 333 | 20,063 | ||||||
Valero Energy Corp. | 211 | 19,760 | ||||||
Occidental Petroleum Corp. | 459 | 18,915 | ||||||
ONEOK, Inc. | 212 | 16,042 | ||||||
Williams Companies, Inc. | 622 | 14,754 | ||||||
Pioneer Natural Resources Co. | 85 | 12,866 | ||||||
Halliburton Co. | 451 | 11,036 | ||||||
Concho Resources, Inc. | 103 | 9,020 | ||||||
Hess Corp. | 133 | 8,886 | ||||||
Baker Hughes Co. | 334 | 8,561 | ||||||
Diamondback Energy, Inc. | 83 | 7,707 | ||||||
Noble Energy, Inc. | 246 | 6,111 | ||||||
Marathon Oil Corp. | 411 | 5,581 | ||||||
Devon Energy Corp. | 199 | 5,168 | ||||||
National Oilwell Varco, Inc. | 198 | 4,960 | ||||||
Apache Corp. | 193 | 4,939 | ||||||
TechnipFMC plc | 216 | 4,631 | ||||||
HollyFrontier Corp. | 76 | 3,854 | ||||||
Cabot Oil & Gas Corp. — Class A | 209 | 3,639 | ||||||
Cimarex Energy Co. | 52 | 2,730 | ||||||
Helmerich & Payne, Inc. | 56 | 2,544 | ||||||
Total Energy | 597,154 | |||||||
Utilities - 0.8% | ||||||||
NextEra Energy, Inc. | 251 | 60,782 | ||||||
Dominion Energy, Inc. | 423 | 35,033 | ||||||
Southern Co. | 538 | 34,271 | ||||||
Duke Energy Corp. | 374 | 34,112 | ||||||
American Electric Power Company, Inc. | 254 | 24,005 | ||||||
Exelon Corp. | 499 | 22,749 | ||||||
Sempra Energy | 145 | 21,965 | ||||||
Xcel Energy, Inc. | 269 | 17,079 | ||||||
Consolidated Edison, Inc. | 171 | 15,470 | ||||||
Public Service Enterprise Group, Inc. | 260 | 15,353 | ||||||
WEC Energy Group, Inc. | 162 | 14,941 | ||||||
Eversource Energy | 166 | 14,122 | ||||||
Edison International | 184 | 13,875 | ||||||
FirstEnergy Corp. | 277 | 13,462 | ||||||
PPL Corp. | 371 | 13,311 | ||||||
DTE Energy Co. | 99 | 12,857 | ||||||
Entergy Corp. | 102 | 12,220 | ||||||
American Water Works Company, Inc. | 93 | 11,425 | ||||||
Ameren Corp. | 126 | 9,677 | ||||||
CMS Energy Corp. | 146 | 9,175 | ||||||
Evergy, Inc. | 117 | 7,615 | ||||||
CenterPoint Energy, Inc. | 258 | 7,036 | ||||||
Atmos Energy Corp. | 61 | 6,824 | ||||||
AES Corp. | 341 | 6,786 | ||||||
Alliant Energy Corp. | 123 | 6,731 | ||||||
NiSource, Inc. | 192 | 5,345 | ||||||
Pinnacle West Capital Corp. | 58 | 5,216 | ||||||
NRG Energy, Inc. | 129 | 5,128 | ||||||
Total Utilities | 456,565 | |||||||
Basic Materials - 0.6% | ||||||||
Linde plc | 276 | 58,760 | ||||||
Air Products & Chemicals, Inc. | 113 | 26,554 | ||||||
Ecolab, Inc. | 129 | 24,896 | ||||||
Sherwin-Williams Co. | 42 | 24,509 | ||||||
DuPont de Nemours, Inc. | 380 | 24,396 | ||||||
Dow, Inc. | 381 | 20,852 | ||||||
Newmont Goldcorp Corp. | 421 | 18,293 | ||||||
PPG Industries, Inc. | 121 | 16,152 | ||||||
LyondellBasell Industries N.V. — Class A | 132 | 12,471 | ||||||
Freeport-McMoRan, Inc. | 745 | 9,774 | ||||||
International Paper Co. | 201 | 9,256 | ||||||
Nucor Corp. | 156 | 8,780 | ||||||
Celanese Corp. — Class A | 62 | 7,634 | ||||||
International Flavors & Fragrances, Inc.1 | 55 | 7,096 | ||||||
FMC Corp. | 67 | 6,688 | ||||||
Eastman Chemical Co. | 70 | 5,548 | ||||||
CF Industries Holdings, Inc. | 112 | 5,347 | ||||||
Albemarle Corp. | 54 | 3,944 | ||||||
Mosaic Co. | 180 | 3,895 | ||||||
Total Basic Materials | 294,845 | |||||||
Total Common Stocks | ||||||||
(Cost $13,153,853) | 13,737,863 | |||||||
MUTUAL FUNDS† - 52.5% | ||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class2 | 1,528,925 | 15,212,806 | ||||||
Guggenheim Strategy Fund II2 | 533,995 | 13,211,039 | ||||||
Total Mutual Funds | ||||||||
(Cost $28,465,973) | 28,423,845 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 4.9% | ||||||||
U.S. Treasury Bills | ||||||||
1.50% due 01/14/203,5 | $ | 1,346,000 | 1,345,341 | |||||
1.47% due 02/04/203,4 | 1,029,000 | 1,027,524 | ||||||
1.54% due 01/14/203,5 | 300,000 | 299,853 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $2,672,634) | 2,672,718 | |||||||
FEDERAL AGENCY NOTES†† - 1.8% | ||||||||
Federal Farm Credit Bank | ||||||||
1.90% (U.S. Prime Rate - 2.85%, Rate Floor: 0.00%) due 08/30/226 | 1,000,000 | 999,479 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $1,000,000) | 999,479 |
50 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
S&P 500® 2x STRATEGY FUND |
| Face | Value | ||||||
REPURCHASE AGREEMENTS††,7 - 18.6% | ||||||||
J.P. Morgan Securities LLC | $ | 6,143,668 | $ | 6,143,668 | ||||
Barclays Capital, Inc. | 1,981,001 | 1,981,001 | ||||||
BofA Securities, Inc. | 1,981,001 | 1,981,001 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $10,105,670) | 10,105,670 | |||||||
| Shares |
| ||||||
SECURITIES LENDING COLLATERAL†,8 - 0.0% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.47%9 | 1,961 | 1,961 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $1,961) | 1,961 | |||||||
Total Investments - 103.2% | ||||||||
(Cost $55,400,091) | $ | 55,941,536 | ||||||
Other Assets & Liabilities, net - (3.2)% | (1,745,779 | ) | ||||||
Total Net Assets - 100.0% | $ | 54,195,757 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||||
S&P 500 Index Mini Futures Contracts | 117 | Mar 2020 | $ | 18,892,575 | $ | 436,792 |
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 | 2.05% (1 Week USD LIBOR + 0.45%) | At Maturity | 01/31/20 | 5,024 | $ | 16,231,098 | $ | 47,676 | ||||||||||
BNP Paribas | S&P 500 Index | 2.35% (1 Month USD LIBOR + 0.55%) | At Maturity | 01/28/20 | 1,585 | 5,119,424 | (14,469 | ) | |||||||||||
Goldman Sachs International | S&P 500 Index | 2.05% (1 Week USD LIBOR + 0.45%) | At Maturity | 01/28/20 | 17,320 | 55,955,871 | (140,788 | ) | |||||||||||
$ | 77,306,393 | $ | (107,581 | ) |
* | 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, 2019 — See Note 7. |
2 | Affiliated issuer. |
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, 2019. |
5 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2019. |
6 | Variable rate security. Rate indicated is the rate effective at December 31, 2019. 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. |
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, 2019. |
LIBOR — London Interbank Offered Rate | |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 51 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
S&P 500® 2x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 13,737,863 | $ | — | $ | — | $ | 13,737,863 | ||||||||
Mutual Funds | 28,423,845 | — | — | 28,423,845 | ||||||||||||
U.S. Treasury Bills | — | 2,672,718 | — | 2,672,718 | ||||||||||||
Federal Agency Notes | — | 999,479 | — | 999,479 | ||||||||||||
Repurchase Agreements | — | 10,105,670 | — | 10,105,670 | ||||||||||||
Securities Lending Collateral | 1,961 | — | — | 1,961 | ||||||||||||
Equity Futures Contracts** | 436,792 | — | — | 436,792 | ||||||||||||
Equity Index Swap Agreements** | — | 47,676 | — | 47,676 | ||||||||||||
Total Assets | $ | 42,600,461 | $ | 13,825,543 | $ | — | $ | 56,426,004 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Index Swap Agreements** | $ | — | $ | 155,257 | $ | — | $ | 155,257 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
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 “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, 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/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 10,456,955 | $ | 11,400,525 | $ | (8,600,000 | ) | $ | (65,157 | ) | $ | 18,716 | $ | 13,211,039 | 533,995 | $ | 351,004 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 7,299,146 | 21,026,049 | (13,100,000 | ) | (22,674 | ) | 10,285 | 15,212,806 | 1,528,925 | 276,107 | ||||||||||||||||||||||
$ | 17,756,101 | $ | 32,426,574 | $ | (21,700,000 | ) | $ | (87,831 | ) | $ | 29,001 | $ | 28,423,845 | $ | 627,111 |
52 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P 500® 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $1,943 of securities loaned (cost $16,828,448) | $ | 17,412,021 | ||
Investments in affiliated issuers, at value (cost $28,465,973) | 28,423,845 | |||
Repurchase agreements, at value (cost $10,105,670) | 10,105,670 | |||
Unrealized appreciation on OTC swap agreements | 47,676 | |||
Cash | 43 | |||
Receivables: | ||||
Fund shares sold | 66,335 | |||
Dividends | 55,710 | |||
Variation margin on futures contracts | 34,218 | |||
Interest | 2,110 | |||
Securities lending income | 8 | |||
Total assets | 56,147,636 | |||
Liabilities: | ||||
Unrealized depreciation on OTC swap agreements | 155,257 | |||
Payable for: | ||||
Securities purchased | 1,052,711 | |||
Fund shares redeemed | 578,326 | |||
Management fees | 32,446 | |||
Transfer agent and administrative fees | 9,869 | |||
Investor service fees | 9,869 | |||
Swap settlement | 5,437 | |||
Portfolio accounting fees | 3,947 | |||
Return of securities lending collateral | 1,961 | |||
Trustees’ fees* | 695 | |||
Miscellaneous | 101,361 | |||
Total liabilities | 1,951,879 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 54,195,757 | ||
Net assets consist of: | ||||
Paid in capital | $ | 47,604,744 | ||
Total distributable earnings (loss) | 6,591,013 | |||
Net assets | $ | 54,195,757 | ||
Capital shares outstanding | 173,035 | |||
Net asset value per share | $ | 313.21 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 124,842 | ||
Dividends from securities of affiliated issuers | 627,111 | |||
Interest | 241,989 | |||
Income from securities lending, net | 180 | |||
Total investment income | 994,122 | |||
Expenses: | ||||
Management fees | 369,517 | |||
Investor service fees | 102,644 | |||
Transfer agent and administrative fees | 102,644 | |||
Professional fees | 71,654 | |||
Portfolio accounting fees | 41,057 | |||
Trustees’ fees* | 9,475 | |||
Custodian fees | 7,715 | |||
Line of credit fees | 41 | |||
Miscellaneous | 63,490 | |||
Total expenses | 768,237 | |||
Less: | ||||
Expenses waived by Adviser | (27,647 | ) | ||
Net expenses | 740,590 | |||
Net investment income | 253,532 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 905,718 | |||
Investments in affiliated issuers | (87,831 | ) | ||
Swap agreements | 15,377,653 | |||
Futures contracts | 2,707,808 | |||
Net realized gain | 18,903,348 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 528,417 | |||
Investments in affiliated issuers | 29,001 | |||
Swap agreements | (737,939 | ) | ||
Futures contracts | 434,750 | |||
Net change in unrealized appreciation (depreciation) | 254,229 | |||
Net realized and unrealized gain | 19,157,577 | |||
Net increase in net assets resulting from operations | $ | 19,411,109 |
* | 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 | 53 |
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 | $ | 253,532 | $ | 263,512 | ||||
Net realized gain (loss) on investments | 18,903,348 | (7,612,368 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 254,229 | (1,016,227 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 19,411,109 | (8,365,083 | ) | |||||
Distributions to shareholders | — | (3,409,316 | ) | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 197,656,279 | 399,584,471 | ||||||
Distributions reinvested | — | 3,409,316 | ||||||
Cost of shares redeemed | (194,048,996 | ) | (396,554,714 | ) | ||||
Net increase from capital share transactions | 3,607,283 | 6,439,073 | ||||||
Net increase (decrease) in net assets | 23,018,392 | (5,335,326 | ) | |||||
Net assets: | ||||||||
Beginning of year | 31,177,365 | 36,512,691 | ||||||
End of year | $ | 54,195,757 | $ | 31,177,365 | ||||
Capital share activity: | ||||||||
Shares sold | 764,748 | 1,618,168 | ||||||
Shares issued from reinvestment of distributions | — | 13,736 | ||||||
Shares redeemed | (753,476 | ) | (1,619,549 | ) | ||||
Net increase in shares | 11,272 | 12,355 |
54 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P 500® 2x STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 192.73 | $ | 244.38 | $ | 176.52 | $ | 165.22 | $ | 227.28 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | 1.59 | 1.48 | .13 | (.53 | ) | (1.11 | ) | |||||||||||||
Net gain (loss) on investments (realized and unrealized) | 118.89 | (35.10 | ) | 75.18 | 32.62 | 1.42 | ||||||||||||||
Total from investment operations | 120.48 | (33.62 | ) | 75.31 | 32.09 | .31 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | — | (.14 | ) | — | — | — | ||||||||||||||
Net realized gains | — | (17.89 | ) | (7.45 | ) | (20.79 | ) | (62.37 | ) | |||||||||||
Total distributions | — | (18.03 | ) | (7.45 | ) | (20.79 | ) | (62.37 | ) | |||||||||||
Net asset value, end of period | $ | 313.21 | $ | 192.73 | $ | 244.38 | $ | 176.52 | $ | 165.22 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 62.51 | % | (15.41 | %) | 43.49 | % | 20.40 | % | (1.66 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 54,196 | $ | 31,177 | $ | 36,513 | $ | 24,895 | $ | 21,167 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.62 | % | 0.60 | % | 0.06 | % | (0.32 | %) | (0.55 | %) | ||||||||||
Total expensesc | 1.87 | % | 1.77 | % | 1.76 | % | 1.71 | % | 1.66 | % | ||||||||||
Net expensesd | 1.80 | % | 1.77 | % | 1.76 | % | 1.71 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 248 | % | 424 | % | 282 | % | 578 | % | 558 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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 | 55 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, with the NASDAQ-100 Index returning 39.46%, the NASDAQ-100® 2x Strategy Fund returned 80.50%. For the one-year period ending December 31, 2019, the Fund maintained a daily correlation of over 99% to its benchmark of 200% of the daily price movement of the NASDAQ-100 Index.
The Information Technology, Communications Services, and Consumer Discretionary sectors contributed the most to the performance of the underlying index during the year. No sector detracted from the performance of the underlying index for the year.
Apple, Inc., Microsoft Corp., and Amazon.com, Inc. contributed the most to performance of the underlying index for 2019. Kraft Heinz Co., Baidu, Inc. ADR, and Walgreens Boots Alliance, 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.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but that fee is waived by the respective investee fund. For the one-year period ended December 31, 2019, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
56 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
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: October 1, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Ultra Short Duration Fund — Institutional Class | 29.3% |
Guggenheim Strategy Fund II | 28.1% |
Apple, Inc. | 1.1% |
Microsoft Corp. | 1.1% |
Amazon.com, Inc. | 0.8% |
Facebook, Inc. — Class A | 0.4% |
Alphabet, Inc. — Class A | 0.4% |
Alphabet, Inc. — Class C | 0.4% |
Intel Corp. | 0.3% |
Comcast Corp. — Class A | 0.2% |
Top Ten Total | 62.1% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
NASDAQ-100® 2x Strategy Fund | 80.50% | 28.37% | 31.66% |
NASDAQ-100 Index | 39.46% | 16.91% | 18.07% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The NASDAQ-100 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 57 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
NASDAQ-100® 2x STRATEGY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 9.9% | ||||||||
Technology - 4.3% | ||||||||
Apple, Inc. | 3,897 | $ | 1,144,354 | |||||
Microsoft Corp. | 6,691 | 1,055,171 | ||||||
Intel Corp. | 4,866 | 291,230 | ||||||
Adobe, Inc.* | 542 | 178,757 | ||||||
NVIDIA Corp. | 685 | 161,181 | ||||||
Broadcom, Inc. | 444 | 140,313 | ||||||
Texas Instruments, Inc. | 1,046 | 134,191 | ||||||
QUALCOMM, Inc. | 1,278 | 112,758 | ||||||
Fiserv, Inc.* | 761 | 87,994 | ||||||
Intuit, Inc. | 291 | 76,222 | ||||||
Micron Technology, Inc.* | 1,239 | 66,634 | ||||||
Applied Materials, Inc. | 1,034 | 63,115 | ||||||
Advanced Micro Devices, Inc.* | 1,246 | 57,142 | ||||||
Activision Blizzard, Inc. | 860 | 51,101 | ||||||
Analog Devices, Inc. | 412 | 48,962 | ||||||
Lam Research Corp. | 162 | 47,369 | ||||||
Autodesk, Inc.* | 246 | 45,131 | ||||||
NXP Semiconductor N.V. | 313 | 39,832 | ||||||
Cognizant Technology Solutions Corp. — Class A | 613 | 38,018 | ||||||
Electronic Arts, Inc.* | 327 | 35,156 | ||||||
Paychex, Inc. | 401 | 34,109 | ||||||
KLA Corp. | 177 | 31,536 | ||||||
Workday, Inc. — Class A* | 184 | 30,259 | ||||||
Microchip Technology, Inc. | 267 | 27,960 | ||||||
Xilinx, Inc. | 281 | 27,473 | ||||||
Cerner Corp. | 351 | 25,760 | ||||||
Splunk, Inc.* | 169 | 25,311 | ||||||
NetEase, Inc. ADR | 82 | 25,144 | ||||||
ASML Holding N.V. — Class G | 83 | 24,563 | ||||||
ANSYS, Inc.* | 94 | 24,196 | ||||||
Synopsys, Inc.* | 168 | 23,386 | ||||||
Skyworks Solutions, Inc. | 191 | 23,088 | ||||||
Cadence Design Systems, Inc.* | 314 | 21,779 | ||||||
Western Digital Corp. | 333 | 21,136 | ||||||
Check Point Software Technologies Ltd.* | 170 | 18,863 | ||||||
Maxim Integrated Products, Inc. | 303 | 18,638 | ||||||
Citrix Systems, Inc. | 146 | 16,191 | ||||||
NetApp, Inc. | 255 | 15,874 | ||||||
Take-Two Interactive Software, Inc.* | 127 | 15,549 | ||||||
Total Technology | 4,325,446 | |||||||
Communications - 3.3% | ||||||||
Amazon.com, Inc.* | 435 | 803,810 | ||||||
Facebook, Inc. — Class A* | 2,111 | 433,283 | ||||||
Alphabet, Inc. — Class A* | 302 | 404,496 | ||||||
Alphabet, Inc. — Class C* | 301 | 402,443 | ||||||
Comcast Corp. — Class A | 5,079 | 228,403 | ||||||
Cisco Systems, Inc. | 4,746 | 227,618 | ||||||
Netflix, Inc.* | 490 | 158,549 | ||||||
Charter Communications, Inc. — Class A* | 240 | 116,419 | ||||||
Booking Holdings, Inc.* | 47 | 96,525 | ||||||
T-Mobile US, Inc.* | 957 | 75,048 | ||||||
Baidu, Inc. ADR* | 309 | 39,058 | ||||||
JD.com, Inc. ADR* | 1,037 | 36,533 | ||||||
Sirius XM Holdings, Inc.1 | 4,949 | 35,385 | ||||||
eBay, Inc. | 910 | 32,860 | ||||||
MercadoLibre, Inc.* | 56 | 32,029 | ||||||
VeriSign, Inc.* | 131 | 25,241 | ||||||
CDW Corp. | 161 | 22,997 | ||||||
Trip.com Group Ltd. ADR* | 585 | 19,621 | ||||||
Expedia Group, Inc. | 156 | 16,870 | ||||||
Fox Corp. — Class A | 397 | 14,717 | ||||||
Fox Corp. — Class B | 298 | 10,847 | ||||||
Liberty Global plc — Class C* | 491 | 10,702 | ||||||
Liberty Global plc — Class A* | 203 | 4,616 | ||||||
Total Communications | 3,248,070 | |||||||
Consumer, Non-cyclical - 1.4% | ||||||||
PepsiCo, Inc. | 1,560 | 213,205 | ||||||
Amgen, Inc. | 665 | 160,312 | ||||||
PayPal Holdings, Inc.* | 1,314 | 142,136 | ||||||
Gilead Sciences, Inc. | 1,416 | 92,012 | ||||||
Mondelez International, Inc. — Class A | 1,611 | 88,734 | ||||||
Automatic Data Processing, Inc. | 484 | 82,522 | ||||||
Intuitive Surgical, Inc.* | 129 | 76,258 | ||||||
Vertex Pharmaceuticals, Inc.* | 288 | 63,058 | ||||||
Biogen, Inc.* | 202 | 59,939 | ||||||
Illumina, Inc.* | 164 | 54,405 | ||||||
Regeneron Pharmaceuticals, Inc.* | 121 | 45,433 | ||||||
Kraft Heinz Co. | 1,366 | 43,890 | ||||||
Monster Beverage Corp.* | 602 | 38,257 | ||||||
Cintas Corp. | 116 | 31,213 | ||||||
Verisk Analytics, Inc. — Class A | 183 | 27,329 | ||||||
Alexion Pharmaceuticals, Inc.* | 248 | 26,821 | ||||||
IDEXX Laboratories, Inc.* | 96 | 25,068 | ||||||
Align Technology, Inc.* | 88 | 24,556 | ||||||
CoStar Group, Inc.* | 41 | 24,530 | ||||||
Seattle Genetics, Inc.* | 192 | 21,938 | ||||||
Incyte Corp.* | 241 | 21,044 | ||||||
BioMarin Pharmaceutical, Inc.* | 201 | 16,995 | ||||||
Total Consumer, Non-cyclical | 1,379,655 | |||||||
Consumer, Cyclical - 0.7% | ||||||||
Costco Wholesale Corp. | 494 | 145,197 | ||||||
Starbucks Corp. | 1,321 | 116,142 | ||||||
Tesla, Inc.* | 202 | 84,502 | ||||||
Walgreens Boots Alliance, Inc. | 999 | 58,901 | ||||||
Marriott International, Inc. — Class A | 366 | 55,424 | ||||||
Ross Stores, Inc. | 405 | 47,150 | ||||||
O’Reilly Automotive, Inc.* | 85 | 37,252 | ||||||
Lululemon Athletica, Inc.* | 138 | 31,971 | ||||||
PACCAR, Inc. | 387 | 30,612 | ||||||
United Airlines Holdings, Inc.* | 283 | 24,930 | ||||||
Dollar Tree, Inc.* | 265 | 24,923 | ||||||
Fastenal Co. | 642 | 23,722 | ||||||
Copart, Inc.* | 260 | 23,644 | ||||||
Ulta Beauty, Inc.* | 66 | 16,707 | ||||||
American Airlines Group, Inc. | 490 | 14,053 | ||||||
Total Consumer, Cyclical | 735,130 | |||||||
58 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
NASDAQ-100® 2x STRATEGY FUND |
| Shares | Value | ||||||
Utilities - 0.1% | ||||||||
Exelon Corp. | 1,088 | $ | 49,602 | |||||
Xcel Energy, Inc. | 600 | 38,094 | ||||||
Total Utilities | 87,696 | |||||||
Industrial - 0.1% | ||||||||
CSX Corp. | 875 | 63,315 | ||||||
Financial - 0.0% | ||||||||
Willis Towers Watson plc | 144 | 29,079 | ||||||
Total Common Stocks | ||||||||
(Cost $9,308,372) | 9,868,391 | |||||||
MUTUAL FUNDS† - 57.4% | ||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class2 | 2,938,764 | 29,240,701 | ||||||
Guggenheim Strategy Fund II2 | 1,135,661 | 28,096,247 | ||||||
Total Mutual Funds | ||||||||
(Cost $57,544,024) | 57,336,948 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 14.9% | ||||||||
U.S. Treasury Bills | ||||||||
1.50% due 01/14/203,4 | $ | 6,946,000 | 6,942,602 | |||||
1.49% due 01/14/203,4 | 3,575,000 | 3,573,251 | ||||||
1.54% due 01/14/203,4 | 3,200,000 | 3,198,435 | ||||||
1.53% due 01/14/203,4 | 600,000 | 599,706 | ||||||
1.47% due 02/04/203,5 | 544,000 | 543,220 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $14,856,369) | 14,857,214 | |||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 7.5% | ||||||||
Federal Home Loan Bank | ||||||||
1.15% due 01/02/203 | 7,500,000 | 7,499,760 | ||||||
Total Federal Agency Discount Notes | ||||||||
(Cost $7,499,760) | 7,499,760 | |||||||
REPURCHASE AGREEMENTS††,6 - 16.4% | ||||||||
J.P. Morgan Securities LLC | 9,949,749 | 9,949,749 | ||||||
Barclays Capital, Inc. | 3,208,257 | 3,208,257 | ||||||
BofA Securities, Inc. | 3,208,257 | 3,208,257 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $16,366,263) | 16,366,263 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,7 - 0.0% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.47%8 | 13,224 | 13,224 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $13,224) | 13,224 | |||||||
Total Investments - 106.1% | ||||||||
(Cost $105,588,012) | $ | 105,941,800 | ||||||
Other Assets & Liabilities, net - (6.1)% | (6,131,060 | ) | ||||||
Total Net Assets - 100.0% | $ | 99,810,740 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||||
NASDAQ-100 Index Mini Futures Contracts | 65 | Mar 2020 | $ | 11,372,075 | $ | 348,123 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||
Barclays Bank plc | NASDAQ-100 Index | 2.10% (1 Week USD LIBOR + 0.50%) | At Maturity | 01/31/20 | 14,010 | $ | 122,351,230 | $ | 327,079 | ||||||||||
BNP Paribas | NASDAQ-100 Index | 2.45% (1 Month USD LIBOR + 0.65%) | At Maturity | 01/28/20 | 831 | 7,258,065 | (37,601 | ) | |||||||||||
Goldman Sachs International | NASDAQ-100 Index | 2.15% (1 Week USD LIBOR + 0.55%) | At Maturity | 01/28/20 | 5,452 | 47,610,645 | (244,218 | ) | |||||||||||
$ | 177,219,940 | $ | 45,260 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 59 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
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, 2019 — See Note 7. |
2 | Affiliated issuer. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2019. |
5 | All or a portion of this security is pledged as futures collateral at December 31, 2019. |
6 | Repurchase Agreements — See Note 6. |
7 | Securities lending collateral — See Note 7. |
8 | Rate indicated is the 7-day yield as of December 31, 2019. |
ADR — American Depositary Receipt | |
LIBOR --- London Interbank Offered Rate | |
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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 9,868,391 | $ | — | $ | — | $ | 9,868,391 | ||||||||
Mutual Funds | 57,336,948 | — | — | 57,336,948 | ||||||||||||
U.S. Treasury Bills | — | 14,857,214 | — | 14,857,214 | ||||||||||||
Federal Agency Discount Notes | — | 7,499,760 | — | 7,499,760 | ||||||||||||
Repurchase Agreements | — | 16,366,263 | — | 16,366,263 | ||||||||||||
Securities Lending Collateral | 13,224 | — | — | 13,224 | ||||||||||||
Equity Futures Contracts** | 348,123 | — | — | 348,123 | ||||||||||||
Equity Index Swap Agreements** | — | 327,079 | — | 327,079 | ||||||||||||
Total Assets | $ | 67,566,686 | $ | 39,050,316 | $ | — | $ | 106,617,002 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Index Swap Agreements** | $ | — | $ | 281,819 | $ | — | $ | 281,819 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
60 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
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 “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, 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/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 17,164,426 | $ | 15,008,764 | $ | (4,000,000 | ) | $ | (27,779 | ) | $ | (49,164 | ) | $ | 28,096,247 | 1,135,661 | $ | 639,524 | ||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 11,888,529 | 21,045,111 | (3,650,000 | ) | (18,544 | ) | (24,395 | ) | 29,240,701 | 2,938,764 | 534,997 | |||||||||||||||||||||
$ | 29,052,955 | $ | 36,053,875 | $ | (7,650,000 | ) | $ | (46,323 | ) | $ | (73,559 | ) | $ | 57,336,948 | $ | 1,174,521 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 61 |
NASDAQ-100® 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $13,042 of securities loaned (cost $31,677,725) | $ | 32,238,589 | ||
Investments in affiliated issuers, at value (cost $57,544,024) | 57,336,948 | |||
Repurchase agreements, at value (cost $16,366,263) | 16,366,263 | |||
Unrealized appreciation on OTC swap agreements | 327,079 | |||
Cash | 35 | |||
Receivables: | ||||
Fund shares sold | 3,673,121 | |||
Dividends | 99,604 | |||
Variation margin on futures contracts | 14,537 | |||
Interest | 681 | |||
Securities lending income | 3 | |||
Total assets | 110,056,860 | |||
Liabilities: | ||||
Unrealized depreciation on OTC swap agreements | 281,819 | |||
Payable for: | ||||
Securities purchased | 9,106,094 | |||
Fund shares redeemed | 410,542 | |||
Swap settlement | 89,225 | |||
Management fees | 71,504 | |||
Transfer agent and administrative fees | 21,529 | |||
Investor service fees | 21,529 | |||
Return of securities lending collateral | 13,224 | |||
Portfolio accounting fees | 8,611 | |||
Trustees’ fees* | 1,456 | |||
Miscellaneous | 220,587 | |||
Total liabilities | 10,246,120 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 99,810,740 | ||
Net assets consist of: | ||||
Paid in capital | $ | 81,614,291 | ||
Total distributable earnings (loss) | 18,196,449 | |||
Net assets | $ | 99,810,740 | ||
Capital shares outstanding | 1,092,773 | |||
Net asset value per share | $ | 91.34 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $223) | $ | 207,296 | ||
Dividends from securities of affiliated issuers | 1,174,521 | |||
Interest | 452,720 | |||
Income from securities lending, net | 416 | |||
Total investment income | 1,834,953 | |||
Expenses: | ||||
Management fees | 769,672 | |||
Investor service fees | 213,798 | |||
Transfer agent and administrative fees | 213,798 | |||
Professional fees | 152,482 | |||
Portfolio accounting fees | 85,518 | |||
Trustees’ fees* | 17,784 | |||
Custodian fees | 15,443 | |||
Line of credit fees | 719 | |||
Miscellaneous | 161,274 | |||
Total expenses | 1,630,488 | |||
Less: | ||||
Expenses waived by Adviser | (53,396 | ) | ||
Net expenses | 1,577,092 | |||
Net investment income | 257,861 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 4,679,489 | |||
Investments in affiliated issuers | (46,323 | ) | ||
Swap agreements | 37,145,902 | |||
Futures contracts | 2,979,725 | |||
Net realized gain | 44,758,793 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (79,802 | ) | ||
Investments in affiliated issuers | (73,559 | ) | ||
Swap agreements | (594,300 | ) | ||
Futures contracts | 969,392 | |||
Net change in unrealized appreciation (depreciation) | 221,731 | |||
Net realized and unrealized gain | 44,980,524 | |||
Net increase in net assets resulting from operations | $ | 45,238,385 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
62 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
NASDAQ-100® 2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 257,861 | $ | 152,253 | ||||
Net realized gain (loss) on investments | 44,758,793 | (2,755,877 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 221,731 | (6,360,779 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 45,238,385 | (8,964,403 | ) | |||||
Distributions to shareholders | (152,254 | ) | (11,852,712 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 435,924,619 | 401,658,572 | ||||||
Distributions reinvested | 152,254 | 11,852,712 | ||||||
Cost of shares redeemed | (440,031,905 | ) | (404,867,151 | ) | ||||
Net increase (decrease) from capital share transactions | (3,955,032 | ) | 8,644,133 | |||||
Net increase (decrease) in net assets | 41,131,099 | (12,172,982 | ) | |||||
Net assets: | ||||||||
Beginning of year | 58,679,641 | 70,852,623 | ||||||
End of year | $ | 99,810,740 | $ | 58,679,641 | ||||
Capital share activity: | ||||||||
Shares sold | 6,163,093 | 5,896,035 | ||||||
Shares issued from reinvestment of distributions | 1,940 | 164,530 | ||||||
Shares redeemed | (6,230,204 | ) | (5,993,427 | ) | ||||
Net increase (decrease) in shares | (65,171 | ) | 67,138 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 63 |
NASDAQ-100® 2x STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 50.68 | $ | 64.95 | $ | 38.79 | $ | 38.67 | $ | 41.60 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .22 | .14 | (.17 | ) | (.22 | ) | (.31 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | 40.55 | (2.70 | ) | 26.97 | 3.57 | 6.26 | ||||||||||||||
Total from investment operations | 40.77 | (2.56 | ) | 26.80 | 3.35 | 5.95 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.11 | ) | — | — | — | — | ||||||||||||||
Net realized gains | — | (11.71 | ) | (.64 | ) | (3.23 | ) | (8.88 | ) | |||||||||||
Total distributions | (.11 | ) | (11.71 | ) | (.64 | ) | (3.23 | ) | (8.88 | ) | ||||||||||
Net asset value, end of period | $ | 91.34 | $ | 50.68 | $ | 64.95 | $ | 38.79 | $ | 38.67 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 80.50 | % | (9.31 | %) | 69.49 | % | 9.60 | % | 14.63 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 99,811 | $ | 58,680 | $ | 70,853 | $ | 41,115 | $ | 49,994 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.30 | % | 0.21 | % | (0.32 | %) | (0.62 | %) | (0.75 | %) | ||||||||||
Total expensesc | 1.91 | % | 1.81 | % | 1.80 | % | 1.75 | % | 1.68 | % | ||||||||||
Net expensesd | 1.84 | % | 1.80 | % | 1.80 | % | 1.75 | % | 1.68 | % | ||||||||||
Portfolio turnover rate | 346 | % | 220 | % | 97 | % | 494 | % | 294 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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. |
64 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, the Mid-Cap 1.5x Strategy Fund returned 36.11%. Over the year, its benchmark, the S&P MidCap 400 Index, returned 26.20%. The Fund had a correlation of more than 99% to its benchmark of 150% of the daily price movement of the S&P MidCap 400 Index.
The Information Technology, Industrials, and Financials sectors contributed the most to performance of the underlying index during the year. The Energy sector was the only detractor from performance of the underlying index for the year.
Teradyne, Inc., Fair Issac Corp., and Teledyne Technologies, Inc. contributed the most to performance of the underlying index for the year. Covetrus, Inc., Green Dot Corp. Class A, and EQT 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.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but that fee is waived by the respective investee fund. For the one-year period ended December 31, 2019, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 65 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
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: October 1, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 21.0% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 14.0% |
Teledyne Technologies, Inc. | 0.2% |
Domino’s Pizza, Inc. | 0.2% |
Tyler Technologies, Inc. | 0.2% |
Teradyne, Inc. | 0.2% |
Alleghany Corp. | 0.2% |
West Pharmaceutical Services, Inc. | 0.2% |
Medical Properties Trust, Inc. | 0.2% |
Fair Isaac Corp. | 0.2% |
Top Ten Total | 36.6% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Mid-Cap 1.5x Strategy Fund | 36.11% | 10.48% | 15.90% |
S&P MidCap 400 Index | 26.20% | 9.03% | 12.72% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
66 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
MID-CAP 1.5x STRATEGY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 35.8% | ||||||||
Financial - 9.7% | ||||||||
Alleghany Corp.* | 15 | $ | 11,994 | |||||
Medical Properties Trust, Inc. REIT | 553 | 11,674 | ||||||
Camden Property Trust REIT | 103 | 10,928 | ||||||
Reinsurance Group of America, Inc. — Class A | 67 | 10,925 | ||||||
Liberty Property Trust REIT | 169 | 10,148 | ||||||
Brown & Brown, Inc. | 250 | 9,870 | ||||||
Omega Healthcare Investors, Inc. REIT | 233 | 9,868 | ||||||
National Retail Properties, Inc. REIT | 183 | 9,813 | ||||||
Jones Lang LaSalle, Inc. | 55 | 9,575 | ||||||
RenaissanceRe Holdings Ltd. | 47 | 9,213 | ||||||
SEI Investments Co. | 135 | 8,840 | ||||||
American Financial Group, Inc. | 80 | 8,772 | ||||||
Kilroy Realty Corp. REIT | 104 | 8,726 | ||||||
Lamar Advertising Co. — Class A REIT | 92 | 8,212 | ||||||
Signature Bank | 58 | 7,923 | ||||||
CyrusOne, Inc. REIT | 121 | 7,917 | ||||||
Douglas Emmett, Inc. REIT | 176 | 7,726 | ||||||
TCF Financial Corp. | 164 | 7,675 | ||||||
East West Bancorp, Inc. | 156 | 7,597 | ||||||
Commerce Bancshares, Inc. | 111 | 7,541 | ||||||
Prosperity Bancshares, Inc. | 101 | 7,261 | ||||||
First American Financial Corp. | 120 | 6,998 | ||||||
American Campus Communities, Inc. REIT | 147 | 6,913 | ||||||
Brixmor Property Group, Inc. REIT | 318 | 6,872 | ||||||
Old Republic International Corp. | 305 | 6,823 | ||||||
Park Hotels & Resorts, Inc. REIT | 256 | 6,623 | ||||||
Cousins Properties, Inc. REIT | 157 | 6,468 | ||||||
Synovus Financial Corp. | 157 | 6,154 | ||||||
New York Community Bancorp, Inc. | 499 | 5,998 | ||||||
Cullen/Frost Bankers, Inc. | 61 | 5,965 | ||||||
EPR Properties REIT | 84 | 5,934 | ||||||
Jefferies Financial Group, Inc. | 269 | 5,749 | ||||||
Primerica, Inc. | 44 | 5,745 | ||||||
Hanover Insurance Group, Inc. | 42 | 5,740 | ||||||
Eaton Vance Corp. | 121 | 5,650 | ||||||
First Industrial Realty Trust, Inc. REIT | 136 | 5,645 | ||||||
First Horizon National Corp. | 333 | 5,514 | ||||||
EastGroup Properties, Inc. REIT | 41 | 5,440 | ||||||
Highwoods Properties, Inc. REIT | 111 | 5,429 | ||||||
Life Storage, Inc. REIT | 50 | 5,414 | ||||||
Spirit Realty Capital, Inc. REIT | 107 | 5,262 | ||||||
Webster Financial Corp. | 98 | 5,229 | ||||||
Kemper Corp. | 67 | 5,192 | ||||||
First Financial Bankshares, Inc. | 145 | 5,090 | ||||||
JBG SMITH Properties REIT | 126 | 5,026 | ||||||
Pinnacle Financial Partners, Inc. | 77 | 4,928 | ||||||
PacWest Bancorp | 128 | 4,899 | ||||||
Valley National Bancorp | 419 | 4,798 | ||||||
Healthcare Realty Trust, Inc. REIT | 143 | 4,772 | ||||||
Brighthouse Financial, Inc.* | 117 | 4,590 | ||||||
Sterling Bancorp | 216 | 4,553 | ||||||
Rayonier, Inc. REIT | 138 | 4,521 | ||||||
Affiliated Managers Group, Inc. | 53 | 4,491 | ||||||
CoreSite Realty Corp. REIT | 40 | 4,485 | ||||||
Stifel Financial Corp. | 73 | 4,427 | ||||||
Sabra Health Care REIT, Inc. REIT | 207 | 4,417 | ||||||
FNB Corp. | 347 | 4,407 | ||||||
Wintrust Financial Corp. | 61 | 4,325 | ||||||
Service Properties Trust REIT | 176 | 4,282 | ||||||
United Bankshares, Inc. | 108 | 4,175 | ||||||
Umpqua Holdings Corp. | 235 | 4,160 | ||||||
Selective Insurance Group, Inc. | 63 | 4,107 | ||||||
Bank of Hawaii Corp. | 43 | 4,092 | ||||||
Hancock Whitney Corp. | 93 | 4,081 | ||||||
Janus Henderson Group plc | 166 | 4,059 | ||||||
Weingarten Realty Investors REIT | 129 | 4,030 | ||||||
SLM Corp. | 451 | 4,018 | ||||||
Bank OZK | 129 | 3,935 | ||||||
RLI Corp. | 43 | 3,871 | ||||||
Interactive Brokers Group, Inc. — Class A | 82 | 3,823 | ||||||
Pebblebrook Hotel Trust REIT | 140 | 3,753 | ||||||
Associated Banc-Corp. | 170 | 3,747 | ||||||
Corporate Office Properties Trust REIT | 120 | 3,526 | ||||||
PS Business Parks, Inc. REIT | 21 | 3,462 | ||||||
Federated Investors, Inc. — Class B | 103 | 3,357 | ||||||
Home BancShares, Inc. | 166 | 3,264 | ||||||
BancorpSouth Bank | 103 | 3,235 | ||||||
Macerich Co. REIT1 | 118 | 3,177 | ||||||
UMB Financial Corp. | 46 | 3,157 | ||||||
Evercore, Inc. — Class A | 42 | 3,140 | ||||||
Legg Mason, Inc. | 87 | 3,124 | ||||||
PotlatchDeltic Corp. REIT | 72 | 3,115 | ||||||
Cathay General Bancorp | 81 | 3,082 | ||||||
Washington Federal, Inc. | 84 | 3,079 | ||||||
Texas Capital Bancshares, Inc.* | 54 | 3,066 | ||||||
Fulton Financial Corp. | 175 | 3,050 | ||||||
CNO Financial Group, Inc. | 162 | 2,937 | ||||||
Navient Corp. | 208 | 2,845 | ||||||
International Bancshares Corp. | 61 | 2,627 | ||||||
LendingTree, Inc.* | 8 | 2,428 | ||||||
Trustmark Corp. | 69 | 2,381 | ||||||
Genworth Financial, Inc. — Class A* | 538 | 2,367 | ||||||
Urban Edge Properties REIT | 123 | 2,359 | ||||||
Deluxe Corp. | 45 | 2,246 | ||||||
Mack-Cali Realty Corp. REIT | 97 | 2,244 | ||||||
CoreCivic, Inc. REIT | 127 | 2,207 | ||||||
GEO Group, Inc. REIT | 130 | 2,159 | ||||||
Diversified Healthcare Trust REIT | 254 | 2,144 | ||||||
Taubman Centers, Inc. REIT | 65 | 2,021 | ||||||
Alexander & Baldwin, Inc. REIT | 73 | 1,530 | ||||||
Tanger Factory Outlet Centers, Inc. REIT1 | 99 | 1,458 | ||||||
Mercury General Corp. | 29 | 1,413 | ||||||
Total Financial | 529,017 | |||||||
Industrial - 6.9% | ||||||||
Teledyne Technologies, Inc.* | 39 | 13,515 | ||||||
Trimble, Inc.* | 266 | 11,090 | ||||||
Cognex Corp. | 183 | 10,255 | ||||||
Carlisle Companies, Inc. | 61 | 9,872 | ||||||
Universal Display Corp. | 45 | 9,273 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 67 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
MID-CAP 1.5x STRATEGY FUND |
| Shares | Value | ||||||
Graco, Inc. | 178 | $ | 9,256 | |||||
Lennox International, Inc. | 37 | 9,027 | ||||||
Nordson Corp. | 55 | 8,956 | ||||||
Hubbell, Inc. | 58 | 8,574 | ||||||
XPO Logistics, Inc.* | 99 | 7,890 | ||||||
AptarGroup, Inc. | 68 | 7,862 | ||||||
Gentex Corp. | 270 | 7,825 | ||||||
Donaldson Company, Inc. | 135 | 7,779 | ||||||
Owens Corning | 116 | 7,554 | ||||||
Arrow Electronics, Inc.* | 87 | 7,372 | ||||||
AECOM* | 168 | 7,246 | ||||||
Woodward, Inc. | 60 | 7,106 | ||||||
ITT, Inc. | 94 | 6,947 | ||||||
Oshkosh Corp. | 73 | 6,909 | ||||||
Sonoco Products Co. | 107 | 6,604 | ||||||
Curtiss-Wright Corp. | 46 | 6,481 | ||||||
MDU Resources Group, Inc. | 214 | 6,358 | ||||||
Lincoln Electric Holdings, Inc. | 65 | 6,287 | ||||||
Stericycle, Inc.* | 97 | 6,190 | ||||||
Jabil, Inc. | 148 | 6,117 | ||||||
Acuity Brands, Inc. | 42 | 5,796 | ||||||
Kirby Corp.* | 64 | 5,730 | ||||||
SYNNEX Corp. | 44 | 5,667 | ||||||
Trex Company, Inc.* | 62 | 5,573 | ||||||
Tech Data Corp.* | 38 | 5,457 | ||||||
National Instruments Corp. | 126 | 5,335 | ||||||
EMCOR Group, Inc. | 60 | 5,178 | ||||||
AGCO Corp. | 67 | 5,176 | ||||||
Tetra Tech, Inc. | 58 | 4,997 | ||||||
Littelfuse, Inc. | 26 | 4,974 | ||||||
MSA Safety, Inc. | 38 | 4,802 | ||||||
Landstar System, Inc. | 42 | 4,783 | ||||||
Clean Harbors, Inc.* | 55 | 4,716 | ||||||
Knight-Swift Transportation Holdings, Inc. | 131 | 4,695 | ||||||
Crane Co. | 54 | 4,665 | ||||||
Axon Enterprise, Inc.* | 63 | 4,617 | ||||||
KBR, Inc. | 151 | 4,606 | ||||||
Avnet, Inc. | 108 | 4,584 | ||||||
Coherent, Inc.* | 26 | 4,325 | ||||||
nVent Electric plc | 166 | 4,246 | ||||||
MasTec, Inc.* | 64 | 4,106 | ||||||
Mercury Systems, Inc.* | 59 | 4,077 | ||||||
Timken Co. | 72 | 4,054 | ||||||
Eagle Materials, Inc. | 44 | 3,989 | ||||||
Regal Beloit Corp. | 44 | 3,767 | ||||||
Louisiana-Pacific Corp. | 126 | 3,738 | ||||||
Energizer Holdings, Inc. | 69 | 3,465 | ||||||
Valmont Industries, Inc. | 23 | 3,445 | ||||||
EnerSys | 45 | 3,367 | ||||||
Kennametal, Inc. | 89 | 3,283 | ||||||
Colfax Corp.* | 89 | 3,238 | ||||||
GATX Corp. | 38 | 3,148 | ||||||
II-VI, Inc.* | 93 | 3,131 | ||||||
Ryder System, Inc. | 57 | 3,096 | ||||||
Vishay Intertechnology, Inc. | 141 | 3,002 | ||||||
Fluor Corp. | 150 | 2,832 | ||||||
Silgan Holdings, Inc. | 83 | 2,580 | ||||||
Trinity Industries, Inc. | 105 | 2,326 | ||||||
Belden, Inc. | 41 | 2,255 | ||||||
Terex Corp. | 70 | 2,085 | ||||||
O-I Glass, Inc. | 166 | 1,980 | ||||||
Werner Enterprises, Inc. | 47 | 1,710 | ||||||
Worthington Industries, Inc. | 39 | 1,645 | ||||||
Dycom Industries, Inc.* | 34 | 1,603 | ||||||
Greif, Inc. — Class A | 28 | 1,238 | ||||||
Total Industrial | 375,427 | |||||||
Consumer, Non-cyclical - 5.7% | ||||||||
West Pharmaceutical Services, Inc. | 79 | 11,876 | ||||||
WEX, Inc.* | 46 | 9,635 | ||||||
Molina Healthcare, Inc.* | 67 | 9,091 | ||||||
Bio-Techne Corp. | 41 | 9,000 | ||||||
Service Corporation International | 195 | 8,976 | ||||||
Catalent, Inc.* | 156 | 8,783 | ||||||
Bio-Rad Laboratories, Inc. — Class A* | 23 | 8,511 | ||||||
Masimo Corp.* | 52 | 8,219 | ||||||
Hill-Rom Holdings, Inc. | 71 | 8,061 | ||||||
Charles River Laboratories International, Inc.* | 52 | 7,944 | ||||||
Post Holdings, Inc.* | 71 | 7,746 | ||||||
PRA Health Sciences, Inc.* | 68 | 7,558 | ||||||
Chemed Corp. | 17 | 7,468 | ||||||
Encompass Health Corp. | 105 | 7,273 | ||||||
Arrowhead Pharmaceuticals, Inc.* | 107 | 6,787 | ||||||
Ingredion, Inc. | 71 | 6,599 | ||||||
Sabre Corp. | 293 | 6,575 | ||||||
Haemonetics Corp.* | 54 | 6,205 | ||||||
ManpowerGroup, Inc. | 63 | 6,117 | ||||||
Exelixis, Inc.* | 325 | 5,726 | ||||||
Amedisys, Inc.* | 34 | 5,675 | ||||||
HealthEquity, Inc.* | 76 | 5,629 | ||||||
Penumbra, Inc.* | 34 | 5,585 | ||||||
Grand Canyon Education, Inc.* | 52 | 4,981 | ||||||
Helen of Troy Ltd.* | 27 | 4,854 | ||||||
Globus Medical, Inc. — Class A* | 82 | 4,828 | ||||||
Brink’s Co. | 53 | 4,806 | ||||||
Repligen Corp.* | 50 | 4,625 | ||||||
Flowers Foods, Inc. | 206 | 4,478 | ||||||
Integra LifeSciences Holdings Corp.* | 76 | 4,429 | ||||||
FTI Consulting, Inc.* | 40 | 4,427 | ||||||
NuVasive, Inc.* | 56 | 4,331 | ||||||
Tenet Healthcare Corp.* | 111 | 4,221 | ||||||
United Therapeutics Corp.* | 47 | 4,140 | ||||||
Aaron’s, Inc. | 72 | 4,112 | ||||||
Nektar Therapeutics* | 188 | 4,058 | ||||||
Syneos Health, Inc.* | 67 | 3,985 | ||||||
ASGN, Inc.* | 56 | 3,974 | ||||||
ICU Medical, Inc.* | 21 | 3,930 | ||||||
LivaNova plc* | 52 | 3,922 | ||||||
Boston Beer Company, Inc. — Class A* | 10 | 3,779 | ||||||
CoreLogic, Inc.* | 85 | 3,715 | ||||||
Sanderson Farms, Inc. | 21 | 3,701 | ||||||
LiveRamp Holdings, Inc.* | 72 | 3,461 |
68 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
MID-CAP 1.5x STRATEGY FUND |
| Shares | Value | ||||||
Insperity, Inc. | 40 | $ | 3,442 | |||||
Lancaster Colony Corp. | 21 | 3,362 | ||||||
Graham Holdings Co. — Class B | 5 | 3,195 | ||||||
Acadia Healthcare Company, Inc.* | 95 | 3,156 | ||||||
TreeHouse Foods, Inc.* | 60 | 2,910 | ||||||
Cantel Medical Corp. | 40 | 2,836 | ||||||
MEDNAX, Inc.* | 90 | 2,501 | ||||||
Sprouts Farmers Market, Inc.* | 126 | 2,438 | ||||||
Hain Celestial Group, Inc.* | 86 | 2,232 | ||||||
Prestige Consumer Healthcare, Inc.* | 54 | 2,187 | ||||||
Adtalem Global Education, Inc.* | 58 | 2,028 | ||||||
Ligand Pharmaceuticals, Inc. — Class B* | 19 | 1,981 | ||||||
Avis Budget Group, Inc.* | 61 | 1,967 | ||||||
Healthcare Services Group, Inc. | 79 | 1,921 | ||||||
WW International, Inc.* | 50 | 1,911 | ||||||
Patterson Companies, Inc. | 92 | 1,884 | ||||||
Pilgrim’s Pride Corp.* | 56 | 1,832 | ||||||
Edgewell Personal Care Co.* | 58 | 1,796 | ||||||
Avanos Medical, Inc.* | 51 | 1,719 | ||||||
Green Dot Corp. — Class A* | 51 | 1,188 | ||||||
Tootsie Roll Industries, Inc. | 18 | 615 | ||||||
Total Consumer, Non-cyclical | 310,897 | |||||||
Consumer, Cyclical - 5.1% | ||||||||
Domino’s Pizza, Inc. | 44 | 12,926 | ||||||
Pool Corp. | 43 | 9,132 | ||||||
Toro Co. | 114 | 9,082 | ||||||
Caesars Entertainment Corp.* | 596 | 8,105 | ||||||
Lear Corp. | 59 | 8,095 | ||||||
Five Below, Inc.* | 59 | 7,544 | ||||||
Dunkin’ Brands Group, Inc. | 89 | 6,723 | ||||||
Wyndham Hotels & Resorts, Inc. | 102 | 6,407 | ||||||
Watsco, Inc. | 35 | 6,305 | ||||||
Polaris, Inc. | 61 | 6,204 | ||||||
Casey’s General Stores, Inc. | 39 | 6,201 | ||||||
Skechers U.S.A., Inc. — Class A* | 143 | 6,176 | ||||||
Williams-Sonoma, Inc. | 83 | 6,096 | ||||||
JetBlue Airways Corp.* | 308 | 5,766 | ||||||
Toll Brothers, Inc. | 138 | 5,452 | ||||||
Brunswick Corp. | 87 | 5,218 | ||||||
Churchill Downs, Inc. | 38 | 5,214 | ||||||
Marriott Vacations Worldwide Corp. | 40 | 5,150 | ||||||
Carter’s, Inc. | 47 | 5,139 | ||||||
Deckers Outdoor Corp.* | 30 | 5,066 | ||||||
Wyndham Destinations, Inc. | 97 | 5,014 | ||||||
Mattel, Inc.*,1 | 370 | 5,013 | ||||||
GrubHub, Inc.* | 98 | 4,767 | ||||||
Scotts Miracle-Gro Co. — Class A | 42 | 4,460 | ||||||
Foot Locker, Inc. | 114 | 4,445 | ||||||
Thor Industries, Inc. | 59 | 4,383 | ||||||
Wendy’s Co. | 197 | 4,375 | ||||||
Tempur Sealy International, Inc.* | 49 | 4,266 | ||||||
Eldorado Resorts, Inc.* | 70 | 4,175 | ||||||
Cracker Barrel Old Country Store, Inc.1 | 26 | 3,997 | ||||||
Texas Roadhouse, Inc. — Class A | 70 | 3,942 | ||||||
Goodyear Tire & Rubber Co. | 249 | 3,873 | ||||||
Cinemark Holdings, Inc. | 114 | 3,859 | ||||||
Six Flags Entertainment Corp. | 84 | 3,789 | ||||||
Ollie’s Bargain Outlet Holdings, Inc.* | 58 | 3,788 | ||||||
MSC Industrial Direct Company, Inc. — Class A | 48 | 3,767 | ||||||
FirstCash, Inc. | 46 | 3,709 | ||||||
RH* | 17 | 3,629 | ||||||
Choice Hotels International, Inc. | 34 | 3,517 | ||||||
Dick’s Sporting Goods, Inc. | 68 | 3,365 | ||||||
KB Home | 92 | 3,153 | ||||||
Columbia Sportswear Co. | 31 | 3,106 | ||||||
AutoNation, Inc.* | 63 | 3,064 | ||||||
World Fuel Services Corp. | 70 | 3,039 | ||||||
KAR Auction Services, Inc. | 138 | 3,007 | ||||||
BJ’s Wholesale Club Holdings, Inc.* | 131 | 2,979 | ||||||
Penn National Gaming, Inc.* | 116 | 2,965 | ||||||
Dana, Inc. | 154 | 2,803 | ||||||
Herman Miller, Inc. | 63 | 2,624 | ||||||
Visteon Corp.* | 30 | 2,598 | ||||||
Boyd Gaming Corp. | 86 | 2,575 | ||||||
American Eagle Outfitters, Inc. | 170 | 2,499 | ||||||
Nu Skin Enterprises, Inc. — Class A | 59 | 2,418 | ||||||
Bed Bath & Beyond, Inc. | 135 | 2,335 | ||||||
TRI Pointe Group, Inc.* | 149 | 2,322 | ||||||
Sally Beauty Holdings, Inc.* | 124 | 2,263 | ||||||
Urban Outfitters, Inc.* | 75 | 2,083 | ||||||
Adient plc* | 93 | 1,976 | ||||||
Jack in the Box, Inc. | 25 | 1,951 | ||||||
HNI Corp. | 46 | 1,723 | ||||||
Cheesecake Factory, Inc.1 | 44 | 1,710 | ||||||
Brinker International, Inc. | 40 | 1,680 | ||||||
Resideo Technologies, Inc.* | 131 | 1,563 | ||||||
Scientific Games Corp. — Class A* | 58 | 1,553 | ||||||
Papa John’s International, Inc. | 24 | 1,516 | ||||||
Delphi Technologies plc* | 92 | 1,180 | ||||||
Dillard’s, Inc. — Class A1 | 11 | 808 | ||||||
Total Consumer, Cyclical | 279,627 | |||||||
Technology - 3.1% | ||||||||
Tyler Technologies, Inc.* | 42 | 12,601 | ||||||
Teradyne, Inc. | 179 | 12,206 | ||||||
Fair Isaac Corp.* | 31 | 11,615 | ||||||
Cypress Semiconductor Corp. | 395 | 9,215 | ||||||
PTC, Inc.* | 111 | 8,313 | ||||||
Monolithic Power Systems, Inc. | 43 | 7,655 | ||||||
Ceridian HCM Holding, Inc.* | 108 | 7,331 | ||||||
CDK Global, Inc. | 130 | 7,108 | ||||||
CACI International, Inc. — Class A* | 27 | 6,750 | ||||||
Lumentum Holdings, Inc.* | 82 | 6,502 | ||||||
MKS Instruments, Inc. | 58 | 6,381 | ||||||
Manhattan Associates, Inc.* | 68 | 5,423 | ||||||
Silicon Laboratories, Inc.* | 46 | 5,335 | ||||||
Cree, Inc.* | 115 | 5,307 | ||||||
Cirrus Logic, Inc.* | 62 | 5,109 | ||||||
MAXIMUS, Inc. | 68 | 5,058 | ||||||
NCR Corp.* | 136 | 4,782 | ||||||
ACI Worldwide, Inc.* | 124 | 4,698 | ||||||
j2 Global, Inc. | 49 | 4,592 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 69 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
MID-CAP 1.5x STRATEGY FUND |
| Shares | Value | ||||||
Science Applications International Corp. | 52 | $ | 4,525 | |||||
Cabot Microelectronics Corp. | 31 | 4,474 | ||||||
Blackbaud, Inc. | 53 | 4,219 | ||||||
Perspecta, Inc. | 147 | 3,887 | ||||||
Semtech Corp.* | 71 | 3,756 | ||||||
Teradata Corp.* | 120 | 3,212 | ||||||
Synaptics, Inc.* | 36 | 2,368 | ||||||
CommVault Systems, Inc.* | 45 | 2,009 | ||||||
Allscripts Healthcare Solutions, Inc.* | 174 | 1,708 | ||||||
NetScout Systems, Inc.* | 70 | 1,685 | ||||||
Total Technology | 167,824 | |||||||
Basic Materials - 1.6% | ||||||||
RPM International, Inc. | 139 | 10,669 | ||||||
Royal Gold, Inc. | 70 | 8,557 | ||||||
Reliance Steel & Aluminum Co. | 71 | 8,503 | ||||||
Steel Dynamics, Inc. | 230 | 7,829 | ||||||
Ashland Global Holdings, Inc. | 64 | 4,898 | ||||||
Valvoline, Inc. | 201 | 4,303 | ||||||
Ingevity Corp.* | 45 | 3,932 | ||||||
NewMarket Corp. | 8 | 3,892 | ||||||
Chemours Co. | 175 | 3,166 | ||||||
PolyOne Corp. | 82 | 3,017 | ||||||
Sensient Technologies Corp. | 45 | 2,974 | ||||||
Olin Corp. | 171 | 2,950 | ||||||
Cabot Corp. | 61 | 2,899 | ||||||
Commercial Metals Co. | 127 | 2,828 | ||||||
Allegheny Technologies, Inc.* | 135 | 2,789 | ||||||
Carpenter Technology Corp. | 51 | 2,539 | ||||||
Domtar Corp. | 61 | 2,333 | ||||||
Compass Minerals International, Inc. | 36 | 2,195 | ||||||
Minerals Technologies, Inc. | 37 | 2,132 | ||||||
United States Steel Corp.1 | 182 | 2,077 | ||||||
Total Basic Materials | 84,482 | |||||||
Utilities - 1.5% | ||||||||
Aqua America, Inc. | 231 | 10,843 | ||||||
UGI Corp. | 223 | 10,071 | ||||||
OGE Energy Corp. | 214 | 9,517 | ||||||
IDACORP, Inc. | 54 | 5,767 | ||||||
Hawaiian Electric Industries, Inc. | 116 | 5,436 | ||||||
ONE Gas, Inc. | 56 | 5,240 | ||||||
Black Hills Corp. | 66 | 5,184 | ||||||
New Jersey Resources Corp. | 102 | 4,546 | ||||||
Spire, Inc. | 54 | 4,499 | ||||||
ALLETE, Inc. | 55 | 4,464 | ||||||
Southwest Gas Holdings, Inc. | 58 | 4,406 | ||||||
PNM Resources, Inc. | 85 | 4,310 | ||||||
National Fuel Gas Co. | 92 | 4,282 | ||||||
NorthWestern Corp. | 54 | 3,870 | ||||||
Total Utilities | 82,435 | |||||||
Communications - 1.2% | ||||||||
FactSet Research Systems, Inc. | 41 | 11,000 | ||||||
Cable One, Inc. | 5 | 7,442 | ||||||
Ciena Corp.* | 165 | 7,044 | ||||||
Etsy, Inc.* | 127 | 5,626 | ||||||
New York Times Co. — Class A | 154 | 4,954 | ||||||
ViaSat, Inc.* | 62 | 4,538 | ||||||
LogMeIn, Inc. | 52 | 4,459 | ||||||
TEGNA, Inc. | 232 | 3,872 | ||||||
TripAdvisor, Inc. | 112 | 3,403 | ||||||
World Wrestling Entertainment, Inc. — Class A | 51 | 3,308 | ||||||
Telephone & Data Systems, Inc. | 105 | 2,670 | ||||||
Yelp, Inc. — Class A* | 68 | 2,368 | ||||||
John Wiley & Sons, Inc. — Class A | 47 | 2,281 | ||||||
AMC Networks, Inc. — Class A* | 47 | 1,857 | ||||||
InterDigital, Inc. | 33 | 1,798 | ||||||
Meredith Corp. | 43 | 1,396 | ||||||
Total Communications | 68,016 | |||||||
Energy - 1.0% | ||||||||
WPX Energy, Inc.* | 445 | 6,114 | ||||||
SolarEdge Technologies, Inc.* | 52 | 4,944 | ||||||
First Solar, Inc.* | 81 | 4,533 | ||||||
Murphy Oil Corp. | 160 | 4,288 | ||||||
Transocean Ltd.* | 615 | 4,231 | ||||||
Murphy USA, Inc.* | 31 | 3,627 | ||||||
PBF Energy, Inc. — Class A | 109 | 3,419 | ||||||
Equities Corp. | 273 | 2,976 | ||||||
Equitrans Midstream Corp. | 218 | 2,913 | ||||||
Apergy Corp.* | 83 | 2,804 | ||||||
Antero Midstream Corp.1 | 317 | 2,406 | ||||||
Patterson-UTI Energy, Inc. | 208 | 2,184 | ||||||
Matador Resources Co.* | 117 | 2,103 | ||||||
Core Laboratories N.V. | 47 | 1,770 | ||||||
CNX Resources Corp.* | 199 | 1,761 | ||||||
NOW, Inc.* | 116 | 1,304 | ||||||
Chesapeake Energy Corp.*,1 | 1,253 | 1,035 | ||||||
Total Energy | 52,412 | |||||||
Total Common Stocks | ||||||||
(Cost $1,787,254) | 1,950,137 | |||||||
MUTUAL FUNDS† - 35.0% | ||||||||
Guggenheim Strategy Fund II2 | 46,093 | 1,140,345 | ||||||
Guggenheim Ultra Short Duration Fund — Institutional Class2 | 76,654 | 762,708 | ||||||
Total Mutual Funds | ||||||||
(Cost $1,902,497) | 1,903,053 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 20.3% | ||||||||
U.S. Treasury Bills | ||||||||
1.50% due 01/14/203,4 | $ | 745,000 | 744,635 | |||||
1.49% due 01/14/203,4 | 250,000 | 249,878 | ||||||
1.47% due 02/04/203,5 | 109,000 | 108,844 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $1,103,301) | 1,103,357 | |||||||
70 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
MID-CAP 1.5x STRATEGY FUND |
| Face | Value | ||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 9.2% | ||||||||
Federal Home Loan Bank Discount Notes | ||||||||
1.59% due 01/02/203 | $ | 500,000 | $ | 499,978 | ||||
Total Federal Agency Discount Notes | ||||||||
(Cost $499,978) | 499,978 | |||||||
REPURCHASE AGREEMENTS††,6 - 71.3% | ||||||||
J.P. Morgan Securities LLC | 2,360,757 | 2,360,757 | ||||||
Barclays Capital, Inc. | 761,216 | 761,216 | ||||||
BofA Securities, Inc. | 761,217 | 761,217 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $3,883,190) | $ | 3,883,190 | ||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,7 - 0.2% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.47%8 | 12,347 | 12,347 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $12,347) | 12,347 | |||||||
Total Investments - 171.8% | ||||||||
(Cost $9,188,567) | $ | 9,352,062 | ||||||
Other Assets & Liabilities, net - (71.8)% | (3,908,384 | ) | ||||||
Total Net Assets - 100.0% | $ | 5,443,678 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||||
S&P MidCap 400 Index Mini Futures Contracts | 12 | Mar 2020 | $ | 2,477,160 | $ | 54,602 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||
Barclays Bank plc | S&P MidCap 400 Index | 1.95% (1 Week USD LIBOR + 0.35%) | At Maturity | 01/31/20 | 1,334 | $ | 2,751,053 | $ | 3,067 | ||||||||||
BNP Paribas | S&P MidCap 400 Index | 2.25% (1 Month USD LIBOR + 0.45%) | At Maturity | 01/28/20 | 233 | 480,294 | (1,004 | ) | |||||||||||
Goldman Sachs International | S&P MidCap 400 Index | 2.00% (1 Week USD LIBOR + 0.40%) | At Maturity | 01/28/20 | 257 | 529,548 | (1,106 | ) | |||||||||||
$ | 3,760,895 | $ | 957 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 71 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
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, 2019 — See Note 7. |
2 | Affiliated issuer. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2019. |
5 | All or a portion of this security is pledged as futures collateral at December 31, 2019. |
6 | Repurchase Agreements — See Note 6. |
7 | Securities lending collateral — See Note 7. |
8 | Rate indicated is the 7-day yield as of December 31, 2019. |
LIBOR — London Interbank Offered Rate | |
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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 1,950,137 | $ | — | $ | — | $ | 1,950,137 | ||||||||
Mutual Funds | 1,903,053 | — | — | 1,903,053 | ||||||||||||
U.S. Treasury Bills | — | 1,103,357 | — | 1,103,357 | ||||||||||||
Federal Agency Discount Notes | — | 499,978 | — | 499,978 | ||||||||||||
Repurchase Agreements | — | 3,883,190 | — | 3,883,190 | ||||||||||||
Securities Lending Collateral | 12,347 | — | — | 12,347 | ||||||||||||
Equity Futures Contracts** | 54,602 | — | — | 54,602 | ||||||||||||
Equity Index Swap Agreements** | — | 3,067 | — | 3,067 | ||||||||||||
Total Assets | $ | 3,920,139 | $ | 5,489,592 | $ | — | $ | 9,409,731 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Index Swap Agreements** | $ | — | $ | 2,110 | $ | — | $ | 2,110 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
72 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
MID-CAP 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, 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 “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, 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/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 1,929,681 | $ | 4,571,253 | $ | (5,350,000 | ) | $ | (13,775 | ) | $ | 3,186 | $ | 1,140,345 | 46,093 | $ | 66,480 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 1,183,579 | 5,162,382 | (5,580,000 | ) | (4,368 | ) | 1,115 | 762,708 | 76,654 | 52,374 | ||||||||||||||||||||||
$ | 3,113,260 | $ | 9,733,635 | $ | (10,930,000 | ) | $ | (18,143 | ) | $ | 4,301 | $ | 1,903,053 | $ | 118,854 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 73 |
MID-CAP 1.5x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $12,004 of securities loaned (cost $3,402,880) | $ | 3,565,819 | ||
Investments in affiliated issuers, at value (cost $1,902,497) | 1,903,053 | |||
Repurchase agreements, at value (cost $3,883,190) | 3,883,190 | |||
Cash | 5,039 | |||
Unrealized appreciation on OTC swap agreements | 3,067 | |||
Receivables: | ||||
Securities sold | 6,000,000 | |||
Dividends | 15,824 | |||
Variation margin on futures contracts | 1,680 | |||
Interest | 162 | |||
Securities lending income | 7 | |||
Total assets | 15,377,841 | |||
Liabilities: | ||||
Unrealized depreciation on OTC swap agreements | 2,110 | |||
Payable for: | ||||
Fund shares redeemed | 9,362,364 | |||
Securities purchased | 512,359 | |||
Return of securities lending collateral | 12,347 | |||
Swap settlement | 11,086 | |||
Management fees | 8,986 | |||
Transfer agent and administrative fees | 2,743 | |||
Investor service fees | 2,743 | |||
Portfolio accounting fees | 1,097 | |||
Trustees’ fees* | 125 | |||
Miscellaneous | 18,203 | |||
Total liabilities | 9,934,163 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 5,443,678 | ||
Net assets consist of: | ||||
Paid in capital | $ | 5,118,851 | ||
Total distributable earnings (loss) | 324,827 | |||
Net assets | $ | 5,443,678 | ||
Capital shares outstanding | 280,618 | |||
Net asset value per share | $ | 19.40 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $8) | $ | 18,448 | ||
Dividends from securities of affiliated issuers | 118,854 | |||
Interest | 29,743 | |||
Income from securities lending, net | 58 | |||
Total investment income | 167,103 | |||
Expenses: | ||||
Management fees | 62,924 | |||
Investor service fees | 17,479 | |||
Transfer agent and administrative fees | 17,479 | |||
Portfolio accounting fees | 6,991 | |||
Professional fees | 6,282 | |||
Trustees’ fees* | 1,345 | |||
Printing fees | 2,290 | |||
Pricing fees | 1,672 | |||
Custodian fees | 1,053 | |||
Line of credit fees | 31 | |||
Miscellaneous | 13,371 | |||
Total expenses | 130,917 | |||
Less: | ||||
Expenses waived by Adviser | (5,417 | ) | ||
Net expenses | 125,500 | |||
Net investment income | 41,603 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 193,788 | |||
Investments in affiliated issuers | (18,143 | ) | ||
Swap agreements | 1,421,244 | |||
Futures contracts | 316,744 | |||
Net realized gain | 1,913,633 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 114,961 | |||
Investments in affiliated issuers | 4,301 | |||
Swap agreements | (53,110 | ) | ||
Futures contracts | 151,954 | |||
Net change in unrealized appreciation (depreciation) | 218,106 | |||
Net realized and unrealized gain | 2,131,739 | |||
Net increase in net assets resulting from operations | $ | 2,173,342 |
* | 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. |
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 | $ | 41,603 | $ | 58,449 | ||||
Net realized gain (loss) on investments | 1,913,633 | (1,722,253 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 218,106 | (143,616 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 2,173,342 | (1,807,420 | ) | |||||
Distributions to shareholders | (57,404 | ) | (1,545,520 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 22,974,077 | 32,788,786 | ||||||
Distributions reinvested | 57,404 | 1,545,520 | ||||||
Cost of shares redeemed | (25,111,651 | ) | (33,448,918 | ) | ||||
Net increase (decrease) from capital share transactions | (2,080,170 | ) | 885,388 | |||||
Net increase (decrease) in net assets | 35,768 | (2,467,552 | ) | |||||
Net assets: | ||||||||
Beginning of year | 5,407,910 | 7,875,462 | ||||||
End of year | $ | 5,443,678 | $ | 5,407,910 | ||||
Capital share activity: | ||||||||
Shares sold | 1,258,420 | 1,892,297 | ||||||
Shares issued from reinvestment of distributions | 3,120 | 80,538 | ||||||
Shares redeemed | (1,356,484 | ) | (1,934,256 | ) | ||||
Net increase (decrease) in shares | (94,944 | ) | 38,579 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 75 |
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 | $ | 14.40 | $ | 23.37 | $ | 36.19 | $ | 31.14 | $ | 35.05 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .11 | .13 | .02 | (.10 | ) | (.20 | ) | |||||||||||||
Net gain (loss) on investments (realized and unrealized) | 5.08 | (3.20 | ) | 5.81 | 8.87 | (1.45 | ) | |||||||||||||
Total from investment operations | 5.19 | (3.07 | ) | 5.83 | 8.77 | (1.65 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.19 | ) | (.06 | ) | — | — | — | |||||||||||||
Net realized gains | — | (5.84 | ) | (18.65 | ) | (3.72 | ) | (2.26 | ) | |||||||||||
Total distributions | (.19 | ) | (5.90 | ) | (18.65 | ) | (3.72 | ) | (2.26 | ) | ||||||||||
Net asset value, end of period | $ | 19.40 | $ | 14.40 | $ | 23.37 | $ | 36.19 | $ | 31.14 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 36.11 | % | (19.40 | %) | 22.44 | % | 29.64 | % | (5.50 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 5,444 | $ | 5,408 | $ | 7,875 | $ | 19,948 | $ | 15,093 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.60 | % | 0.67 | % | 0.07 | % | (0.30 | %) | (0.58 | %) | ||||||||||
Total expensesc | 1.87 | % | 1.78 | % | 1.76 | % | 1.72 | % | 1.67 | % | ||||||||||
Net expensesd | 1.80 | % | 1.78 | % | 1.76 | % | 1.72 | % | 1.67 | % | ||||||||||
Portfolio turnover rate | 274 | % | 368 | % | 403 | % | 368 | % | 477 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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. |
76 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, Inverse Mid-Cap Strategy Fund returned -20.31%. Over the year, its benchmark, the S&P MidCap 400 Index, returned 26.20%. Inverse Mid-Cap Strategy Fund achieved a daily correlation of 99% to its benchmark of -100% of the daily price movement of the S&P MidCap 400 Index.
The Information Technology, Industrials, and Financials sectors contributed the most to performance of the underlying index during the year. The Energy sector was the only detractor from performance of the underlying index for the year.
Teradyne, Inc., Fair Isaac Corp., and Teledyne Technologies, Inc. contributed the most to performance of the underlying index for the year. Covetrus, Inc., Green Dot Corp. — Class A, and EQT 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.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but that fee is waived by the respective investee fund. For the one-year period ended December 31, 2019, investment in the Short Term Investment Vehicles benefited Fund performance.
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, 2019 |
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 3, 2004 |
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 — Institutional Class | 27.4% |
Guggenheim Strategy Fund II | 25.6% |
Total | 53.0% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Inverse Mid-Cap Strategy Fund | (20.31%) | (9.38%) | (14.00%) |
S&P MidCap 400 Index | 26.20% | 9.03% | 12.72% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
78 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
INVERSE MID-CAP STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 53.0% | ||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 7,311 | $ | 72,747 | |||||
Guggenheim Strategy Fund II1 | 2,745 | 67,902 | ||||||
Total Mutual Funds | ||||||||
(Cost $140,851) | 140,649 | |||||||
Face | ||||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 7.5% | ||||||||
Federal Farm Credit Bank | ||||||||
1.56% due 08/21/202 | $ | 20,000 | 19,799 | |||||
Total Federal Agency Discount Notes | ||||||||
(Cost $19,798) | 19,799 | |||||||
U.S. TREASURY BILLS†† - 3.8% | ||||||||
U.S. Treasury Bills | ||||||||
1.50% due 01/14/202,4 | 10,000 | 9,995 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $9,995) | 9,995 | |||||||
REPURCHASE AGREEMENTS††,3 - 48.6% | ||||||||
J.P. Morgan Securities LLC | 78,440 | 78,440 | ||||||
Barclays Capital, Inc. | 25,293 | 25,293 | ||||||
BofA Securities, Inc. | 25,293 | 25,293 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $129,026) | 129,026 | |||||||
Total Investments - 112.9% | ||||||||
(Cost $299,670) | $ | 299,469 | ||||||
Other Assets & Liabilities, net - (12.9)% | (34,292 | ) | ||||||
Total Net Assets - 100.0% | $ | 265,177 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements Sold Short†† | |||||||||||||||||||
BNP Paribas | S&P MidCap 400 Index | (1.75%) (1 Month USD LIBOR - 0.05%) | At Maturity | 01/28/20 | 102 | $ | 210,146 | $ | 439 | ||||||||||
Goldman Sachs International | S&P MidCap 400 Index | (1.70%) (1 Week USD LIBOR + 0.10%) | At Maturity | 01/28/20 | 16 | 33,860 | 70 | ||||||||||||
Barclays Bank plc | S&P MidCap 400 Index | (1.80%) (1 Week USD LIBOR + 0.20%) | At Maturity | 01/31/20 | 10 | 21,624 | (24 | ) | |||||||||||
$ | 265,630 | $ | 485 |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Rate indicated is the effective yield at the time of purchase. |
3 | Repurchase Agreements — See Note 6. |
4 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2019. |
LIBOR — London Interbank Offered Rate | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 79 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
INVERSE MID-CAP STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 140,649 | $ | — | $ | — | $ | 140,649 | ||||||||
Federal Agency Discount Notes | — | 19,799 | — | 19,799 | ||||||||||||
U.S. Treasury Bills | — | 9,995 | — | 9,995 | ||||||||||||
Repurchase Agreements | — | 129,026 | — | 129,026 | ||||||||||||
Equity Index Swap Agreements** | — | 509 | — | 509 | ||||||||||||
Total Assets | $ | 140,649 | $ | 159,329 | $ | — | $ | 299,978 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Index Swap Agreements** | $ | — | $ | 24 | $ | — | $ | 24 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
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 “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, 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/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 129,855 | $ | 188,319 | $ | (250,000 | ) | $ | (364 | ) | $ | 92 | $ | 67,902 | 2,745 | $ | 3,325 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 119,433 | 213,327 | (260,000 | ) | (266 | ) | 253 | 72,747 | 7,311 | 2,831 | ||||||||||||||||||||||
$ | 249,288 | $ | 401,646 | $ | (510,000 | ) | $ | (630 | ) | $ | 345 | $ | 140,649 | $ | 6,156 |
80 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE MID-CAP STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $29,793) | $ | 29,794 | ||
Investments in affiliated issuers, at value (cost $140,851) | 140,649 | |||
Repurchase agreements, at value (cost $129,026) | 129,026 | |||
Segregated cash with broker | 52 | |||
Unrealized appreciation on OTC swap agreements | 509 | |||
Receivables: | ||||
Dividends | 299 | |||
Interest | 5 | |||
Swap settlement | 3 | |||
Total assets | 300,337 | |||
Liabilities: | ||||
Unrealized depreciation on OTC swap agreements | 24 | |||
Payable for: | ||||
Fund shares redeemed | 33,707 | |||
Securities purchased | 306 | |||
Management fees | 187 | |||
Transfer agent and administrative fees | 57 | |||
Investor service fees | 57 | |||
Portfolio accounting fees | 22 | |||
Trustees’ fees* | 6 | |||
Miscellaneous | 794 | |||
Total liabilities | 35,160 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 265,177 | ||
Net assets consist of: | ||||
Paid in capital | $ | 2,044,972 | ||
Total distributable earnings (loss) | (1,779,795 | ) | ||
Net assets | $ | 265,177 | ||
Capital shares outstanding | 4,416 | |||
Net asset value per share | $ | 60.05 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 6,156 | ||
Interest | 3,078 | |||
Total investment income | 9,234 | |||
Expenses: | ||||
Management fees | 3,215 | |||
Investor service fees | 893 | |||
Transfer agent and administrative fees | 893 | |||
Professional fees | 669 | |||
Portfolio accounting fees | 357 | |||
Trustees’ fees* | 93 | |||
Custodian fees | 89 | |||
Miscellaneous | 522 | |||
Total expenses | 6,731 | |||
Less: | ||||
Expenses waived by Adviser | (278 | ) | ||
Net expenses | 6,453 | |||
Net investment income | 2,781 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | (19 | ) | ||
Investments in affiliated issuers | (630 | ) | ||
Swap agreements | (62,056 | ) | ||
Futures contracts | (35,574 | ) | ||
Net realized loss | (98,279 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in affiliated issuers | 345 | |||
Swap agreements | 3,078 | |||
Futures contracts | 661 | |||
Net change in unrealized appreciation (depreciation) | 4,084 | |||
Net realized and unrealized loss | (94,195 | ) | ||
Net decrease in net assets resulting from operations | $ | (91,414 | ) |
* | 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 | 81 |
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 | $ | 2,781 | $ | 1,261 | ||||
Net realized loss on investments | (98,279 | ) | (28,926 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | 4,084 | (4,997 | ) | |||||
Net decrease in net assets resulting from operations | (91,414 | ) | (32,662 | ) | ||||
Distributions to shareholders | (1,261 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 2,723,707 | 5,179,494 | ||||||
Distributions reinvested | 1,261 | — | ||||||
Cost of shares redeemed | (3,012,184 | ) | (4,679,265 | ) | ||||
Net increase (decrease) from capital share transactions | (287,216 | ) | 500,229 | |||||
Net increase (decrease) in net assets | (379,891 | ) | 467,567 | |||||
Net assets: | ||||||||
Beginning of year | 645,068 | 177,501 | ||||||
End of year | $ | 265,177 | $ | 645,068 | ||||
Capital share activity: | ||||||||
Shares sold | 41,564 | 74,967 | ||||||
Shares issued from reinvestment of distributions | 20 | — | ||||||
Shares redeemed | (45,693 | ) | (69,044 | ) | ||||
Net increase (decrease) in shares | (4,109 | ) | 5,923 |
82 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
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 | $ | 75.67 | $ | 68.22 | $ | 78.92 | $ | 97.61 | $ | 98.69 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .51 | .35 | (.16 | ) | (.26 | ) | (1.38 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | (15.87 | ) | 7.10 | f | (10.54 | ) | (18.43 | ) | .30 | |||||||||||
Total from investment operations | (15.36 | ) | 7.45 | (10.70 | ) | (18.69 | ) | (1.08 | ) | |||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.26 | ) | — | — | — | — | ||||||||||||||
Total distributions | (.26 | ) | — | — | — | — | ||||||||||||||
Net asset value, end of period | $ | 60.05 | $ | 75.67 | $ | 68.22 | $ | 78.92 | $ | 97.61 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (20.31 | %) | 10.90 | % | (13.55 | %) | (19.13 | %) | (1.12 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 265 | $ | 645 | $ | 178 | $ | 380 | $ | 611 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.78 | % | 0.51 | % | (0.22 | %) | (0.82 | %) | (1.46 | %) | ||||||||||
Total expensesc | 1.88 | % | 1.77 | % | 1.76 | % | 1.71 | % | 1.66 | % | ||||||||||
Net expensesd | 1.81 | % | 1.77 | % | 1.76 | % | 1.71 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 185 | % | 404 | % | 111 | % | 565 | % | 220 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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 | 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. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 83 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, 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 47.15%, while the Russell 2000 Index returned 25.52% over the same time period.
The Information Technology, Health Care, and Industrials sectors contributed the most to performance of the underlying index during the year. The Energy sector was the only detractor from performance of the underlying index for the year.
Array BioPharma, Inc., Medicines Co., and Arrowhead Pharmaceuticals, Inc. were the largest contributors to performance of the underlying index for the year. Green Dot Corp. — Class A, Merit Medical Systems, Inc., and Peabody Energy Corp. 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.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but that fee is waived by the respective investee fund. For the one-year period ended December 31, 2019, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
84 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
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: October 27, 2006 |
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 — Institutional Class | 24.7% |
Guggenheim Strategy Fund II | 16.9% |
Total | 41.6% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Russell 2000® 2x Strategy Fund | 47.15% | 10.46% | 17.37% |
Russell 2000 Index | 25.52% | 9.64% | 13.47% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 85 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
RUSSELL 2000® 2x STRATEGY FUND |
| Shares | Value | ||||||
RIGHTS†††,1 - 0.0% | ||||||||
Omthera Pharmaceuticals, Inc.* | 10 | $ | — | |||||
Tobira Therapeutics, Inc.* | 7 | — | ||||||
A Schulman, Inc.* | 20 | — | ||||||
Nexstar Media Group, Inc.* | 207 | — | ||||||
Total Rights | ||||||||
(Cost $—) | — | |||||||
MUTUAL FUNDS† - 41.6% | ||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class2 | 95,973 | 954,930 | ||||||
Guggenheim Strategy Fund II2 | 26,507 | 655,774 | ||||||
Total Mutual Funds | ||||||||
(Cost $1,612,891) | 1,610,704 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 7.1% | ||||||||
U.S. Treasury Bills | ||||||||
1.54% due 01/14/203,5 | $ | 250,000 | 249,877 | |||||
1.49% due 01/14/203,5 | 25,000 | 24,988 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $274,847) | 274,865 | |||||||
REPURCHASE AGREEMENTS††,4 - 52.0% | ||||||||
J.P. Morgan Securities LLC | 1,225,718 | 1,225,718 | ||||||
Barclays Capital, Inc. | 395,228 | 395,228 | ||||||
BofA Securities, Inc. | 395,228 | 395,228 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $2,016,174) | 2,016,174 | |||||||
Total Investments - 100.7% | ||||||||
(Cost $3,903,912) | $ | 3,901,743 | ||||||
Other Assets & Liabilities, net - (0.7)% | (27,220 | ) | ||||||
Total Net Assets - 100.0% | $ | 3,874,523 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Equity Futures Contracts Sold Short† | ||||||||||||||||
Russell 2000 Index Mini Futures Contracts | 7 | Mar 2020 | $ | 584,430 | $ | 1,302 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||
Barclays Bank plc | Russell 2000 Index | 1.60% (1 Week USD LIBOR) | At Maturity | 01/31/20 | 1,800 | $ | 3,002,770 | $ | 7,773 | ||||||||||
BNP Paribas | Russell 2000 Index | 1.90% (1 Month USD LIBOR + 0.10%) | At Maturity | 01/28/20 | 1,572 | 2,622,700 | (8,901 | ) | |||||||||||
Goldman Sachs International | Russell 2000 Index | 1.85% (1 Week USD LIBOR + 0.25%) | At Maturity | 01/28/20 | 1,621 | 2,703,805 | (11,661 | ) | |||||||||||
$ | 8,329,275 | $ | (12,789 | ) |
86 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
RUSSELL 2000® 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. |
††† | Value determined based on Level 3 inputs — See Note 4. |
1 | Security was fair valued by the Valuation Committee at December 31, 2019. The total market value of fair valued securities amounts to $0, (cost $0) or 0.0% of total net assets. |
2 | Affiliated issuer. |
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, 2019. |
LIBOR — London Interbank Offered Rate | |
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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Rights | $ | — | $ | — | $ | — | * | $ | — | |||||||
Mutual Funds | 1,610,704 | — | — | 1,610,704 | ||||||||||||
U.S. Treasury Bills | — | 274,865 | — | 274,865 | ||||||||||||
Repurchase Agreements | — | 2,016,174 | — | 2,016,174 | ||||||||||||
Equity Futures Contracts** | 1,302 | — | — | 1,302 | ||||||||||||
Equity Index Swap Agreements** | — | 7,773 | — | 7,773 | ||||||||||||
Total Assets | $ | 1,612,006 | $ | 2,298,812 | $ | — | $ | 3,910,818 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Index Swap Agreements** | $ | — | $ | 20,562 | $ | — | $ | 20,562 |
* | Includes securities with a market value of $0. |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 87 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
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 “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, 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/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 448,611 | $ | 3,399,313 | $ | (3,190,000 | ) | $ | (2,320 | ) | $ | 170 | $ | 655,774 | 26,507 | $ | 24,330 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 459,770 | 4,220,058 | (3,725,000 | ) | 571 | (469 | ) | 954,930 | 95,973 | 20,063 | ||||||||||||||||||||||
$ | 908,381 | $ | 7,619,371 | $ | (6,915,000 | ) | $ | (1,749 | ) | $ | (299 | ) | $ | 1,610,704 | $ | 44,393 |
88 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RUSSELL 2000® 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $274,847) | $ | 274,865 | ||
Investments in affiliated issuers, at value (cost $1,612,891) | 1,610,704 | |||
Repurchase agreements, at value (cost $2,016,174) | 2,016,174 | |||
Segregated cash with broker | 5,496 | |||
Unrealized appreciation on OTC swap agreements | 7,773 | |||
Receivables: | ||||
Dividends | 3,818 | |||
Swap settlement | 1,812 | |||
Variation margin on futures contracts | 1,302 | |||
Interest | 85 | |||
Total assets | 3,922,029 | |||
Liabilities: | ||||
Unrealized depreciation on OTC swap agreements | 20,562 | |||
Payable for: | ||||
Fund shares redeemed | 10,297 | |||
Securities purchased | 3,900 | |||
Management fees | 2,627 | |||
Transfer agent and administrative fees | 795 | |||
Investor service fees | 795 | |||
Portfolio accounting fees | 318 | |||
Trustees’ fees* | 51 | |||
Miscellaneous | 8,161 | |||
Total liabilities | 47,506 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 3,874,523 | ||
Net assets consist of: | ||||
Paid in capital | $ | 4,172,074 | ||
Total distributable earnings (loss) | (297,551 | ) | ||
Net assets | $ | 3,874,523 | ||
Capital shares outstanding | 16,488 | |||
Net asset value per share | $ | 234.99 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 44,393 | ||
Interest | 29,996 | |||
Income from securities lending, net | 1 | |||
Total investment income | 74,390 | |||
Expenses: | ||||
Management fees | 27,114 | |||
Investor service fees | 7,532 | |||
Transfer agent and administrative fees | 7,532 | |||
Professional fees | 9,242 | |||
Portfolio accounting fees | 3,013 | |||
Trustees’ fees* | 1,128 | |||
Custodian fees | 869 | |||
Line of credit fees | 6 | |||
Miscellaneous | 1,483 | |||
Total expenses | 57,919 | |||
Less: | ||||
Expenses waived by Adviser | (2,002 | ) | ||
Net expenses | 55,917 | |||
Net investment income | 18,473 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 12,131 | |||
Investments in affiliated issuers | (1,749 | ) | ||
Swap agreements | 464,299 | |||
Futures contracts | 12,445 | |||
Net realized gain | 487,126 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (7,035 | ) | ||
Investments in affiliated issuers | (299 | ) | ||
Swap agreements | (51,645 | ) | ||
Futures contracts | 12,312 | |||
Net change in unrealized appreciation (depreciation) | (46,667 | ) | ||
Net realized and unrealized gain | 440,459 | |||
Net increase in net assets resulting from operations | $ | 458,932 |
* | 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 | 89 |
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 | $ | 18,473 | $ | 16,911 | ||||
Net realized gain (loss) on investments | 487,126 | (623,839 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | (46,667 | ) | (99,825 | ) | ||||
Net increase (decrease) in net assets resulting from operations | 458,932 | (706,753 | ) | |||||
Distributions to shareholders | (17,289 | ) | (567,824 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 36,929,861 | 138,484,712 | ||||||
Distributions reinvested | 17,289 | 567,824 | ||||||
Cost of shares redeemed | (35,204,749 | ) | (143,127,280 | ) | ||||
Net increase (decrease) from capital share transactions | 1,742,401 | (4,074,744 | ) | |||||
Net increase (decrease) in net assets | 2,184,044 | (5,349,321 | ) | |||||
Net assets: | ||||||||
Beginning of year | 1,690,479 | 7,039,800 | ||||||
End of year | $ | 3,874,523 | $ | 1,690,479 | ||||
Capital share activity: | ||||||||
Shares sold | 176,687 | 548,261 | ||||||
Shares issued from reinvestment of distributions | 81 | 2,192 | ||||||
Shares redeemed | (170,815 | ) | (569,919 | ) | ||||
Net increase (decrease) in shares | 5,953 | (19,466 | ) |
90 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
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 | $ | 160.46 | $ | 234.65 | $ | 192.92 | $ | 139.69 | $ | 180.03 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | 1.27 | .70 | (.79 | ) | (1.11 | ) | (1.73 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | 74.31 | (54.40 | ) | 50.24 | 54.34 | (17.40 | ) | |||||||||||||
Total from investment operations | 75.58 | (53.70 | ) | 49.45 | 53.23 | (19.13 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (1.05 | ) | — | — | — | — | ||||||||||||||
Net realized gains | — | (20.49 | ) | (7.72 | ) | — | (21.21 | ) | ||||||||||||
Total distributions | (1.05 | ) | (20.49 | ) | (7.72 | ) | — | (21.21 | ) | |||||||||||
Net asset value, end of period | $ | 234.99 | $ | 160.46 | $ | 234.65 | $ | 192.92 | $ | 139.69 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 47.15 | % | (26.21 | %) | 26.26 | % | 38.11 | % | (13.15 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 3,875 | $ | 1,690 | $ | 7,040 | $ | 5,747 | $ | 2,770 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.61 | % | 0.28 | % | (0.38 | %) | (0.74 | %) | (1.00 | %) | ||||||||||
Total expensesc | 1.92 | % | 1.82 | % | 1.80 | % | 1.77 | % | 1.70 | % | ||||||||||
Net expensesd | 1.86 | % | 1.82 | % | 1.80 | % | 1.77 | % | 1.70 | % | ||||||||||
Portfolio turnover rate | 510 | % | 625 | % | 525 | % | 1,125 | % | 327 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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 | 91 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, 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 35.36%, while the Russell 2000 Index returned 25.52% over the same time period.
The Information Technology, Health Care, and Industrials sectors contributed the most to performance of the underlying index during the year. The Energy sector was the only detractor from performance of the underlying index for the year.
Array BioPharma, Inc., Medicines Co., and Arrowhead Pharmaceuticals, Inc. were the largest contributors to performance of the underlying index for the year. Green Dot Corp. — Class A, Merit Medical Systems, Inc., and Peabody Energy Corp. 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.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but that fee is waived by the respective investee fund. For the one-year period ended December 31, 2019, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
92 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
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: October 1, 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 — Institutional Class | 33.7% |
Guggenheim Strategy Fund II | 23.4% |
Total | 57.1% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Russell 2000® 1.5x Strategy Fund | 35.36% | 9.15% | 14.24% |
Russell 2000 Index | 25.52% | 9.64% | 13.47% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 93 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
RUSSELL 2000® 1.5x STRATEGY FUND |
| Shares | Value | ||||||
RIGHTS†††,1 - 0.0% | ||||||||
Tobira Therapeutics, Inc.* | 8 | $ | — | |||||
Nexstar Media Group, Inc.* | 132 | — | ||||||
Omthera Pharmaceuticals, Inc.* | 37 | — | ||||||
A Schulman, Inc.* | 18 | — | ||||||
Total Rights | ||||||||
(Cost $—) | — | |||||||
MUTUAL FUNDS† - 57.1% | ||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class2 | 180,754 | 1,798,499 | ||||||
Guggenheim Strategy Fund II2 | 50,595 | 1,251,714 | ||||||
Total Mutual Funds | ||||||||
(Cost $3,054,390) | 3,050,213 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 9.9% | ||||||||
U.S. Treasury Bills | ||||||||
1.50% due 01/14/203,6 | $ | 530,000 | 529,741 | |||||
Total U.S. Treasury Bills | ||||||||
(Cost $529,708) | 529,741 | |||||||
FEDERAL AGENCY NOTES†† - 4.7% | ||||||||
Federal Farm Credit Bank | ||||||||
1.95% (U.S. Prime Rate - 2.80%, Rate Floor: 0.00%) due 03/14/224 | 250,000 | 250,491 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $250,000) | 250,491 | |||||||
REPURCHASE AGREEMENTS††,5 - 38.1% | ||||||||
J.P. Morgan Securities LLC | 1,237,977 | 1,237,977 | ||||||
Barclays Capital, Inc. | 399,181 | 399,181 | ||||||
BofA Securities, Inc. | 399,180 | 399,180 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $2,036,338) | 2,036,338 | |||||||
Total Investments - 109.8% | ||||||||
(Cost $5,870,436) | $ | 5,866,783 | ||||||
Other Assets & Liabilities, net - (9.8)% | (521,893 | ) | ||||||
Total Net Assets - 100.0% | $ | 5,344,890 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||
Barclays Bank plc | Russell 2000 Index | 1.60% (1 Week USD LIBOR) | At Maturity | 01/31/20 | 3,147 | $ | 5,250,350 | $ | 13,591 | ||||||||||
BNP Paribas | Russell 2000 Index | 1.90% (1 Month USD LIBOR + 0.10%) | At Maturity | 01/28/20 | 759 | 1,266,961 | (3,363 | ) | |||||||||||
Goldman Sachs International | Russell 2000 Index | 1.85% (1 Week USD LIBOR + 0.25%) | At Maturity | 01/28/20 | 923 | 1,539,178 | (8,488 | ) | |||||||||||
$ | 8,056,489 | $ | 1,740 |
94 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
RUSSELL 2000® 1.5x STRATEGY FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
††† | Value determined based on Level 3 inputs — See Note 4. |
1 | Security was fair valued by the Valuation Committee at December 31, 2019. The total market value of fair valued securities amounts to $0, (cost $0) or 0.0% of total net assets. |
2 | Affiliated issuer. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | Variable rate security. Rate indicated is the rate effective at December 31, 2019. 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 | Repurchase Agreements — See Note 6. |
6 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2019. |
LIBOR — London Interbank Offered Rate | |
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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Rights | $ | — | $ | — | $ | — | * | $ | — | |||||||
Mutual Funds | 3,050,213 | — | — | 3,050,213 | ||||||||||||
U.S. Treasury Bills | — | 529,741 | — | 529,741 | ||||||||||||
Federal Agency Notes | — | 250,491 | — | 250,491 | ||||||||||||
Repurchase Agreements | — | 2,036,338 | — | 2,036,338 | ||||||||||||
Equity Index Swap Agreements** | — | 13,591 | — | 13,591 | ||||||||||||
Total Assets | $ | 3,050,213 | $ | 2,830,161 | $ | — | $ | 5,880,374 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Index Swap Agreements** | $ | — | $ | 11,851 | $ | — | $ | 11,851 |
* | Includes securities with a market value of $0. |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 95 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
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, 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 “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, 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/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 1,998,839 | $ | 1,353,326 | $ | (2,095,000 | ) | $ | (9,147 | ) | $ | 3,696 | $ | 1,251,714 | 50,595 | $ | 53,501 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 1,893,534 | 3,096,679 | (3,190,000 | ) | (7,623 | ) | 5,909 | 1,798,499 | 180,754 | 46,795 | ||||||||||||||||||||||
$ | 3,892,373 | $ | 4,450,005 | $ | (5,285,000 | ) | $ | (16,770 | ) | $ | 9,605 | $ | 3,050,213 | $ | 100,296 |
96 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RUSSELL 2000® 1.5x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $779,708) | $ | 780,232 | ||
Investments in affiliated issuers, at value (cost $3,054,390) | 3,050,213 | |||
Repurchase agreements, at value (cost $2,036,338) | 2,036,338 | |||
Segregated cash with broker | 3,626 | |||
Unrealized appreciation on OTC swap agreements | 13,591 | |||
Receivables: | ||||
Dividends | 6,029 | |||
Fund shares sold | 2,712 | |||
Interest | 328 | |||
Total assets | 5,893,069 | |||
Liabilities: | ||||
Unrealized depreciation on OTC swap agreements | 11,851 | |||
Payable for: | ||||
Fund shares redeemed | 498,314 | |||
Swap settlement | 9,067 | |||
Securities purchased | 6,184 | |||
Management fees | 3,781 | |||
Transfer agent and administrative fees | 1,153 | |||
Investor service fees | 1,153 | |||
Portfolio accounting fees | 461 | |||
Trustees’ fees* | 101 | |||
Miscellaneous | 16,114 | |||
Total liabilities | 548,179 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 5,344,890 | ||
Net assets consist of: | ||||
Paid in capital | $ | 5,209,168 | ||
Total distributable earnings (loss) | 135,722 | |||
Net assets | $ | 5,344,890 | ||
Capital shares outstanding | 68,577 | |||
Net asset value per share | $ | 77.94 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $1) | $ | 3,304 | ||
Dividends from securities of affiliated issuers | 100,296 | |||
Interest | 45,469 | |||
Income from securities lending, net | 79 | |||
Total investment income | 149,148 | |||
Expenses: | ||||
Management fees | 55,255 | |||
Investor service fees | 15,349 | |||
Transfer agent and administrative fees | 15,349 | |||
Professional fees | 14,449 | |||
Portfolio accounting fees | 6,139 | |||
Trustees’ fees* | 1,985 | |||
Custodian fees | 1,382 | |||
Line of credit fees | 10 | |||
Miscellaneous | 8,075 | |||
Total expenses | 117,993 | |||
Less: | ||||
Expenses waived by Adviser | (4,623 | ) | ||
Net expenses | 113,370 | |||
Net investment income | 35,778 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 111,615 | |||
Investments in affiliated issuers | (16,770 | ) | ||
Swap agreements | 1,790,024 | |||
Futures contracts | 7,847 | |||
Net realized gain | 1,892,716 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (34,638 | ) | ||
Investments in affiliated issuers | 9,605 | |||
Swap agreements | (116,269 | ) | ||
Futures contracts | 44,040 | |||
Net change in unrealized appreciation (depreciation) | (97,262 | ) | ||
Net realized and unrealized gain | 1,795,454 | |||
Net increase in net assets resulting from operations | $ | 1,831,232 |
* | 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 | 97 |
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 | $ | 35,778 | $ | 43,568 | ||||
Net realized gain (loss) on investments | 1,892,716 | (1,774,980 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | (97,262 | ) | (223,242 | ) | ||||
Net increase (decrease) in net assets resulting from operations | 1,831,232 | (1,954,654 | ) | |||||
Distributions to shareholders | — | (457,521 | ) | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 22,821,308 | 44,616,756 | ||||||
Distributions reinvested | — | 457,521 | ||||||
Cost of shares redeemed | (25,780,443 | ) | (45,258,875 | ) | ||||
Net decrease from capital share transactions | (2,959,135 | ) | (184,598 | ) | ||||
Net decrease in net assets | (1,127,903 | ) | (2,596,773 | ) | ||||
Net assets: | ||||||||
Beginning of year | 6,472,793 | 9,069,566 | ||||||
End of year | $ | 5,344,890 | $ | 6,472,793 | ||||
Capital share activity: | ||||||||
Shares sold | 328,788 | 589,674 | ||||||
Shares issued from reinvestment of distributions | — | 5,585 | ||||||
Shares redeemed | (372,633 | ) | (604,439 | ) | ||||
Net decrease in shares | (43,845 | ) | (9,180 | ) |
98 | 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 | $ | 57.58 | $ | 74.58 | $ | 64.03 | $ | 49.10 | $ | 53.99 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .41 | .34 | (.14 | ) | (.38 | ) | (.46 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | 19.95 | (13.90 | ) | 12.71 | 15.31 | (4.43 | ) | |||||||||||||
Total from investment operations | 20.36 | (13.56 | ) | 12.57 | 14.93 | (4.89 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | — | (3.44 | ) | (2.02 | ) | — | — | |||||||||||||
Total distributions | — | (3.44 | ) | (2.02 | ) | — | — | |||||||||||||
Net asset value, end of period | $ | 77.94 | $ | 57.58 | $ | 74.58 | $ | 64.03 | $ | 49.10 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 35.36 | % | (19.57 | %) | 20.01 | % | 30.41 | % | (9.08 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 5,345 | $ | 6,473 | $ | 9,070 | $ | 9,759 | $ | 6,342 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.58 | % | 0.45 | % | (0.21 | %) | (0.74 | %) | (0.84 | %) | ||||||||||
Total expensesc | 1.92 | % | 1.82 | % | 1.80 | % | 1.77 | % | 1.70 | % | ||||||||||
Net expensesd | 1.85 | % | 1.81 | % | 1.80 | % | 1.77 | % | 1.70 | % | ||||||||||
Portfolio turnover rate | 127 | % | 268 | % | 234 | % | 1,198 | % | 406 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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 | 99 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, 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 -20.62% while the Russell 2000 Index returned 25.52% over the same time period.
The Information Technology, Health Care, and Industrials sectors contributed the most to performance of the underlying index during the year. The Energy sector was the only detractor from performance of the underlying index for the year.
Array BioPharma, Inc., Medicines Co., and Arrowhead Pharmaceuticals, Inc. were the largest contributors to performance of the underlying index for the year. Green Dot Corp. — Class A, Merit Medical Systems, Inc., and Peabody Energy Corp. 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.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but that fee is waived by the respective investee fund. For the one-year period ended December 31, 2019, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
100 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
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 3, 2004 |
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 — Institutional Class | 26.9% |
Guggenheim Strategy Fund II | 25.1% |
Total | 52.0% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Inverse Russell 2000® Strategy Fund | (20.62%) | (9.44%) | (14.45%) |
Russell 2000 Index | 25.52% | 9.64% | 13.47% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 101 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
INVERSE RUSSELL 2000® STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 52.0% | ||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 16,554 | $ | 164,715 | |||||
Guggenheim Strategy Fund II1 | 6,201 | 153,407 | ||||||
Total Mutual Funds | ||||||||
(Cost $318,051) | 318,122 | |||||||
Face | ||||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 8.6% | ||||||||
Federal Farm Credit Bank | ||||||||
1.56% due 08/21/202 | $ | 53,000 | 52,467 | |||||
Total Federal Agency Discount Notes | ||||||||
(Cost $52,465) | 52,467 | |||||||
U.S. TREASURY BILLS†† - 0.6% | ||||||||
U.S. Treasury Bills | ||||||||
1.47% due 02/04/202,3 | 4,000 | 3,994 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $3,994) | 3,994 | |||||||
REPURCHASE AGREEMENTS††,4 - 41.1% | ||||||||
J.P. Morgan Securities LLC | 153,091 | 153,091 | ||||||
Barclays Capital, Inc. | 49,364 | 49,364 | ||||||
BofA Securities, Inc. | 49,363 | 49,363 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $251,818) | 251,818 | |||||||
Total Investments - 102.3% | ||||||||
(Cost $626,328) | $ | 626,401 | ||||||
Other Assets & Liabilities, net - (2.3)% | (14,128 | ) | ||||||
Total Net Assets - 100.0% | $ | 612,273 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Equity Futures Contracts Sold Short† | ||||||||||||||||
Russell 2000 Index Mini Futures Contracts | 1 | Mar 2020 | $ | 83,490 | $ | (1,656 | ) |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements Sold Short†† | |||||||||||||||||||
Goldman Sachs International | Russell 2000 Index | (1.55%) (1 Week USD LIBOR - 0.05%) | At Maturity | 01/28/20 | 181 | $ | 302,472 | $ | 1,667 | ||||||||||
BNP Paribas | Russell 2000 Index | (1.40%) (1 Month USD LIBOR - 0.40%) | At Maturity | 01/28/20 | 71 | 118,152 | 651 | ||||||||||||
Barclays Bank plc | Russell 2000 Index | (1.10%) (1 Week USD LIBOR - 0.50%) | At Maturity | 01/31/20 | 75 | 125,694 | (325 | ) | |||||||||||
$ | 546,318 | $ | 1,993 |
102 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
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 | Rate indicated is the effective yield at the time of purchase. |
3 | All or a portion of this security is pledged as futures collateral at December 31, 2019. |
4 | Repurchase Agreements — See Note 6. |
5 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2019. |
LIBOR — London Interbank Offered Rate | |
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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 318,122 | $ | — | $ | — | $ | 318,122 | ||||||||
Federal Agency Discount Notes | — | 52,467 | — | 52,467 | ||||||||||||
U.S. Treasury Bills | — | 3,994 | — | 3,994 | ||||||||||||
Repurchase Agreements | — | 251,818 | — | 251,818 | ||||||||||||
Equity Index Swap Agreements** | — | 2,318 | — | 2,318 | ||||||||||||
Total Assets | $ | 318,122 | $ | 310,597 | $ | — | $ | 628,719 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Futures Contracts** | $ | 1,656 | $ | — | $ | — | $ | 1,656 | ||||||||
Equity Index Swap Agreements** | — | 325 | — | 325 | ||||||||||||
Total Liabilities | $ | 1,656 | $ | 325 | $ | — | $ | 1,981 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 103 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
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 “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, 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/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 1,209,164 | $ | 555,693 | $ | (1,610,000 | ) | $ | (4,367 | ) | $ | 2,917 | $ | 153,407 | 6,201 | $ | 10,834 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 1,060,232 | 694,616 | (1,590,000 | ) | (676 | ) | 543 | 164,715 | 16,554 | 9,720 | ||||||||||||||||||||||
$ | 2,269,396 | $ | 1,250,309 | $ | (3,200,000 | ) | $ | (5,043 | ) | $ | 3,460 | $ | 318,122 | $ | 20,554 |
104 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE RUSSELL 2000® STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $56,459) | $ | 56,461 | ||
Investments in affiliated issuers, at value (cost $318,051) | 318,122 | |||
Repurchase agreements, at value (cost $251,818) | 251,818 | |||
Unrealized appreciation on OTC swap agreements | 2,318 | |||
Receivables: | ||||
Dividends | 754 | |||
Swap settlement | 148 | |||
Interest | 11 | |||
Total assets | 629,632 | |||
Liabilities: | ||||
Unrealized depreciation on OTC swap agreements | 325 | |||
Payable for: | ||||
Fund shares redeemed | 12,354 | |||
Professional fees | 1,756 | |||
Securities purchased | 770 | |||
Management fees | 468 | |||
Transfer agent and administrative fees | 143 | |||
Investor service fees | 143 | |||
Variation margin on futures contracts | 70 | |||
Portfolio accounting fees | 57 | |||
Trustees’ fees* | 19 | |||
Miscellaneous | 1,254 | |||
Total liabilities | 17,359 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 612,273 | ||
Net assets consist of: | ||||
Paid in capital | $ | 7,450,678 | ||
Total distributable earnings (loss) | (6,838,405 | ) | ||
Net assets | $ | 612,273 | ||
Capital shares outstanding | 11,377 | |||
Net asset value per share | $ | 53.82 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 20,554 | ||
Interest | 10,981 | |||
Total investment income | 31,535 | |||
Expenses: | ||||
Management fees | 10,879 | |||
Investor service fees | 3,022 | |||
Transfer agent and administrative fees | 3,022 | |||
Professional fees | 1,434 | |||
Portfolio accounting fees | 1,209 | |||
Printing fees | 667 | |||
Trustees’ fees* | 349 | |||
Custodian fees | 194 | |||
Miscellaneous | 2,508 | |||
Total expenses | 23,284 | |||
Less: | ||||
Expenses waived by Adviser | (967 | ) | ||
Net expenses | 22,317 | |||
Net investment income | 9,218 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 5 | |||
Investments in affiliated issuers | (5,043 | ) | ||
Swap agreements | (494,658 | ) | ||
Futures contracts | (2,650 | ) | ||
Net realized loss | (502,346 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 15 | |||
Investments in affiliated issuers | 3,460 | |||
Swap agreements | 53,681 | |||
Futures contracts | (7,152 | ) | ||
Net change in unrealized appreciation (depreciation) | 50,004 | |||
Net realized and unrealized loss | (452,342 | ) | ||
Net decrease in net assets resulting from operations | $ | (443,124 | ) |
* | 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 |
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 | $ | 9,218 | $ | 7,165 | ||||
Net realized gain (loss) on investments | (502,346 | ) | 261,341 | |||||
Net change in unrealized appreciation (depreciation) on investments | 50,004 | (59,370 | ) | |||||
Net increase (decrease) in net assets resulting from operations | (443,124 | ) | 209,136 | |||||
Distributions to shareholders | (7,165 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 15,962,630 | 22,485,357 | ||||||
Distributions reinvested | 7,165 | — | ||||||
Cost of shares redeemed | (18,689,264 | ) | (19,835,857 | ) | ||||
Net increase (decrease) from capital share transactions | (2,719,469 | ) | 2,649,500 | |||||
Net increase (decrease) in net assets | (3,169,758 | ) | 2,858,636 | |||||
Net assets: | ||||||||
Beginning of year | 3,782,031 | 923,395 | ||||||
End of year | $ | 612,273 | $ | 3,782,031 | ||||
Capital share activity: | ||||||||
Shares sold | 269,058 | 376,275 | ||||||
Shares issued from reinvestment of distributions | 125 | — | ||||||
Shares redeemed | (313,193 | ) | (335,916 | ) | ||||
Net increase (decrease) in shares | (44,010 | ) | 40,359 |
106 | 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 | $ | 68.28 | $ | 61.44 | $ | 71.04 | $ | 89.12 | $ | 89.01 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .46 | .31 | (.51 | ) | (.35 | ) | (1.20 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | (14.50 | ) | 6.53 | (9.09 | ) | (17.73 | ) | 1.31 | ||||||||||||
Total from investment operations | (14.04 | ) | 6.84 | (9.60 | ) | (18.08 | ) | .11 | ||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.42 | ) | — | — | — | — | ||||||||||||||
Total distributions | (.42 | ) | — | — | — | — | ||||||||||||||
Net asset value, end of period | $ | 53.82 | $ | 68.28 | $ | 61.44 | $ | 71.04 | $ | 89.12 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (20.62 | %) | 11.13 | % | (13.49 | %) | (20.28 | %) | 0.10 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 612 | $ | 3,782 | $ | 923 | $ | 12,310 | $ | 6,949 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.76 | % | 0.51 | % | (0.74 | %) | (1.14 | %) | (1.39 | %) | ||||||||||
Total expensesc | 1.93 | % | 1.83 | % | 1.80 | % | 1.75 | % | 1.71 | % | ||||||||||
Net expensesd | 1.85 | % | 1.82 | % | 1.80 | % | 1.75 | % | 1.71 | % | ||||||||||
Portfolio turnover rate | 164 | % | 287 | % | 445 | % | 1,160 | % | 452 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 107 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, Dow 2x Strategy Fund maintained a daily correlation of over 99% to its benchmark of 200% of the daily price movement of the Dow Jones Industrial Average Index. Dow 2x Strategy Fund gained 47.47% while the Dow Jones Industrial Average Index returned 25.34% over the same time period.
The Information Technology, Financials, and Consumer Discretionary sectors contributed the most to performance of the underlying index during the year. No sector detracted from performance of the underlying index for the year.
Apple, Inc., Goldman Sachs Group, Inc., and Visa, Inc. — Class A contributed the most to performance of the underlying index for the year. Top detractors to performance of the underlying index for the year were 3M Co., Walgreen Boots Alliance, Inc., and Pfizer, Inc.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage 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.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but that fee is waived by the respective investee fund. For the one-year period ended December 31, 2019, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
108 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
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 3, 2004 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Ultra Short Duration Fund — Institutional Class | 35.3% |
Guggenheim Strategy Fund II | 28.8% |
Boeing Co. | 1.2% |
UnitedHealth Group, Inc. | 1.1% |
Apple, Inc. | 1.1% |
Goldman Sachs Group, Inc. | 0.8% |
Home Depot, Inc. | 0.8% |
McDonald’s Corp. | 0.7% |
Visa, Inc. — Class A | 0.7% |
3M Co. | 0.6% |
Top Ten Total | 71.1% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Dow 2x Strategy Fund | 47.47% | 20.21% | 22.48% |
Dow Jones Industrial Average Index | 25.34% | 12.59% | 13.40% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 109 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
DOW 2x STRATEGY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 15.2% | ||||||||
Financial - 3.0% | ||||||||
Goldman Sachs Group, Inc. | 562 | $ | 129,221 | |||||
Visa, Inc. — Class A | 562 | 105,600 | ||||||
JPMorgan Chase & Co. | 562 | 78,343 | ||||||
Travelers Companies, Inc. | 562 | 76,966 | ||||||
American Express Co. | 562 | 69,963 | ||||||
Total Financial | 460,093 | |||||||
Industrial - 2.9% | ||||||||
Boeing Co. | 562 | 183,078 | ||||||
3M Co. | 562 | 99,148 | ||||||
United Technologies Corp. | 562 | 84,165 | ||||||
Caterpillar, Inc. | 562 | 82,996 | ||||||
Total Industrial | 449,387 | |||||||
Consumer, Non-cyclical - 2.7% | ||||||||
UnitedHealth Group, Inc. | 562 | 165,217 | ||||||
Johnson & Johnson | 562 | 81,979 | ||||||
Procter & Gamble Co. | 562 | 70,194 | ||||||
Merck & Company, Inc. | 562 | 51,114 | ||||||
Coca-Cola Co. | 562 | 31,106 | ||||||
Pfizer, Inc. | 562 | 22,019 | ||||||
Total Consumer, Non-cyclical | 421,629 | |||||||
Consumer, Cyclical - 2.5% | ||||||||
Home Depot, Inc. | 562 | 122,730 | ||||||
McDonald’s Corp. | 562 | 111,057 | ||||||
Walmart, Inc. | 562 | 66,788 | ||||||
NIKE, Inc. — Class B | 562 | 56,936 | ||||||
Walgreens Boots Alliance, Inc. | 562 | 33,135 | ||||||
Total Consumer, Cyclical | 390,646 | |||||||
Technology - 2.3% | ||||||||
Apple, Inc. | 562 | 165,031 | ||||||
Microsoft Corp. | 562 | 88,627 | ||||||
International Business Machines Corp. | 562 | 75,331 | ||||||
Intel Corp. | 562 | 33,636 | ||||||
Total Technology | 362,625 | |||||||
Communications - 0.9% | ||||||||
Walt Disney Co. | 562 | 81,282 | ||||||
Verizon Communications, Inc. | 562 | 34,507 | ||||||
Cisco Systems, Inc. | 562 | 26,953 | ||||||
Total Communications | 142,742 | |||||||
Energy - 0.7% | ||||||||
Chevron Corp. | 562 | 67,727 | ||||||
Exxon Mobil Corp. | 562 | 39,216 | ||||||
Total Energy | 106,943 | |||||||
Basic Materials - 0.2% | ||||||||
Dow, Inc. | 562 | 30,758 | ||||||
Total Common Stocks | ||||||||
(Cost $1,947,430) | 2,364,823 | |||||||
MUTUAL FUNDS† - 64.1% | ||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 550,362 | 5,476,105 | ||||||
Guggenheim Strategy Fund II1 | 180,546 | 4,466,704 | ||||||
Total Mutual Funds | ||||||||
(Cost $9,963,518) | 9,942,809 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 10.7% | ||||||||
U.S. Treasury Bills | ||||||||
1.50% due 01/14/202,3 | $ | 985,000 | 984,518 | |||||
1.49% due 01/14/202,3 | 350,000 | 349,829 | ||||||
1.54% due 01/14/202,3 | 300,000 | 299,853 | ||||||
1.47% due 02/04/202,4 | 36,000 | 35,949 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $1,670,052) | 1,670,149 | |||||||
REPURCHASE AGREEMENTS††,5 - 21.4% | ||||||||
J.P. Morgan Securities LLC | 2,016,525 | 2,016,525 | ||||||
Barclays Capital, Inc. | 650,220 | 650,220 | ||||||
BofA Securities, Inc. | 650,221 | 650,221 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $3,316,966) | 3,316,966 | |||||||
Total Investments - 111.4% | ||||||||
(Cost $16,897,966) | $ | 17,294,747 | ||||||
Other Assets & Liabilities, net - (11.4)% | (1,775,738 | ) | ||||||
Total Net Assets - 100.0% | $ | 15,519,009 |
110 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
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 | 10 | Mar 2020 | $ | 1,424,850 | $ | (406 | ) |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||
Barclays Bank plc | Dow Jones Industrial Average Index | 2.10% (1 Week USD LIBOR + 0.50%) | At Maturity | 01/31/20 | 619 | $ | 17,674,464 | $ | 47,249 | ||||||||||
BNP Paribas | Dow Jones Industrial Average Index | 2.30% (1 Month USD LIBOR + 0.50%) | At Maturity | 01/28/20 | 335 | 9,551,682 | (27,765 | ) | |||||||||||
$ | 27,226,146 | $ | 19,484 |
** | 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 | Rate indicated is the effective yield at the time of purchase. |
3 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2019. |
4 | All or a portion of this security is pledged as futures collateral at December 31, 2019. |
5 | Repurchase Agreements — See Note 6. |
LIBOR — London Interbank Offered Rate | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 111 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
DOW 2x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 2,364,823 | $ | — | $ | — | $ | 2,364,823 | ||||||||
Mutual Funds | 9,942,809 | — | — | 9,942,809 | ||||||||||||
U.S. Treasury Bills | — | 1,670,149 | — | 1,670,149 | ||||||||||||
Repurchase Agreements | — | 3,316,966 | — | 3,316,966 | ||||||||||||
Equity Index Swap Agreements** | — | 47,249 | — | 47,249 | ||||||||||||
Total Assets | $ | 12,307,632 | $ | 5,034,364 | $ | — | $ | 17,341,996 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Futures Contracts** | $ | 406 | $ | — | $ | — | $ | 406 | ||||||||
Equity Index Swap Agreements** | — | 27,765 | — | 27,765 | ||||||||||||
Total Liabilities | $ | 406 | $ | 27,765 | $ | — | $ | 28,171 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
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 “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, 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/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 4,151,762 | $ | 2,630,969 | $ | (2,300,000 | ) | $ | (13,742 | ) | $ | (2,285 | ) | $ | 4,466,704 | 180,546 | $ | 131,231 | ||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 2,275,396 | 8,408,324 | (5,200,000 | ) | (7,695 | ) | 80 | 5,476,105 | 550,362 | 108,308 | ||||||||||||||||||||||
$ | 6,427,158 | $ | 11,039,293 | $ | (7,500,000 | ) | $ | (21,437 | ) | $ | (2,205 | ) | $ | 9,942,809 | $ | 239,539 |
112 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
DOW 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $3,617,482) | $ | 4,034,972 | ||
Investments in affiliated issuers, at value (cost $9,963,518) | 9,942,809 | |||
Repurchase agreements, at value (cost $3,316,966) | 3,316,966 | |||
Unrealized appreciation on OTC swap agreements | 47,249 | |||
Cash | 16 | |||
Receivables: | ||||
Dividends | 19,114 | |||
Fund shares sold | 9,317 | |||
Interest | 138 | |||
Total assets | 17,370,581 | |||
Liabilities: | ||||
Unrealized depreciation on OTC swap agreements | 27,765 | |||
Payable for: | ||||
Securities purchased | 1,523,783 | |||
Fund shares redeemed | 209,419 | |||
Swap settlement | 23,474 | |||
Management fees | 12,011 | |||
Transfer agent and administrative fees | 3,649 | |||
Investor service fees | 3,649 | |||
Portfolio accounting fees | 1,459 | |||
Variation margin on futures contracts | 406 | |||
Trustees’ fees* | 269 | |||
Miscellaneous | 45,688 | |||
Total liabilities | 1,851,572 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 15,519,009 | ||
Net assets consist of: | ||||
Paid in capital | $ | 13,608,044 | ||
Total distributable earnings (loss) | 1,910,965 | |||
Net assets | $ | 15,519,009 | ||
Capital shares outstanding | 94,987 | |||
Net asset value per share | $ | 163.38 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 85,223 | ||
Dividends from securities of affiliated issuers | 239,539 | |||
Interest | 72,976 | |||
Total investment income | 397,738 | |||
Expenses: | ||||
Management fees | 143,879 | |||
Transfer agent and administrative fees | 39,967 | |||
Investor service fees | 39,967 | |||
Professional fees | 28,436 | |||
Portfolio accounting fees | 15,986 | |||
Trustees’ fees* | 3,947 | |||
Custodian fees | 2,961 | |||
Line of credit fees | 29 | |||
Miscellaneous | 29,881 | |||
Total expenses | 305,053 | |||
Less: | ||||
Expenses waived by Adviser | (10,706 | ) | ||
Net expenses | 294,347 | |||
Net investment income | 103,391 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 532,664 | |||
Investments in affiliated issuers | (21,437 | ) | ||
Swap agreements | 5,176,884 | |||
Futures contracts | 544,361 | |||
Net realized gain | 6,232,472 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 270,535 | |||
Investments in affiliated issuers | (2,205 | ) | ||
Swap agreements | (164,496 | ) | ||
Futures contracts | 77,548 | |||
Net change in unrealized appreciation (depreciation) | 181,382 | |||
Net realized and unrealized gain | 6,413,854 | |||
Net increase in net assets resulting from operations | $ | 6,517,245 |
* | 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 |
DOW 2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 103,391 | $ | 111,188 | ||||
Net realized gain (loss) on investments | 6,232,472 | (2,619,591 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 181,382 | (289,075 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 6,517,245 | (2,797,478 | ) | |||||
Distributions to shareholders | (111,188 | ) | (3,676,566 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 79,655,407 | 97,491,839 | ||||||
Distributions reinvested | 111,188 | 3,676,566 | ||||||
Cost of shares redeemed | (84,863,093 | ) | (103,803,896 | ) | ||||
Net decrease from capital share transactions | (5,096,498 | ) | (2,635,491 | ) | ||||
Net increase (decrease) in net assets | 1,309,559 | (9,109,535 | ) | |||||
Net assets: | ||||||||
Beginning of year | 14,209,450 | 23,318,985 | ||||||
End of year | $ | 15,519,009 | $ | 14,209,450 | ||||
Capital share activity: | ||||||||
Shares sold | 564,560 | 642,512 | ||||||
Shares issued from reinvestment of distributions | 742 | 27,641 | ||||||
Shares redeemed | (597,755 | ) | (678,730 | ) | ||||
Net decrease in shares | (32,453 | ) | (8,577 | ) |
114 | 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 | $ | 111.50 | $ | 171.44 | $ | 110.08 | $ | 84.22 | $ | 112.60 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .91 | 1.01 | .25 | .06 | (.06 | ) | ||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 51.94 | (18.55 | ) | 63.43 | 25.80 | (2.89 | ) | |||||||||||||
Total from investment operations | 52.85 | (17.54 | ) | 63.68 | 25.86 | (2.95 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.97 | ) | (.36 | ) | (.06 | ) | — | — | ||||||||||||
Net realized gains | — | (42.04 | ) | (2.26 | ) | — | (25.43 | ) | ||||||||||||
Total distributions | (.97 | ) | (42.40 | ) | (2.32 | ) | — | (25.43 | ) | |||||||||||
Net asset value, end of period | $ | 163.38 | $ | 111.50 | $ | 171.44 | $ | 110.08 | $ | 84.22 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 47.47 | % | (14.23 | %) | 58.51 | % | 30.72 | % | (4.22 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 15,519 | $ | 14,209 | $ | 23,319 | $ | 16,510 | $ | 21,905 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.65 | % | 0.65 | % | 0.18 | % | 0.07 | % | (0.06 | %) | ||||||||||
Total expensesc | 1.91 | % | 1.80 | % | 1.81 | % | 1.77 | % | 1.72 | % | ||||||||||
Net expensesd | 1.84 | % | 1.80 | % | 1.81 | % | 1.77 | % | 1.72 | % | ||||||||||
Portfolio turnover rate | 256 | % | 362 | % | 256 | % | 361 | % | 212 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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 | 115 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, 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 -36.08% while the Dow Jones Industrial Average Index returned 25.34% over the same time period.
The Information Technology, Financials, and Consumer Discretionary sectors contributed the most to performance of the underlying index during the year. No sector detracted from performance of the underlying index for the year.
Apple, Inc., Goldman Sachs Group, Inc., and Visa, Inc. — Class A contributed the most to performance of the underlying index for the year. Top detractors to performance of the underlying index for the year were 3M Co., Walgreens Boots Alliance, Inc., and Pfizer, Inc.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage 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.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but that fee is waived by the respective investee fund. For the one-year period ended December 31, 2019, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results..
116 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
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 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 | 23.0% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 21.5% |
Total | 44.5% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Inverse Dow 2x Strategy Fund | (36.08%) | (23.85%) | (26.78%) |
Dow Jones Industrial Average Index | 25.34% | 12.59% | 13.40% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 117 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
INVERSE DOW 2x STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 44.5% | ||||||||
Guggenheim Strategy Fund II1 | 30,396 | $ | 752,002 | |||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 70,751 | 703,973 | ||||||
Total Mutual Funds | ||||||||
(Cost $1,457,859) | 1,455,975 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 19.8% | ||||||||
U.S. Treasury Bills | ||||||||
1.49% due 01/14/202,3 | $ | 650,000 | 649,682 | |||||
Total U.S. Treasury Bills | ||||||||
(Cost $649,651) | 649,682 | |||||||
REPURCHASE AGREEMENTS††,4 - 37.3% | ||||||||
J.P. Morgan Securities LLC | 743,571 | 743,571 | ||||||
Barclays Capital, Inc. | 239,761 | 239,761 | ||||||
BofA Securities, Inc. | 239,761 | 239,761 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $1,223,093) | 1,223,093 | |||||||
Total Investments - 101.6% | ||||||||
(Cost $3,330,603) | $ | 3,328,750 | ||||||
Other Assets & Liabilities, net - (1.6)% | (53,518 | ) | ||||||
Total Net Assets - 100.0% | $ | 3,275,232 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Equity Futures Contracts Sold Short† | ||||||||||||||||
Dow Jones Industrial Average Index Mini Futures Contracts | 5 | Mar 2020 | $ | 712,425 | $ | (1,726 | ) |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements Sold Short†† | |||||||||||||||||||
BNP Paribas | Dow Jones Industrial Average Index | (1.80)% (1 Month USD LIBOR) | At Maturity | 01/28/20 | 99 | $ | 2,820,346 | $ | 8,203 | ||||||||||
Barclays Bank plc | Dow Jones Industrial Average Index | (1.85)% (1 Week USD LIBOR + 0.25%) | At Maturity | 01/31/20 | 106 | 3,017,543 | (8,072 | ) | |||||||||||
$ | 5,837,889 | $ | 131 |
** | 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, 2019. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | Repurchase Agreements — See Note 6. |
LIBOR — London Interbank Offered Rate | |
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, 2019 |
INVERSE DOW 2x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 1,455,975 | $ | — | $ | — | $ | 1,455,975 | ||||||||
U.S. Treasury Bills | — | 649,682 | — | 649,682 | ||||||||||||
Repurchase Agreements | — | 1,223,093 | — | 1,223,093 | ||||||||||||
Equity Index Swap Agreements** | — | 8,203 | — | 8,203 | ||||||||||||
Total Assets | $ | 1,455,975 | $ | 1,880,978 | $ | — | $ | 3,336,953 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Futures Contracts** | $ | 1,726 | $ | — | $ | — | $ | 1,726 | ||||||||
Equity Index Swap Agreements** | — | 8,072 | — | 8,072 | ||||||||||||
Total Liabilities | $ | 1,726 | $ | 8,072 | $ | — | $ | 9,798 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
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 “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, 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/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 649,397 | $ | 3,073,204 | $ | (2,970,000 | ) | $ | (1,998 | ) | $ | 1,399 | $ | 752,002 | 30,396 | $ | 23,254 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 447,159 | 4,270,989 | (4,015,000 | ) | (788 | ) | 1,613 | 703,973 | 70,751 | 21,003 | ||||||||||||||||||||||
$ | 1,096,556 | $ | 7,344,193 | $ | (6,985,000 | ) | $ | (2,786 | ) | $ | 3,012 | $ | 1,455,975 | $ | 44,257 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 119 |
INVERSE DOW 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $649,651) | $ | 649,682 | ||
Investments in affiliated issuers, at value (cost $1,457,859) | 1,455,975 | |||
Repurchase agreements, at value (cost $1,223,093) | 1,223,093 | |||
Cash | 714 | |||
Segregated cash with broker | 25,000 | |||
Unrealized appreciation on OTC swap agreements | 8,203 | |||
Receivables: | ||||
Dividends | 3,154 | |||
Swap settlement | 1,603 | |||
Interest | 51 | |||
Total assets | 3,367,475 | |||
Liabilities: | ||||
Unrealized depreciation on OTC swap agreements | 8,072 | |||
Payable for: | ||||
Fund shares redeemed | 64,396 | |||
Securities purchased | 3,229 | |||
Management fees | 2,463 | |||
Variation margin on futures contracts | 2,135 | |||
Transfer agent and administrative fees | 749 | |||
Investor service fees | 749 | |||
Portfolio accounting fees | 300 | |||
Trustees’ fees* | 60 | |||
Miscellaneous | 10,090 | |||
Total liabilities | 92,243 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 3,275,232 | ||
Net assets consist of: | ||||
Paid in capital | $ | 22,196,104 | ||
Total distributable earnings (loss) | (18,920,872 | ) | ||
Net assets | $ | 3,275,232 | ||
Capital shares outstanding | 125,003 | |||
Net asset value per share | $ | 26.20 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 44,257 | ||
Interest | 42,351 | |||
Total investment income | 86,608 | |||
Expenses: | ||||
Management fees | 32,286 | |||
Investor service fees | 8,968 | |||
Transfer agent and administrative fees | 8,968 | |||
Professional fees | 6,275 | |||
Portfolio accounting fees | 3,587 | |||
Trustees’ fees* | 942 | |||
Custodian fees | 634 | |||
Line of credit fees | 4 | |||
Miscellaneous | 7,051 | |||
Total expenses | 68,715 | |||
Less: | ||||
Expenses waived by Adviser | (2,157 | ) | ||
Net expenses | 66,558 | |||
Net investment income | 20,050 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 110 | |||
Investments in affiliated issuers | (2,786 | ) | ||
Swap agreements | (1,417,906 | ) | ||
Futures contracts | (14,987 | ) | ||
Net realized loss | (1,435,569 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 65 | |||
Investments in affiliated issuers | 3,012 | |||
Swap agreements | 31,121 | |||
Futures contracts | (1,726 | ) | ||
Net change in unrealized appreciation (depreciation) | 32,472 | |||
Net realized and unrealized loss | (1,403,097 | ) | ||
Net decrease in net assets resulting from operations | $ | (1,383,047 | ) |
* | 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. |
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 | $ | 20,050 | $ | 22,977 | ||||
Net realized gain (loss) on investments | (1,435,569 | ) | 1,044,324 | |||||
Net change in unrealized appreciation (depreciation) on investments | 32,472 | (53,383 | ) | |||||
Net increase (decrease) in net assets resulting from operations | (1,383,047 | ) | 1,013,918 | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 57,014,446 | 56,638,059 | ||||||
Cost of shares redeemed | (54,477,965 | ) | (59,229,156 | ) | ||||
Net increase (decrease) from capital share transactions | 2,536,481 | (2,591,097 | ) | |||||
Net increase (decrease) in net assets | 1,153,434 | (1,577,179 | ) | |||||
Net assets: | ||||||||
Beginning of year | 2,121,798 | 3,698,977 | ||||||
End of year | $ | 3,275,232 | $ | 2,121,798 | ||||
Capital share activity: | ||||||||
Shares sold | 1,672,865 | 1,570,062 | ||||||
Shares redeemed | (1,599,621 | ) | (1,609,825 | ) | ||||
Net increase (decrease) in shares | 73,244 | (39,763 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 121 |
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 | $ | 40.99 | $ | 40.42 | $ | 66.22 | $ | 94.11 | $ | 102.38 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .18 | .25 | (.32 | ) | (.25 | ) | (1.50 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | (14.97 | ) | .32 | (25.48 | ) | (27.64 | ) | (6.77 | ) | |||||||||||
Total from investment operations | (14.79 | ) | .57 | (25.80 | ) | (27.89 | ) | (8.27 | ) | |||||||||||
Net asset value, end of period | $ | 26.20 | $ | 40.99 | $ | 40.42 | $ | 66.22 | $ | 94.11 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (36.08 | %) | 1.43 | % | (38.95 | %) | (29.65 | %) | (8.03 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 3,275 | $ | 2,122 | $ | 3,699 | $ | 3,403 | $ | 5,057 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.56 | % | 0.67 | % | (0.58 | %) | (0.84 | %) | (1.52 | %) | ||||||||||
Total expensesc | 1.92 | % | 1.81 | % | 1.81 | % | 1.77 | % | 1.72 | % | ||||||||||
Net expensesd | 1.86 | % | 1.80 | % | 1.81 | % | 1.77 | % | 1.72 | % | ||||||||||
Portfolio turnover rate | 427 | % | 524 | % | 915 | % | 642 | % | 270 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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 1:3 reverse share split effective December 1, 2016. |
122 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, the Government Long Bond 1.2x Strategy Fund returned 16.78%.
The Price Movement of Long Treasury Bond was 13.19% for 2019.
The return of a comparison index, the Bloomberg Barclays U.S. Long Treasury Index was 14.83%.
As prices of long-term Treasury bonds rose over 2019, their yields fell, from 3.02% to 2.39%. Robust institutional buying was driven by improving economic fundamentals, yield-starved foreign demand, and the secular decline in inflation. The buying led to an inversion of the 2-year/10-year yield curve in August, which was accompanied by the rate on the 30-year U.S. Treasury Bond sinking to an all-time low, at 1.90%.
With a series of mid-cycle rate cuts from the U.S. Federal Reserve (“Fed”), along with easing measures from other central banks, fears of a recession abated and the expansion continued. Weakness in manufacturing data bottomed out, the consumer remained in good shape, and the labor market showed extraordinary resilience. The recovery in the U.S. also helped drive a pickup in global economic activity. Over the next several months, we expect the Fed will stay on hold as it watches incoming data to ensure that the current level of fed funds remains appropriate.
Derivatives in the Fund are used to provide additional exposure to composition of the benchmark in the most efficient manner possible 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.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but that fee is waived by the respective investee fund. For the one-year period ended December 31, 2019, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 123 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
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: 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 Bonds | 40.6% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 11.9% |
Guggenheim Strategy Fund II | 10.8% |
Total | 63.3% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Government Long Bond 1.2x Strategy Fund | 16.78% | 2.77% | 7.32% |
Price Movement of Long Treasury Bond** | 13.19% | 1.09% | 3.72% |
Bloomberg Barclays U.S. Long Treasury Index | 14.83% | 4.13% | 7.01% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
124 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 22.7% | ||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 123,967 | $ | 1,233,472 | |||||
Guggenheim Strategy Fund II1 | 45,093 | 1,115,601 | ||||||
Total Mutual Funds | ||||||||
(Cost $2,351,782) | 2,349,073 | |||||||
Face | ||||||||
U.S. GOVERNMENT SECURITIES†† - 40.6% | ||||||||
U.S. Treasury Bonds | ||||||||
2.38% due 11/15/49 | $ | 4,200,000 | 4,200,000 | |||||
Total U.S. Government Securities | ||||||||
(Cost $4,244,835) | 4,200,000 | |||||||
U.S. TREASURY BILLS†† - 2.7% | ||||||||
U.S. Treasury Bills | ||||||||
1.47% due 02/04/202,3 | 282,000 | 281,617 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $281,601) | 281,617 | |||||||
REPURCHASE AGREEMENTS††,4 - 33.9% | ||||||||
J.P. Morgan Securities LLC | 2,134,114 | 2,134,114 | ||||||
Barclays Capital, Inc. | 688,137 | 688,137 | ||||||
BofA Securities, Inc. | 688,136 | 688,136 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $3,510,387) | 3,510,387 | |||||||
Total Investments - 99.9% | ||||||||
(Cost $10,388,605) | $ | 10,341,077 | ||||||
Other Assets & Liabilities, net - 0.1% | 11,989 | |||||||
Total Net Assets - 100.0% | $ | 10,353,066 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Interest Rate Futures Contracts Purchased† | ||||||||||||||||
U.S. Treasury Ultra Long Bond Futures Contracts | 53 | Mar 2020 | $ | 9,632,750 | $ | (95,192 | ) |
** | 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 futures collateral at December 31, 2019. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | Repurchase Agreements — See Note 6. |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 125 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 2,349,073 | $ | — | $ | — | $ | 2,349,073 | ||||||||
U.S. Government Securities | — | 4,200,000 | — | 4,200,000 | ||||||||||||
U.S. Treasury Bills | — | 281,617 | — | 281,617 | ||||||||||||
Repurchase Agreements | — | 3,510,387 | — | 3,510,387 | ||||||||||||
Total Assets | $ | 2,349,073 | $ | 7,992,004 | $ | — | $ | 10,341,077 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Interest Rate Futures Contracts** | $ | 95,192 | $ | — | $ | — | $ | 95,192 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
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 “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, 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/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 3,111,413 | $ | 3,709,733 | $ | (5,700,000 | ) | $ | (18,973 | ) | $ | 13,428 | $ | 1,115,601 | 45,093 | $ | 60,056 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 1,590,738 | 13,549,945 | (13,900,000 | ) | (12,769 | ) | 5,558 | 1,233,472 | 123,967 | 50,054 | ||||||||||||||||||||||
$ | 4,702,151 | $ | 17,259,678 | $ | (19,600,000 | ) | $ | (31,742 | ) | $ | 18,986 | $ | 2,349,073 | $ | 110,110 |
126 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $4,526,436) | $ | 4,481,617 | ||
Investments in affiliated issuers, at value (cost $2,351,782) | 2,349,073 | |||
Repurchase agreements, at value (cost $3,510,387) | 3,510,387 | |||
Receivables: | ||||
Securities sold | 100,000 | |||
Fund shares sold | 35,241 | |||
Interest | 13,647 | |||
Dividends | 4,114 | |||
Total assets | 10,494,079 | |||
Liabilities: | ||||
Payable for: | ||||
Variation margin on futures contracts | 56,313 | |||
Fund shares redeemed | 29,742 | |||
Professional fees | 23,633 | |||
Printing fees | 7,542 | |||
Management fees | 5,288 | |||
Securities purchased | 4,234 | |||
Investor service fees | 2,773 | |||
Transfer agent and administrative fees | 2,219 | |||
Portfolio accounting fees | 1,109 | |||
Trustees’ fees* | 265 | |||
Miscellaneous | 7,895 | |||
Total liabilities | 141,013 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 10,353,066 | ||
Net assets consist of: | ||||
Paid in capital | $ | 20,156,034 | ||
Total distributable earnings (loss) | (9,802,968 | ) | ||
Net assets | $ | 10,353,066 | ||
Capital shares outstanding | 303,129 | |||
Net asset value per share | $ | 34.15 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 110,110 | ||
Interest | 308,117 | |||
Total investment income | 418,227 | |||
Expenses: | ||||
Management fees | 81,346 | |||
Investor service fees | 40,673 | |||
Transfer agent and administrative fees | 32,539 | |||
Professional fees | 28,181 | |||
Portfolio accounting fees | 16,269 | |||
Trustees’ fees* | 3,656 | |||
Custodian fees | 2,781 | |||
Line of credit fees | 684 | |||
Miscellaneous | 24,010 | |||
Total expenses | 230,139 | |||
Less: | ||||
Expenses waived by Adviser | (4,823 | ) | ||
Net expenses | 225,316 | |||
Net investment income | 192,911 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 1,582,638 | |||
Investments in affiliated issuers | (31,742 | ) | ||
Futures contracts | 1,234,320 | |||
Net realized gain | 2,785,216 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (391,730 | ) | ||
Investments in affiliated issuers | 18,986 | |||
Futures contracts | (597,338 | ) | ||
Net change in unrealized appreciation (depreciation) | (970,082 | ) | ||
Net realized and unrealized gain | 1,815,134 | |||
Net increase in net assets resulting from operations | $ | 2,008,045 |
* | 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 |
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 | $ | 192,911 | $ | 199,261 | ||||
Net realized gain (loss) on investments | 2,785,216 | (1,208,479 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | (970,082 | ) | 657,189 | |||||
Net increase (decrease) in net assets resulting from operations | 2,008,045 | (352,029 | ) | |||||
Distributions to shareholders | (192,415 | ) | (219,788 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 243,488,670 | 246,354,128 | ||||||
Distributions reinvested | 192,415 | 219,788 | ||||||
Cost of shares redeemed | (248,580,079 | ) | (244,183,035 | ) | ||||
Net increase (decrease) from capital share transactions | (4,898,994 | ) | 2,390,881 | |||||
Net increase (decrease) in net assets | (3,083,364 | ) | 1,819,064 | |||||
Net assets: | ||||||||
Beginning of year | 13,436,430 | 11,617,366 | ||||||
End of year | $ | 10,353,066 | $ | 13,436,430 | ||||
Capital share activity: | ||||||||
Shares sold | 7,334,753 | 8,395,631 | ||||||
Shares issued from reinvestment of distributions | 5,919 | 7,557 | ||||||
Shares redeemed | (7,491,457 | ) | (8,314,762 | ) | ||||
Net increase (decrease) in shares | (150,785 | ) | 88,426 |
128 | 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 | $ | 29.60 | $ | 31.79 | $ | 29.36 | $ | 29.73 | $ | 45.27 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .39 | .46 | .38 | .31 | .32 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 4.55 | (2.16 | ) | 2.43 | (.38 | ) | (3.29 | ) | ||||||||||||
Total from investment operations | 4.94 | (1.70 | ) | 2.81 | (.07 | ) | (2.97 | ) | ||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.39 | ) | (.46 | ) | (.38 | ) | (.30 | ) | (.31 | ) | ||||||||||
Net realized gains | — | (.03 | ) | — | — | (12.26 | ) | |||||||||||||
Total distributions | (.39 | ) | (.49 | ) | (.38 | ) | (.30 | ) | (12.57 | ) | ||||||||||
Net asset value, end of period | $ | 34.15 | $ | 29.60 | $ | 31.79 | $ | 29.36 | $ | 29.73 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 16.78 | % | (5.32 | %) | 9.64 | % | (0.33 | %) | (5.09 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 10,353 | $ | 13,436 | $ | 11,617 | $ | 17,124 | $ | 17,372 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.19 | % | 1.58 | % | 1.24 | % | 0.93 | % | 0.86 | % | ||||||||||
Total expensesc | 1.41 | % | 1.32 | % | 1.30 | % | 1.25 | % | 1.21 | % | ||||||||||
Net expensesd | 1.38 | % | 1.32 | % | 1.30 | % | 1.25 | % | 1.21 | % | ||||||||||
Portfolio turnover rate | 2,060 | % | 2,292 | % | 2,055 | % | 1,386 | % | 1,800 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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 | 129 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, the Inverse Government Long Bond Strategy Fund returned -13.28%.
The Price Movement of Long Treasury Bond was 13.19% for 2019.
The return of a comparison index, the Bloomberg Barclays U.S. Long Treasury Index, was 14.83%.
As prices of long-term Treasury bonds rose over 2019, their yields fell, from 3.02% to 2.39%. Robust institutional buying was driven by improving economic fundamentals, yield-starved foreign demand, and the secular decline in inflation. The buying led to an inversion of the 2-year/10-year yield curve in August, which was accompanied by the rate on the 30-year U.S. Treasury Bond sinking to an all-time low, at 1.90%.
With a series of mid-cycle rate cuts from the U.S. Federal Reserve (“Fed”), along with easing measures from other central banks, fears of a recession abated and the expansion continued. Weakness in manufacturing data bottomed out, the consumer remained in good shape, and the labor market showed extraordinary resilience. The recovery in the U.S. also helped drive a pickup in global economic activity. Over the next several months, we expect the Fed will stay on hold as it watches incoming data to ensure that the current level of fed funds remains appropriate.
Derivatives in the Fund are used to provide additional exposure to composition of the benchmark in the most efficient manner possible 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.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but that fee is waived by the respective investee fund. For the one-year period ended December 31, 2019, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
130 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
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 1, 2003 |
The Fund invests principally in short sales and derivative investments such as futures contracts.
Largest Holdings (% of Total Net Assets) | |
Guggenheim Ultra Short Duration Fund — Institutional Class | 24.5% |
Guggenheim Strategy Fund II | 22.2% |
Total | 46.7% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Inverse Government Long Bond Strategy Fund | (13.28%) | (4.70%) | (9.05%) |
Price Movement of Long Treasury Bond** | 13.19% | 1.09% | 3.72% |
Bloomberg Barclays U.S. Long Treasury Index | 14.83% | 4.13% | 7.01% |
* | 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 interest. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 131 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 46.7% | ||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 58,505 | $ | 582,120 | |||||
Guggenheim Strategy Fund II1 | 21,404 | 529,529 | ||||||
Total Mutual Funds | ||||||||
(Cost $1,110,958) | 1,111,649 | |||||||
Face | ||||||||
FEDERAL AGENCY NOTES†† - 5.3% | ||||||||
Farmer Mac | ||||||||
1.73% (U.S. Prime Rate - 3.02%, Rate Floor: 0.00%) due 09/01/202 | $ | 125,000 | 125,000 | |||||
Total Federal Agency Notes | ||||||||
(Cost $125,000) | 125,000 | |||||||
U.S. TREASURY BILLS†† - 1.3% | ||||||||
U.S. Treasury Bills | ||||||||
1.47% due 02/04/203,4 | 31,000 | 30,958 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $30,956) | 30,958 | |||||||
REPURCHASE AGREEMENTS†† - 142.9% | ||||||||
Individual Repurchase Agreements5 | ||||||||
Barclays Capital, Inc. | 1,680,875 | 1,680,875 | ||||||
Mizuho Financial Group, Inc. | 297,344 | 297,344 | ||||||
Joint Repurchase Agreements6 | ||||||||
J.P. Morgan Securities LLC | 866,925 | 866,925 | ||||||
Barclays Capital, Inc. | 279,536 | 279,536 | ||||||
BofA Securities, Inc. | 279,537 | 279,537 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $3,404,217) | 3,404,217 | |||||||
Total Investments - 196.2% | ||||||||
(Cost $4,671,131) | $ | 4,671,824 | ||||||
U.S. Government Securities Sold Short†† - (84.0)% | ||||||||
U.S. Treasury Bond | ||||||||
2.38% due 11/15/49 | 2,000,000 | (2,000,000 | ) | |||||
Total U.S. Government Securities Sold Short | ||||||||
(Proceeds $2,040,379) | (2,000,000 | ) | ||||||
Other Assets & Liabilities, net - (12.2)% | (289,758 | ) | ||||||
Total Net Assets - 100.0% | $ | 2,382,066 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Interest Rate Futures Contracts Sold Short† | ||||||||||||||||
U.S. Treasury Ultra Long Bond Futures Contracts | 4 | Mar 2020 | $ | 727,000 | $ | 23,267 |
132 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
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 | Variable rate security. Rate indicated is the rate effective at December 31, 2019. 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 | All or a portion of this security is pledged as futures collateral at December 31, 2019. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | All or a portion of this security is pledged as short security collateral at December 31, 2019. |
6 | 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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 1,111,649 | $ | — | $ | — | $ | 1,111,649 | ||||||||
Federal Agency Notes | — | 125,000 | — | 125,000 | ||||||||||||
U.S. Treasury Bills | — | 30,958 | — | 30,958 | ||||||||||||
Repurchase Agreements | — | 3,404,217 | — | 3,404,217 | ||||||||||||
Interest Rate Futures Contracts** | 23,267 | — | — | 23,267 | ||||||||||||
Total Assets | $ | 1,134,916 | $ | 3,560,175 | $ | — | $ | 4,695,091 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
U.S. Government Securities | $ | — | $ | 2,000,000 | $ | — | $ | 2,000,000 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 133 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
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 “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, 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/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 1,467,994 | $ | 1,389,348 | $ | (2,325,000 | ) | $ | (3,869 | ) | $ | 1,056 | $ | 529,529 | 21,404 | $ | 29,499 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 1,452,530 | 1,604,899 | (2,475,000 | ) | (7,268 | ) | 6,959 | 582,120 | 58,505 | 25,026 | ||||||||||||||||||||||
$ | 2,920,524 | $ | 2,994,247 | $ | (4,800,000 | ) | $ | (11,137 | ) | $ | 8,015 | $ | 1,111,649 | $ | 54,525 |
134 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $155,956) | $ | 155,958 | ||
Investments in affiliated issuers, at value (cost $1,110,958) | 1,111,649 | |||
Repurchase agreements, at value (cost $3,404,217) | 3,404,217 | |||
Receivables: | ||||
Variation margin on futures contracts | 4,250 | |||
Dividends | 3,060 | |||
Fund shares sold | 794 | |||
Interest | 310 | |||
Total assets | 4,680,238 | |||
Liabilities: | ||||
Securities sold short, at value (proceeds $2,040,379) | 2,000,000 | |||
Payable for: | ||||
Fund shares redeemed | 278,367 | |||
Interest payable on short sales | 6,133 | |||
Securities purchased | 3,117 | |||
Management fees | 1,950 | |||
Transfer agent and administrative fees | 596 | |||
Investor service fees | 596 | |||
Portfolio accounting fees | 238 | |||
Trustees’ fees* | 49 | |||
Miscellaneous | 7,126 | |||
Total liabilities | 2,298,172 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 2,382,066 | ||
Net assets consist of: | ||||
Paid in capital | $ | 9,853,768 | ||
Total distributable earnings (loss) | (7,471,702 | ) | ||
Net assets | $ | 2,382,066 | ||
Capital shares outstanding | 27,936 | |||
Net asset value per share | $ | 85.27 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 54,525 | ||
Interest | 57,249 | |||
Total investment income | 111,774 | |||
Expenses: | ||||
Management fees | 26,595 | |||
Investor service fees | 7,387 | |||
Transfer agent and administrative fees | 7,387 | |||
Short interest expense | 50,335 | |||
Professional fees | 5,303 | |||
Portfolio accounting fees | 2,955 | |||
Trustees’ fees* | 921 | |||
Custodian fees | 611 | |||
Miscellaneous | 4,236 | |||
Total expenses | 105,730 | |||
Less: | ||||
Expenses waived by Adviser | (2,463 | ) | ||
Net expenses | 103,267 | |||
Net investment income | 8,507 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 9 | |||
Investments in affiliated issuers | (11,137 | ) | ||
Investments sold short | (453,706 | ) | ||
Futures contracts | (186,020 | ) | ||
Net realized loss | (650,854 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 50 | |||
Investments in affiliated issuers | 8,015 | |||
Investments sold short | 193,676 | |||
Futures contracts | 81,975 | |||
Net change in unrealized appreciation (depreciation) | 283,716 | |||
Net realized and unrealized loss | (367,138 | ) | ||
Net decrease in net assets resulting from operations | $ | (358,631 | ) |
* | 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 | 135 |
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 income (loss) | $ | 8,507 | $ | (29,356 | ) | |||
Net realized gain (loss) on investments | (650,854 | ) | 374,856 | |||||
Net change in unrealized appreciation (depreciation) on investments | 283,716 | (213,288 | ) | |||||
Net increase (decrease) in net assets resulting from operations | (358,631 | ) | 132,212 | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 31,903,197 | 42,664,602 | ||||||
Cost of shares redeemed | (33,588,425 | ) | (43,047,030 | ) | ||||
Net decrease from capital share transactions | (1,685,228 | ) | (382,428 | ) | ||||
Net decrease in net assets | (2,043,859 | ) | (250,216 | ) | ||||
Net assets: | ||||||||
Beginning of year | 4,425,925 | 4,676,141 | ||||||
End of year | $ | 2,382,066 | $ | 4,425,925 | ||||
Capital share activity: | ||||||||
Shares sold | 337,151 | 424,953 | ||||||
Shares redeemed | (354,225 | ) | (429,298 | ) | ||||
Net decrease in shares | (17,074 | ) | (4,345 | ) |
136 | 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 | $ | 98.33 | $ | 94.75 | $ | 104.00 | $ | 107.17 | $ | 108.46 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .26 | (.64 | ) | (1.88 | ) | (.87 | ) | (3.63 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | (13.32 | ) | 4.22 | (7.37 | ) | (2.30 | ) | 2.34 | ||||||||||||
Total from investment operations | (13.06 | ) | 3.58 | (9.25 | ) | (3.17 | ) | (1.29 | ) | |||||||||||
Net asset value, end of period | $ | 85.27 | $ | 98.33 | $ | 94.75 | $ | 104.00 | $ | 107.17 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (13.28 | %) | 3.79 | % | (8.89 | %) | (2.94 | %) | (1.22 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 2,382 | $ | 4,426 | $ | 4,676 | $ | 3,821 | $ | 4,740 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.29 | % | (0.63 | %) | (1.89 | %) | (2.59 | %) | (3.39 | %) | ||||||||||
Total expensesc | 3.58 | % | 4.31 | % | 4.00 | % | 3.65 | % | 3.66 | % | ||||||||||
Net expensesd,e | 3.49 | % | 4.30 | % | 4.00 | % | 3.65 | % | 3.66 | % | ||||||||||
Portfolio turnover rate | 966 | % | 907 | % | 2,300 | % | 1,384 | % | 1,305 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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 | Total expenses may include interest expense related to short sales. Excluding interest expense, the net expense ratios for the periods presented would be: |
2019 | 2018 | 2017 | 2016 | 2015 | |
1.79% | 1.75% | 1.75% | 1.72% | 1.65% |
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 | 137 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, the High Yield Strategy Fund returned 13.84%. For comparison, the Bloomberg Barclays U.S. Corporate High Yield Index returned 14.32% 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.
The high yield market delivered strong performance in 2019 with four straight quarters of positive returns, more than offsetting the negative performance from the fourth quarter of 2018. There was little separation between sector returns except for the sizeable underperformance in Energy, with Consumer Cyclicals (+16.7%) and Consumer Non-Cyclicals (+15.8%) among the top performers. In terms of quality, CCC’s (+9.5%) underperformed higher quality bonds in BB’s (+15.5%) and B’s (+14.8%), signaling some investor resistance to owning lower quality bonds at this stage of the cycle.
Fundamental factors underlying the corporate sector are supportive of high yield bonds. Average leverage and interest coverage ratios remain strong coupled with stable corporate earnings. Notably, the trailing 12-month default rate in the ICE BofA Merrill Lynch High Yield Index increased to 2% driven by Energy issuers, but remains below the historical average near 4%. The default rate excluding energy remains steady at less than 1%. Despite a positive fundamental backdrop, the high yield market experienced bouts of volatility during the year on the back of concerns over trade, which added some uncertainty. However, fears of an economic slowdown decreased following a series of mid-cycle rate cuts from the U.S. Federal Reserve, along with easing measures from other central banks, coupled with progress on U.S.-China trade negations.
Derivatives in the Fund are used to help provide exposure to the composition of the benchmark in the most efficient manner possible and not for hedging purposes. Derivatives performed as expected.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but that fee is waived by the respective investee fund. For the one-year period ended December 31, 2019, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
138 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
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: October 15, 2014 |
Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 21.0% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 19.5% |
Total | 40.5% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | Since |
High Yield Strategy Fund | 13.84% | 5.97% | 6.02% |
Bloomberg Barclays U.S. Corporate High Yield Index | 14.32% | 6.13% | 5.89% |
* | 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 is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 139 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
HIGH YIELD STRATEGY FUND |
| Shares | Value | ||||||
EXCHANGE-TRADED FUNDS† - 0.0% | ||||||||
iShares iBoxx High Yield Corporate Bond ETF | 20 | $ | 1,758 | |||||
SPDR Bloomberg Barclays High Yield Bond ETF | 15 | 1,642 | ||||||
Total Exchange-Traded Funds | ||||||||
(Cost $2,949) | 3,400 | |||||||
MUTUAL FUNDS† - 40.5% | ||||||||
Guggenheim Strategy Fund II1 | 89,122 | 2,204,880 | ||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 206,174 | 2,051,428 | ||||||
Total Mutual Funds | ||||||||
(Cost $4,253,883) | 4,256,308 | |||||||
Face | ||||||||
FEDERAL AGENCY NOTES†† - 1.0% | ||||||||
Federal Farm Credit Bank | ||||||||
1.95% (U.S. Prime Rate - 2.80%, Rate Floor: 0.00%) due 03/14/222 | $ | 100,000 | 100,197 | |||||
Total Federal Agency Notes | ||||||||
(Cost $100,000) | 100,197 | |||||||
U.S. TREASURY BILLS†† - 0.4% | ||||||||
U.S. Treasury Bills | ||||||||
1.47% due 02/04/203,4 | 41,000 | 40,944 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $40,942) | 40,944 | |||||||
REPURCHASE AGREEMENTS††,5 - 49.7% | ||||||||
J.P. Morgan Securities LLC | 3,174,276 | 3,174,276 | ||||||
Barclays Capital, Inc. | 1,023,533 | 1,023,533 | ||||||
BofA Securities, Inc. | 1,023,533 | 1,023,533 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $5,221,342) | 5,221,342 | |||||||
Total Investments - 91.6% | ||||||||
(Cost $9,619,116) | $ | 9,622,191 | ||||||
Other Assets & Liabilities, net - 8.4% | 886,017 | |||||||
Total Net Assets - 100.0% | $ | 10,508,208 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Interest Rate Futures Contracts Purchased† | ||||||||||||||||
U.S. Treasury 5 Year Note Futures Contracts | 78 | Mar 2020 | $ | 9,252,141 | $ | (16,502 | ) |
Centrally Cleared Credit Default Swap Agreements Protection Sold†† | ||||||||||||||||||||||||||||||
Counterparty | Exchange | Index | Protection | Payment | Maturity | Notional | Value | Upfront | Unrealized | |||||||||||||||||||||
Barclays Bank plc | ICE | CDX.NA.HY.33 | 5.00 | % | Quarterly | 12/20/24 | $ | 9,009,000 | $ | 869,031 | $ | 668,844 | $ | 200,187 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Reference | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Credit Index Swap Agreements††,7 | |||||||||||||||||||
Goldman Sachs International | iShares iBoxx $ High Yield Corporate Bond ETF | 1.96% (1 Week USD LIBOR + 0.35%) | At Maturity | 01/29/20 | 4,294 | $ | 377,507 | $ | 365 | ||||||||||
BNP Paribas | iShares iBoxx $ High Yield Corporate Bond ETF | 1.60% (1 Month USD LIBOR - 0.20%) | At Maturity | 01/28/20 | 7,481 | 657,708 | (337 | ) | |||||||||||
$ | 1,035,215 | $ | 28 |
140 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
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 | Affiliated issuer. |
2 | Variable rate security. Rate indicated is the rate effective at December 31, 2019. 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 | All or a portion of this security is pledged as futures collateral at December 31, 2019. |
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 credit index swap collateral at December 31, 2019. |
7 | Total return based on iShares iBoxx $ High Yield Corporate Bond ETF +/- financing at variable rate. Rate indicated is the rate effective December 31, 2019. |
CDX.NA.HY.33 Index — Credit Default Swap North American High Yield Series 33 Index | |
ICE — Intercontinental Exchange | |
LIBOR — London Interbank Offered Rate | |
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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Exchange-Traded Funds | $ | 3,400 | $ | — | $ | — | $ | 3,400 | ||||||||
Mutual Funds | 4,256,308 | — | — | 4,256,308 | ||||||||||||
Federal Agency Notes | — | 100,197 | — | 100,197 | ||||||||||||
U.S. Treasury Bills | — | 40,944 | — | 40,944 | ||||||||||||
Repurchase Agreements | — | 5,221,342 | — | 5,221,342 | ||||||||||||
Credit Default Swap Agreements** | — | 200,187 | — | 200,187 | ||||||||||||
Total Return Swap Agreements** | — | 365 | — | 365 | ||||||||||||
Total Assets | $ | 4,259,708 | $ | 5,563,035 | $ | — | $ | 9,822,743 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Interest Rate Futures Contracts** | $ | 16,502 | $ | — | $ | — | $ | 16,502 | ||||||||
Total Return Swap Agreements** | — | 337 | — | 337 | ||||||||||||
Total Liabilities | $ | 16,502 | $ | 337 | $ | — | $ | 16,839 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 141 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
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 “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, 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/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 1,349,675 | $ | 5,957,068 | $ | (5,100,000 | ) | $ | 4,476 | $ | (6,339 | ) | $ | 2,204,880 | 89,122 | $ | 57,111 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 1,002,262 | 6,900,283 | (5,850,000 | ) | (58 | ) | (1,059 | ) | 2,051,428 | 206,174 | 50,274 | |||||||||||||||||||||
$ | 2,351,937 | $ | 12,857,351 | $ | (10,950,000 | ) | $ | 4,418 | $ | (7,398 | ) | $ | 4,256,308 | $ | 107,385 |
142 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
HIGH YIELD STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $143,891) | $ | 144,541 | ||
Investments in affiliated issuers, at value (cost $4,253,883) | 4,256,308 | |||
Repurchase agreements, at value (cost $5,221,342) | 5,221,342 | |||
Segregated cash with broker | 13,864 | |||
Unamortized upfront premiums paid on credit default swap agreements | 668,844 | |||
Unrealized appreciation on OTC swap agreements | 365 | |||
Receivables: | ||||
Securities sold | 400,000 | |||
Protection fees on credit default swap agreements | 15,015 | |||
Dividends | 6,403 | |||
Interest | 315 | |||
Total assets | 10,726,997 | |||
Liabilities: | ||||
Segregated cash due to broker | 177,875 | |||
Unrealized depreciation on OTC swap agreements | 337 | |||
Payable for: | ||||
Securities purchased | 6,642 | |||
Management fees | 5,070 | |||
Variation margin on credit default swap agreements | 5,051 | |||
Transfer agent and administrative fees | 1,817 | |||
Investor service fees | 1,817 | |||
Fund shares redeemed | 1,545 | |||
Variation margin on futures contracts | 1,219 | |||
Portfolio accounting fees | 727 | |||
Swap settlement | 249 | |||
Trustees’ fees* | 112 | |||
Miscellaneous | 16,328 | |||
Total liabilities | 218,789 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 10,508,208 | ||
Net assets consist of: | ||||
Paid in capital | $ | 9,988,653 | ||
Total distributable earnings (loss) | 519,555 | |||
Net assets | $ | 10,508,208 | ||
Capital shares outstanding | 121,337 | |||
Net asset value per share | $ | 86.60 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 178 | ||
Dividends from securities of affiliated issuers | 107,385 | |||
Interest | 55,352 | |||
Income from securities lending, net | 5 | |||
Total investment income | 162,920 | |||
Expenses: | ||||
Management fees | 50,691 | |||
Investor service fees | 16,897 | |||
Transfer agent and administrative fees | 16,897 | |||
Professional fees | 14,111 | |||
Portfolio accounting fees | 6,758 | |||
Trustees’ fees* | 1,698 | |||
Custodian fees | 1,239 | |||
Miscellaneous | 8,094 | |||
Total expenses | 116,385 | |||
Less: | ||||
Expenses waived by Adviser | (4,920 | ) | ||
Net expenses | 111,465 | |||
Net investment income | 51,455 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 33 | |||
Investments in affiliated issuers | 4,418 | |||
Swap agreements | 316,142 | |||
Futures contracts | 193,859 | |||
Net realized gain | 514,452 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 675 | |||
Investments in affiliated issuers | (7,398 | ) | ||
Swap agreements | 284,206 | |||
Futures contracts | (66,061 | ) | ||
Net change in unrealized appreciation (depreciation) | 211,422 | |||
Net realized and unrealized gain | 725,874 | |||
Net increase in net assets resulting from operations | $ | 777,329 |
* | 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 | 143 |
HIGH YIELD STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 51,455 | $ | 44,868 | ||||
Net realized gain (loss) on investments | 514,452 | (19,735 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 211,422 | (107,745 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 777,329 | (82,612 | ) | |||||
Distributions to shareholders | (210,642 | ) | (294,767 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 56,719,845 | 26,422,176 | ||||||
Distributions reinvested | 210,642 | 294,767 | ||||||
Cost of shares redeemed | (51,101,531 | ) | (28,750,779 | ) | ||||
Net increase (decrease) from capital share transactions | 5,828,956 | (2,033,836 | ) | |||||
Net increase (decrease) in net assets | 6,395,643 | (2,411,215 | ) | |||||
Net assets: | ||||||||
Beginning of year | 4,112,565 | 6,523,780 | ||||||
End of year | $ | 10,508,208 | $ | 4,112,565 | ||||
Capital share activity: | ||||||||
Shares sold | 680,824 | 327,338 | ||||||
Shares issued from reinvestment of distributions | 2,509 | 3,747 | ||||||
Shares redeemed | (614,753 | ) | (356,416 | ) | ||||
Net increase (decrease) in shares | 68,580 | (25,331 | ) |
144 | 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 | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 77.95 | $ | 83.54 | $ | 81.50 | $ | 75.17 | $ | 76.12 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .64 | .71 | .29 | .14 | (.30 | ) | ||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 10.08 | (1.39 | ) | 5.23 | 6.99 | (.29 | ) | |||||||||||||
Total from investment operations | 10.72 | (.68 | ) | 5.52 | 7.13 | (.59 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (2.07 | ) | (4.91 | ) | (3.48 | ) | (.80 | ) | — | |||||||||||
Net realized gains | — | — | — | — | (.36 | ) | ||||||||||||||
Total distributions | (2.07 | ) | (4.91 | ) | (3.48 | ) | (.80 | ) | (.36 | ) | ||||||||||
Net asset value, end of period | $ | 86.60 | $ | 77.95 | $ | 83.54 | $ | 81.50 | $ | 75.17 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 13.84 | % | (0.87 | %) | 6.87 | % | 11.62 | % | (0.71 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 10,508 | $ | 4,113 | $ | 6,524 | $ | 7,390 | $ | 6,751 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.76 | % | 0.88 | % | 0.35 | % | 0.51 | % | (0.39 | %) | ||||||||||
Total expensesc | 1.72 | % | 1.62 | % | 1.60 | % | 1.56 | % | 1.49 | % | ||||||||||
Net expensesd | 1.65 | % | 1.61 | % | 1.60 | % | 1.56 | % | 1.49 | % | ||||||||||
Portfolio turnover rate | 299 | % | 116 | % | 124 | % | 255 | % | 258 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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 1:3 reverse share split effective December 1, 2016. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 145 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
U.S. GOVERNMENT MONEY MARKET FUND
OBJECTIVE: Seeks to provide security of principal, high current income, and liquidity.
For the year ended December 31, 2019, U.S. Government Money Market Fund returned 0.87%.
The U.S. Federal Reserve (“Fed”) kept interest rates the same for the first half of the year. Then in July it orchestrated three successive interest rate cuts totaling 0.75%. This reduced the Fed’s target rate from 2.25% to 2.50% at the start of the year to 1.50% to 1.75% at the end of the year. The successive rate cuts were described as a mid-cycle adjustment to help keep the economy expanding. Due the drop in interest rates, the Fund’s yield steadily declined throughout the last half of the year.
The U.S. economy remained strong throughout 2019 although some signs of weakness began to appear in the manufacturing sector. However, personal consumption remained strong. Inflation has remained contained and we expect rates to be on hold for the foreseeable future unless inflation spikes or economic growth accelerates. The most recent data released in December 2019 indicated that the Fed is expecting to keep rates on hold throughout 2020. The market is also expecting that the Fed will pause for an extended period and may even cut once by the end of 2020.
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.
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, 2019
| 1 Year | 5 Year | 10 Year |
U.S. Government Money Market Fund | 0.87% | 0.29% | 0.15% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
146 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
U.S. GOVERNMENT MONEY MARKET FUND |
| Face | Value | ||||||
FEDERAL AGENCY NOTES†† - 52.6% | ||||||||
Federal Home Loan Bank | ||||||||
1.73% (3 Month USD LIBOR - 0.18%, Rate Floor: 0.00%) due 05/08/201 | $ | 6,315,000 | $ | 6,313,578 | ||||
1.80% (1 Month USD LIBOR + 0.06%, Rate Floor: 0.00%) due 06/12/201 | 3,000,000 | 3,000,000 | ||||||
2.13% due 02/11/20 | 730,000 | 730,134 | ||||||
1.88% due 03/13/20 | 430,000 | 429,791 | ||||||
3.00% due 03/18/20 | 250,000 | 250,563 | ||||||
4.13% due 03/13/20 | 225,000 | 225,880 | ||||||
Federal Farm Credit Bank | ||||||||
1.77% (3 Month USD LIBOR - 0.13%, Rate Floor: 0.00%) due 02/03/201 | 2,000,000 | 2,000,004 | ||||||
1.82% (1 Month USD LIBOR + 0.01%, Rate Floor: 0.00%) due 07/30/201 | 2,000,000 | 1,999,983 | ||||||
1.82% (U.S. Prime Rate - 2.93%, Rate Floor: 0.00%) due 09/24/201 | 1,400,000 | 1,401,122 | ||||||
2.38% due 03/27/20 | 300,000 | 300,309 | ||||||
1.76% (1 Month USD LIBOR, Rate Floor: 0.00%) due 06/19/201 | 135,000 | 134,960 | ||||||
5.00% due 03/05/20 | 100,000 | 100,493 | ||||||
1.80% (U.S. Prime Rate - 2.95%, Rate Floor: 0.00%) due 04/30/201 | 100,000 | 99,983 | ||||||
1.63% (1 Month USD LIBOR - 0.08%, Rate Floor: 0.00%) due 06/01/201 | 100,000 | 99,946 | ||||||
Fannie Mae | ||||||||
1.74% (3 Month USD LIBOR - 0.15%, Rate Floor: 0.00%) due 03/13/201 | 2,500,000 | 2,499,798 | ||||||
1.79% (3 Month USD LIBOR - 0.16%, Rate Floor: 0.00%) due 03/25/201 | 1,000,000 | 999,900 | ||||||
1.50% due 02/28/20 | 653,000 | 652,546 | ||||||
1.90% due 10/27/20 | 450,000 | 450,037 | ||||||
2.05% due 04/30/20 | 352,000 | 352,122 | ||||||
1.63% due 01/21/20 | 336,000 | 335,973 | ||||||
2.00% due 02/07/20 | 180,000 | 179,972 | ||||||
2.00% due 03/27/20 | 135,000 | 135,023 | ||||||
1.50% due 04/30/20 | 64,000 | 63,917 | ||||||
Farmer Mac | ||||||||
1.73% (U.S. Prime Rate - 3.02%, Rate Floor: 0.00%) due 07/01/201 | 2,700,000 | 2,700,000 | ||||||
Freddie Mac | ||||||||
1.38% due 04/20/20 | 250,000 | 249,714 | ||||||
1.85% due 07/13/20 | 100,000 | 99,977 | ||||||
1.80% due 04/13/20 | 100,000 | 99,900 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $25,905,625) | 25,905,625 | |||||||
U.S. TREASURY BILLS†† - 16.2% | ||||||||
U.S. Treasury Bills | ||||||||
1.84% due 03/19/202 | 5,000,000 | 4,979,731 | ||||||
2.01% due 01/30/202 | 3,000,000 | 2,995,067 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $7,974,798) | 7,974,798 | |||||||
U.S. GOVERNMENT SECURITIES†† - 2.0% | ||||||||
U.S. Treasury Floating Rate Note | ||||||||
1.57% (3 Month U.S. Treasury Bill Rate + 0.04%, Rate Floor: 0.00%) due 07/31/201 | 1,000,000 | 999,168 | ||||||
Total U.S. Government Securities | ||||||||
(Cost $999,168) | 999,168 | |||||||
REPURCHASE AGREEMENTS††,3 - 29.2% | ||||||||
J.P. Morgan Securities LLC | 8,729,160 | 8,729,160 | ||||||
Barclays Capital, Inc. | 2,814,683 | 2,814,683 | ||||||
BofA Securities, Inc. | 2,814,683 | 2,814,683 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $14,358,526) | 14,358,526 | |||||||
Total Investments - 100.0% | ||||||||
(Cost $49,238,117) | $ | 49,238,117 | ||||||
Other Assets & Liabilities, net - 0.0% | (4,971 | ) | ||||||
Total Net Assets - 100.0% | $ | 49,233,146 |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Variable rate security. Rate indicated is the rate effective at December 31, 2019. 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. |
2 | Rate indicated is the effective yield at the time of purchase. |
3 | 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 | 147 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
U.S. GOVERNMENT MONEY MARKET FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Federal Agency Notes | $ | — | $ | 25,905,625 | $ | — | $ | 25,905,625 | ||||||||
U.S. Treasury Bills | — | 7,974,798 | — | 7,974,798 | ||||||||||||
U.S. Government Securities | — | 999,168 | — | 999,168 | ||||||||||||
Repurchase Agreements | — | 14,358,526 | — | 14,358,526 | ||||||||||||
Total Assets | $ | — | $ | 49,238,117 | $ | — | $ | 49,238,117 |
148 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
U.S. GOVERNMENT MONEY MARKET FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value (cost $34,879,591) | $ | 34,879,591 | ||
Repurchase agreements, at value (cost $14,358,526) | 14,358,526 | |||
Receivables: | ||||
Fund shares sold | 110,570 | |||
Interest | 74,763 | |||
Total assets | 49,423,450 | |||
Liabilities: | ||||
Payable for: | ||||
Professional fees | 93,050 | |||
Printing fees | 28,677 | |||
Management fees | 18,728 | |||
Investor service fees | 9,364 | |||
Transfer agent and administrative fees | 7,491 | |||
Portfolio accounting fees | 3,746 | |||
Trustees’ fees* | 1,030 | |||
Fund shares redeemed | 396 | |||
Miscellaneous | 27,822 | |||
Total liabilities | 190,304 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 49,233,146 | ||
Net assets consist of: | ||||
Paid in capital | $ | 49,226,708 | ||
Total distributable earnings (loss) | 6,438 | |||
Net assets | $ | 49,233,146 | ||
Capital shares outstanding | 49,214,051 | |||
Net asset value per share | $ | 1.00 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Interest | $ | 1,419,236 | ||
Total investment income | 1,419,236 | |||
Expenses: | ||||
Management fees | 309,288 | |||
Investor service fees | 154,644 | |||
Transfer agent and administrative fees | 123,717 | |||
Professional fees | 116,685 | |||
Portfolio accounting fees | 61,857 | |||
Trustees’ fees* | 16,185 | |||
Custodian fees | 11,662 | |||
Miscellaneous | 82,167 | |||
Total expenses | 876,205 | |||
Net investment income | 543,031 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 3,826 | |||
Net realized gain | 3,826 | |||
Net increase in net assets resulting from operations | $ | 546,857 |
* | 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 | 149 |
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 | $ | 543,031 | $ | 373,137 | ||||
Net realized gain on investments | 3,826 | 2,123 | ||||||
Net increase in net assets resulting from operations | 546,857 | 375,260 | ||||||
Distributions to shareholders | (540,419 | ) | (377,479 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 162,304,140 | 224,930,817 | ||||||
Distributions reinvested | 540,419 | 377,479 | ||||||
Cost of shares redeemed | (198,626,169 | ) | (218,566,974 | ) | ||||
Net increase (decrease) from capital share transactions | (35,781,610 | ) | 6,741,322 | |||||
Net increase (decrease) in net assets | (35,775,172 | ) | 6,739,103 | |||||
Net assets: | ||||||||
Beginning of year | 85,008,318 | 78,269,215 | ||||||
End of year | $ | 49,233,146 | $ | 85,008,318 | ||||
Capital share activity: | ||||||||
Shares sold | 162,304,140 | 224,930,817 | ||||||
Shares issued from reinvestment of distributions | 540,419 | 377,638 | ||||||
Shares redeemed | (198,626,169 | ) | (218,566,974 | ) | ||||
Net increase (decrease) in shares | (35,781,610 | ) | 6,741,481 |
150 | 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 | .01 | — | b | — | b | — | b | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | — | — | — | b | — | b | — | b | ||||||||||||
Total from investment operations | .01 | .01 | — | — | — | |||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.01 | ) | (.01 | ) | (— | )b | (— | )b | (— | )b | ||||||||||
Net realized gains | (— | )b | (— | )b | (— | )b | (— | )b | (— | )b | ||||||||||
Total distributions | (.01 | ) | (.01 | ) | (— | )b | (— | )b | (— | )b | ||||||||||
Net asset value, end of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||
| ||||||||||||||||||||
Total Returnc | 0.87 | % | 0.58 | % | 0.01 | % | 0.00 | % | 0.00 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 49,233 | $ | 85,008 | $ | 78,269 | $ | 61,704 | $ | 99,178 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.88 | % | 0.57 | % | — | e | — | e | — | e | ||||||||||
Total expenses | 1.42 | % | 1.32 | % | 1.31 | % | 1.25 | % | 1.20 | % | ||||||||||
Net expensesd | 1.42 | % | 1.32 | % | 0.96 | % | 0.40 | % | 0.13 | % | ||||||||||
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 take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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 | 151 |
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 (each, a “Fund”). The Trust is authorized to issue an unlimited number of no par value shares. The Trust accounts for the assets of each Fund separately. At December 31, 2019, 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 following funds (collectively, the “Funds”):
Fund Name | Investment |
Nova Fund | Non-diversified |
Inverse S&P 500® Strategy Fund | Non-diversified |
NASDAQ-100® Fund | Non-diversified |
Inverse NASDAQ-100® Strategy Fund | Non-diversified |
S&P 500® 2x Strategy Fund | Non-diversified |
NASDAQ-100® 2x Strategy Fund | Non-diversified |
Mid-Cap 1.5x Strategy Fund | Non-diversified |
Inverse Mid-Cap Strategy Fund | Non-diversified |
Russell 2000® 2x Strategy Fund | Non-diversified |
Russell 2000® 1.5x Strategy Fund | Non-diversified |
Inverse Russell 2000® Strategy Fund | Non-diversified |
Dow 2x Strategy Fund | Non-diversified |
Inverse Dow 2x Strategy Fund | Non-diversified |
Government Long Bond 1.2x Strategy Fund | Non-diversified |
Inverse Government Long Bond Strategy Fund | Non-diversified |
High Yield Strategy Fund | Non-diversified |
U.S. Government Money Market Fund | Diversified |
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 and other assets 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.
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.
152 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
With the exception of the U.S. Government Money Market Fund, U.S. government securities are valued by 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.
Repurchase agreements are generally valued at amortized cost, provided such amounts approximate market value.
Equity securities listed or traded on a recognized U.S. securities exchange or the National Association of Securities Dealers Automated Quotations (“NASDAQ”) National Market System shall generally be valued on the basis of the last sale price on the primary U.S. exchange or market on which the security is listed or traded; provided, however, that securities listed on NASDAQ will be valued at the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If there is no sale on the valuation date, exchange-traded U.S. equity securities will be valued on the basis of the last bid price.
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 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 or other underlying position that the swaps pertain to at the close of the New York Stock Exchange (“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
THE RYDEX FUNDS ANNUAL REPORT | 153 |
NOTES TO FINANCIAL STATEMENTS (continued) |
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.
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 receipts or payments are received or made by the Fund depending on fluctuations in the fair value of the reference entity 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.
Upfront payments received or made by a Fund on credit default swap agreements are amortized over the expected life of the agreement. Periodic payments received or paid by a Fund are recorded as realized gains or losses. Payments received or made as a result of a credit event or termination of the contract are recognized, net of a proportional amount of the upfront payment, as realized gains or losses.
(f) Foreign Taxes
The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are paid by the Funds and reflected in their Statements 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, 2019, 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 a reduction to cost if the securities are still held and as realized gains if no longer held 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. Normally, all 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 U.S. federal income tax regulations which may differ from U.S. GAAP.
(i) Cash
The Funds may leave cash overnight in their cash account with the custodian. Periodically, a Fund may have cash due to the custodian bank as an overdraft balance. A fee is incurred on this overdraft, calculated by multiplying the overdraft by a rate based on the federal funds rate, which was 1.55% at December 31, 2019.
(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.
154 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
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 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 Contracts
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 RYDEX FUNDS ANNUAL REPORT | 155 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The following table represents the Funds’ use and volume of futures on a monthly basis:
Average Notional Amount | |||||||||
Fund | Use | Long | Short | ||||||
Nova Fund | Index exposure, Leverage, Liquidity | $ | 6,071,089 | $ | — | ||||
Inverse S&P 500® Strategy Fund | Index exposure, Liquidity | — | 218,560 | ||||||
NASDAQ-100® Fund | Index exposure, Liquidity | 14,515,668 | — | ||||||
Inverse NASDAQ-100® Strategy Fund | Index exposure, Liquidity | — | 108,398 | ||||||
S&P 500® 2x Strategy Fund | Index exposure, Leverage, Liquidity | 9,455,263 | — | ||||||
NASDAQ-100® 2x Strategy Fund | Index exposure, Leverage, Liquidity | 19,134,582 | — | ||||||
Mid-Cap 1.5x Strategy Fund | Index exposure, Leverage, Liquidity | 1,136,487 | — | ||||||
Inverse Mid-Cap Strategy Fund | Index exposure, Liquidity | — | 31,210 | ||||||
Russell 2000® 2x Strategy Fund | Index exposure, Leverage, Liquidity | 82,750 | 48,703 | ||||||
Russell 2000® 1.5x Strategy Fund | Index exposure, Leverage, Liquidity | — | * | — | |||||
Inverse Russell 2000® Strategy Fund | Index exposure, Liquidity | — | 45,832 | ||||||
Dow 2x Strategy Fund | Index exposure, Leverage, Liquidity | 1,841,153 | — | ||||||
Inverse Dow 2x Strategy Fund | Index exposure, Leverage, Liquidity | — | 136,510 | ||||||
Government Long Bond 1.2x Strategy Fund | Duration, Index exposure, Leverage, Liquidity | 10,869,555 | — | ||||||
Inverse Government Long Bond Strategy Fund | Duration, Index exposure, Liquidity | — | 1,285,172 | ||||||
High Yield Strategy Fund | Duration, Index exposure, Liquidity | 5,635,691 | — |
* | Futures contracts were outstanding for 146 days during the year ended December 31, 2019. The daily average outstanding notional amount of equity futures contracts during the year was $404,512. |
Swap Agreements
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. When utilizing over-the-counter (“OTC”) swaps, 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 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. For a fund utilizing centrally-cleared swaps, the exchange bears the risk of loss resulting from a counterparty not being able to pay. 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 an index) 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, 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 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 reference asset declines in value.
156 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
The following table represents the Funds’ use and volume of total return swaps on a monthly basis:
Average Notional Amount | |||||||||
Fund | Use | Long | Short | ||||||
Nova Fund | Index exposure, Leverage, Liquidity | $ | 42,209,763 | $ | — | ||||
Inverse S&P 500® Strategy Fund | Index exposure, Liquidity | — | 3,210,485 | ||||||
NASDAQ-100® Fund | Index exposure, Liquidity | 38,177,256 | — | ||||||
Inverse NASDAQ-100® Strategy Fund | Index exposure, Liquidity | — | 1,219,860 | ||||||
S&P 500® 2x Strategy Fund | Index exposure, Leverage, Liquidity | 68,209,486 | — | ||||||
NASDAQ-100® 2x Strategy Fund | Index exposure, Leverage, Liquidity | 136,309,410 | — | ||||||
Mid-Cap 1.5x Strategy Fund | Index exposure, Leverage, Liquidity | 8,303,196 | — | ||||||
Inverse Mid-Cap Strategy Fund | Index exposure, Liquidity | — | 301,130 | ||||||
Russell 2000® 2x Strategy Fund | Index exposure, Leverage, Liquidity | 6,395,848 | — | ||||||
Russell 2000® 1.5x Strategy Fund | Index exposure, Leverage, Liquidity | 8,786,109 | — | ||||||
Inverse Russell 2000® Strategy Fund | Index exposure, Liquidity | — | 1,018,716 | ||||||
Dow 2x Strategy Fund | Index exposure, Leverage, Liquidity | 26,723,436 | — | ||||||
Inverse Dow 2x Strategy Fund | Index exposure, Leverage, Liquidity | — | 6,475,118 | ||||||
High Yield Strategy Fund | Duration, Index exposure, Liquidity | 826,443 | — |
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 fund enters into credit default swaps as a “seller” or “buyer” of protection primarily to gain or reduce exposure to the investment grade and/or 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. The buyer in a credit default swap is obligated to pay the seller a periodic stream of payments over the term of the contract provided that no event of default on an underlying reference obligation has occurred. If a credit event occurs, as defined under the terms of the swap agreement, the seller 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 amount reflects the maximum potential amount the seller of credit protection could be required to pay to the buyer 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 payments. In the event a credit default occurs on a credit default swap referencing an index, a factor adjustment will take place and the buyer of protection will receive a payment reflecting the par less the default recovery rate of the defaulted index component based on its weighting in the index. If no default occurs, the counterparty will pay the stream of payments and have no further obligations to the fund selling the credit protection. For a fund utilizing centrally cleared credit default swaps, the exchange bears the risk of loss resulting from a counterparty not being able to pay. For OTC credit default swaps, 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.
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 monthly basis:
Average Notional Amount | |||||||||
Fund | Use | Protection Sold | Protection Purchased | ||||||
High Yield Strategy Fund | Duration, Index exposure, Liquidity | $ | 5,683,583 | $ | — |
THE RYDEX FUNDS ANNUAL REPORT | 157 |
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, 2019:
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 OTC swap agreements | Unrealized depreciation on OTC swap agreements |
Credit contracts | Unamortized upfront premiums paid on credit default swap agreements | Variation margin 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, 2019:
Asset Derivative Investments Value | ||||||||||||||||||||
Fund | Futures | Swaps | Futures | Swaps | Total Value at | |||||||||||||||
Nova Fund | $ | — | $ | 28,339 | $ | — | $ | — | $ | 28,339 | ||||||||||
Inverse S&P 500® Strategy Fund | — | 2,386 | — | — | 2,386 | |||||||||||||||
NASDAQ-100® Fund | 552,033 | 62,996 | — | — | 615,029 | |||||||||||||||
Inverse NASDAQ-100® Strategy Fund | — | 2,486 | — | — | 2,486 | |||||||||||||||
S&P 500® 2x Strategy Fund | 436,792 | 47,676 | — | — | 484,468 | |||||||||||||||
NASDAQ-100® 2x Strategy Fund | 348,123 | 327,079 | — | — | 675,202 | |||||||||||||||
Mid-Cap 1.5x Strategy Fund | 54,602 | 3,067 | — | — | 57,669 | |||||||||||||||
Inverse Mid-Cap Strategy Fund | — | 509 | — | — | 509 | |||||||||||||||
Russell 2000® 2x Strategy Fund | 1,302 | 7,773 | — | — | 9,075 | |||||||||||||||
Russell 2000® 1.5x Strategy Fund | — | 13,591 | — | — | 13,591 | |||||||||||||||
Inverse Russell 2000® Strategy Fund | — | 2,318 | — | — | 2,318 | |||||||||||||||
Dow 2x Strategy Fund | — | 47,249 | — | — | 47,249 | |||||||||||||||
Inverse Dow 2x Strategy Fund | — | 8,203 | — | — | 8,203 | |||||||||||||||
Inverse Government Long Bond Strategy Fund | — | — | 23,267 | — | 23,267 | |||||||||||||||
High Yield Strategy Fund | — | — | — | 200,552 | 200,552 |
Liability Derivative Investments Value | ||||||||||||||||||||
Fund | Futures | Swaps | Futures | Swaps | Total Value at | |||||||||||||||
Nova Fund | $ | — | $ | 102,856 | $ | — | $ | — | $ | 102,856 | ||||||||||
Inverse S&P 500® Strategy Fund | — | 1,929 | — | — | 1,929 | |||||||||||||||
NASDAQ-100® Fund | — | 70,918 | — | — | 70,918 | |||||||||||||||
Inverse NASDAQ-100® Strategy Fund | — | 318 | — | — | 318 | |||||||||||||||
S&P 500® 2x Strategy Fund | — | 155,257 | — | — | 155,257 | |||||||||||||||
NASDAQ-100® 2x Strategy Fund | — | 281,819 | — | — | 281,819 | |||||||||||||||
Mid-Cap 1.5x Strategy Fund | — | 2,110 | — | — | 2,110 | |||||||||||||||
Inverse Mid-Cap Strategy Fund | — | 24 | — | — | 24 | |||||||||||||||
Russell 2000® 2x Strategy Fund | — | 20,562 | — | — | 20,562 | |||||||||||||||
Russell 2000® 1.5x Strategy Fund | — | 11,851 | — | — | 11,851 | |||||||||||||||
Inverse Russell 2000® Strategy Fund | 1,656 | 325 | — | — | 1,981 | |||||||||||||||
Dow 2x Strategy Fund | 406 | 27,765 | — | — | 28,171 | |||||||||||||||
Inverse Dow 2x Strategy Fund | 1,726 | 8,072 | — | — | 9,798 | |||||||||||||||
Government Long Bond 1.2x Strategy Fund | — | — | 95,192 | — | 95,192 | |||||||||||||||
High Yield Strategy Fund | — | — | 16,502 | 337 | 16,839 |
* | Includes cumulative appreciation (depreciation) of futures contracts, OTC and centrally cleared derivatives as reported on the Schedules of Investments. For exchange-traded and centrally cleared derivatives, variation margin is reported within the Statements of Assets and Liabilities. |
158 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
The following is a summary of the location of derivative investments on the Funds’ Statements of Operations for the year ended December 31, 2019:
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, 2019:
Realized Gain (Loss) on Derivative Investments Recognized on the Statements of Operations | ||||||||||||||||||||
Fund | Futures Equity Risk | Swaps Equity Risk | Futures Interest Rate Risk | Swaps Credit Risk | Total | |||||||||||||||
Nova Fund | $ | 2,051,315 | $ | 7,896,833 | $ | — | $ | — | $ | 9,948,148 | ||||||||||
Inverse S&P 500® Strategy Fund | (64,604 | ) | (813,844 | ) | — | — | (878,448 | ) | ||||||||||||
NASDAQ-100® Fund | 3,244,060 | 11,265,747 | — | — | 14,509,807 | |||||||||||||||
Inverse NASDAQ-100® Strategy Fund | (46,301 | ) | (930,696 | ) | — | — | (976,997 | ) | ||||||||||||
S&P 500® 2x Strategy Fund | 2,707,808 | 15,377,653 | — | — | 18,085,461 | |||||||||||||||
NASDAQ-100® 2x Strategy Fund | 2,979,725 | 37,145,902 | — | — | 40,125,627 | |||||||||||||||
Mid-Cap 1.5x Strategy Fund | 316,744 | 1,421,244 | — | — | 1,737,988 | |||||||||||||||
Inverse Mid-Cap Strategy Fund | (35,574 | ) | (62,056 | ) | — | — | (97,630 | ) | ||||||||||||
Russell 2000® 2x Strategy Fund | 12,445 | 464,299 | — | — | 476,744 | |||||||||||||||
Russell 2000® 1.5x Strategy Fund | 7,847 | 1,790,024 | — | — | 1,797,871 | |||||||||||||||
Inverse Russell 2000® Strategy Fund | (2,650 | ) | (494,658 | ) | — | — | (497,308 | ) | ||||||||||||
Dow 2x Strategy Fund | 544,361 | 5,176,884 | — | — | 5,721,245 | |||||||||||||||
Inverse Dow 2x Strategy Fund | (14,987 | ) | (1,417,906 | ) | — | — | (1,432,893 | ) | ||||||||||||
Government Long Bond 1.2x Strategy Fund | — | — | 1,234,320 | — | 1,234,320 | |||||||||||||||
Inverse Government Long Bond Strategy Fund | — | — | (186,020 | ) | — | (186,020 | ) | |||||||||||||
High Yield Strategy Fund | — | — | 193,859 | 316,142 | 510,001 |
Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized on the Statements of Operations | ||||||||||||||||||||
Fund | Futures Equity Risk | Swaps Equity Risk | Futures Interest Rate Risk | Swaps Credit Risk | Total | |||||||||||||||
Nova Fund | $ | (2,042 | ) | $ | (313,890 | ) | $ | — | $ | — | $ | (315,932 | ) | |||||||
Inverse S&P 500® Strategy Fund | 754 | 44,352 | — | — | 45,106 | |||||||||||||||
NASDAQ-100® Fund | 1,233,943 | (240,468 | ) | — | — | 993,475 | ||||||||||||||
Inverse NASDAQ-100® Strategy Fund | (3,438 | ) | 78,591 | — | — | 75,153 | ||||||||||||||
S&P 500® 2x Strategy Fund | 434,750 | (737,939 | ) | — | — | (303,189 | ) | |||||||||||||
NASDAQ-100® 2x Strategy Fund | 969,392 | (594,300 | ) | — | — | 375,092 | ||||||||||||||
Mid-Cap 1.5x Strategy Fund | 151,954 | (53,110 | ) | — | — | 98,844 | ||||||||||||||
Inverse Mid-Cap Strategy Fund | 661 | 3,078 | — | — | 3,739 | |||||||||||||||
Russell 2000® 2x Strategy Fund | 12,312 | (51,645 | ) | — | — | (39,333 | ) | |||||||||||||
Russell 2000® 1.5x Strategy Fund | 44,040 | (116,269 | ) | — | — | (72,229 | ) | |||||||||||||
Inverse Russell 2000® Strategy Fund | (7,152 | ) | 53,681 | — | — | 46,529 | ||||||||||||||
Dow 2x Strategy Fund | 77,548 | (164,496 | ) | — | — | (86,948 | ) | |||||||||||||
Inverse Dow 2x Strategy Fund | (1,726 | ) | 31,121 | — | — | 29,395 | ||||||||||||||
Government Long Bond 1.2x Strategy Fund | — | — | (597,338 | ) | — | (597,338 | ) | |||||||||||||
Inverse Government Long Bond Strategy Fund | — | — | 81,975 | — | 81,975 | |||||||||||||||
High Yield Strategy Fund | — | — | (66,061 | ) | 284,206 | 218,145 |
THE RYDEX FUNDS ANNUAL REPORT | 159 |
NOTES TO 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 as collateral.
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.
160 | 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:
Gross Amounts Not Offset | |||||||||||||||||||||||||
Fund | Instrument | Gross | Gross | Net Amount | Financial | Cash | Net | ||||||||||||||||||
Nova Fund | Swap equity contracts | $ | 28,339 | $ | — | $ | 28,339 | $ | — | $ | — | $ | 28,339 | ||||||||||||
Inverse S&P 500® Strategy Fund | Swap equity contracts | 2,386 | — | 2,386 | — | — | 2,386 | ||||||||||||||||||
NASDAQ-100® Fund | Swap equity contracts | 62,996 | — | 62,996 | — | — | 62,996 | ||||||||||||||||||
Inverse NASDAQ-100® Strategy Fund | Swap equity contracts | 2,486 | — | 2,486 | — | — | 2,486 | ||||||||||||||||||
S&P 500® 2x Strategy Fund | Swap equity contracts | 47,676 | — | 47,676 | — | — | 47,676 | ||||||||||||||||||
NASDAQ-100® 2x Strategy Fund | Swap equity contracts | 327,079 | — | 327,079 | — | — | 327,079 | ||||||||||||||||||
Mid-Cap 1.5x Strategy Fund | Swap equity contracts | 3,067 | — | 3,067 | — | — | 3,067 | ||||||||||||||||||
Inverse Mid-Cap Strategy Fund | Swap equity contracts | 509 | — | 509 | — | — | 509 | ||||||||||||||||||
Russell 2000® 2x Strategy Fund | Swap equity contracts | 7,773 | — | 7,773 | — | — | 7,773 | ||||||||||||||||||
Russell 2000® 1.5x Strategy Fund | Swap equity contracts | 13,591 | — | 13,591 | — | — | 13,591 | ||||||||||||||||||
Inverse Russell 2000® Strategy Fund | Swap equity contracts | 2,318 | — | 2,318 | — | — | 2,318 | ||||||||||||||||||
Dow 2x Strategy Fund | Swap equity contracts | 47,249 | — | 47,249 | — | — | 47,249 | ||||||||||||||||||
Inverse Dow 2x Strategy Fund | Swap equity contracts | 8,203 | — | 8,203 | — | — | 8,203 | ||||||||||||||||||
High Yield Strategy Fund | Swap credit contracts | 365 | — | 365 | — | — | 365 |
THE RYDEX FUNDS ANNUAL REPORT | 161 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Gross Amounts Not Offset | |||||||||||||||||||||||||
Fund | Instrument | Gross | Gross | Net Amount | Financial | Cash | Net | ||||||||||||||||||
Nova Fund | Swap equity contracts | $ | 102,856 | $ | — | $ | 102,856 | $ | (102,856 | ) | $ | — | $ | — | |||||||||||
Inverse S&P 500® Strategy Fund | Swap equity contracts | 1,929 | — | 1,929 | (1,567 | ) | (362 | ) | — | ||||||||||||||||
NASDAQ-100® Fund | Swap equity contracts | 70,918 | — | 70,918 | (50,042 | ) | — | 20,876 | |||||||||||||||||
Inverse NASDAQ-100® Strategy Fund | Swap equity contracts | 318 | — | 318 | — | — | 318 | ||||||||||||||||||
S&P 500® 2x Strategy Fund | Swap equity contracts | 155,257 | — | 155,257 | (155,257 | ) | — | — | |||||||||||||||||
NASDAQ-100® 2x Strategy Fund | Swap equity contracts | 281,819 | — | 281,819 | (281,819 | ) | — | — | |||||||||||||||||
Mid-Cap 1.5x Strategy Fund | Swap equity contracts | 2,110 | — | 2,110 | (1,106 | ) | — | 1,004 | |||||||||||||||||
Inverse Mid-Cap Strategy Fund | Swap equity contracts | 24 | — | 24 | — | (24 | ) | — | |||||||||||||||||
Russell 2000® 2x Strategy Fund | Swap equity contracts | 20,562 | — | 20,562 | (20,562 | ) | — | — | |||||||||||||||||
Russell 2000® 1.5x Strategy Fund | Swap equity contracts | 11,851 | — | 11,851 | (8,488 | ) | — | 3,363 | |||||||||||||||||
Inverse Russell 2000® Strategy Fund | Swap equity contracts | 325 | — | 325 | — | — | 325 | ||||||||||||||||||
Dow 2x Strategy Fund | Swap equity contracts | 27,765 | — | 27,765 | (27,765 | ) | — | — | |||||||||||||||||
Inverse Dow 2x Strategy Fund | Swap equity contracts | 8,072 | — | 8,072 | (8,072 | ) | — | — | |||||||||||||||||
High Yield Strategy Fund | Swap credit contracts | 337 | — | 337 | — | — | 337 |
1 | Exchange-traded or centrally-cleared derivatives 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, 2019.
Fund | Counterparty | Asset Type | Cash Pledged | Cash Received | ||||||
Inverse S&P 500® Strategy Fund | Barclays Bank plc | Total return swap agreements | $ | 362 | $ | — | ||||
Inverse Mid-Cap Strategy Fund | Barclays Bank plc | Total return swap agreements | 52 | — | ||||||
Russell 2000® 2x Strategy Fund | Barclays Bank plc | Total return swap agreements | 5,496 | — | ||||||
Russell 2000® 1.5x Strategy Fund | Barclays Bank plc | Total return swap agreements | 3,626 | — | ||||||
Inverse Dow 2x Strategy Fund | Goldman Sachs Group | Futures contracts | 25,000 | — | ||||||
High Yield Strategy Fund | Barclays Bank plc | Credit default swap agreements | — | 177,875 | ||||||
| Goldman Sachs Group | Futures contracts | 13,864 | — | ||||||
High Yield Strategy Fund Total |
|
| 13,864 | 177,875 |
162 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 4 – Fair Value Measurement
In accordance with U.S. GAAP, fair value is defined as the price that the Funds would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. U.S. GAAP establishes a three-tier fair value hierarchy based on the types of inputs used to value assets and liabilities and requires corresponding disclosure. The hierarchy and the corresponding inputs are summarized below:
Level 1 — | quoted prices in active markets for identical assets or liabilities. |
Level 2 — | significant other observable inputs (for example quoted prices for securities that are similar based on characteristics such as interest rates, prepayment speeds, credit risk, etc.). |
Level 3 — | significant unobservable inputs based on the best information available under the circumstances, to the extent observable inputs are not available, which may include assumptions. |
The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly, fair value determinations for Level 3 securities require the greatest amount of judgment.
The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The suitability of the techniques and sources employed to determine fair valuation are regularly monitored and subject to change.
Note 5 – Investment Advisory Agreement and Other Agreements
Under the terms of an investment advisory contract, the Funds pay GI investment advisory fees calculated at the annualized rates below, based on the average daily net assets of the Funds:
Fund | Management Fees | |||
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 pays operating expenses on behalf of the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, amoung others, on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.
The Board 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.
THE RYDEX FUNDS ANNUAL REPORT | 163 |
NOTES TO FINANCIAL STATEMENTS (continued) |
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 in effect for the investing Fund. Fees waived under this arrangement are not subject to reimbursement to GI. For the year ended December 31, 2019, the following Funds waived fees related to investments in affiliated funds:
Fund | Amount Waived | |||
Nova Fund | $ | 23,937 | ||
Inverse S&P 500® Strategy Fund | 2,340 | |||
NASDAQ-100® Fund | 47,280 | |||
Inverse NASDAQ-100® Strategy Fund | 1,332 | |||
S&P 500® 2x Strategy Fund | 27,647 | |||
NASDAQ-100® 2x Strategy Fund | 53,396 | |||
Mid-Cap 1.5x Strategy Fund | 5,417 | |||
Inverse Mid-Cap Strategy Fund | 278 | |||
Russell 2000® 2x Strategy Fund | 2,002 | |||
Russell 2000® 1.5x Strategy Fund | 4,623 | |||
Inverse Russell 2000® Strategy Fund | 967 | |||
Dow 2x Strategy Fund | 10,706 | |||
Inverse Dow 2x Strategy Fund | 2,157 | |||
Government Long Bond 1.2x Strategy Fund | 4,823 | |||
Inverse Government Long Bond Strategy Fund | 2,463 | |||
High Yield Strategy Fund | 4,920 |
Certain trustees and 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.
At December 31, 2019, GI and its affiliates owned over twenty percent of the outstanding shares of the Funds, as follows:
Fund | Percent of Outstanding | |||
High Yield Strategy Fund | 22 | % |
MUFG Investor Services (US), LLC (“MUIS”) acts as the Funds’ administrator, transfer agent and accounting agent. As administrator, transfer agent and accounting agent, MUIS maintains 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.
164 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
At December 31, 2019, the repurchase agreements in the joint account were as follows:
Counterparty and | Face Value | Repurchase Price |
| Collateral | Par Value | Fair Value | ||||||||||||
J.P. Morgan Securities LLC | U.S. Treasury Inflation Indexed Bonds | |||||||||||||||||
1.53% | 0.38% - 3.38% | |||||||||||||||||
Due 01/02/20 | $ | 52,221,118 | $ | 52,225,557 | 07/15/25 - 04/15/32 | $ | 29,508,166 | $ | 30,293,286 | |||||||||
U.S. Treasury Notes | ||||||||||||||||||
1.38% - 2.50% | ||||||||||||||||||
02/28/21 - 10/31/26 | 16,685,500 | 17,041,602 | ||||||||||||||||
U.S. Treasury Bond | ||||||||||||||||||
6.25% | ||||||||||||||||||
08/15/23 | 3,032,900 | 3,592,802 | ||||||||||||||||
U.S. Treasury Floating Rate Note | ||||||||||||||||||
1.61% | ||||||||||||||||||
10/31/20 | 2,332,000 | 2,337,154 | ||||||||||||||||
U.S. Treasury Bills | ||||||||||||||||||
0.00% | ||||||||||||||||||
01/02/20 - 08/13/20 | 700 | 697 | ||||||||||||||||
51,559,266 | 53,265,541 | |||||||||||||||||
BofA Securities, Inc. | U.S. Treasury Note | |||||||||||||||||
1.50% | 2.00% | |||||||||||||||||
Due 01/02/20 | 16,838,493 | 16,839,896 | 10/31/22 | 16,936,000 | 17,175,334 | |||||||||||||
Barclays Capital, Inc. | U.S. Treasury Inflation Indexed Bond | |||||||||||||||||
1.40% | 0.13% | |||||||||||||||||
Due 01/02/20 | 16,838,493 | 16,839,803 | 10/15/24 | 17,030,300 | 17,175,300 |
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 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 | 165 |
NOTES TO FINANCIAL STATEMENTS (continued) |
At December 31, 2019, 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 | |||||||||||||||||||
Nova Fund | $ | 1,781 | $ | (1,781 | ) | $ | — | $ | 1,798 | $ | — | $ | 1,798 | ||||||||||||
NASDAQ-100® Fund | 152,385 | (152,385 | ) | — | 154,749 | — | 154,749 | ||||||||||||||||||
S&P 500® 2x Strategy Fund | 1,943 | (1,943 | ) | — | 1,961 | — | 1,961 | ||||||||||||||||||
NASDAQ-100® 2x Strategy Fund | 13,042 | (13,042 | ) | — | 13,224 | — | 13,224 | ||||||||||||||||||
Mid-Cap 1.5x Strategy Fund | 12,004 | (12,004 | ) | — | 12,347 | — | 12,347 |
(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 U.S. 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’ U.S. federal income tax returns are subject to examination by the Internal Revenue Service (“IRS”) for a period of three years after they are filed.
The tax character of distributions paid during the year ended December 31, 2019 was as follows:
Fund | Ordinary | Long-Term | Total | |||||||||
Nova Fund | $ | 297,044 | $ | — | $ | 297,044 | ||||||
Inverse S&P 500® Strategy Fund | 23,392 | — | 23,392 | |||||||||
NASDAQ-100® Fund | 660,763 | 1,122,922 | 1,783,685 | |||||||||
Inverse NASDAQ-100® Strategy Fund | 7,340 | — | 7,340 | |||||||||
NASDAQ-100® 2x Strategy Fund | 152,254 | — | 152,254 | |||||||||
Mid-Cap 1.5x Strategy Fund | 57,404 | — | 57,404 | |||||||||
Inverse Mid-Cap Strategy Fund | 1,261 | — | 1,261 | |||||||||
Russell 2000® 2x Strategy Fund | 17,289 | — | 17,289 | |||||||||
Inverse Russell 2000® Strategy Fund | 7,165 | — | 7,165 | |||||||||
Dow 2x Strategy Fund | 111,188 | — | 111,188 | |||||||||
Government Long Bond 1.2x Strategy Fund | 192,415 | — | 192,415 | |||||||||
High Yield Strategy Fund | 210,642 | — | 210,642 | |||||||||
U.S. Government Money Market Fund | 540,419 | — | 540,419 |
166 | 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 |
Note: For U.S. federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
The tax components of distributable earnings/(loss) as of December 31, 2019 were as follows:
Fund | Undistributed | Undistributed | Net Unrealized | Accumulated | Total | |||||||||||||||
Nova Fund | $ | 3,552,133 | $ | — | $ | 67,246 | $ | — | $ | 3,619,379 | ||||||||||
Inverse S&P 500® Strategy Fund | 25,202 | — | 657 | (14,739,311 | ) | (14,713,452 | ) | |||||||||||||
NASDAQ-100® Fund | 12,636,620 | — | 13,083,804 | — | 25,720,424 | |||||||||||||||
Inverse NASDAQ-100® Strategy Fund | 12,149 | — | 1,350 | (6,992,890 | ) | (6,979,391 | ) | |||||||||||||
S&P 500® 2x Strategy Fund | 6,283,640 | — | 307,373 | — | 6,591,013 | |||||||||||||||
NASDAQ-100® 2x Strategy Fund | 18,829,665 | — | (633,216 | ) | — | 18,196,449 | ||||||||||||||
Mid-Cap 1.5x Strategy Fund | 43,396 | 160,922 | 120,509 | — | 324,827 | |||||||||||||||
Inverse Mid-Cap Strategy Fund | 2,781 | — | 70 | (1,782,646 | ) | (1,779,795 | ) | |||||||||||||
Russell 2000® 2x Strategy Fund | 18,820 | — | (19,129 | ) | (297,242 | ) | (297,551 | ) | ||||||||||||
Russell 2000® 1.5x Strategy Fund | 94,590 | 53,967 | (12,835 | ) | — | 135,722 | ||||||||||||||
Inverse Russell 2000® Strategy Fund | 9,218 | — | 961 | (6,848,584 | ) | (6,838,405 | ) | |||||||||||||
Dow 2x Strategy Fund | 1,605,976 | — | 304,989 | — | 1,910,965 | |||||||||||||||
Inverse Dow 2x Strategy Fund | 20,050 | — | (2,923 | ) | (18,937,999 | ) | (18,920,872 | ) | ||||||||||||
Government Long Bond 1.2x Strategy Fund | 496 | — | (144,458 | ) | (9,659,006 | ) | (9,802,968 | ) | ||||||||||||
Inverse Government Long Bond Strategy Fund | 8,507 | — | 13,945 | (7,494,154 | ) | (7,471,702 | ) | |||||||||||||
High Yield Strategy Fund | 318,168 | 4,284 | 197,103 | — | 519,555 | |||||||||||||||
U.S. Government Money Market Fund | 6,025 | 413 | — | — | 6,438 |
THE RYDEX FUNDS ANNUAL REPORT | 167 |
NOTES TO FINANCIAL STATEMENTS (continued) |
For U.S. 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, 2019, capital loss carryforwards for the Funds were as follows:
Unlimited | ||||||||||||
Fund | Short-Term | Long-Term | Total | |||||||||
Inverse S&P 500® Strategy Fund | $ | (12,985,388 | ) | $ | (1,753,923 | ) | $ | (14,739,311 | ) | |||
Inverse NASDAQ-100® Strategy Fund | (6,113,578 | ) | (879,312 | ) | (6,992,890 | ) | ||||||
Inverse Mid-Cap Strategy Fund | (1,654,688 | ) | (127,958 | ) | (1,782,646 | )* | ||||||
Russell 2000® 2x Strategy Fund | (297,242 | ) | — | (297,242 | ) | |||||||
Inverse Russell 2000® Strategy Fund | (6,017,393 | ) | (831,191 | ) | (6,848,584 | ) | ||||||
Inverse Dow 2x Strategy Fund | (16,765,807 | ) | (2,172,192 | ) | (18,937,999 | ) | ||||||
Government Long Bond 1.2x Strategy Fund | (7,132,514 | ) | (2,526,492 | ) | (9,659,006 | ) | ||||||
Inverse Government Long Bond Strategy Fund | (5,646,399 | ) | (1,847,755 | ) | (7,494,154 | ) |
* | 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, 2019, the following capital loss carryforward amounts were utilized:
Fund | Utilized | |||
Nova Fund | $ | 1,256,438 | ||
S&P 500® 2x Strategy Fund | 7,926,477 | |||
NASDAQ-100® 2x Strategy Fund | 3,840,816 | |||
Mid-Cap 1.5x Strategy Fund | 1,829,145 | |||
Russell 2000® 2x Strategy Fund | 499,748 | |||
Russell 2000® 1.5x Strategy Fund | 1,801,142 | |||
Dow 2x Strategy Fund | 2,658,871 | |||
Government Long Bond 1.2x Strategy Fund | 2,268,314 | |||
High Yield Strategy Fund | 173,706 |
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, 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 and distribution reclasses. 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, 2019 for permanent book/tax differences:
Fund | Paid In | Total | ||||||
Nova Fund | $ | 5,061,090 | $ | (5,061,090 | ) | |||
NASDAQ-100® Fund | 10,028,452 | (10,028,452 | ) | |||||
S&P 500® 2x Strategy Fund | 5,186,576 | (5,186,576 | ) | |||||
NASDAQ-100® 2x Strategy Fund | 23,811,853 | (23,811,853 | ) | |||||
Mid-Cap 1.5x Strategy Fund | 12,914 | (12,914 | ) | |||||
Russell 2000® 2x Strategy Fund | 7 | (7 | ) | |||||
Russell 2000® 1.5x Strategy Fund | 12,941 | (12,941 | ) | |||||
Dow 2x Strategy Fund | 2,054,453 | (2,054,453 | ) |
168 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
At December 31, 2019, the cost of investments for U.S. federal income tax purposes, the aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost and the aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value, were as follows:
Fund | Tax | Tax | Tax | Net | ||||||||||||
Nova Fund | $ | 37,226,056 | $ | 223,701 | $ | (156,455 | ) | $ | 67,246 | |||||||
Inverse S&P 500® Strategy Fund | 1,872,805 | 3,574 | (2,917 | ) | 657 | |||||||||||
NASDAQ-100® Fund | 74,062,631 | 13,452,186 | (368,382 | ) | 13,083,804 | |||||||||||
Inverse NASDAQ-100® Strategy Fund | 654,671 | 2,020 | (670 | ) | 1,350 | |||||||||||
S&P 500® 2x Strategy Fund | 55,526,582 | 623,183 | (315,810 | ) | 307,373 | |||||||||||
NASDAQ-100® 2x Strategy Fund | 106,620,276 | 237,104 | (870,320 | ) | (633,216 | ) | ||||||||||
Mid-Cap 1.5x Strategy Fund | 9,232,510 | 137,810 | (17,301 | ) | 120,509 | |||||||||||
Inverse Mid-Cap Strategy Fund | 299,884 | 509 | (439 | ) | 70 | |||||||||||
Russell 2000® 2x Strategy Fund | 3,908,083 | 8,661 | (27,790 | ) | (19,129 | ) | ||||||||||
Russell 2000® 1.5x Strategy Fund | 5,881,358 | 12,895 | (25,730 | ) | (12,835 | ) | ||||||||||
Inverse Russell 2000® Strategy Fund | 627,434 | 2,812 | (1,851 | ) | 961 | |||||||||||
Dow 2x Strategy Fund | 17,009,243 | 358,975 | (53,986 | ) | 304,989 | |||||||||||
Inverse Dow 2x Strategy Fund | 3,331,803 | 9,050 | (11,973 | ) | (2,923 | ) | ||||||||||
Government Long Bond 1.2x Strategy Fund | 10,485,535 | — | (144,458 | ) | (144,458 | ) | ||||||||||
Inverse Government Long Bond Strategy Fund | 2,657,879 | 13,945 | — | 13,945 | ||||||||||||
High Yield Strategy Fund | 9,625,303 | 212,664 | (15,561 | ) | 197,103 | |||||||||||
U.S. Government Money Market Fund | 49,238,117 | — | — | — |
Note 9 – Securities Transactions
For the year ended December 31, 2019, 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 | $ | 104,643,077 | $ | 99,311,958 | ||||
Inverse S&P 500® Strategy Fund | 8,155,850 | 9,780,000 | ||||||
NASDAQ-100® Fund | 55,177,170 | 39,563,111 | ||||||
Inverse NASDAQ-100® Strategy Fund | 4,396,978 | 7,960,000 | ||||||
S&P 500® 2x Strategy Fund | 93,950,155 | 72,532,896 | ||||||
NASDAQ-100® 2x Strategy Fund | 242,887,626 | 214,048,162 | ||||||
Mid-Cap 1.5x Strategy Fund | 15,390,045 | 16,332,969 | ||||||
Inverse Mid-Cap Strategy Fund | 401,646 | 510,000 | ||||||
Russell 2000® 2x Strategy Fund | 7,619,525 | 6,952,521 | ||||||
Russell 2000® 1.5x Strategy Fund | 4,920,813 | 5,967,574 | ||||||
Inverse Russell 2000® Strategy Fund | 1,250,310 | 3,200,000 | ||||||
Dow 2x Strategy Fund | 34,056,932 | 31,863,387 | ||||||
Inverse Dow 2x Strategy Fund | 7,344,192 | 6,985,000 | ||||||
Government Long Bond 1.2x Strategy Fund | 17,259,678 | 19,600,000 | ||||||
Inverse Government Long Bond Strategy Fund | 2,994,247 | 4,800,000 | ||||||
High Yield Strategy Fund | 12,857,352 | 10,950,070 | ||||||
U.S. Government Money Market Fund | 450,045 | — |
For the year ended December 31, 2019, the cost of purchases and proceeds from sales of government securities were as follows:
Fund | Purchases | Sales | ||||||
Government Long Bond 1.2x Strategy Fund | $ | 291,073,375 | $ | 293,405,203 | ||||
Inverse Government Long Bond Strategy Fund | 34,289,922 | 32,607,750 |
THE RYDEX FUNDS ANNUAL REPORT | 169 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The Funds are permitted to purchase or sell securities from or to certain affiliated funds under specified conditions outlined in procedures adopted by the Board. 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, 2019, 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 | $ | 27,433,633 | $ | 26,706,357 | $ | (114,374 | ) | |||||
NASDAQ-100® Fund | 17,584,876 | 22,543,345 | 4,971,924 | |||||||||
S&P 500® 2x Strategy Fund | 36,047,072 | 47,731,751 | 879,250 | |||||||||
NASDAQ-100® 2x Strategy Fund | 64,019,695 | 136,284,344 | 3,220,668 | |||||||||
Mid-Cap 1.5x Strategy Fund | 495,015 | 1,219,928 | 139,565 | |||||||||
Russell 2000® 2x Strategy Fund | — | 36,561 | 10,987 | |||||||||
Russell 2000® 1.5x Strategy Fund | 456,683 | 655,286 | 103,241 | |||||||||
Dow 2x Strategy Fund | 7,220,687 | 7,613,343 | 74,369 | |||||||||
U.S. Government Money Market Fund | 1,401,269 | — | — |
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 8, 2020.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 3.28% for the year ended December 31, 2019. The Funds did not have any borrowings outstanding under this agreement at December 31, 2019.
The average daily balances borrowed for the year ended December 31, 2019, were as follows:
Fund | Average Daily Balance | |||
Nova Fund | $ | 3,553 | ||
Inverse S&P 500® Strategy Fund | 649 | |||
NASDAQ-100® Fund | 3,197 | |||
Inverse NASDAQ-100® Strategy Fund | 19 | |||
S&P 500® 2x Strategy Fund | 1,301 | |||
NASDAQ-100® 2x Strategy Fund | 21,014 | |||
Mid-Cap 1.5x Strategy Fund | 877 | |||
Russell 2000® 2x Strategy Fund | 173 | |||
Russell 2000® 1.5x Strategy Fund | 279 | |||
Dow 2x Strategy Fund | 940 | |||
Inverse Dow 2x Strategy Fund | 112 | |||
Government Long Bond 1.2x Strategy Fund | 21,929 |
Note 11 – 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. As of January 1, 2020, the Funds have fully adopted the provisions of the 2017 ASU which were applied on a modified retrospective basis, as prescribed. The adoption did not result in a cumulative-effect adjustment as of the beginning of the period and had no impact on total distributable earnings, net assets, the current period results from operations, or any prior period information presented in 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
170 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. As of December 31, 2019, the Funds have fully adopted the provisions of the 2018 ASU, 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 – 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-2296 (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 December 19, 2019, the Second Circuit issued an amended opinion that again affirmed the district court’s ruling on the basis that plaintiffs’ claims were preempted by Section 546(e) of the Bankruptcy Code. Plaintiffs filed a motion for rehearing and rehearing en banc on January 2, 2020.
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 intended to permit an interlocutory appeal of the dismissal order, but would wait to do so until it has resolved outstanding motions to dismiss filed by other defendants.
THE RYDEX FUNDS ANNUAL REPORT | 171 |
NOTES TO FINANCIAL STATEMENTS (concluded) |
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 mediation did not result in a settlement of the claims against the shareholder defendants.
On April 4, 2019, plaintiff filed a motion to amend the Fifth Amended Complaint to assert a federal constructive fraudulent transfer claim against certain shareholder defendants. On April 10, 2019, the shareholder defendants filed a brief in opposition to plaintiff’s motion to amend. On April 12, 2019, the plaintiff filed a reply brief. On April 23, 2019, the court denied the plaintiff’s motion to amend. On June 13, 2019, the court entered judgment pursuant to Rule 54(b). On July 12, 2019, the Plaintiff filed a notice of appeal with respect to the dismissal of his claims and the District Court’s denial of his motion for leave to amend. Plaintiff filed an appellate brief on January 7, 2020. The shareholder defendants’ brief is currently due April 6, 2020.
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 13 – Subsequent Events
The Funds evaluated subsequent events through the date the financial statements were available for issue and determined there were no material events that would require adjustment to or disclosure in the Funds’ financial statements.
172 | THE RYDEX FUNDS ANNUAL REPORT |
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, 2019, 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 (seventeen of the funds constituting Rydex Variable Trust) at December 31, 2019, 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, 2019, 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 27, 2020
THE RYDEX FUNDS ANNUAL REPORT | 173 |
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 2020, 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 2019.
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, 2019, the following funds had the corresponding percentages qualify for the dividends received deduction for corporations.
Fund | Dividend |
Nova Fund | 38.68% |
NASDAQ-100® Fund | 80.73% |
NASDAQ-100® 2x Strategy Fund | 100.0% |
Mid-Cap 1.5x Strategy Fund | 11.46% |
Russell 2000® 2x Strategy Fund | 50.84% |
Dow 2x Strategy Fund | 75.94% |
With respect to the taxable year ended December 31, 2019, 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 long-term | ||||||
Nova Fund | $ | — | $ | 1,009,348 | ||||
NASDAQ-100® Fund | 1,122,922 | 8,804,478 | ||||||
S&P 500® 2x Strategy Fund | — | 1,827,134 | ||||||
NASDAQ-100® 2x Strategy Fund | — | 2,892,463 | ||||||
Mid-Cap 1.5x Strategy Fund | — | 12,915 | ||||||
Russell 2000® 1.5x Strategy Fund | — | 13,949 | ||||||
Dow 2x Strategy Fund | — | 371,779 |
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.
Special Meeting of Shareholders — Voting Results
A joint special meeting of shareholders of the Trust was held on October 24, 2019 to elect the following ten nominees to the Board of Trustees of the Trust: Randall C. Barnes, Angela Brock-Kyle, Donald A. Chubb, Jr., Jerry B. Farley, Roman Friedrich III, Thomas F. Lydon, Jr., Ronald A. Nyberg, Sandra G. Sponem, Ronald E. Toupin, Jr. and Amy J. Lee. At the meeting, the following votes were recorded:
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OTHER INFORMATION (Unaudited)(concluded) |
Nominee | Shares For | Shares Withheld | ||||||
Randall C. Barnes | 80,976,563 | 3,278,383 | ||||||
Angela Brock-Kyle | 80,976,448 | 3,278,498 | ||||||
Donald A. Chubb, Jr. | 80,889,189 | 3,365,757 | ||||||
Jerry B. Farley | 80,698,759 | 3,556,187 | ||||||
Roman Friedrich III | 80,706,634 | 3,548,312 | ||||||
Thomas F. Lydon, Jr. | 80,699,239 | 3,555,707 | ||||||
Ronald A. Nyberg | 80,694,478 | 3,560,468 | ||||||
Sandra G. Sponem | 80,774,487 | 3,480,459 | ||||||
Ronald E. Toupin, Jr. | 80,771,319 | 3,483,627 | ||||||
Amy J. Lee | 80,977,346 | 3,277,600 |
Corey A. Colehour and J. Kenneth Dalton resigned from the Board of Trustees of the Trust effective as of the conclusion of the quarterly meeting of the Board of Trustees of the Trust held on November 11, 2019.
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 as an exhibit to its reports on Form N-PORT, and for reporting periods ended prior to March 31, 2019, filed such information on Form N-Q. The Funds’ Forms N-PORT and N-Q are available on the SEC’s website at https://www.sec.gov. The Funds’ Forms N-PORT and 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* | Position(s) Held | Term of Office | Principal Occupation(s) | Number of | Other |
INDEPENDENT TRUSTEES | |||||
Randall C. Barnes (1951) | Trustee | Since 2019 | Current: Private Investor (2001-present).
Former: Senior Vice President and Treasurer, PepsiCo, Inc. (1993-1997); President, Pizza Hut International (1991-1993); Senior Vice President, Strategic Planning and New Business Development, PepsiCo, Inc. (1987-1990). | 157 | Current: Purpose Investments Funds (2013-present).
Former: Managed Duration Investment Grade Municipal Fund (2003-2016). |
Angela Brock-Kyle (1959) | Trustee | Since 2016 | Current: Founder and Chief Executive Officer, B.O.A.R.D.S. (2013-present).
Former: Senior Leader, TIAA (1987-2012). | 156 | Current: Hunt Companies, Inc. (2019-present).
Former: Infinity Property & Casualty Corp. (2014-2018). |
Donald A. Chubb, Jr. (1946) | Trustee and Chairman of the Valuation Oversight Committee | Since 2019 | Current: Retired
Former: Business broker and manager of commercial real estate, Griffith & Blair, Inc. (1997-2017). | 156 | Former: Midland Care, Inc. (2011-2016). |
Jerry B. Farley (1946) | Trustee | Since 2019 | Current: President, Washburn University (1997-present). | 156 | Current: CoreFirst Bank & Trust (2000-present).
Former: Westar Energy, Inc. (2004-2018). |
Roman Friedrich III (1946) | Trustee and Chairman of the Contracts Review Committee | Since 2019 | Current: Founder and Managing Partner, Roman Friedrich & Company (1998-present). | 156 | Former: Zincore Metals, Inc. (2009-2019). |
Thomas F. Lydon, Jr.
(1960) | Trustee and Vice Chairman of the Contracts Review Committee | Since 2005 (Trustee) Since 2019 (Vice Chairman of the Contracts Review Committee) | Current: President, Global Trends Investments (1996-present); Co-Chief Executive Officer, ETF Flows, LLC (2019-present); Chief Executive Officer, Lydon Media (2016-present). | 156 | Current: US Global Investors (GROW) (1995-present).
Former: Harvest Volatility Edge Trust (3) (2017-2019). |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) Held | Term of Office | Principal Occupation(s) | Number of | Other |
INDEPENDENT TRUSTEES - continued | |||||
Ronald A. Nyberg (1953) | Trustee and Chairman of the Nominating and Governance Committee | Since 2019 | Current: Partner, Momkus LLC (2016-present).
Former: Partner, Nyberg & Cassioppi, LLC (2000-2016); Executive Vice President, General Counsel, and Corporate Secretary, Van Kampen Investments (1982-1999). | 157 | Current: PPM Funds (9) (2018 - present); Edward-Elmhurst Healthcare System (2012-present); Western Asset Inflation-Linked Opportunities & Income Fund (2004-present); Western Asset Inflation-Linked Income Fund (2003-present).
Former: Managed Duration Investment Grade Municipal Fund (2003-2016). |
Sandra G. Sponem (1958) | Trustee and Chair of the Audit Committee | Since 2016 (Trustee) Since 2019 (Chair of the Audit Committee) | Current: Retired.
Former: Senior Vice President and Chief Financial Officer, M.A. Mortenson-Companies, Inc. (2007-2017). | 156 | Current: SPDR Series Trust (78) (2018-present); SPDR Index Shares Funds (31) (2018-present); SSGA Active Trust (12) (2018-present); and SSGA Master Trust (1) (2018-present). |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) Held | Term of Office | Principal Occupation(s) | Number of | Other |
INDEPENDENT TRUSTEES - concluded | |||||
Ronald E. Toupin, Jr. (1958) | Trustee and Chairman of the Board and Chairman of the Executive Committee | Since 2019 | Current: Portfolio Consultant (2010-present); Member, Governing Council, Independent Directors Council (2013-present); Governor, Board of Governors, Investment Company Institute (2018-present).
Former: Member, Executive Committee, Independent Directors Council (2016-2018); Vice President, Manager and Portfolio Manager, Nuveen Asset Management (1998-1999); Vice President, Nuveen Investment Advisory Corp. (1992-1999); Vice President and Manager, Nuveen Unit Investment Trusts (1991-1999); and Assistant Vice President and Portfolio Manager, Nuveen Unit Investment Trusts (1988-1999), each of John Nuveen & Co., Inc. (1982-1999). | 156 | Current: Western Asset Inflation-Linked Opportunities & Income Fund (2004-present); Western Asset Inflation-Linked Income Fund (2003-present).
Former: Managed Duration Investment Grade Municipal Fund (2003-2016). |
INTERESTED TRUSTEE | |||||
Amy J. Lee*** (1961) | Trustee, Vice President and Chief Legal Officer | Since 2018 (Trustee) Since 2019 (Vice President and Chief Legal Officer) | Current: Interested Trustee, certain other funds in the Fund Complex (2018-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: President and Chief Executive Officer, certain other funds in the Fund Complex (2017-2019); Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004-2012). | 156 | None. |
* | The business address of each Trustee is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each Trustee serves an indefinite term, until his or her successor is elected and qualified. Time served includes time served in the respective position for the Predecessor Corporation. |
*** | This Trustee is deemed to be an “interested person” of the Funds under the 1940 Act by reason of her position with the Funds’ Investment Manager and/or the parent of the Investment Manager. |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) Held | Term of Office and Length | Principal Occupation(s) |
OFFICERS |
|
| |
Brian E. Binder (1972) | President and Chief Executive Officer | Since 2019 | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2018-present); President, Chief Executive Officer and Chairman of the Board of Managers, Guggenheim Funds Investment Advisors, LLC (2018-present); President and Chief Executive Officer, Security Investors, LLC (2018-present); Board Member of Guggenheim Partners Fund Management (Europe) Limited (2018-present); Senior Managing Director and Chief Administrative Officer, Guggenheim Investments (2018-present).
Former: Managing Director and President, Deutsche Funds, and Head of US Product, Trading and Fund Administration, Deutsche Asset Management (2013-2018); Managing Director, Head of Business Management and Consulting, Invesco Ltd. (2010-2012). |
James M. Howley (1972) | Assistant Treasurer | Since 2016 | 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). |
Mark E. Mathiasen (1978) | Secretary | Since 2017 | Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present). |
Glenn McWhinnie (1969) | Assistant Treasurer | Since 2016 | Current: Vice President, Guggenheim Investments (2009-present); Assistant Treasurer, certain other funds in the Fund Complex (2016-present). |
Michael P. Megaris (1984) | Assistant Secretary | Since 2018 | 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 | Term of Office and Length | Principal Occupation(s) |
OFFICERS - continued | |||
Elisabeth Miller (1968) | Chief Compliance Officer | Since 2012 | Current: Chief Compliance Officer, certain other funds in the Fund Complex (2012-present); Senior Managing Director, Guggenheim Investments (2012-present). Vice President, Guggenheim Funds Distributors, LLC (2014-present).
Former: Chief Compliance Officer, Security Investors, LLC and 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 | Since 2017 | 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). |
William Rehder (1967) | Assistant Vice President | Since 2018 | Current: Managing Director, Guggenheim Investments (2002-present). |
Kimberly J. Scott (1974) | Assistant Treasurer | Since 2016 | 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). |
Bryan Stone (1979) | Vice President | Since 2019 | Current: Vice President, certain other funds in the Fund Complex (2014-present); Managing Director, Guggenheim Investments (2013-present).
Former: Senior Vice President, Neuberger Berman Group LLC (2009-2013); Vice President, Morgan Stanley (2002-2009). |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(concluded) |
Name, Address* | Position(s) Held | Term of Office and Length | Principal Occupation(s) |
OFFICERS - concluded | |||
John L. Sullivan (1955) | Chief Financial Officer, Chief Accounting Officer and Treasurer | Since 2016 | 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 | Since 2017 | 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). |
* | The business address of each officer is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each officer serves an indefinite term, until his or her successor is duly elected and qualified. |
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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
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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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12.31.2019
Rydex Variable Trust Funds Annual Report
Domestic Equity Funds |
S&P 500® Pure Growth Fund |
S&P 500® Pure Value Fund |
S&P MidCap 400® Pure Growth Fund |
S&P MidCap 400® Pure Value Fund |
S&P SmallCap 600® Pure Growth Fund |
S&P SmallCap 600® Pure Value Fund |
International Equity Funds |
Europe 1.25x Strategy 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 may no longer be sent by mail, unless you specifically request paper copies of the reports from the insurance company that offers your contract 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. Instructions for requesting paper copies will be provided by your insurance company.
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 the insurance company electronically by following the instructions provided by the insurance company.
You may elect to receive all future shareholder reports in paper free of charge. You can inform the insurance company that you wish to receive paper copies of reports by following the instructions provided by the insurance company. Your election to receive reports in paper will apply to all portfolio companies available under your contract.
GuggenheimInvestments.com | RVATB2-ANN-2-1219x1220 |
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 | 23 |
S&P MIDCAP 400® PURE VALUE FUND | 30 |
S&P SMALLCAP 600® PURE GROWTH FUND | 37 |
S&P SMALLCAP 600® PURE VALUE FUND | 45 |
EUROPE 1.25x STRATEGY FUND | 53 |
JAPAN 2x STRATEGY FUND | 61 |
STRENGTHENING DOLLAR 2x STRATEGY FUND | 68 |
WEAKENING DOLLAR 2x STRATEGY FUND | 75 |
NOTES TO FINANCIAL STATEMENTS | 82 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 97 |
OTHER INFORMATION | 98 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS | 100 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE | 105 |
THE RYDEX FUNDS ANNUAL REPORT | 1 |
| December 31, 2019 |
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, 2019.
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, 2020
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.
2 | THE RYDEX FUNDS ANNUAL REPORT |
| December 31, 2019 |
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 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.
The 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 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 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 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. 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 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 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 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 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. 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 RYDEX FUNDS ANNUAL REPORT | 3 |
ECONOMIC AND MARKET OVERVIEW (Unaudited) | December 31, 2019 |
Recent U.S. economic data demonstrates that the expansion is being helped by lower interest rates. New home sales have risen at a double-digit, year-over-year pace for four consecutive months since August, spurred by lower mortgage rates but also base effects. Manufacturing production rose in both November and December, corroborating the signal seen in improving manufacturing surveys. Monthly non-farm payroll gains averaged 184,000 jobs in the fourth quarter of 2019, above underlying labor force growth. Income gains and a positive wealth effect are also flowing through into retail sales, where “core” sales recovered in December after three months of declines.
The latest evidence suggests that the U.S. Federal Reserve’s (the “Fed”) easing efforts have given the U.S. economy the extra gas it needs to extend the cycle. Furthermore, the new year kicks off with some clarity on U.S.-China trade policy. The eleventh-hour phase one U.S.-China trade agreement may give U.S. companies some comfort that they can expect tariffs on either side to remain where they are for now. This should help support U.S. manufacturing activity, especially if China steps up purchases of U.S. goods as promised.
Over the next several months, we expect the Fed will stay on hold as it watches incoming data to ensure that the current level of fed funds remains appropriate. Monetary policy acts on the economy with a timing lag, so the effects of the last rate cut in October 2019 might not be apparent until mid-2020. More economic data improvements may come as low rates flow through to consumers and to the credit markets.
While the Fed successfully pushed off a recession in 2019, 2020 arrives with several risks worth watching, including the U.S. presidential election, U.S.-Europe trade negotiations, the potential for a military conflict between the U.S. and Iran, and rising corporate and local government defaults in China.
For the 12 months ended December 31, 2019, the Standard & Poor’s 500® (“S&P 500®”) Index* returned 31.49%. The MSCI Europe-Australasia-Far East (“EAFE”) Index* returned 22.01%. The return of the MSCI Emerging Markets Index* was 18.42%.
In the bond market, the Bloomberg Barclays U.S. Aggregate Bond Index* posted a 8.72% return for the period, while the Bloomberg Barclays U.S. Corporate High Yield Index* returned 14.32%. The return of the ICE Bank of America (“BofA”) Merrill Lynch 3-Month U.S. Treasury Bill Index* was 2.28% for the 12-month period.
The opinions and forecasts expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
*Index Definitions:
The following indices are referenced throughout this report. Indices are unmanaged and not available for direct investment. Index performance does not reflect transaction costs, fees, or expenses.
Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, mortgage-backed securities or “MBS” (agency fixed-rate and hybrid adjustable-rate mortgage, or “ARM”, pass-throughs), asset-backed securities (“ABS”), and commercial mortgage-backed securities (“CMBS”) (agency and non-agency).
Bloomberg Barclays U.S. Corporate High Yield Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB +/BB + or below.
4 | THE RYDEX FUNDS ANNUAL REPORT |
ECONOMIC AND MARKET OVERVIEW (Unaudited)(concluded) | December 31, 2019 |
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, Europe’s leading Blue-chip Index, provides a representation of supersector leaders in Europe. The index covers 50 stocks from 17 European countries: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Norway, Poland, Portugal, Spain, Sweden, Switzerland and the United Kingdom.
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) |
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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) |
|
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, 2019 and ending December 31, 2019.
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 | 1.69% | 5.99% | $ 1,000.00 | $ 1,059.90 | $ 8.77 |
S&P 500® Pure Value Fund | 1.70% | 7.18% | 1,000.00 | 1,071.80 | 8.88 |
S&P MidCap 400® Pure Growth Fund | 1.69% | 2.99% | 1,000.00 | 1,029.90 | 8.65 |
S&P MidCap 400® Pure Value Fund | 1.69% | 3.49% | 1,000.00 | 1,034.90 | 8.67 |
S&P SmallCap 600® Pure Growth Fund | 1.69% | 5.95% | 1,000.00 | 1,059.50 | 8.77 |
S&P SmallCap 600® Pure Value Fund | 1.70% | 11.65% | 1,000.00 | 1,116.50 | 9.07 |
Europe 1.25x Strategy Fund | 1.77% | 6.81% | 1,000.00 | 1,068.10 | 9.23 |
Japan 2x Strategy Fund | 1.63% | 18.65% | 1,000.00 | 1,186.50 | 8.98 |
Strengthening Dollar 2x Strategy Fund | 1.98% | 2.30% | 1,000.00 | 1,023.00 | 10.10 |
Weakening Dollar 2x Strategy Fund | 1.97% | (2.74%) | 1,000.00 | 972.60 | 9.79 |
| |||||
Table 2. Based on hypothetical 5% return (before expenses) | |||||
S&P 500® Pure Growth Fund | 1.69% | 5.00% | $ 1,000.00 | $ 1,016.69 | $ 8.59 |
S&P 500® Pure Value Fund | 1.70% | 5.00% | 1,000.00 | 1,016.64 | 8.64 |
S&P MidCap 400® Pure Growth Fund | 1.69% | 5.00% | 1,000.00 | 1,016.69 | 8.59 |
S&P MidCap 400® Pure Value Fund | 1.69% | 5.00% | 1,000.00 | 1,016.69 | 8.59 |
S&P SmallCap 600® Pure Growth Fund | 1.69% | 5.00% | 1,000.00 | 1,016.69 | 8.59 |
S&P SmallCap 600® Pure Value Fund | 1.70% | 5.00% | 1,000.00 | 1,016.64 | 8.64 |
Europe 1.25x Strategy Fund | 1.77% | 5.00% | 1,000.00 | 1,016.28 | 9.00 |
Japan 2x Strategy Fund | 1.63% | 5.00% | 1,000.00 | 1,016.99 | 8.29 |
Strengthening Dollar 2x Strategy Fund | 1.98% | 5.00% | 1,000.00 | 1,015.22 | 10.06 |
Weakening Dollar 2x Strategy Fund | 1.97% | 5.00% | 1,000.00 | 1,015.27 | 10.01 |
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, 2019 to December 31, 2019. |
8 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, S&P 500® Pure Growth Fund returned 26.60%, compared with a return of 28.92% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
Information Technology was the sector contributing the most to the return of the underlying index, followed by Health Care and Industrials. No sector detracted from return.
Stocks contributing the most to return of the underlying index were Advanced Micro Devices, Inc., Keysight Technologies, Inc., and TransDigm Group, Inc. Occidental Petroleum Corp., Alliance Data Systems Corp., and Pfizer, 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) | |
ServiceNow, Inc. | 1.8% |
Lam Research Corp. | 1.7% |
Facebook, Inc. — Class A | 1.7% |
Micron Technology, Inc. | 1.7% |
PulteGroup, Inc. | 1.6% |
Hilton Worldwide Holdings, Inc. | 1.6% |
United Rentals, Inc. | 1.6% |
Incyte Corp. | 1.5% |
Fortinet, Inc. | 1.5% |
Synchrony Financial | 1.5% |
Top Ten Total | 16.2% |
“Ten Largest Holdings” excludes any temporary cash investments. |
THE RYDEX FUNDS ANNUAL REPORT | 9 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
S&P 500® Pure Growth Fund | 26.60% | 9.03% | 13.12% |
S&P 500 Pure Growth Index | 28.92% | 10.89% | 15.13% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
10 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
S&P 500® PURE GROWTH FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.5% | ||||||||
Technology - 28.5% | ||||||||
ServiceNow, Inc.* | 2,660 | $ | 750,971 | |||||
Lam Research Corp. | 2,420 | 707,608 | ||||||
Micron Technology, Inc.* | 12,910 | 694,300 | ||||||
Fortinet, Inc.* | 5,879 | 627,642 | ||||||
Applied Materials, Inc. | 9,670 | 590,257 | ||||||
KLA Corp. | 3,220 | 573,707 | ||||||
Adobe, Inc.* | 1,700 | 560,677 | ||||||
Xerox Holdings Corp. | 14,980 | 552,313 | ||||||
MSCI, Inc. — Class A | 2,100 | 542,178 | ||||||
ANSYS, Inc.* | 2,089 | 537,730 | ||||||
Microchip Technology, Inc. | 4,670 | 489,042 | ||||||
Apple, Inc. | 1,610 | 472,777 | ||||||
Microsoft Corp. | 2,870 | 452,599 | ||||||
Synopsys, Inc.* | 3,100 | 431,520 | ||||||
Broadcom, Inc. | 1,342 | 424,099 | ||||||
Fiserv, Inc.* | 3,630 | 419,737 | ||||||
Cadence Design Systems, Inc.* | 5,910 | 409,918 | ||||||
salesforce.com, Inc.* | 2,233 | 363,175 | ||||||
NVIDIA Corp. | 1,450 | 341,185 | ||||||
Qorvo, Inc.* | 2,560 | 297,549 | ||||||
Autodesk, Inc.* | 1,464 | 268,585 | ||||||
QUALCOMM, Inc. | 3,000 | 264,690 | ||||||
Analog Devices, Inc. | 2,170 | 257,883 | ||||||
Advanced Micro Devices, Inc.* | 5,377 | 246,589 | ||||||
Take-Two Interactive Software, Inc.* | 2,003 | 245,227 | ||||||
Zebra Technologies Corp. — Class A* | 950 | 242,668 | ||||||
Intuit, Inc. | 896 | 234,689 | ||||||
Total Technology | 11,999,315 | |||||||
Consumer, Non-cyclical - 16.7% | ||||||||
United Rentals, Inc.* | 4,040 | 673,751 | ||||||
Incyte Corp.* | 7,380 | 644,421 | ||||||
Vertex Pharmaceuticals, Inc.* | 2,507 | 548,908 | ||||||
FleetCor Technologies, Inc.* | 1,850 | 532,282 | ||||||
Align Technology, Inc.* | 1,780 | 496,691 | ||||||
WellCare Health Plans, Inc.* | 1,446 | 477,484 | ||||||
Edwards Lifesciences Corp.* | 2,023 | 471,946 | ||||||
PayPal Holdings, Inc.* | 4,217 | 456,153 | ||||||
MarketAxess Holdings, Inc. | 1,060 | 401,857 | ||||||
Cintas Corp. | 1,390 | 374,021 | ||||||
Moody’s Corp. | 1,430 | 339,496 | ||||||
Estee Lauder Companies, Inc. — Class A | 1,550 | 320,137 | ||||||
ResMed, Inc. | 1,900 | 294,443 | ||||||
S&P Global, Inc. | 980 | 267,589 | ||||||
Intuitive Surgical, Inc.* | 450 | 266,017 | ||||||
IDEXX Laboratories, Inc.* | 900 | 235,017 | ||||||
Thermo Fisher Scientific, Inc. | 714 | 231,957 | ||||||
Total Consumer, Non-cyclical | 7,032,170 | |||||||
Consumer, Cyclical - 16.2% | ||||||||
PulteGroup, Inc. | 17,680 | 685,984 | ||||||
Hilton Worldwide Holdings, Inc. | 6,112 | 677,882 | ||||||
Copart, Inc.* | 6,190 | 562,919 | ||||||
Chipotle Mexican Grill, Inc. — Class A* | 576 | 482,176 | ||||||
NVR, Inc.* | 120 | 457,009 | ||||||
DR Horton, Inc. | 8,520 | 449,430 | ||||||
PACCAR, Inc. | 5,300 | 419,230 | ||||||
Yum! Brands, Inc. | 4,132 | 416,216 | ||||||
CarMax, Inc.* | 4,430 | 388,378 | ||||||
Dollar General Corp. | 2,240 | 349,395 | ||||||
Starbucks Corp. | 3,760 | 330,579 | ||||||
AutoZone, Inc.* | 270 | 321,654 | ||||||
O’Reilly Automotive, Inc.* | 678 | 297,140 | ||||||
Ross Stores, Inc. | 2,350 | 273,587 | ||||||
Wynn Resorts Ltd. | 1,930 | 268,019 | ||||||
Tiffany & Co. | 1,610 | 215,177 | ||||||
TJX Companies, Inc. | 3,238 | 197,712 | ||||||
Total Consumer, Cyclical | 6,792,487 | |||||||
Industrial - 11.8% | ||||||||
TransDigm Group, Inc. | 1,015 | 568,400 | ||||||
L3Harris Technologies, Inc. | 2,060 | 407,612 | ||||||
Old Dominion Freight Line, Inc. | 2,120 | 402,333 | ||||||
Northrop Grumman Corp. | 1,090 | 374,927 | ||||||
Masco Corp. | 7,650 | 367,124 | ||||||
Keysight Technologies, Inc.* | 3,534 | 362,694 | ||||||
Kansas City Southern | 2,210 | 338,484 | ||||||
Fortune Brands Home & Security, Inc. | 4,660 | 304,484 | ||||||
AMETEK, Inc. | 2,930 | 292,238 | ||||||
Lockheed Martin Corp. | 730 | 284,248 | ||||||
Martin Marietta Materials, Inc. | 1,010 | 282,436 | ||||||
Vulcan Materials Co. | 1,940 | 279,341 | ||||||
Garmin Ltd. | 2,850 | 278,046 | ||||||
Allegion plc | 1,780 | 221,681 | ||||||
Roper Technologies, Inc. | 559 | 198,015 | ||||||
Total Industrial | 4,962,063 | |||||||
Communications - 9.4% | ||||||||
Facebook, Inc. — Class A* | 3,411 | 700,108 | ||||||
Charter Communications, Inc. — Class A* | 960 | 465,676 | ||||||
CDW Corp. | 3,170 | 452,803 | ||||||
Netflix, Inc.* | 1,338 | 432,937 | ||||||
Amazon.com, Inc.* | 210 | 388,046 | ||||||
eBay, Inc. | 9,400 | 339,434 | ||||||
Motorola Solutions, Inc. | 1,549 | 249,606 | ||||||
Alphabet, Inc. — Class C* | 170 | 227,293 | ||||||
Booking Holdings, Inc.* | 110 | 225,910 | ||||||
Alphabet, Inc. — Class A* | 168 | 225,018 | ||||||
Arista Networks, Inc.* | 1,090 | 221,706 | ||||||
Total Communications | 3,928,537 | |||||||
Financial - 9.1% | ||||||||
Synchrony Financial | 17,000 | 612,170 | ||||||
Mastercard, Inc. — Class A | 2,050 | 612,109 | ||||||
CBRE Group, Inc. — Class A* | 9,720 | 595,739 | ||||||
Visa, Inc. — Class A | 2,550 | 479,145 | ||||||
Cboe Global Markets, Inc. | 3,529 | 423,480 | ||||||
Equinix, Inc. REIT | 580 | 338,546 | ||||||
SBA Communications Corp. REIT | 1,240 | 298,827 | ||||||
American Tower Corp. — Class A REIT | 1,090 | 250,504 | ||||||
Western Union Co. | 8,370 | 224,149 | ||||||
Total Financial | 3,834,669 | |||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 11 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
S&P 500® PURE GROWTH FUND |
| Shares | Value | ||||||
Basic Materials - 4.8% | ||||||||
FMC Corp. | 5,610 | $ | 559,990 | |||||
Dow, Inc. | 9,900 | 541,827 | ||||||
Sherwin-Williams Co. | 720 | 420,149 | ||||||
Celanese Corp. — Class A | 2,050 | 252,396 | ||||||
Air Products & Chemicals, Inc. | 1,050 | 246,740 | ||||||
Total Basic Materials | 2,021,102 | |||||||
Energy - 1.9% | ||||||||
ConocoPhillips | 7,364 | 478,881 | ||||||
Hess Corp. | 5,030 | 336,054 | ||||||
Total Energy | 814,935 | |||||||
Utilities - 1.1% | ||||||||
NRG Energy, Inc. | 11,681 | 464,320 | ||||||
Total Common Stocks | ||||||||
(Cost $36,102,273) | 41,849,598 |
| Face | |||||||
REPURCHASE AGREEMENTS††,1 - 0.9% | ||||||||
J.P. Morgan Securities LLC | $ | 233,329 | 233,329 | |||||
Barclays Capital, Inc. | 75,236 | 75,236 | ||||||
BofA Securities, Inc. | 75,236 | 75,236 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $383,801) | 383,801 | |||||||
Total Investments - 100.4% | ||||||||
(Cost $36,486,074) | $ | 42,233,399 | ||||||
Other Assets & Liabilities, net - (0.4)% | (176,703 | ) | ||||||
Total Net Assets - 100.0% | $ | 42,056,696 |
* | 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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 41,849,598 | $ | — | $ | — | $ | 41,849,598 | ||||||||
Repurchase Agreements | — | 383,801 | — | 383,801 | ||||||||||||
Total Assets | $ | 41,849,598 | $ | 383,801 | $ | — | $ | 42,233,399 |
12 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P 500® PURE GROWTH FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value (cost $36,102,273) | $ | 41,849,598 | ||
Repurchase agreements, at value (cost $383,801) | 383,801 | |||
Cash | 1,456 | |||
Receivables: | ||||
Fund shares sold | 638,340 | |||
Dividends | 53,331 | |||
Interest | 16 | |||
Total assets | 42,926,542 | |||
Liabilities: | ||||
Payable for: | ||||
Securities purchased | 704,759 | |||
Management fees | 25,208 | |||
Fund shares redeemed | 19,109 | |||
Transfer agent and administrative fees | 8,403 | |||
Investor service fees | 8,403 | |||
Portfolio accounting fees | 3,361 | |||
Trustees’ fees* | 683 | |||
Miscellaneous | 99,920 | |||
Total liabilities | 869,846 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 42,056,696 | ||
Net assets consist of: | ||||
Paid in capital | $ | 29,794,155 | ||
Total distributable earnings (loss) | 12,262,541 | |||
Net assets | $ | 42,056,696 | ||
Capital shares outstanding | 771,759 | |||
Net asset value per share | $ | 54.49 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends | $ | 525,988 | ||
Interest | 6,154 | |||
Income from securities lending, net | 1,929 | |||
Total investment income | 534,071 | |||
Expenses: | ||||
Management fees | 308,350 | |||
Investor service fees | 102,784 | |||
Transfer agent and administrative fees | 102,784 | |||
Professional fees | 71,159 | |||
Portfolio accounting fees | 41,113 | |||
Trustees’ fees* | 11,002 | |||
Custodian fees | 8,007 | |||
Line of credit fees | 69 | |||
Miscellaneous | 63,490 | |||
Total expenses | 708,758 | |||
Net investment loss | (174,687 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 9,219,238 | |||
Net realized gain | 9,219,238 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 740,571 | |||
Net change in unrealized appreciation (depreciation) | 740,571 | |||
Net realized and unrealized gain | 9,959,809 | |||
Net increase in net assets resulting from operations | $ | 9,785,122 |
* | 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 | $ | (174,687 | ) | $ | (473,030 | ) | ||
Net realized gain on investments | 9,219,238 | 1,832,113 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 740,571 | (4,989,546 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 9,785,122 | (3,630,463 | ) | |||||
Distributions to shareholders | (893,743 | ) | (4,208,400 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 64,113,779 | 95,984,550 | ||||||
Distributions reinvested | 893,743 | 4,208,400 | ||||||
Cost of shares redeemed | (73,667,137 | ) | (105,551,660 | ) | ||||
Net decrease from capital share transactions | (8,659,615 | ) | (5,358,710 | ) | ||||
Net increase (decrease) in net assets | 231,764 | (13,197,573 | ) | |||||
Net assets: | ||||||||
Beginning of year | 41,824,932 | 55,022,505 | ||||||
End of year | $ | 42,056,696 | $ | 41,824,932 | ||||
Capital share activity: | ||||||||
Shares sold | 1,281,107 | 1,846,716 | ||||||
Shares issued from reinvestment of distributions | 17,017 | 79,434 | ||||||
Shares redeemed | (1,477,477 | ) | (2,069,476 | ) | ||||
Net decrease in shares | (179,353 | ) | (143,326 | ) |
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 | $ | 43.97 | $ | 50.27 | $ | 42.31 | $ | 43.72 | $ | 47.51 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.22 | ) | (.44 | ) | (.38 | ) | (.23 | ) | (.25 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 11.87 | (1.68 | ) | 10.51 | 1.38 | .91 | ||||||||||||||
Total from investment operations | 11.65 | (2.12 | ) | 10.13 | 1.15 | .66 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (1.13 | ) | (4.18 | ) | (2.17 | ) | (2.56 | ) | (4.45 | ) | ||||||||||
Total distributions | (1.13 | ) | (4.18 | ) | (2.17 | ) | (2.56 | ) | (4.45 | ) | ||||||||||
Net asset value, end of period | $ | 54.49 | $ | 43.97 | $ | 50.27 | $ | 42.31 | $ | 43.72 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 26.60 | % | (5.63 | %) | 24.39 | % | 2.58 | % | 1.08 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 42,057 | $ | 41,825 | $ | 55,023 | $ | 43,908 | $ | 77,644 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.42 | %) | (0.85 | %) | (0.80 | %) | (0.54 | %) | (0.54 | %) | ||||||||||
Total expenses | 1.72 | % | 1.62 | % | 1.67 | % | 1.56 | % | 1.51 | % | ||||||||||
Portfolio turnover rate | 190 | % | 203 | % | 303 | % | 265 | % | 174 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 15 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, S&P 500® Pure Value Fund returned 23.27%, compared with a return of 25.39% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
The Financials sector was the leading contributor to performance of the underlying index for the period, followed by the Consumer Discretionary sector and Energy sector. Utilities was the only sector that detracted from performance.
The strongest contributors to performance of the underlying index for the year included Coty, Inc. — Class A, Tyson Foods, Inc. — Class A, and Target Corp. The stocks detracting most from performance of the underlying index were PG&E Corp., DXC Technology Co., and Kohl’s 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) | |
Macy’s, Inc. | 2.7% |
Berkshire Hathaway, Inc. — Class B | 2.6% |
Ford Motor Co. | 2.1% |
Baker Hughes Co. | 2.0% |
Marathon Petroleum Corp. | 2.0% |
General Motors Co. | 1.9% |
Prudential Financial, Inc. | 1.8% |
Unum Group | 1.8% |
MetLife, Inc. | 1.7% |
Westrock Co. | 1.7% |
Top Ten Total | 20.3% |
“Ten Largest Holdings” excludes any temporary cash investments. |
16 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
S&P 500® Pure Value Fund | 23.27% | 5.66% | 11.70% |
S&P 500 Pure Value Index | 25.39% | 7.39% | 13.84% |
* | 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 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 17 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
S&P 500® PURE VALUE FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.3% | ||||||||
Financial - 33.4% | ||||||||
Berkshire Hathaway, Inc. — Class B* | 3,690 | $ | 835,785 | |||||
Prudential Financial, Inc. | 6,265 | 587,281 | ||||||
Unum Group | 19,802 | 577,426 | ||||||
MetLife, Inc. | 11,038 | 562,607 | ||||||
Lincoln National Corp. | 9,196 | 542,656 | ||||||
American International Group, Inc. | 9,017 | 462,843 | ||||||
Loews Corp. | 8,308 | 436,087 | ||||||
Invesco Ltd. | 22,522 | 404,946 | ||||||
Principal Financial Group, Inc. | 6,561 | 360,855 | ||||||
Citizens Financial Group, Inc. | 8,856 | 359,642 | ||||||
Capital One Financial Corp. | 3,268 | 336,310 | ||||||
Citigroup, Inc. | 3,956 | 316,045 | ||||||
Goldman Sachs Group, Inc. | 1,272 | 292,471 | ||||||
People’s United Financial, Inc. | 16,473 | 278,394 | ||||||
Morgan Stanley | 5,129 | 262,195 | ||||||
Regions Financial Corp. | 14,434 | 247,687 | ||||||
Allstate Corp. | 2,073 | 233,109 | ||||||
Fifth Third Bancorp | 7,542 | 231,841 | ||||||
Assurant, Inc. | 1,752 | 229,652 | ||||||
Travelers Companies, Inc. | 1,643 | 225,009 | ||||||
Hartford Financial Services Group, Inc. | 3,666 | 222,783 | ||||||
Everest Re Group Ltd. | 777 | 215,105 | ||||||
Zions Bancorp North America | 3,812 | 197,919 | ||||||
Bank of New York Mellon Corp. | 3,829 | 192,714 | ||||||
Bank of America Corp. | 5,202 | 183,214 | ||||||
Chubb Ltd. | 1,176 | 183,056 | ||||||
KeyCorp | 8,956 | 181,269 | ||||||
State Street Corp. | 2,274 | 179,873 | ||||||
Aflac, Inc. | 3,345 | 176,950 | ||||||
Franklin Resources, Inc. | 6,390 | 166,012 | ||||||
Wells Fargo & Co. | 3,070 | 165,166 | ||||||
Alliance Data Systems Corp. | 1,440 | 161,568 | ||||||
Comerica, Inc. | 2,110 | 151,393 | ||||||
Huntington Bancshares, Inc. | 9,037 | 136,278 | ||||||
Truist Financial Corp. | 2,329 | 131,169 | ||||||
Host Hotels & Resorts, Inc. REIT | 6,780 | 125,769 | ||||||
M&T Bank Corp. | 730 | 123,918 | ||||||
Globe Life, Inc. | 1,170 | 123,142 | ||||||
Raymond James Financial, Inc. | 1,320 | 118,087 | ||||||
Total Financial | 10,918,226 | |||||||
Consumer, Cyclical - 21.7% | ||||||||
Macy’s, Inc. | 51,660 | 878,220 | ||||||
Ford Motor Co. | 72,982 | 678,733 | ||||||
General Motors Co. | 16,657 | 609,646 | ||||||
Kohl’s Corp. | 10,577 | 538,898 | ||||||
Gap, Inc. | 27,154 | 480,083 | ||||||
American Airlines Group, Inc. | 12,730 | 365,096 | ||||||
Walgreens Boots Alliance, Inc. | 6,106 | 360,010 | ||||||
PVH Corp. | 3,409 | 358,456 | ||||||
Whirlpool Corp. | 2,004 | 295,650 | ||||||
Lennar Corp. — Class A | 5,169 | 288,378 | ||||||
Nordstrom, Inc. | 6,800 | 278,324 | ||||||
United Airlines Holdings, Inc.* | 3,137 | 276,338 | ||||||
Carnival Corp. | 5,242 | 266,451 | ||||||
Mohawk Industries, Inc.* | 1,891 | 257,895 | ||||||
L Brands, Inc. | 11,890 | 215,447 | ||||||
BorgWarner, Inc. | 4,511 | 195,687 | ||||||
Best Buy Company, Inc. | 2,019 | 177,268 | ||||||
Delta Air Lines, Inc. | 3,024 | 176,844 | ||||||
Alaska Air Group, Inc. | 2,373 | 160,771 | ||||||
Norwegian Cruise Line Holdings Ltd.* | 2,106 | 123,011 | ||||||
Capri Holdings Ltd.* | 3,130 | 119,410 | ||||||
Total Consumer, Cyclical | 7,100,616 | |||||||
Energy - 15.4% | ||||||||
Baker Hughes Co. | 25,885 | 663,433 | ||||||
Marathon Petroleum Corp. | 10,606 | 639,011 | ||||||
Marathon Oil Corp. | 32,440 | 440,535 | ||||||
HollyFrontier Corp. | 8,070 | 409,230 | ||||||
Concho Resources, Inc. | 4,650 | 407,200 | ||||||
Valero Energy Corp. | 4,284 | 401,197 | ||||||
Diamondback Energy, Inc. | 3,620 | 336,153 | ||||||
Devon Energy Corp. | 11,910 | 309,303 | ||||||
TechnipFMC plc | 13,270 | 284,509 | ||||||
Helmerich & Payne, Inc. | 5,136 | 233,328 | ||||||
Halliburton Co. | 8,620 | 210,931 | ||||||
Occidental Petroleum Corp. | 4,720 | 194,511 | ||||||
Exxon Mobil Corp. | 2,710 | 189,104 | ||||||
Chevron Corp. | 1,511 | 182,091 | ||||||
Kinder Morgan, Inc. | 6,656 | 140,908 | ||||||
Total Energy | 5,041,444 | |||||||
Consumer, Non-cyclical - 14.6% | ||||||||
Archer-Daniels-Midland Co. | 11,197 | 518,981 | ||||||
Kroger Co. | 16,463 | 477,262 | ||||||
CVS Health Corp. | 5,791 | 430,213 | ||||||
Centene Corp.* | 6,770 | 425,630 | ||||||
Mylan N.V.* | 21,057 | 423,246 | ||||||
Corteva, Inc. | 13,787 | 407,544 | ||||||
Molson Coors Beverage Co. — Class B | 7,423 | 400,099 | ||||||
AmerisourceBergen Corp. — Class A | 4,028 | 342,460 | ||||||
Cigna Corp. | 1,640 | 335,364 | ||||||
McKesson Corp. | 2,327 | 321,871 | ||||||
Perrigo Company plc | 3,850 | 198,891 | ||||||
Anthem, Inc. | 608 | 183,634 | ||||||
Kraft Heinz Co. | 4,890 | 157,116 | ||||||
JM Smucker Co. | 1,460 | 152,030 | ||||||
Total Consumer, Non-cyclical | 4,774,341 | |||||||
Basic Materials - 5.1% | ||||||||
Mosaic Co. | 24,690 | 534,292 | ||||||
DuPont de Nemours, Inc. | 6,167 | 395,921 | ||||||
Nucor Corp. | 4,598 | 258,775 | ||||||
Eastman Chemical Co. | 2,100 | 166,446 | ||||||
International Paper Co. | 3,440 | 158,412 | ||||||
Newmont Goldcorp Corp. | 3,470 | 150,772 | ||||||
Total Basic Materials | 1,664,618 | |||||||
18 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
S&P 500® PURE VALUE FUND |
| Shares | Value | ||||||
Industrial - 2.8% | ||||||||
Westrock Co. | 12,798 | $ | 549,162 | |||||
Textron, Inc. | 4,608 | 205,517 | ||||||
FedEx Corp. | 1,170 | 176,916 | ||||||
Total Industrial | 931,595 | |||||||
Technology - 2.4% | ||||||||
DXC Technology Co. | 8,824 | 331,694 | ||||||
Hewlett Packard Enterprise Co. | 20,260 | 321,324 | ||||||
HP, Inc. | 6,824 | 140,233 | ||||||
Total Technology | 793,251 | |||||||
Communications - 2.3% | ||||||||
News Corp. — Class A | 21,843 | 308,860 | ||||||
DISH Network Corp. — Class A* | 5,174 | 183,522 | ||||||
AT&T, Inc. | 4,295 | 167,848 | ||||||
News Corp. — Class B | 6,847 | 99,350 | ||||||
Total Communications | 759,580 | |||||||
Utilities - 1.6% | ||||||||
Exelon Corp. | 4,714 | 214,911 | ||||||
CenterPoint Energy, Inc. | 6,080 | 165,802 | ||||||
Duke Energy Corp. | 1,430 | 130,430 | ||||||
Total Utilities | 511,143 | |||||||
Total Common Stocks | ||||||||
(Cost $27,377,764) | 32,494,814 |
| Face | |||||||
REPURCHASE AGREEMENTS††,1 - 0.4% | ||||||||
J.P. Morgan Securities LLC | $ | 76,633 | 76,633 | |||||
Barclays Capital, Inc. | 24,710 | 24,710 | ||||||
BofA Securities, Inc. | 24,710 | 24,710 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $126,053) | 126,053 | |||||||
Total Investments - 99.7% | ||||||||
(Cost $27,503,817) | $ | 32,620,867 | ||||||
Other Assets & Liabilities, net - 0.3% | 109,895 | |||||||
Total Net Assets - 100.0% | $ | 32,730,762 |
* | 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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 32,494,814 | $ | — | $ | — | $ | 32,494,814 | ||||||||
Repurchase Agreements | — | 126,053 | — | 126,053 | ||||||||||||
Total Assets | $ | 32,494,814 | $ | 126,053 | $ | — | $ | 32,620,867 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 19 |
S&P 500® PURE VALUE FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value (cost $27,377,764) | $ | 32,494,814 | ||
Repurchase agreements, at value (cost $126,053) | 126,053 | |||
Receivables: | ||||
Fund shares sold | 208,405 | |||
Dividends | 36,803 | |||
Interest | 5 | |||
Total assets | 32,866,080 | |||
Liabilities: | ||||
Payable for: | ||||
Professional fees | 49,058 | |||
Management fees | 20,972 | |||
Printing fees | 15,656 | |||
Fund shares redeemed | 13,690 | |||
Transfer agent and administrative fees | 6,991 | |||
Investor service fees | 6,991 | |||
Portfolio accounting fees | 2,796 | |||
Trustees’ fees* | 571 | |||
Miscellaneous | 18,593 | |||
Total liabilities | 135,318 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 32,730,762 | ||
Net assets consist of: | ||||
Paid in capital | $ | 28,461,051 | ||
Total distributable earnings (loss) | 4,269,711 | |||
Net assets | $ | 32,730,762 | ||
Capital shares outstanding | 564,239 | |||
Net asset value per share | $ | 58.01 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends | $ | 940,851 | ||
Interest | 4,192 | |||
Income from securities lending, net | 7,936 | |||
Total investment income | 952,979 | |||
Expenses: | ||||
Management fees | 253,286 | |||
Investor service fees | 84,429 | |||
Transfer agent and administrative fees | 84,429 | |||
Professional fees | 69,318 | |||
Portfolio accounting fees | 33,771 | |||
Trustees’ fees* | 9,071 | |||
Custodian fees | 6,832 | |||
Line of credit fees | 22 | |||
Miscellaneous | 41,106 | |||
Total expenses | 582,264 | |||
Net investment income | 370,715 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 3,213,291 | |||
Net realized gain | 3,213,291 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 3,562,491 | |||
Net change in unrealized appreciation (depreciation) | 3,562,491 | |||
Net realized and unrealized gain | 6,775,782 | |||
Net increase in net assets resulting from operations | $ | 7,146,497 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
20 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
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 | $ | 370,715 | $ | 346,389 | ||||
Net realized gain (loss) on investments | 3,213,291 | (641,649 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 3,562,491 | (5,863,849 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 7,146,497 | (6,159,109 | ) | |||||
Distributions to shareholders | (674,374 | ) | (3,121,849 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 43,355,945 | 70,588,571 | ||||||
Distributions reinvested | 674,374 | 3,121,849 | ||||||
Cost of shares redeemed | (50,882,754 | ) | (75,813,932 | ) | ||||
Net decrease from capital share transactions | (6,852,435 | ) | (2,103,512 | ) | ||||
Net decrease in net assets | (380,312 | ) | (11,384,470 | ) | ||||
Net assets: | ||||||||
Beginning of year | 33,111,074 | 44,495,544 | ||||||
End of year | $ | 32,730,762 | $ | 33,111,074 | ||||
Capital share activity: | ||||||||
Shares sold | 809,655 | 1,202,731 | ||||||
Shares issued from reinvestment of distributions | 12,210 | 55,490 | ||||||
Shares redeemed | (947,155 | ) | (1,288,384 | ) | ||||
Net decrease in shares | (125,290 | ) | (30,163 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 21 |
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 | $ | 48.02 | $ | 61.83 | $ | 56.45 | $ | 50.08 | $ | 71.22 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .59 | .53 | .35 | .83 | .63 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 10.53 | (7.82 | ) | 8.28 | 9.87 | (5.87 | ) | |||||||||||||
Total from investment operations | 11.12 | (7.29 | ) | 8.63 | 10.70 | (5.24 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.45 | ) | (.53 | ) | (.46 | ) | (1.23 | ) | (.82 | ) | ||||||||||
Net realized gains | (.68 | ) | (5.99 | ) | (2.79 | ) | (3.10 | ) | (15.08 | ) | ||||||||||
Total distributions | (1.13 | ) | (6.52 | ) | (3.25 | ) | (4.33 | ) | (15.90 | ) | ||||||||||
Net asset value, end of period | $ | 58.01 | $ | 48.02 | $ | 61.83 | $ | 56.45 | $ | 50.08 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 23.27 | % | (13.32 | %) | 15.86 | % | 17.40 | % | (9.38 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 32,731 | $ | 33,111 | $ | 44,496 | $ | 44,849 | $ | 32,326 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.10 | % | 0.91 | % | 0.61 | % | 0.88 | % | 1.02 | % | ||||||||||
Total expenses | 1.72 | % | 1.63 | % | 1.61 | % | 1.56 | % | 1.51 | % | ||||||||||
Portfolio turnover rate | 144 | % | 197 | % | 127 | % | 207 | % | 162 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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. |
22 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, S&P MidCap 400® Pure Growth Fund returned 15.41%, compared with a return of 17.24% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
The Consumer Discretionary sector contributed the most to the return of the underlying index for the period, followed by the Information Technology sector and the Industrials sector. The Energy sector and the Materials sector were the only detractors from return.
Eldorado Resorts, Inc., Churchill Downs, Inc., and Fair Isaac Corp. added the most to return of the underlying index for the year. Mallinckrodt plc, Green Dot Corp. — Class A, and Valaris plc — Class A 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) | |
SolarEdge Technologies, Inc. | 2.2% |
Matador Resources Co. | 2.2% |
RH | 2.2% |
Universal Display Corp. | 2.1% |
WPX Energy, Inc. | 2.0% |
MasTec, Inc. | 2.0% |
RenaissanceRe Holdings Ltd. | 1.9% |
Arrowhead Pharmaceuticals, Inc. | 1.9% |
Axon Enterprise, Inc. | 1.9% |
Jabil, Inc. | 1.8% |
Top Ten Total | 20.2% |
“Ten Largest Holdings” excludes any temporary cash investments. |
THE RYDEX FUNDS ANNUAL REPORT | 23 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
S&P MidCap 400® Pure Growth Fund | 15.41% | 3.97% | 9.38% |
S&P MidCap 400 Pure Growth Index | 17.24% | 5.70% | 11.08% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
24 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
S&P MIDCAP 400® PURE GROWTH FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.3% | ||||||||
Industrial - 24.3% | ||||||||
Universal Display Corp. | 1,300 | $ | 267,891 | |||||
MasTec, Inc.* | 3,880 | 248,941 | ||||||
Axon Enterprise, Inc.* | 3,220 | 235,961 | ||||||
Jabil, Inc. | 5,650 | 233,515 | ||||||
Mercury Systems, Inc.* | 2,860 | 197,655 | ||||||
Carlisle Companies, Inc. | 1,100 | 178,024 | ||||||
Trex Company, Inc.* | 1,840 | 165,379 | ||||||
KBR, Inc. | 5,140 | 156,770 | ||||||
Timken Co. | 2,660 | 149,785 | ||||||
Knight-Swift Transportation Holdings, Inc. | 4,020 | 144,077 | ||||||
Teledyne Technologies, Inc.* | 410 | 142,081 | ||||||
Woodward, Inc. | 1,160 | 137,390 | ||||||
Tetra Tech, Inc. | 1,490 | 128,378 | ||||||
Coherent, Inc.* | 740 | 123,099 | ||||||
Hubbell, Inc. | 780 | 115,299 | ||||||
Cognex Corp. | 1,790 | 100,312 | ||||||
Clean Harbors, Inc.* | 950 | 81,463 | ||||||
Nordson Corp. | 480 | 78,163 | ||||||
Gentex Corp. | 2,590 | 75,058 | ||||||
Lincoln Electric Holdings, Inc. | 730 | 70,613 | ||||||
Eagle Materials, Inc. | 710 | 64,369 | ||||||
Total Industrial | 3,094,223 | |||||||
Consumer, Cyclical - 20.9% | ||||||||
RH* | 1,300 | 277,550 | ||||||
Caesars Entertainment Corp.* | 14,700 | 199,920 | ||||||
Eldorado Resorts, Inc.* | 3,108 | 185,361 | ||||||
Marriott Vacations Worldwide Corp. | 1,430 | 184,127 | ||||||
Five Below, Inc.* | 1,370 | 175,168 | ||||||
Skechers U.S.A., Inc. — Class A* | 3,900 | 168,441 | ||||||
Scientific Games Corp. — Class A* | 5,911 | 158,296 | ||||||
Casey’s General Stores, Inc. | 970 | 154,220 | ||||||
Domino’s Pizza, Inc. | 479 | 140,721 | ||||||
Dunkin’ Brands Group, Inc. | 1,840 | 138,994 | ||||||
Scotts Miracle-Gro Co. — Class A | 1,240 | 131,663 | ||||||
Boyd Gaming Corp. | 3,430 | 102,694 | ||||||
Churchill Downs, Inc. | 709 | 97,275 | ||||||
Pool Corp. | 418 | 88,775 | ||||||
Wyndham Hotels & Resorts, Inc. | 1,357 | 85,233 | ||||||
Deckers Outdoor Corp.* | 500 | 84,430 | ||||||
Polaris, Inc. | 790 | 80,343 | ||||||
Herman Miller, Inc. | 1,780 | 74,137 | ||||||
Tempur Sealy International, Inc.* | 840 | 73,130 | ||||||
Toro Co. | 850 | 67,720 | ||||||
Total Consumer, Cyclical | 2,668,198 | |||||||
Consumer, Non-cyclical - 20.1% | ||||||||
Arrowhead Pharmaceuticals, Inc.* | 3,790 | 240,400 | ||||||
Repligen Corp.* | 2,440 | 225,700 | ||||||
Penumbra, Inc.* | 1,240 | 203,695 | ||||||
WEX, Inc.* | 800 | 167,568 | ||||||
FTI Consulting, Inc.* | 1,450 | 160,457 | ||||||
Exelixis, Inc.* | 8,340 | 146,951 | ||||||
Ligand Pharmaceuticals, Inc. — Class B*,1 | 1,380 | 143,920 | ||||||
Boston Beer Company, Inc. — Class A* | 370 | 139,805 | ||||||
Syneos Health, Inc.* | 2,290 | 136,198 | ||||||
PRA Health Sciences, Inc.* | 1,110 | 123,376 | ||||||
Bio-Techne Corp. | 550 | 120,730 | ||||||
Masimo Corp.* | 690 | 109,061 | ||||||
Charles River Laboratories International, Inc.* | 610 | 93,184 | ||||||
Chemed Corp. | 210 | 92,245 | ||||||
Sanderson Farms, Inc. | 510 | 89,872 | ||||||
Amedisys, Inc.* | 530 | 88,467 | ||||||
West Pharmaceutical Services, Inc. | 490 | 73,662 | ||||||
Catalent, Inc.* | 1,270 | 71,501 | ||||||
Brink’s Co. | 770 | 69,824 | ||||||
ICU Medical, Inc.* | 350 | 65,492 | ||||||
Total Consumer, Non-cyclical | 2,562,108 | |||||||
Technology - 15.0% | ||||||||
Teradyne, Inc. | 3,020 | 205,934 | ||||||
MKS Instruments, Inc. | 1,830 | 201,318 | ||||||
Cabot Microelectronics Corp. | 1,370 | 197,718 | ||||||
Lumentum Holdings, Inc.* | 2,120 | 168,116 | ||||||
Fair Isaac Corp.* | 445 | 166,733 | ||||||
Tyler Technologies, Inc.* | 510 | 153,010 | ||||||
j2 Global, Inc. | 1,619 | 151,716 | ||||||
Cypress Semiconductor Corp. | 5,738 | 133,868 | ||||||
CACI International, Inc. — Class A* | 520 | 129,995 | ||||||
Monolithic Power Systems, Inc. | 720 | 128,174 | ||||||
Perspecta, Inc. | 4,220 | 111,577 | ||||||
Manhattan Associates, Inc.* | 1,130 | 90,118 | ||||||
ACI Worldwide, Inc.* | 1,774 | 67,208 | ||||||
Total Technology | 1,905,485 | |||||||
Energy - 8.0% | ||||||||
SolarEdge Technologies, Inc.* | 2,970 | 282,417 | ||||||
Matador Resources Co.* | 15,550 | 279,434 | ||||||
WPX Energy, Inc.* | 18,960 | 260,510 | ||||||
Murphy USA, Inc.* | 1,660 | 194,220 | ||||||
Total Energy | 1,016,581 | |||||||
Financial - 7.1% | ||||||||
RenaissanceRe Holdings Ltd. | 1,230 | 241,105 | ||||||
LendingTree, Inc.*,1 | 720 | 218,477 | ||||||
Cousins Properties, Inc. REIT | 4,250 | 175,100 | ||||||
Primerica, Inc. | 800 | 104,448 | ||||||
Brown & Brown, Inc. | 2,622 | 103,516 | ||||||
EastGroup Properties, Inc. REIT | 470 | 62,355 | ||||||
Total Financial | 905,001 | |||||||
Basic Materials - 2.1% | ||||||||
Reliance Steel & Aluminum Co. | 1,420 | 170,059 | ||||||
Royal Gold, Inc. | 760 | 92,910 | ||||||
Total Basic Materials | 262,969 | |||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 25 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
S&P MIDCAP 400® PURE GROWTH FUND |
| Shares | Value | ||||||
Communications - 1.8% | ||||||||
Cable One, Inc. | 100 | $ | 148,847 | |||||
Etsy, Inc.* | 1,950 | 86,385 | ||||||
Total Communications | 235,232 | |||||||
Total Common Stocks | ||||||||
(Cost $11,534,739) | 12,649,797 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.4% | ||||||||
J.P. Morgan Securities LLC | $ | 31,939 | 31,939 | |||||
Barclays Capital, Inc. | 10,299 | 10,299 | ||||||
BofA Securities, Inc. | 10,299 | 10,299 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $52,537) | 52,537 |
| Shares | |||||||
SECURITIES LENDING COLLATERAL†,3 - 1.3% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.47%4 | 162,748 | $ | 162,748 | |||||
Total Securities Lending Collateral | ||||||||
(Cost $162,748) | 162,748 | |||||||
Total Investments - 101.0% | ||||||||
(Cost $11,750,024) | $ | 12,865,082 | ||||||
Other Assets & Liabilities, net - (1.0)% | (127,195 | ) | ||||||
Total Net Assets - 100.0% | $ | 12,737,887 |
* | 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, 2019 — 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, 2019. |
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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 12,649,797 | $ | — | $ | — | $ | 12,649,797 | ||||||||
Repurchase Agreements | — | 52,537 | — | 52,537 | ||||||||||||
Securities Lending Collateral | 162,748 | — | — | 162,748 | ||||||||||||
Total Assets | $ | 12,812,545 | $ | 52,537 | $ | — | $ | 12,865,082 |
26 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P MIDCAP 400® PURE GROWTH FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value - including $159,612 of securities loaned (cost $11,697,487) | $ | 12,812,545 | ||
Repurchase agreements, at value (cost $52,537) | 52,537 | |||
Receivables: | ||||
Securities sold | 1,243,456 | |||
Fund shares sold | 48,292 | |||
Dividends | 9,336 | |||
Securities lending income | 20 | |||
Interest | 2 | |||
Total assets | 14,166,188 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 918,819 | |||
Securities purchased | 296,772 | |||
Return of securities lending collateral | 162,748 | |||
Management fees | 8,633 | |||
Transfer agent and administrative fees | 2,878 | |||
Investor service fees | 2,878 | |||
Portfolio accounting fees | 1,151 | |||
Trustees’ fees* | 234 | |||
Miscellaneous | 34,188 | |||
Total liabilities | 1,428,301 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 12,737,887 | ||
Net assets consist of: | ||||
Paid in capital | $ | 11,259,600 | ||
Total distributable earnings (loss) | 1,478,287 | |||
Net assets | $ | 12,737,887 | ||
Capital shares outstanding | 352,132 | |||
Net asset value per share | $ | 36.17 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends | $ | 132,329 | ||
Interest | 2,284 | |||
Income from securities lending, net | 551 | |||
Total investment income | 135,164 | |||
Expenses: | ||||
Management fees | 106,480 | |||
Investor service fees | 35,494 | |||
Transfer agent and administrative fees | 35,494 | |||
Professional fees | 24,104 | |||
Portfolio accounting fees | 14,197 | |||
Trustees’ fees* | 3,945 | |||
Custodian fees | 2,855 | |||
Line of credit fees | 21 | |||
Miscellaneous | 22,462 | |||
Total expenses | 245,052 | |||
Net investment loss | (109,888 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 1,664,662 | |||
Net realized gain | 1,664,662 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 442,373 | |||
Net change in unrealized appreciation (depreciation) | 442,373 | |||
Net realized and unrealized gain | 2,107,035 | |||
Net increase in net assets resulting from operations | $ | 1,997,147 |
* | 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 | 27 |
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 | $ | (109,888 | ) | $ | (152,436 | ) | ||
Net realized gain (loss) on investments | 1,664,662 | (611,299 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 442,373 | (1,883,907 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 1,997,147 | (2,647,642 | ) | |||||
Distributions to shareholders | — | (1,549,049 | ) | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 15,348,447 | 25,614,538 | ||||||
Distributions reinvested | — | 1,549,049 | ||||||
Cost of shares redeemed | (18,818,025 | ) | (29,150,899 | ) | ||||
Net decrease from capital share transactions | (3,469,578 | ) | (1,987,312 | ) | ||||
Net decrease in net assets | (1,472,431 | ) | (6,184,003 | ) | ||||
Net assets: | ||||||||
Beginning of year | 14,210,318 | 20,394,321 | ||||||
End of year | $ | 12,737,887 | $ | 14,210,318 | ||||
Capital share activity: | ||||||||
Shares sold | 441,408 | 642,331 | ||||||
Shares issued from reinvestment of distributions | — | 38,862 | ||||||
Shares redeemed | (542,670 | ) | (746,632 | ) | ||||
Net decrease in shares | (101,262 | ) | (65,439 | ) |
28 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
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 | $ | 31.34 | $ | 39.31 | $ | 33.11 | $ | 32.23 | $ | 34.05 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.27 | ) | (.28 | ) | (.25 | ) | (.22 | ) | (.22 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 5.10 | (4.97 | ) | 6.45 | 1.10 | .88 | ||||||||||||||
Total from investment operations | 4.83 | (5.25 | ) | 6.20 | .88 | .66 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | — | (2.72 | ) | — | — | (2.48 | ) | |||||||||||||
Total distributions | — | (2.72 | ) | — | — | (2.48 | ) | |||||||||||||
Net asset value, end of period | $ | 36.17 | $ | 31.34 | $ | 39.31 | $ | 33.11 | $ | 32.23 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 15.41 | % | (14.83 | %) | 18.73 | % | 2.70 | % | 1.32 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 12,738 | $ | 14,210 | $ | 20,394 | $ | 19,061 | $ | 34,144 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.77 | %) | (0.72 | %) | (0.70 | %) | (0.71 | %) | (0.64 | %) | ||||||||||
Total expenses | 1.73 | % | 1.62 | % | 1.61 | % | 1.56 | % | 1.50 | % | ||||||||||
Portfolio turnover rate | 176 | % | 183 | % | 233 | % | 296 | % | 269 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 29 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, S&P MidCap 400® Pure Value Fund returned 22.46%, compared with a return of 24.49% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
The Consumer Discretionary sector contributed the most to the return of the underlying index for the period, followed by the Information Technology sector and the Financials sector. The Communication Services sector and Real Estate sector were the only detractors from return.
World Fuel Services Corp., KB Home, and Bed Bath & Beyond, Inc. added the most to return of the underlying index for the year. McDermott International, Inc., Realogy Holdings Corp., and United States Steel Corp. detracted the most from performance of the underlying index for the year.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 3, 2004 |
Ten Largest Holdings (% of Total Net Assets) | |
Chesapeake Energy Corp. | 2.9% |
Resideo Technologies, Inc. | 2.7% |
Genworth Financial, Inc. — Class A | 2.6% |
Goodyear Tire & Rubber Co. | 2.4% |
Dillard’s, Inc. — Class A | 2.2% |
United States Steel Corp. | 2.1% |
Avnet, Inc. | 2.0% |
Ryder System, Inc. | 2.0% |
Brighthouse Financial, Inc. | 2.0% |
CNX Resources Corp. | 2.0% |
Top Ten Total | 22.9% |
“Ten Largest Holdings” excludes any temporary cash investments. |
30 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
S&P MidCap 400® Pure Value Fund | 22.46% | 4.98% | 9.20% |
S&P MidCap 400 Pure Value Index | 24.49% | 6.75% | 11.33% |
* | 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 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 31 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
S&P MIDCAP 400® PURE VALUE FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.1% | ||||||||
Consumer, Cyclical - 26.6% | ||||||||
Resideo Technologies, Inc.* | 21,528 | $ | 256,829 | |||||
Goodyear Tire & Rubber Co. | 14,756 | 229,530 | ||||||
Dillard’s, Inc. — Class A1 | 2,830 | 207,948 | ||||||
Dana, Inc. | 9,717 | 176,850 | ||||||
World Fuel Services Corp. | 3,663 | 159,047 | ||||||
AutoNation, Inc.* | 3,149 | 153,136 | ||||||
Lear Corp. | 960 | 131,712 | ||||||
Delphi Technologies plc* | 9,375 | 120,281 | ||||||
Bed Bath & Beyond, Inc. | 6,485 | 112,190 | ||||||
TRI Pointe Group, Inc.* | 6,927 | 107,923 | ||||||
Adient plc* | 4,953 | 105,251 | ||||||
Thor Industries, Inc. | 1,371 | 101,851 | ||||||
Penn National Gaming, Inc.* | 3,870 | 98,917 | ||||||
JetBlue Airways Corp.* | 5,140 | 96,221 | ||||||
Foot Locker, Inc. | 2,110 | 82,269 | ||||||
BJ’s Wholesale Club Holdings, Inc.* | 3,570 | 81,182 | ||||||
Dick’s Sporting Goods, Inc. | 1,591 | 78,739 | ||||||
KAR Auction Services, Inc. | 3,170 | 69,074 | ||||||
Urban Outfitters, Inc.* | 2,480 | 68,870 | ||||||
American Eagle Outfitters, Inc. | 4,270 | 62,769 | ||||||
Total Consumer, Cyclical | 2,500,589 | |||||||
Financial - 26.0% | ||||||||
Genworth Financial, Inc. — Class A* | 55,290 | 243,276 | ||||||
Brighthouse Financial, Inc.* | 4,762 | 186,813 | ||||||
CNO Financial Group, Inc. | 7,765 | 140,780 | ||||||
Reinsurance Group of America, Inc. — Class A | 735 | 119,849 | ||||||
Jefferies Financial Group, Inc. | 5,144 | 109,927 | ||||||
Umpqua Holdings Corp. | 5,221 | 92,412 | ||||||
Park Hotels & Resorts, Inc. REIT | 3,450 | 89,251 | ||||||
FNB Corp. | 6,920 | 87,884 | ||||||
GEO Group, Inc. REIT | 5,060 | 84,047 | ||||||
CoreCivic, Inc. REIT | 4,700 | 81,686 | ||||||
Diversified Healthcare Trust REIT | 9,666 | 81,581 | ||||||
Associated Banc-Corp. | 3,500 | 77,140 | ||||||
Old Republic International Corp. | 3,435 | 76,841 | ||||||
PacWest Bancorp | 2,007 | 76,808 | ||||||
Legg Mason, Inc. | 2,065 | 74,154 | ||||||
Navient Corp. | 5,296 | 72,449 | ||||||
Kemper Corp. | 910 | 70,525 | ||||||
Mercury General Corp. | 1,440 | 70,171 | ||||||
Janus Henderson Group plc | 2,832 | 69,243 | ||||||
Sterling Bancorp | 3,260 | 68,721 | ||||||
Bank OZK | 2,245 | 68,484 | ||||||
Hancock Whitney Corp. | 1,445 | 63,406 | ||||||
Pebblebrook Hotel Trust REIT | 2,080 | 55,765 | ||||||
First Horizon National Corp. | 3,219 | 53,307 | ||||||
Wintrust Financial Corp. | 750 | 53,175 | ||||||
Pinnacle Financial Partners, Inc. | 736 | 47,104 | ||||||
Texas Capital Bancshares, Inc.* | 820 | 46,551 | ||||||
Valley National Bancorp | 3,750 | 42,937 | ||||||
TCF Financial Corp. | 910 | 42,588 | ||||||
Total Financial | 2,446,875 | |||||||
Industrial - 15.3% | ||||||||
Avnet, Inc. | 4,541 | 192,720 | ||||||
Ryder System, Inc. | 3,498 | 189,976 | ||||||
SYNNEX Corp. | 1,187 | 152,886 | ||||||
Arrow Electronics, Inc.* | 1,785 | 151,261 | ||||||
Tech Data Corp.* | 1,032 | 148,195 | ||||||
AECOM* | 2,395 | 103,296 | ||||||
Terex Corp. | 3,020 | 89,936 | ||||||
Greif, Inc. — Class A | 1,940 | 85,748 | ||||||
Dycom Industries, Inc.* | 1,580 | 74,497 | ||||||
Trinity Industries, Inc. | 2,950 | 65,343 | ||||||
Regal Beloit Corp. | 620 | 53,078 | ||||||
II-VI, Inc.* | 1,460 | 49,158 | ||||||
XPO Logistics, Inc.* | 570 | 45,429 | ||||||
Worthington Industries, Inc. | 960 | 40,493 | ||||||
Total Industrial | 1,442,016 | |||||||
Energy - 11.2% | ||||||||
Chesapeake Energy Corp.*,1 | 330,960 | 273,241 | ||||||
CNX Resources Corp.* | 21,020 | 186,027 | ||||||
PBF Energy, Inc. — Class A | 5,260 | 165,006 | ||||||
NOW, Inc.* | 14,680 | 165,003 | ||||||
Equities Corp. | 10,285 | 112,106 | ||||||
Antero Midstream Corp.1 | 10,630 | 80,682 | ||||||
Patterson-UTI Energy, Inc. | 6,670 | 70,035 | ||||||
Total Energy | 1,052,100 | |||||||
Consumer, Non-cyclical - 8.9% | ||||||||
Patterson Companies, Inc. | 7,421 | 151,982 | ||||||
ManpowerGroup, Inc. | 1,497 | 145,359 | ||||||
Avis Budget Group, Inc.* | 3,307 | 106,617 | ||||||
Graham Holdings Co. — Class B | 116 | 74,123 | ||||||
TreeHouse Foods, Inc.* | 1,380 | 66,930 | ||||||
Green Dot Corp. — Class A* | 2,340 | 54,522 | ||||||
Sprouts Farmers Market, Inc.* | 2,770 | 53,600 | ||||||
Tenet Healthcare Corp.* | 1,370 | 52,101 | ||||||
Molina Healthcare, Inc.* | 350 | 47,491 | ||||||
Acadia Healthcare Company, Inc.* | 1,372 | 45,578 | ||||||
Adtalem Global Education, Inc.* | 1,240 | 43,363 | ||||||
Spectrum Brands Holdings, Inc. | 1 | 64 | ||||||
Total Consumer, Non-cyclical | 841,730 | |||||||
Basic Materials - 8.0% | ||||||||
United States Steel Corp.1 | 17,738 | 202,390 | ||||||
Domtar Corp. | 4,483 | 171,430 | ||||||
Olin Corp. | 7,900 | 136,275 | ||||||
Commercial Metals Co. | 4,971 | 110,704 | ||||||
Chemours Co. | 3,970 | 71,817 | ||||||
Minerals Technologies, Inc. | 1,050 | 60,512 | ||||||
Total Basic Materials | 753,128 | |||||||
Communications - 2.6% | ||||||||
Telephone & Data Systems, Inc. | 6,995 | 177,883 | ||||||
Meredith Corp. | 2,100 | 68,187 | ||||||
Total Communications | 246,070 | |||||||
32 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
S&P MIDCAP 400® PURE VALUE FUND |
| Shares | Value | ||||||
Technology - 0.5% | ||||||||
NetScout Systems, Inc.* | 1,985 | $ | 47,779 | |||||
Total Common Stocks | ||||||||
(Cost $8,043,605) | 9,330,287 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.5% | ||||||||
J.P. Morgan Securities LLC | $ | 30,839 | 30,839 | |||||
Barclays Capital, Inc. | 9,944 | 9,944 | ||||||
BofA Securities, Inc. | 9,944 | 9,944 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $50,727) | 50,727 |
| Shares | |||||||
SECURITIES LENDING COLLATERAL†,3 - 6.5% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.47%4 | 613,614 | $ | 613,614 | |||||
Total Securities Lending Collateral | ||||||||
(Cost $613,614) | 613,614 | |||||||
Total Investments - 106.1% | ||||||||
(Cost $8,707,946) | $ | 9,994,628 | ||||||
Other Assets & Liabilities, net - (6.1)% | (576,704 | ) | ||||||
Total Net Assets - 100.0% | $ | 9,417,924 |
* | 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, 2019 — 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, 2019. |
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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 9,330,287 | $ | — | $ | — | $ | 9,330,287 | ||||||||
Repurchase Agreements | — | 50,727 | — | 50,727 | ||||||||||||
Securities Lending Collateral | 613,614 | — | — | 613,614 | ||||||||||||
Total Assets | $ | 9,943,901 | $ | 50,727 | $ | — | $ | 9,994,628 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 33 |
S&P MIDCAP 400® PURE VALUE FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value - including $566,223 of securities loaned (cost $8,657,219) | $ | 9,943,901 | ||
Repurchase agreements, at value (cost $50,727) | 50,727 | |||
Receivables: | ||||
Fund shares sold | 156,610 | |||
Dividends | 12,725 | |||
Securities lending income | 1,296 | |||
Interest | 2 | |||
Total assets | 10,165,261 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 613,614 | |||
Securities purchased | 98,030 | |||
Management fees | 5,945 | |||
Transfer agent and administrative fees | 1,982 | |||
Investor service fees | 1,982 | |||
Portfolio accounting fees | 792 | |||
Fund shares redeemed | 267 | |||
Trustees’ fees* | 168 | |||
Miscellaneous | 24,557 | |||
Total liabilities | 747,337 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 9,417,924 | ||
Net assets consist of: | ||||
Paid in capital | $ | 8,452,535 | ||
Total distributable earnings (loss) | 965,389 | |||
Net assets | $ | 9,417,924 | ||
Capital shares outstanding | 223,436 | |||
Net asset value per share | $ | 42.15 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends | $ | 197,048 | ||
Interest | 1,458 | |||
Income from securities lending, net | 11,397 | |||
Total investment income | 209,903 | |||
Expenses: | ||||
Management fees | 75,883 | |||
Investor service fees | 25,294 | |||
Transfer agent and administrative fees | 25,294 | |||
Professional fees | 21,406 | |||
Portfolio accounting fees | 10,118 | |||
Trustees’ fees* | 2,893 | |||
Custodian fees | 2,101 | |||
Line of credit fees | 24 | |||
Miscellaneous | 11,684 | |||
Total expenses | 174,697 | |||
Net investment income | 35,206 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 846,642 | |||
Net realized gain | 846,642 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 1,093,223 | |||
Net change in unrealized appreciation (depreciation) | 1,093,223 | |||
Net realized and unrealized gain | 1,939,865 | |||
Net increase in net assets resulting from operations | $ | 1,975,071 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
34 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
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 income (loss) | $ | 35,206 | $ | (3,727 | ) | |||
Net realized gain (loss) on investments | 846,642 | (300,173 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 1,093,223 | (2,067,546 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 1,975,071 | (2,371,446 | ) | |||||
Distributions to shareholders | — | (1,912,944 | ) | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 15,114,260 | 15,203,247 | ||||||
Distributions reinvested | — | 1,912,944 | ||||||
Cost of shares redeemed | (16,656,592 | ) | (21,262,053 | ) | ||||
Net decrease from capital share transactions | (1,542,332 | ) | (4,145,862 | ) | ||||
Net increase (decrease) in net assets | 432,739 | (8,430,252 | ) | |||||
Net assets: | ||||||||
Beginning of year | 8,985,185 | 17,415,437 | ||||||
End of year | $ | 9,417,924 | $ | 8,985,185 | ||||
Capital share activity: | ||||||||
Shares sold | 377,132 | 323,982 | ||||||
Shares issued from reinvestment of distributions | — | 44,363 | ||||||
Shares redeemed | (414,713 | ) | (457,135 | ) | ||||
Net decrease in shares | (37,581 | ) | (88,790 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 35 |
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 | $ | 34.42 | $ | 49.79 | $ | 54.35 | $ | 42.30 | $ | 53.78 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .14 | (.01 | ) | (.05 | ) | (.06 | ) | .26 | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | 7.59 | (7.95 | ) | 6.13 | 12.41 | (5.93 | ) | |||||||||||||
Total from investment operations | 7.73 | (7.96 | ) | 6.08 | 12.35 | (5.67 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | — | — | — | (.30 | ) | (.08 | ) | |||||||||||||
Net realized gains | — | (7.41 | ) | (10.64 | ) | — | (5.73 | ) | ||||||||||||
Total distributions | — | (7.41 | ) | (10.64 | ) | (.30 | ) | (5.81 | ) | |||||||||||
Net asset value, end of period | $ | 42.15 | $ | 34.42 | $ | 49.79 | $ | 54.35 | $ | 42.30 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 22.46 | % | (18.98 | %) | 13.15 | % | 28.89 | % | (11.86 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 9,418 | $ | 8,985 | $ | 17,415 | $ | 30,207 | $ | 12,007 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.35 | % | (0.03 | %) | (0.10 | %) | (0.07 | %) | 0.52 | % | ||||||||||
Total expenses | 1.73 | % | 1.62 | % | 1.61 | % | 1.56 | % | 1.50 | % | ||||||||||
Portfolio turnover rate | 188 | % | 145 | % | 144 | % | 282 | % | 280 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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. |
36 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, S&P SmallCap 600® Pure Growth Fund return was 12.57%, compared with a return of 14.78% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
The Health Care, Information Technology, and Industrials sectors contributed the most to the return of the underlying index for the period. The Energy, Consumer Discretionary, and Communication Services sectors detracted the most from return.
The best-performing stocks of the underlying index were Avon Products, Inc., Arrowhead Pharmaceuticals, Inc., and NeoGenomics, Inc. The weakest performers of the underlying index were Ascena Retail Group, Inc., KLX Energy Services Holdings, Inc., and Tailored Brands, 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) | |
Talos Energy, Inc. | 2.0% |
Par Pacific Holdings, Inc. | 1.4% |
SRC Energy, Inc. | 1.4% |
Innovative Industrial Properties, Inc. | 1.3% |
NMI Holdings, Inc. — Class A | 1.3% |
Kinsale Capital Group, Inc. | 1.3% |
Rent-A-Center, Inc. | 1.3% |
Winnebago Industries, Inc. | 1.3% |
LGI Homes, Inc. | 1.2% |
Ultra Clean Holdings, Inc. | 1.2% |
Top Ten Total | 13.7% |
“Ten Largest Holdings” excludes any temporary cash investments. |
THE RYDEX FUNDS ANNUAL REPORT | 37 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
S&P SmallCap 600® Pure Growth Fund | 12.57% | 7.05% | 11.05% |
S&P SmallCap 600 Pure Growth Index | 14.78% | 8.95% | 13.14% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
38 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
S&P SMALLCAP 600® PURE GROWTH FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.2% | ||||||||
Industrial - 20.9% | ||||||||
Triumph Group, Inc. | 5,200 | $ | 131,404 | |||||
TopBuild Corp.* | 1,240 | 127,819 | ||||||
Federal Signal Corp. | 3,960 | 127,710 | ||||||
Patrick Industries, Inc. | 2,350 | 123,210 | ||||||
American Woodmark Corp.* | 1,170 | 122,277 | ||||||
Ichor Holdings Ltd.* | 3,610 | 120,105 | ||||||
Griffon Corp. | 5,640 | 114,661 | ||||||
Universal Forest Products, Inc. | 2,160 | 103,032 | ||||||
OSI Systems, Inc.* | 1,020 | 102,755 | ||||||
Saia, Inc.* | 1,090 | 101,501 | ||||||
Advanced Energy Industries, Inc.* | 1,240 | 88,288 | ||||||
Simpson Manufacturing Company, Inc. | 1,100 | 88,253 | ||||||
CIRCOR International, Inc.* | 1,800 | 83,232 | ||||||
John Bean Technologies Corp. | 680 | 76,609 | ||||||
ESCO Technologies, Inc. | 769 | 71,132 | ||||||
Itron, Inc.* | 840 | 70,518 | ||||||
Alamo Group, Inc. | 550 | 69,052 | ||||||
Comtech Telecommunications Corp. | 1,910 | 67,786 | ||||||
Alarm.com Holdings, Inc.* | 1,490 | 64,025 | ||||||
Franklin Electric Company, Inc. | 1,110 | 63,625 | ||||||
Plexus Corp.* | 800 | 61,552 | ||||||
Aerojet Rocketdyne Holdings, Inc.* | 1,342 | 61,276 | ||||||
Fabrinet* | 940 | 60,950 | ||||||
Forward Air Corp. | 860 | 60,157 | ||||||
SPX FLOW, Inc.* | 1,220 | 59,621 | ||||||
Tennant Co. | 720 | 56,102 | ||||||
Watts Water Technologies, Inc. — Class A | 540 | 53,870 | ||||||
Exponent, Inc. | 770 | 53,138 | ||||||
Albany International Corp. — Class A | 668 | 50,715 | ||||||
SPX Corp.* | 970 | 49,354 | ||||||
AAON, Inc. | 910 | 44,963 | ||||||
Vicor Corp.* | 944 | 44,104 | ||||||
Total Industrial | 2,572,796 | |||||||
Consumer, Non-cyclical - 16.9% | ||||||||
Rent-A-Center, Inc. | 5,480 | 158,043 | ||||||
Medpace Holdings, Inc.* | 1,530 | 128,612 | ||||||
Hanger, Inc.* | 4,020 | 110,992 | ||||||
Innoviva, Inc.* | 7,766 | 109,967 | ||||||
Cardiovascular Systems, Inc.* | 2,220 | 107,870 | ||||||
NeoGenomics, Inc.* | 3,670 | 107,347 | ||||||
Eagle Pharmaceuticals, Inc.* | 1,736 | 104,299 | ||||||
ANI Pharmaceuticals, Inc.* | 1,610 | 99,289 | ||||||
Coca-Cola Consolidated, Inc. | 330 | 93,737 | ||||||
Pennant Group, Inc.* | 2,789 | 92,232 | ||||||
RR Donnelley & Sons Co. | 22,340 | 88,243 | ||||||
Cutera, Inc.* | 2,440 | 87,376 | ||||||
RadNet, Inc.* | 3,860 | 78,358 | ||||||
CONMED Corp. | 660 | 73,808 | ||||||
Corcept Therapeutics, Inc.* | 6,010 | 72,721 | ||||||
LHC Group, Inc.* | 450 | 61,992 | ||||||
Addus HomeCare Corp.* | 630 | 61,249 | ||||||
Anika Therapeutics, Inc.* | 1,060 | 54,961 | ||||||
Enanta Pharmaceuticals, Inc.* | 870 | 53,748 | ||||||
LeMaitre Vascular, Inc. | 1,450 | 52,128 | ||||||
Inter Parfums, Inc. | 702 | 51,042 | ||||||
EVERTEC, Inc. | 1,380 | 46,975 | ||||||
Medifast, Inc. | 371 | 40,654 | ||||||
CorVel Corp.* | 441 | 38,526 | ||||||
Medicines Co.* | 450 | 38,223 | ||||||
REGENXBIO, Inc.* | 890 | 36,463 | ||||||
John B Sanfilippo & Son, Inc. | 390 | 35,599 | ||||||
Total Consumer, Non-cyclical | 2,084,454 | |||||||
Consumer, Cyclical - 15.5% | ||||||||
Winnebago Industries, Inc. | 2,970 | 157,351 | ||||||
LGI Homes, Inc.* | 2,120 | 149,778 | ||||||
Installed Building Products, Inc.* | 2,100 | 144,627 | ||||||
Sleep Number Corp.* | 2,621 | 129,058 | ||||||
Lithia Motors, Inc. — Class A | 800 | 117,600 | ||||||
Callaway Golf Co. | 5,460 | 115,752 | ||||||
Wingstop, Inc. | 1,314 | 113,306 | ||||||
MDC Holdings, Inc. | 2,500 | 95,400 | ||||||
Fox Factory Holding Corp.* | 1,320 | 91,833 | ||||||
Boot Barn Holdings, Inc.* | 1,980 | 88,169 | ||||||
LCI Industries | 820 | 87,846 | ||||||
Zumiez, Inc.* | 2,480 | 85,659 | ||||||
Steven Madden Ltd. | 1,620 | 69,676 | ||||||
Shake Shack, Inc. — Class A* | 1,163 | 69,280 | ||||||
UniFirst Corp. | 310 | 62,614 | ||||||
Allegiant Travel Co. — Class A | 358 | 62,306 | ||||||
Chuy’s Holdings, Inc.* | 2,230 | 57,802 | ||||||
Cavco Industries, Inc.* | 284 | 55,488 | ||||||
Universal Electronics, Inc.* | 1,010 | 52,783 | ||||||
St. Joe Co.* | 2,540 | 50,368 | ||||||
Crocs, Inc.* | 1,100 | 46,079 | ||||||
Total Consumer, Cyclical | 1,902,775 | |||||||
Financial - 15.0% | ||||||||
Innovative Industrial Properties, Inc. REIT1 | 2,180 | 165,397 | ||||||
NMI Holdings, Inc. — Class A* | 4,880 | 161,918 | ||||||
Kinsale Capital Group, Inc. | 1,580 | 160,623 | ||||||
Essential Properties Realty Trust, Inc. REIT | 6,016 | 149,257 | ||||||
Safehold, Inc. REIT | 3,660 | 147,498 | ||||||
Meta Financial Group, Inc. | 3,780 | 138,008 | ||||||
Virtus Investment Partners, Inc. | 1,040 | 126,589 | ||||||
PennyMac Mortgage Investment Trust REIT | 5,040 | 112,342 | ||||||
Walker & Dunlop, Inc. | 1,660 | 107,369 | ||||||
eHealth, Inc.* | 1,090 | 104,727 | ||||||
Enova International, Inc.* | 4,029 | 96,938 | ||||||
Granite Point Mortgage Trust, Inc. REIT | 5,030 | 92,451 | ||||||
Community Healthcare Trust, Inc. REIT | 2,000 | 85,720 | ||||||
Preferred Bank/Los Angeles CA | 1,160 | 69,704 | ||||||
Universal Health Realty Income Trust REIT | 490 | 57,506 | ||||||
ServisFirst Bancshares, Inc. | 1,050 | 39,564 | ||||||
Agree Realty Corp. REIT | 520 | 36,488 | ||||||
Total Financial | 1,852,099 | |||||||
Technology - 13.3% | ||||||||
Ultra Clean Holdings, Inc.* | 6,360 | 149,269 | ||||||
Brooks Automation, Inc. | 3,423 | 143,629 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 39 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
S&P SMALLCAP 600® PURE GROWTH FUND |
| Shares | Value | ||||||
KEMET Corp. | 4,344 | $ | 117,506 | |||||
FormFactor, Inc.* | 4,040 | 104,919 | ||||||
Xperi Corp. | 4,920 | 91,020 | ||||||
Diodes, Inc.* | 1,560 | 87,937 | ||||||
Diebold Nixdorf, Inc.* | 8,280 | 87,437 | ||||||
TTEC Holdings, Inc. | 2,190 | 86,768 | ||||||
SPS Commerce, Inc.* | 1,430 | 79,251 | ||||||
CSG Systems International, Inc. | 1,380 | 71,456 | ||||||
Virtusa Corp.* | 1,549 | 70,216 | ||||||
ManTech International Corp. — Class A | 840 | 67,099 | ||||||
Agilysys, Inc.* | 2,600 | 66,066 | ||||||
Digi International, Inc.* | 3,600 | 63,792 | ||||||
LivePerson, Inc.* | 1,510 | 55,870 | ||||||
ExlService Holdings, Inc.* | 790 | 54,873 | ||||||
3D Systems Corp.* | 6,190 | 54,163 | ||||||
Qualys, Inc.* | 640 | 53,357 | ||||||
Power Integrations, Inc. | 520 | 51,433 | ||||||
Glu Mobile, Inc.* | 8,210 | 49,671 | ||||||
Progress Software Corp. | 810 | 33,655 | ||||||
Total Technology | 1,639,387 | |||||||
Energy - 10.0% | ||||||||
Talos Energy, Inc.* | 8,350 | 251,753 | ||||||
Par Pacific Holdings, Inc.* | 7,680 | 178,483 | ||||||
SRC Energy, Inc.* | 41,080 | 169,250 | ||||||
Penn Virginia Corp.* | 4,860 | 147,501 | ||||||
Ring Energy, Inc.* | 55,660 | 146,942 | ||||||
DMC Global, Inc. | 2,870 | 128,978 | ||||||
Helix Energy Solutions Group, Inc.* | 12,118 | 116,696 | ||||||
Geospace Technologies Corp.* | 5,564 | 93,308 | ||||||
Total Energy | 1,232,911 | |||||||
Communications - 5.0% | ||||||||
TechTarget, Inc.* | 3,550 | 92,655 | ||||||
Viavi Solutions, Inc.* | 5,828 | 87,420 | ||||||
Perficient, Inc.* | 1,760 | 81,083 | ||||||
Extreme Networks, Inc.* | 9,900 | 72,963 | ||||||
NIC, Inc. | 2,560 | 57,216 | ||||||
Harmonic, Inc.* | 7,277 | 56,761 | ||||||
Cogent Communications Holdings, Inc. | 760 | 50,016 | ||||||
QuinStreet, Inc.* | 3,240 | 49,604 | ||||||
8x8, Inc.* | 2,000 | 36,600 | ||||||
Shutterstock, Inc.* | 810 | 34,733 | ||||||
Total Communications | 619,051 | |||||||
Basic Materials - 2.6% | ||||||||
Innospec, Inc. | 1,110 | 114,819 | ||||||
Koppers Holdings, Inc.* | 2,900 | 110,838 | ||||||
Schweitzer-Mauduit International, Inc. | 1,500 | 62,985 | ||||||
Rogers Corp.* | 280 | 34,924 | ||||||
Total Basic Materials | 323,566 | |||||||
Total Common Stocks | ||||||||
(Cost $11,265,933) | 12,227,039 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.7% | ||||||||
J.P. Morgan Securities LLC | $ | 53,446 | 53,446 | |||||
Barclays Capital, Inc. | 17,234 | 17,234 | ||||||
BofA Securities, Inc. | 17,234 | 17,234 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $87,914) | 87,914 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 0.8% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.47%4 | 92,775 | 92,775 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $92,775) | 92,775 | |||||||
Total Investments - 100.7% | ||||||||
(Cost $11,446,622) | $ | 12,407,728 | ||||||
Other Assets & Liabilities, net - (0.7)% | (84,792 | ) | ||||||
Total Net Assets - 100.0% | $ | 12,322,936 |
* | 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, 2019 — 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, 2019. |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
40 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
S&P SMALLCAP 600® PURE GROWTH FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 12,227,039 | $ | — | $ | — | $ | 12,227,039 | ||||||||
Repurchase Agreements | — | 87,914 | — | 87,914 | ||||||||||||
Securities Lending Collateral | 92,775 | — | — | 92,775 | ||||||||||||
Total Assets | $ | 12,319,814 | $ | 87,914 | $ | — | $ | 12,407,728 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 41 |
S&P SMALLCAP 600® PURE GROWTH FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value - including $93,851 of securities loaned (cost $11,358,708) | $ | 12,319,814 | ||
Repurchase agreements, at value (cost $87,914) | 87,914 | |||
Receivables: | ||||
Fund shares sold | 1,023,146 | |||
Securities sold | 128,094 | |||
Dividends | 12,688 | |||
Securities lending income | 300 | |||
Interest | 4 | |||
Total assets | 13,571,960 | |||
Liabilities: | ||||
Payable for: | ||||
Securities purchased | 1,069,283 | |||
Return of securities lending collateral | 92,775 | |||
Fund shares redeemed | 46,427 | |||
Management fees | 6,680 | |||
Transfer agent and administrative fees | 2,227 | |||
Investor service fees | 2,227 | |||
Portfolio accounting fees | 891 | |||
Trustees’ fees* | 193 | |||
Miscellaneous | 28,321 | |||
Total liabilities | 1,249,024 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 12,322,936 | ||
Net assets consist of: | ||||
Paid in capital | $ | 11,125,433 | ||
Total distributable earnings (loss) | 1,197,503 | |||
Net assets | $ | 12,322,936 | ||
Capital shares outstanding | 223,088 | |||
Net asset value per share | $ | 55.24 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends | $ | 114,535 | ||
Interest | 2,003 | |||
Income from securities lending, net | 5,081 | |||
Total investment income | 121,619 | |||
Expenses: | ||||
Management fees | 88,082 | |||
Investor service fees | 29,361 | |||
Transfer agent and administrative fees | 29,361 | |||
Professional fees | 25,734 | |||
Portfolio accounting fees | 11,744 | |||
Trustees’ fees* | 4,131 | |||
Custodian fees | 2,831 | |||
Line of credit fees | 14 | |||
Miscellaneous | 11,542 | |||
Total expenses | 202,800 | |||
Net investment loss | (81,181 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 2,382,069 | |||
Net realized gain | 2,382,069 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (722,819 | ) | ||
Net change in unrealized appreciation (depreciation) | (722,819 | ) | ||
Net realized and unrealized gain | 1,659,250 | |||
Net increase in net assets resulting from operations | $ | 1,578,069 |
* | 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. |
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 | $ | (81,181 | ) | $ | (241,095 | ) | ||
Net realized gain (loss) on investments | 2,382,069 | (1,539,254 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | (722,819 | ) | (1,822,907 | ) | ||||
Net increase (decrease) in net assets resulting from operations | 1,578,069 | (3,603,256 | ) | |||||
Distributions to shareholders | — | (549,379 | ) | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 16,580,571 | 68,349,093 | ||||||
Distributions reinvested | — | 549,379 | ||||||
Cost of shares redeemed | (22,841,246 | ) | (68,178,483 | ) | ||||
Net increase (decrease) from capital share transactions | (6,260,675 | ) | 719,989 | |||||
Net decrease in net assets | (4,682,606 | ) | (3,432,646 | ) | ||||
Net assets: | ||||||||
Beginning of year | 17,005,542 | 20,438,188 | ||||||
End of year | $ | 12,322,936 | $ | 17,005,542 | ||||
Capital share activity: | ||||||||
Shares sold | 316,090 | 1,133,425 | ||||||
Shares issued from reinvestment of distributions | — | 8,745 | ||||||
Shares redeemed | (439,562 | ) | (1,167,579 | ) | ||||
Net decrease in shares | (123,472 | ) | (25,409 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 43 |
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 | $ | 49.07 | $ | 54.95 | $ | 49.86 | $ | 42.01 | $ | 45.67 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.36 | ) | (.60 | ) | (.47 | ) | (.14 | ) | (.30 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 6.53 | (4.12 | ) | 8.25 | 7.99 | .62 | ||||||||||||||
Total from investment operations | 6.17 | (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 | $ | 55.24 | $ | 49.07 | $ | 54.95 | $ | 49.86 | $ | 42.01 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 12.57 | % | (9.03 | %) | 16.08 | % | 18.69 | % | (0.37 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 12,323 | $ | 17,006 | $ | 20,438 | $ | 20,844 | $ | 22,156 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.69 | %) | (1.01 | %) | (0.90 | %) | (0.32 | %) | (0.64 | %) | ||||||||||
Total expenses | 1.73 | % | 1.63 | % | 1.61 | % | 1.56 | % | 1.50 | % | ||||||||||
Portfolio turnover rate | 190 | % | 313 | % | 280 | % | 475 | % | 282 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
44 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, S&P SmallCap 600® Pure Value Fund returned 20.68%, compared with a return of 23.05% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
The sectors contributing the most to the return of the underlying index for the year were the Consumer Discretionary sector, the Information Technology sector, and the Industrials sector. The Consumer Staples and Communications Services sectors detracted the most from return.
The stocks contributing the most to return of the underlying index were Ultra Clean Holdings, Inc., Sonic Automotive, Inc. — Class A, and Group 1 Automotive, Inc. Those detracting the most from return of the underlying index were Dean Foods Co., Orion Group Holdings, Inc., and Rayonier Advanced Materials, 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) | |
Whiting Petroleum Corp. | 1.6% |
Southwestern Energy Co. | 1.5% |
Cooper-Standard Holdings, Inc. | 1.5% |
Denbury Resources, Inc. | 1.5% |
Gulfport Energy Corp. | 1.4% |
Office Depot, Inc. | 1.4% |
Greenbrier Companies, Inc. | 1.4% |
CONSOL Energy, Inc. | 1.4% |
Oasis Petroleum, Inc. | 1.3% |
Kelly Services, Inc. — Class A | 1.3% |
Top Ten Total | 14.3% |
“Ten Largest Holdings” excludes any temporary cash investments. |
THE RYDEX FUNDS ANNUAL REPORT | 45 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
S&P SmallCap 600® Pure Value Fund | 20.68% | 1.71% | 7.95% |
S&P SmallCap 600 Pure Value Index | 23.05% | 3.43% | 9.95% |
* | 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 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
46 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
S&P SMALLCAP 600® PURE VALUE FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.5% | ||||||||
Consumer, Cyclical - 30.3% | ||||||||
Cooper-Standard Holdings, Inc.* | 4,136 | $ | 137,150 | |||||
Office Depot, Inc. | 47,060 | 128,944 | ||||||
Fossil Group, Inc.* | 14,182 | 111,754 | ||||||
Red Robin Gourmet Burgers, Inc.* | 3,060 | 101,041 | ||||||
MarineMax, Inc.* | 6,016 | 100,407 | ||||||
Abercrombie & Fitch Co. — Class A | 5,356 | 92,605 | ||||||
ScanSource, Inc.* | 2,476 | 91,488 | ||||||
Genesco, Inc.* | 1,901 | 91,096 | ||||||
Veritiv Corp.* | 4,383 | 86,214 | ||||||
Big Lots, Inc. | 3,000 | 86,160 | ||||||
Express, Inc.* | 17,665 | 86,029 | ||||||
Titan International, Inc. | 23,303 | 84,357 | ||||||
Barnes & Noble Education, Inc.* | 18,890 | 80,660 | ||||||
William Lyon Homes — Class A* | 4,010 | 80,120 | ||||||
Chico’s FAS, Inc. | 19,264 | 73,396 | ||||||
Caleres, Inc. | 2,982 | 70,823 | ||||||
Sonic Automotive, Inc. — Class A | 2,135 | 66,185 | ||||||
Movado Group, Inc. | 3,030 | 65,872 | ||||||
Signet Jewelers Ltd. | 3,020 | 65,655 | ||||||
Group 1 Automotive, Inc. | 656 | 65,600 | ||||||
G-III Apparel Group Ltd.* | 1,870 | 62,645 | ||||||
Conn’s, Inc.* | 5,000 | 61,950 | ||||||
American Axle & Manufacturing Holdings, Inc.* | 5,606 | 60,321 | ||||||
Core-Mark Holding Company, Inc. | 2,191 | 59,573 | ||||||
Anixter International, Inc.* | 642 | 59,128 | ||||||
Designer Brands, Inc. — Class A | 3,210 | 50,525 | ||||||
Wabash National Corp. | 3,420 | 50,240 | ||||||
Hawaiian Holdings, Inc. | 1,540 | 45,107 | ||||||
Michaels Companies, Inc.* | 5,180 | 41,906 | ||||||
Cooper Tire & Rubber Co. | 1,446 | 41,572 | ||||||
Tupperware Brands Corp. | 4,640 | 39,811 | ||||||
Cato Corp. — Class A | 2,105 | 36,627 | ||||||
Haverty Furniture Companies, Inc. | 1,802 | 36,328 | ||||||
Ethan Allen Interiors, Inc. | 1,880 | 35,833 | ||||||
Daktronics, Inc. | 5,860 | 35,687 | ||||||
Garrett Motion, Inc.* | 3,510 | 35,065 | ||||||
GameStop Corp. — Class A1 | 5,656 | 34,389 | ||||||
Shoe Carnival, Inc. | 910 | 33,925 | ||||||
Unifi, Inc.* | 1,329 | 33,571 | ||||||
J.C. Penney Company, Inc.*,1 | 27,676 | 30,997 | ||||||
Tailored Brands, Inc.1 | 7,040 | 29,146 | ||||||
Lumber Liquidators Holdings, Inc.* | 2,660 | 25,988 | ||||||
Vista Outdoor, Inc.* | 3,436 | 25,701 | ||||||
Vera Bradley, Inc.* | 1,864 | 21,995 | ||||||
Total Consumer, Cyclical | 2,753,586 | |||||||
Energy - 24.5% | ||||||||
Whiting Petroleum Corp.* | 20,310 | 149,075 | ||||||
Southwestern Energy Co.* | 57,100 | 138,182 | ||||||
Denbury Resources, Inc.* | 95,180 | 134,204 | ||||||
Gulfport Energy Corp.* | 42,980 | 130,659 | ||||||
CONSOL Energy, Inc.* | 8,590 | 124,641 | ||||||
Oasis Petroleum, Inc.* | 36,890 | 120,261 | ||||||
Renewable Energy Group, Inc.* | 3,760 | 101,332 | ||||||
Green Plains, Inc. | 6,555 | 101,144 | ||||||
TETRA Technologies, Inc.* | 51,010 | 99,980 | ||||||
KLX Energy Services Holdings, Inc.* | 15,160 | 97,630 | ||||||
HighPoint Resources Corp.* | 57,000 | 96,330 | ||||||
Exterran Corp.* | 12,261 | 96,004 | ||||||
ProPetro Holding Corp.* | 8,130 | 91,462 | ||||||
SM Energy Co. | 7,670 | 86,211 | ||||||
Valaris plc1 | 12,500 | 82,000 | ||||||
Laredo Petroleum, Inc.* | 28,401 | 81,511 | ||||||
Bonanza Creek Energy, Inc.* | 2,730 | 63,718 | ||||||
Matrix Service Co.* | 2,320 | 53,082 | ||||||
SunCoke Energy, Inc. | 7,580 | 47,223 | ||||||
Era Group, Inc.* | 4,500 | 45,765 | ||||||
RPC, Inc.1 | 8,580 | 44,959 | ||||||
Oil States International, Inc.* | 2,331 | 38,019 | ||||||
Nabors Industries Ltd. | 12,920 | 37,210 | ||||||
Range Resources Corp.1 | 7,660 | 37,151 | ||||||
Noble Corporation plc* | 30,360 | 37,039 | ||||||
US Silica Holdings, Inc. | 5,569 | 34,249 | ||||||
Warrior Met Coal, Inc. | 1,340 | 28,314 | ||||||
Oceaneering International, Inc.* | 1,748 | 26,063 | ||||||
Total Energy | 2,223,418 | |||||||
Industrial - 14.8% | ||||||||
Greenbrier Companies, Inc. | 3,882 | 125,893 | ||||||
Atlas Air Worldwide Holdings, Inc.* | 4,309 | 118,799 | ||||||
Olympic Steel, Inc. | 6,053 | 108,470 | ||||||
Briggs & Stratton Corp. | 14,929 | 99,427 | ||||||
ArcBest Corp. | 3,465 | 95,634 | ||||||
TimkenSteel Corp.* | 11,244 | 88,378 | ||||||
Lydall, Inc.* | 4,081 | 83,742 | ||||||
Sanmina Corp.* | 2,293 | 78,512 | ||||||
Echo Global Logistics, Inc.* | 3,673 | 76,031 | ||||||
Granite Construction, Inc. | 2,340 | 64,748 | ||||||
Bel Fuse, Inc. — Class B | 2,907 | 59,593 | ||||||
TTM Technologies, Inc.* | 3,490 | 52,525 | ||||||
Boise Cascade Co. | 1,225 | 44,749 | ||||||
Hub Group, Inc. — Class A* | 790 | 40,519 | ||||||
LSB Industries, Inc.* | 8,960 | 37,632 | ||||||
Trinseo S.A. | 1,010 | 37,582 | ||||||
Arcosa, Inc. | 670 | 29,848 | ||||||
US Concrete, Inc.* | 690 | 28,746 | ||||||
DXP Enterprises, Inc.* | 620 | 24,683 | ||||||
Applied Optoelectronics, Inc.* | 2,010 | 23,879 | ||||||
Aegion Corp. — Class A* | 1,024 | 22,907 | ||||||
Total Industrial | 1,342,297 | |||||||
Consumer, Non-cyclical - 11.3% | ||||||||
Kelly Services, Inc. — Class A | 5,262 | 118,816 | ||||||
Andersons, Inc. | 4,639 | 117,274 | ||||||
SpartanNash Co. | 7,435 | 105,874 | ||||||
Seneca Foods Corp. — Class A* | 2,219 | 90,513 | ||||||
Fresh Del Monte Produce, Inc. | 2,470 | 86,401 | ||||||
Invacare Corp. | 7,572 | 68,299 | ||||||
Magellan Health, Inc.* | 849 | 66,434 | ||||||
TrueBlue, Inc.* | 2,440 | 58,706 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 47 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
S&P SMALLCAP 600® PURE VALUE FUND |
| Shares | Value | ||||||
Universal Corp. | 913 | $ | 52,096 | |||||
Team, Inc.* | 3,099 | 49,491 | ||||||
Lannett Company, Inc.* | 5,160 | 45,511 | ||||||
ABM Industries, Inc. | 1,150 | 43,367 | ||||||
United Natural Foods, Inc.* | 4,420 | 38,719 | ||||||
B&G Foods, Inc.1 | 2,100 | 37,653 | ||||||
Central Garden & Pet Co. — Class A* | 940 | 27,598 | ||||||
Owens & Minor, Inc. | 3,290 | 17,010 | ||||||
Central Garden & Pet Co.* | 230 | 7,146 | ||||||
Total Consumer, Non-cyclical | 1,030,908 | |||||||
Financial - 10.0% | ||||||||
EZCORP, Inc. — Class A* | 15,739 | 107,340 | ||||||
INTL FCStone, Inc.* | 1,966 | 96,000 | ||||||
Realogy Holdings Corp.1 | 8,590 | 83,151 | ||||||
FGL Holdings | 5,010 | 53,356 | ||||||
iStar, Inc. REIT | 3,390 | 49,189 | ||||||
American Equity Investment Life Holding Co. | 1,430 | 42,800 | ||||||
Cedar Realty Trust, Inc. REIT | 14,286 | 42,144 | ||||||
Hersha Hospitality Trust REIT | 2,860 | 41,613 | ||||||
Stewart Information Services Corp. | 987 | 40,260 | ||||||
Cadence BanCorp | 1,913 | 34,683 | ||||||
Encore Capital Group, Inc.* | 824 | 29,136 | ||||||
CBL & Associates Properties, Inc. REIT1 | 27,474 | 28,848 | ||||||
Customers Bancorp, Inc.* | 1,190 | 28,334 | ||||||
United Insurance Holdings Corp. | 2,200 | 27,742 | ||||||
Hope Bancorp, Inc. | 1,764 | 26,213 | ||||||
Third Point Reinsurance Ltd.* | 2,280 | 23,986 | ||||||
Berkshire Hills Bancorp, Inc. | 690 | 22,687 | ||||||
Ready Capital Corp. REIT | 1,470 | 22,667 | ||||||
Simmons First National Corp. — Class A | 816 | 21,860 | ||||||
Horace Mann Educators Corp. | 495 | 21,612 | ||||||
Opus Bank | 815 | 21,084 | ||||||
United Fire Group, Inc. | 470 | 20,553 | ||||||
Pacific Premier Bancorp, Inc. | 615 | 20,052 | ||||||
Total Financial | 905,310 | |||||||
Basic Materials - 3.8% | ||||||||
Kraton Corp.* | 3,490 | 88,367 | ||||||
Rayonier Advanced Materials, Inc. | 21,304 | 81,807 | ||||||
AdvanSix, Inc.* | 2,829 | 56,467 | ||||||
Century Aluminum Co.* | 7,440 | 55,912 | ||||||
AK Steel Holding Corp.* | 11,460 | 37,703 | ||||||
Clearwater Paper Corp.* | 1,366 | 29,178 | ||||||
Total Basic Materials | 349,434 | |||||||
Communications - 3.2% | ||||||||
Gannett Company, Inc. | 16,855 | 107,535 | ||||||
Consolidated Communications Holdings, Inc. | 24,520 | 95,137 | ||||||
Scholastic Corp. | 800 | 30,760 | ||||||
Spok Holdings, Inc. | 2,200 | 26,906 | ||||||
NETGEAR, Inc.* | 1,080 | 26,471 | ||||||
Total Communications | 286,809 | |||||||
Technology - 1.6% | ||||||||
Donnelley Financial Solutions, Inc.* | 5,896 | 61,731 | ||||||
Pitney Bowes, Inc. | 7,470 | 30,104 | ||||||
Unisys Corp.* | 2,390 | 28,346 | ||||||
Photronics, Inc.* | 1,474 | 23,230 | ||||||
Total Technology | 143,411 | |||||||
Total Common Stocks | ||||||||
(Cost $7,849,696) | 9,035,173 | |||||||
RIGHTS††† - 0.0% | ||||||||
A Schulman, Inc.*,2 | 1,164 | — | ||||||
Total Rights | ||||||||
(Cost $—) | — | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,3 - 0.7% | ||||||||
J.P. Morgan Securities LLC | $ | 36,161 | 36,161 | |||||
Barclays Capital, Inc. | 11,660 | 11,660 | ||||||
BofA Securities, Inc. | 11,660 | 11,660 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $59,481) | 59,481 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,4 - 2.4% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.47%5 | 214,684 | 214,684 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $214,684) | 214,684 | |||||||
Total Investments - 102.6% | ||||||||
(Cost $8,123,861) | $ | 9,309,338 | ||||||
Other Assets & Liabilities, net - (2.6)% | (232,729 | ) | ||||||
Total Net Assets - 100.0% | $ | 9,076,609 |
48 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
S&P SMALLCAP 600® PURE VALUE FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
††† | Value determined based on Level 3 inputs — See Note 4 |
1 | All or a portion of this security is on loan at December 31, 2019 — See Note 7. |
2 | Security was fair valued by the Valuation Committee at December 31, 2019. 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, 2019. |
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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 9,035,173 | $ | — | $ | — | $ | 9,035,173 | ||||||||
Rights | — | — | — | * | — | |||||||||||
Repurchase Agreements | — | 59,481 | — | 59,481 | ||||||||||||
Securities Lending Collateral | 214,684 | — | — | 214,684 | ||||||||||||
Total Assets | $ | 9,249,857 | $ | 59,481 | $ | — | $ | 9,309,338 |
* | Includes securities with a market value of $0. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 49 |
S&P SMALLCAP 600® PURE VALUE FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value - including $198,513 of securities loaned (cost $8,064,380) | $ | 9,249,857 | ||
Repurchase agreements, at value (cost $59,481) | 59,481 | |||
Receivables: | ||||
Fund shares sold | 191,971 | |||
Dividends | 6,626 | |||
Securities lending income | 1,473 | |||
Interest | 2 | |||
Total assets | 9,509,410 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 214,684 | |||
Securities purchased | 157,952 | |||
Fund shares redeemed | 27,989 | |||
Management fees | 5,982 | |||
Transfer agent and administrative fees | 1,994 | |||
Investor service fees | 1,994 | |||
Portfolio accounting fees | 798 | |||
Trustees’ fees* | 146 | |||
Miscellaneous | 21,262 | |||
Total liabilities | 432,801 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 9,076,609 | ||
Net assets consist of: | ||||
Paid in capital | $ | 11,150,766 | ||
Total distributable earnings (loss) | (2,074,157 | ) | ||
Net assets | $ | 9,076,609 | ||
Capital shares outstanding | 142,923 | |||
Net asset value per share | $ | 63.51 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends | $ | 115,238 | ||
Interest | 1,292 | |||
Income from securities lending, net | 6,986 | |||
Total investment income | 123,516 | |||
Expenses: | ||||
Management fees | 64,184 | |||
Investor service fees | 21,395 | |||
Transfer agent and administrative fees | 21,395 | |||
Professional fees | 18,208 | |||
Portfolio accounting fees | 8,558 | |||
Trustees’ fees* | 2,752 | |||
Custodian fees | 2,003 | |||
Line of credit fees | 10 | |||
Miscellaneous | 9,145 | |||
Total expenses | 147,650 | |||
Net investment loss | (24,134 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 361,026 | |||
Net realized gain | 361,026 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 1,305,177 | |||
Net change in unrealized appreciation (depreciation) | 1,305,177 | |||
Net realized and unrealized gain | 1,666,203 | |||
Net increase in net assets resulting from operations | $ | 1,642,069 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
50 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
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) | $ | (24,134 | ) | $ | 18,260 | |||
Net realized gain (loss) on investments | 361,026 | (768,745 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 1,305,177 | (2,189,576 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 1,642,069 | (2,940,061 | ) | |||||
Distributions to shareholders | (22,849 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 18,171,779 | 29,766,017 | ||||||
Distributions reinvested | 22,849 | — | ||||||
Cost of shares redeemed | (19,151,588 | ) | (36,159,635 | ) | ||||
Net decrease from capital share transactions | (956,960 | ) | (6,393,618 | ) | ||||
Net increase (decrease) in net assets | 662,260 | (9,333,679 | ) | |||||
Net assets: | ||||||||
Beginning of year | 8,414,349 | 17,748,028 | ||||||
End of year | $ | 9,076,609 | $ | 8,414,349 | ||||
Capital share activity: | ||||||||
Shares sold | 308,030 | 430,933 | ||||||
Shares issued from reinvestment of distributions | 401 | — | ||||||
Shares redeemed | (324,852 | ) | (538,553 | ) | ||||
Net decrease in shares | (16,421 | ) | (107,620 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 51 |
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 | $ | 52.81 | $ | 66.48 | $ | 69.13 | $ | 52.48 | $ | 65.72 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.17 | ) | .08 | (.23 | ) | (.45 | ) | (.06 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | 11.06 | (13.75 | ) | (.20 | ) | 17.10 | (8.15 | ) | ||||||||||||
Total from investment operations | 10.89 | (13.67 | ) | (.43 | ) | 16.65 | (8.21 | ) | ||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.19 | ) | — | — | — | — | ||||||||||||||
Net realized gains | — | — | (2.22 | ) | — | (5.03 | ) | |||||||||||||
Total distributions | (.19 | ) | — | (2.22 | ) | — | (5.03 | ) | ||||||||||||
Net asset value, end of period | $ | 63.51 | $ | 52.81 | $ | 66.48 | $ | 69.13 | $ | 52.48 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 20.68 | % | (20.58 | %) | (0.28 | %) | 31.74 | % | (13.54 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 9,077 | $ | 8,414 | $ | 17,748 | $ | 28,408 | $ | 11,747 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.28 | %) | 0.12 | % | (0.35 | %) | (0.44 | %) | (0.09 | %) | ||||||||||
Total expenses | 1.73 | % | 1.62 | % | 1.61 | % | 1.56 | % | 1.50 | % | ||||||||||
Portfolio turnover rate | 248 | % | 194 | % | 204 | % | 303 | % | 245 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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. |
52 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, Europe 1.25x Strategy Fund maintained a daily correlation of over 98% to its benchmark of 125% of the daily price movement of the underlying index. Europe 1.25x Strategy Fund returned 28.43% while the underlying index returned 25.06% over the same period.
The sectors contributing the most to the return of the underlying index for the period were Consumer Discretionary, Industrials, and Financials sectors. No sector detracted from performance.
The stocks contributing the most to performance of the underlying index were ASML Holding N.V. — Class G, LVMH Moet Hennessy Louis Vuitton SE, and SAP SE. Those detracting the most from return of the underlying index were Nokia Oyj, Telefonica SA, and Banco Santander S.A.
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. The results of derivatives use during the period were within our expectations and were a factor in the Fund’s positive performance.
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.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration Fund, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but that fee is waived by the respective investee fund. For the one year period ended December 31, 2019, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 53 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
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: October 1, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 26.1% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 22.8% |
Nestle S.A. ADR | 1.2% |
Novartis AG ADR | 0.9% |
Roche Holding AG ADR | 0.8% |
HSBC Holdings plc ADR | 0.6% |
SAP SE ADR | 0.6% |
Total S.A. ADR | 0.6% |
ASML Holding N.V. — Class G | 0.5% |
AstraZeneca plc ADR | 0.5% |
Top Ten Total | 54.6% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
Country Diversification
Country | % of Long-Term | |||
United Kingdom | 31.2 | % | ||
Switzerland | 20.3 | % | ||
France | 19.9 | % | ||
Germany | 13.1 | % | ||
Netherlands | 5.9 | % | ||
Spain | 2.8 | % | ||
Denmark | 2.2 | % | ||
Other | 4.6 | % | ||
Total Long–Term Investments | 100.0 | % |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Europe 1.25x Strategy Fund | 28.43% | 3.24% | 1.59% |
STOXX Europe 50 Index | 25.06% | 4.39% | 3.69% |
* | 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 STOXX Europe 50 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
54 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
EUROPE 1.25x STRATEGY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 17.0% | ||||||||
Consumer, Non-cyclical - 7.1% | ||||||||
Nestle S.A. ADR | 441 | $ | 47,743 | |||||
Novartis AG ADR | 359 | 33,994 | ||||||
Roche Holding AG ADR | 831 | 33,788 | ||||||
AstraZeneca plc ADR | 385 | 19,196 | ||||||
GlaxoSmithKline plc ADR | 372 | 17,480 | ||||||
Sanofi ADR | 334 | 16,767 | ||||||
Diageo plc ADR | 91 | 15,326 | ||||||
Novo Nordisk A/S ADR | 258 | 14,933 | ||||||
British American Tobacco plc ADR | 336 | 14,267 | ||||||
Unilever N.V. — Class Y1 | 215 | 12,354 | ||||||
Bayer AG ADR1 | 547 | 11,093 | ||||||
L’Oreal S.A. ADR | 180 | 10,597 | ||||||
Anheuser-Busch InBev S.A. ADR1 | 127 | 10,419 | ||||||
Unilever plc ADR | 178 | 10,176 | ||||||
Reckitt Benckiser Group plc ADR1 | 544 | 9,009 | ||||||
RELX plc ADR | 300 | 7,581 | ||||||
Total Consumer, Non-cyclical | 284,723 | |||||||
Financial - 2.9% | ||||||||
HSBC Holdings plc ADR | 606 | 23,689 | ||||||
Allianz SE ADR | 620 | 15,010 | ||||||
BNP Paribas S.A. ADR | 345 | 10,243 | ||||||
Banco Santander S.A. ADR | 2,467 | 10,213 | ||||||
Zurich Insurance Group AG ADR | 225 | 9,225 | ||||||
AXA S.A. ADR | 312 | 8,781 | ||||||
Lloyds Banking Group plc ADR | 2,627 | 8,695 | ||||||
Prudential plc ADR1 | 192 | 7,314 | ||||||
ING Groep N.V. ADR | 577 | 6,953 | ||||||
UBS Group AG* | 543 | 6,831 | ||||||
Intesa Sanpaolo SpA ADR | 403 | 6,339 | ||||||
Total Financial | 113,293 | |||||||
Energy - 1.6% | ||||||||
Total S.A. ADR | 397 | 21,954 | ||||||
BP plc ADR | 503 | 18,983 | ||||||
Royal Dutch Shell plc — Class A ADR | 310 | 18,284 | ||||||
Eni SpA ADR | 189 | 5,852 | ||||||
Total Energy | 65,073 | |||||||
Industrial - 1.5% | ||||||||
Siemens AG ADR | 237 | 15,398 | ||||||
Airbus SE ADR | 345 | 12,679 | ||||||
Vinci S.A. ADR | 332 | 9,173 | ||||||
Schneider Electric SE ADR | 409 | 8,343 | ||||||
Safran S.A. ADR | 214 | 8,282 | ||||||
ABB Ltd. ADR1 | 267 | 6,432 | ||||||
Total Industrial | 60,307 | |||||||
Basic Materials - 1.2% | ||||||||
Linde plc | 83 | 17,671 | ||||||
BASF SE ADR | 549 | 10,274 | ||||||
Air Liquide S.A. ADR | 353 | 9,902 | ||||||
Rio Tinto plc ADR | 165 | 9,794 | ||||||
Total Basic Materials | 47,641 | |||||||
Technology - 1.1% | ||||||||
SAP SE ADR1 | 168 | 22,510 | ||||||
ASML Holding N.V. — Class G | 69 | 20,420 | ||||||
Total Technology | 42,930 | |||||||
Consumer, Cyclical - 0.6% | ||||||||
LVMH Moet Hennessy Louis Vuitton SE ADR | 197 | 18,374 | ||||||
Daimler AG ADR | 511 | 6,940 | ||||||
Total Consumer, Cyclical | 25,314 | |||||||
Utilities - 0.6% | ||||||||
Enel SpA ADR | 1,160 | 9,106 | ||||||
Iberdrola S.A. ADR | 220 | 9,088 | ||||||
National Grid plc ADR | 112 | �� | 7,019 | |||||
Total Utilities | 25,213 | |||||||
Communications - 0.4% | ||||||||
Deutsche Telekom AG ADR | 489 | 7,966 | ||||||
Vodafone Group plc ADR | 401 | 7,751 | ||||||
Total Communications | 15,717 | |||||||
Total Common Stocks | ||||||||
(Cost $560,846) | 680,211 | |||||||
MUTUAL FUNDS† - 48.9% | ||||||||
Guggenheim Strategy Fund II2 | 42,055 | 1,040,436 | ||||||
Guggenheim Ultra Short Duration Fund — Institutional Class2 | 91,444 | 909,864 | ||||||
Total Mutual Funds | ||||||||
(Cost $1,953,853) | 1,950,300 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 14.9% | ||||||||
U.S. Treasury Bills | ||||||||
1.47% due 02/04/203,4 | $ | 595,000 | 594,146 | |||||
Total U.S. Treasury Bills | ||||||||
(Cost $594,157) | 594,146 | |||||||
REPURCHASE AGREEMENTS††,5 - 18.5% | ||||||||
J.P. Morgan Securities LLC | 449,925 | 449,925 | ||||||
Barclays Capital, Inc. | 145,077 | 145,077 | ||||||
BofA Securities, Inc. | 145,076 | 145,076 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $740,078) | 740,078 | |||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 55 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
EUROPE 1.25x STRATEGY FUND |
| Shares | Value | ||||||
SECURITIES LENDING COLLATERAL†,6 - 1.7% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 1.47%7 | 66,065 | $ | 66,065 | |||||
Total Securities Lending Collateral | ||||||||
(Cost $66,065) | 66,065 | |||||||
Total Investments - 101.0% | ||||||||
(Cost $3,914,999) | $ | 4,030,800 | ||||||
Other Assets & Liabilities, net - (1.0)% | (40,982 | ) | ||||||
Total Net Assets - 100.0% | $ | 3,989,818 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Currency Futures Contracts Purchased† | ||||||||||||||||
Euro FX Futures Contracts | 31 | Mar 2020 | $ | 4,367,513 | $ | 40,024 | ||||||||||
Equity Futures Contracts Purchased†† | ||||||||||||||||
STOXX Europe 50 Index Futures Contracts | 113 | Mar 2020 | 4,279,724 | 15,520 |
* | 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, 2019 — See Note 7. |
2 | Affiliated issuer. |
3 | All or a portion of this security is pledged as futures collateral at December 31, 2019. |
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, 2019. |
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, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 680,211 | $ | — | $ | — | $ | 680,211 | ||||||||
Mutual Funds | 1,950,300 | — | — | 1,950,300 | ||||||||||||
U.S. Treasury Bills | — | 594,146 | — | 594,146 | ||||||||||||
Repurchase Agreements | — | 740,078 | — | 740,078 | ||||||||||||
Securities Lending Collateral | 66,065 | — | — | 66,065 | ||||||||||||
Currency Futures Contracts** | 40,024 | — | — | 40,024 | ||||||||||||
Equity Futures Contracts** | 15,520 | — | — | 15,520 | ||||||||||||
Total Assets | $ | 2,752,120 | $ | 1,334,224 | $ | — | $ | 4,086,344 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
56 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
EUROPE 1.25x 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 “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, 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/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 876,931 | $ | 3,620,932 | $ | (3,450,000 | ) | $ | (8,704 | ) | $ | 1,277 | $ | 1,040,436 | 42,055 | $ | 45,979 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 696,060 | 4,296,528 | (4,080,000 | ) | (5,036 | ) | 2,312 | 909,864 | 91,444 | 36,558 | ||||||||||||||||||||||
$ | 1,572,991 | $ | 7,917,460 | $ | (7,530,000 | ) | $ | (13,740 | ) | $ | 3,589 | $ | 1,950,300 | $ | 82,537 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 57 |
EUROPE 1.25x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $64,611 of securities loaned (cost $1,221,068) | $ | 1,340,422 | ||
Investments in affiliated issuers, at value (cost $1,953,853) | 1,950,300 | |||
Repurchase agreements, at value (cost $740,078) | 740,078 | |||
Cash | 2 | |||
Receivables: | ||||
Securities sold | 85,444 | |||
Foreign tax reclaims | 7,922 | |||
Dividends | 7,205 | |||
Variation margin on futures contracts | 5,213 | |||
Fund shares sold | 3,393 | |||
Securities lending income | 47 | |||
Interest | 31 | |||
Total assets | 4,140,057 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 66,065 | |||
Fund shares redeemed | 58,454 | |||
Securities purchased | 6,407 | |||
Management fees | 3,549 | |||
Transfer agent and administrative fees | 1,100 | |||
Investor service fees | 1,100 | |||
Portfolio accounting fees | 440 | |||
Trustees’ fees* | 82 | |||
Miscellaneous | 13,042 | |||
Total liabilities | 150,239 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 3,989,818 | ||
Net assets consist of: | ||||
Paid in capital | $ | 4,764,224 | ||
Total distributable earnings (loss) | (774,406 | ) | ||
Net assets | $ | 3,989,818 | ||
Capital shares outstanding | 37,168 | |||
Net asset value per share | $ | 107.35 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $2,711) | $ | 19,817 | ||
Dividends from securities of affiliated issuers | 82,537 | |||
Interest | 17,969 | |||
Income from securities lending, net | 586 | |||
Total investment income | 120,909 | |||
Expenses: | ||||
Management fees | 42,354 | |||
Investor service fees | 11,765 | |||
Transfer agent and administrative fees | 11,765 | |||
Professional fees | 7,312 | |||
Portfolio accounting fees | 4,706 | |||
Trustees’ fees* | 857 | |||
Custodian fees | 436 | |||
Line of credit fees | 10 | |||
Miscellaneous | 9,051 | |||
Total expenses | 88,256 | |||
Less: | ||||
Expenses waived by Adviser | (3,713 | ) | ||
Net expenses | 84,543 | |||
Net investment income | 36,366 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 60,922 | |||
Investments in affiliated issuers | (13,740 | ) | ||
Futures contracts | 632,451 | |||
Foreign currency transactions | (1,388 | ) | ||
Net realized gain | 678,245 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 79,978 | |||
Investments in affiliated issuers | 3,589 | |||
Futures contracts | 61,674 | |||
Foreign currency translations | 113 | |||
Net change in unrealized appreciation (depreciation) | 145,354 | |||
Net realized and unrealized gain | 823,599 | |||
Net increase in net assets resulting from operations | $ | 859,965 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
58 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
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 | $ | 36,366 | $ | 73,856 | ||||
Net realized gain (loss) on investments | 678,245 | (799,572 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 145,354 | (251,541 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 859,965 | (977,257 | ) | |||||
Distributions to shareholders | (73,007 | ) | (15,264 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 26,408,052 | 14,938,345 | ||||||
Distributions reinvested | 73,007 | 15,264 | ||||||
Cost of shares redeemed | (25,965,356 | ) | (16,999,276 | ) | ||||
Net increase (decrease) from capital share transactions | 515,703 | (2,045,667 | ) | |||||
Net increase (decrease) in net assets | 1,302,661 | (3,038,188 | ) | |||||
Net assets: | ||||||||
Beginning of year | 2,687,157 | 5,725,345 | ||||||
End of year | $ | 3,989,818 | $ | 2,687,157 | ||||
Capital share activity: | ||||||||
Shares sold | 269,303 | 149,773 | ||||||
Shares issued from reinvestment of distributions | 734 | 153 | ||||||
Shares redeemed | (264,674 | ) | (172,823 | ) | ||||
Net increase (decrease) in shares | 5,363 | (22,897 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 59 |
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 | $ | 84.49 | $ | 104.66 | $ | 82.06 | $ | 88.28 | $ | 96.17 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .76 | 1.66 | .25 | .25 | .66 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 23.18 | (21.46 | ) | 23.17 | (6.25 | ) | (7.35 | ) | ||||||||||||
Total from investment operations | 23.94 | (19.80 | ) | 23.42 | (6.00 | ) | (6.69 | ) | ||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (1.08 | ) | (.37 | ) | (.82 | ) | (.22 | ) | (1.20 | ) | ||||||||||
Total distributions | (1.08 | ) | (.37 | ) | (.82 | ) | (.22 | ) | (1.20 | ) | ||||||||||
Net asset value, end of period | $ | 107.35 | $ | 84.49 | $ | 104.66 | $ | 82.06 | $ | 88.28 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 28.43 | % | (18.97 | %) | 28.60 | % | (5.58 | %) | (7.19 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 3,990 | $ | 2,687 | $ | 5,725 | $ | 2,553 | $ | 3,083 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.77 | % | 1.67 | % | 0.26 | % | 1.70 | % | 0.63 | % | ||||||||||
Total expensesc | 1.88 | % | 1.78 | % | 1.80 | % | 1.73 | % | 1.66 | % | ||||||||||
Net expensesd | 1.80 | % | 1.77 | % | 1.80 | % | 1.73 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 391 | % | 187 | % | 121 | % | 441 | % | 620 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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. |
60 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, 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 39.03%, while the underlying index returned 19.84% over the same time period.
The sectors contributing the most to the return of the underlying index for the period were Information Technology, Industrials, and Consumer Discretionary. Consumer Staples and Utilities detracted the most from the performance of the underlying index for the period.
Stocks contributing most to return of the underlying index were Tokyo Electron Ltd., Fast Retailing Co. Ltd., and Advantest Corp. Those detracting most from performance of the underlying index were FamilyMart Co. Ltd., Sumitomo Dainippon Pharma Co. Ltd., and Yamato Holdings Co. 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. The results of derivatives use during the period were within our expectations and were a factor in the Fund’s positive performance.
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.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration Fund, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but that fee is waived by the respective investee fund. For the one year period ended December 31, 2019, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 61 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
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: 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 | 24.0% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 23.6% |
Total | 47.6% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Japan 2x Strategy Fund | 39.03% | 14.44% | 9.85% |
Nikkei-225 Stock Average Index | 19.84% | 8.26% | 6.65% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
62 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
JAPAN 2x STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 47.6% | ||||||||
Guggenheim Strategy Fund II1 | 19,764 | $ | 488,954 | |||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 48,311 | 480,691 | ||||||
Total Mutual Funds | ||||||||
(Cost $969,370) | 969,645 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 8.3% | ||||||||
U.S. Treasury Bills | ||||||||
1.47% due 02/04/202,3 | $ | 169,000 | 168,758 | |||||
Total U.S. Treasury Bills | ||||||||
(Cost $168,761) | 168,758 | |||||||
FEDERAL AGENCY NOTES†† - 3.6% | ||||||||
Farmer Mac | ||||||||
1.73% (U.S. Prime Rate - 3.02%, Rate Floor: 0.00%) due 09/01/204 | 75,000 | 75,000 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $75,000) | 75,000 |
REPURCHASE AGREEMENTS††,5 - 40.0% | ||||||||
J.P. Morgan Securities LLC | 495,197 | 495,197 | ||||||
Barclays Capital, Inc. | 159,674 | 159,674 | ||||||
BofA Securities, Inc. | 159,674 | 159,674 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $814,545) | 814,545 | |||||||
Total Investments - 99.5% | ||||||||
(Cost $2,027,676) | $ | 2,027,948 | ||||||
Other Assets & Liabilities, net - 0.5% | 9,219 | |||||||
Total Net Assets - 100.0% | $ | 2,037,167 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||||
Nikkei-225 (CME) Index Equity Futures Contracts | 35 | Mar 2020 | $ | 4,108,125 | $ | 19,107 | ||||||||||
Currency Futures Contracts Purchased† | ||||||||||||||||
Japanese Yen Futures Contracts | 35 | Mar 2020 | 4,042,063 | (11,218 | ) |
** | 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 futures collateral at December 31, 2019. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | Variable rate security. Rate indicated is the rate effective at December 31, 2019. 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 | Repurchase Agreements — See Note 6. |
CME — Chicago Mercantile Exchange | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 63 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
JAPAN 2x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 969,645 | $ | — | $ | — | $ | 969,645 | ||||||||
U.S. Treasury Bills | — | 168,758 | — | 168,758 | ||||||||||||
Federal Agency Notes | — | 75,000 | — | 75,000 | ||||||||||||
Repurchase Agreements | — | 814,545 | — | 814,545 | ||||||||||||
Equity Futures Contracts** | 19,107 | — | — | 19,107 | ||||||||||||
Total Assets | $ | 988,752 | $ | 1,058,303 | $ | — | $ | 2,047,055 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Currency Futures Contracts** | $ | 11,218 | $ | — | $ | — | $ | 11,218 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
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 “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, 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/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 683,491 | $ | 837,958 | $ | (1,030,000 | ) | $ | (935 | ) | $ | (1,560 | ) | $ | 488,954 | 19,764 | $ | 17,990 | ||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 456,957 | 954,419 | (930,000 | ) | (205 | ) | (480 | ) | 480,691 | 48,311 | 14,446 | |||||||||||||||||||||
$ | 1,140,448 | $ | 1,792,377 | $ | (1,960,000 | ) | $ | (1,140 | ) | $ | (2,040 | ) | $ | 969,645 | $ | 32,436 |
64 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
JAPAN 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES | ||||
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $243,761) | $ | 243,758 | ||
Investments in affiliated issuers, at value (cost $969,370) | 969,645 | |||
Repurchase agreements, at value (cost $814,545) | 814,545 | |||
Receivables: | ||||
Variation margin on futures contracts | 13,977 | |||
Dividends | 2,515 | |||
Fund shares sold | 2,164 | |||
Interest | 146 | |||
Total assets | 2,046,750 | |||
Liabilities: | ||||
Payable for: | ||||
Professional fees | 2,774 | |||
Securities purchased | 2,565 | |||
Management fees | 1,162 | |||
Printing fees | 885 | |||
Transfer agent and administrative fees | 439 | |||
Investor service fees | 439 | |||
Portfolio accounting fees | 175 | |||
Fund shares redeemed | 58 | |||
Trustees’ fees* | 32 | |||
Miscellaneous | 1,054 | |||
Total liabilities | 9,583 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 2,037,167 | ||
Net assets consist of: | ||||
Paid in capital | $ | 3,613,474 | ||
Total distributable earnings (loss) | (1,576,307 | ) | ||
Net assets | $ | 2,037,167 | ||
Capital shares outstanding | 23,867 | |||
Net asset value per share | $ | 85.35 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 32,436 | ||
Interest | 15,920 | |||
Total investment income | 48,356 | |||
Expenses: | ||||
Management fees | 14,323 | |||
Investor service fees | 4,775 | |||
Transfer agent and administrative fees | 4,775 | |||
Portfolio accounting fees | 1,910 | |||
Professional fees | 1,905 | |||
Trustees’ fees* | 490 | |||
Custodian fees | 344 | |||
Line of credit fees | 7 | |||
Miscellaneous | 4,317 | |||
Total expenses | 32,846 | |||
Less: | ||||
Expenses waived by Adviser | (1,449 | ) | ||
Net expenses | 31,397 | |||
Net investment income | 16,959 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 11,399 | |||
Investments in affiliated issuers | (1,140 | ) | ||
Futures contracts | 472,423 | |||
Net realized gain | 482,682 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 45 | |||
Investments in affiliated issuers | (2,040 | ) | ||
Futures contracts | 78,418 | |||
Net change in unrealized appreciation (depreciation) | 76,423 | |||
Net realized and unrealized gain | 559,105 | |||
Net increase in net assets resulting from operations | $ | 576,064 |
* | 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 | 65 |
JAPAN 2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 16,959 | $ | 25,936 | ||||
Net realized gain (loss) on investments | 482,682 | (441,002 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 76,423 | (253,910 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 576,064 | (668,976 | ) | |||||
Distributions to shareholders | (25,936 | ) | (556,668 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 10,910,626 | 31,061,412 | ||||||
Distributions reinvested | 25,936 | 556,668 | ||||||
Cost of shares redeemed | (11,462,568 | ) | (33,993,486 | ) | ||||
Net decrease from capital share transactions | (526,006 | ) | (2,375,406 | ) | ||||
Net increase (decrease) in net assets | 24,122 | (3,601,050 | ) | |||||
Net assets: | ||||||||
Beginning of year | 2,013,045 | 5,614,095 | ||||||
End of year | $ | 2,037,167 | $ | 2,013,045 | ||||
Capital share activity: | ||||||||
Shares sold | 151,194 | 341,586 | ||||||
Shares issued from reinvestment of distributions | 348 | 6,993 | ||||||
Shares redeemed | (159,986 | ) | (371,950 | ) | ||||
Net decrease in shares | (8,444 | ) | (23,371 | ) |
66 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
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 | $ | 62.30 | $ | 100.82 | $ | 67.08 | $ | 61.65 | $ | 55.02 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .66 | .70 | (.13 | ) | (.06 | ) | (.78 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | 23.49 | (19.56 | ) | 33.87 | 5.49 | 7.41 | ||||||||||||||
Total from investment operations | 24.15 | (18.86 | ) | 33.74 | 5.43 | 6.63 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (1.10 | ) | — | — | — | — | ||||||||||||||
Net realized gains | — | (19.66 | ) | — | — | — | ||||||||||||||
Total distributions | (1.10 | ) | (19.66 | ) | — | — | — | |||||||||||||
Net asset value, end of period | $ | 85.35 | $ | 62.30 | $ | 100.82 | $ | 67.08 | $ | 61.65 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 39.03 | % | (22.95 | %) | 50.30 | % | 8.86 | % | 12.00 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 2,037 | $ | 2,013 | $ | 5,614 | $ | 2,499 | $ | 3,577 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.89 | % | 0.76 | % | (0.15 | %) | (0.50 | %) | (1.22 | %) | ||||||||||
Total expensesc | 1.72 | % | 1.58 | % | 1.83 | % | 1.56 | % | 1.50 | % | ||||||||||
Net expensesd | 1.64 | % | 1.58 | % | 1.83 | % | 1.56 | % | 1.50 | % | ||||||||||
Portfolio turnover rate | 153 | % | 180 | % | 73 | % | 183 | % | 87 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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 | 67 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, 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 4.61%, compared with a return of 0.23% for its benchmark, the underlying index.
Contributing the most to performance of the underlying index for the year were the British Pound, Canadian Dollar, and Japanese Yen. The Euro, Swedish Krona, and Swiss Franc 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. The results of derivatives use during the period were within our expectations and were a factor in the Fund’s positive performance.
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.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration Fund, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but that fee is waived by the respective investee fund. For the one year period ended December 31, 2019, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
68 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
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: 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 | 22.9% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 22.8% |
Total | 45.7% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Strengthening Dollar 2x Strategy Fund | 4.61% | 3.16% | 1.79% |
U.S. Dollar Index | 0.23% | 1.32% | 2.16% |
* | 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 U.S. Dollar Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 69 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
STRENGTHENING DOLLAR 2x STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 45.7% | ||||||||
Guggenheim Strategy Fund II1 | 13,082 | $ | 323,643 | |||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 32,364 | 322,019 | ||||||
Total Mutual Funds | ||||||||
(Cost $644,862) | 645,662 | |||||||
Face | ||||||||
FEDERAL AGENCY NOTES†† - 7.1% | ||||||||
Farmer Mac | ||||||||
1.73% (U.S. Prime Rate - 3.02%, Rate Floor: 0.00%) due 09/01/202 | $ | 100,000 | 100,000 | |||||
Total Federal Agency Notes | ||||||||
(Cost $100,000) | 100,000 | |||||||
U.S. TREASURY BILLS†† - 3.8% | ||||||||
U.S. Treasury Bills | ||||||||
1.47% due 02/04/203,4 | 54,000 | 53,922 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $53,923) | 53,922 |
REPURCHASE AGREEMENTS††,5 - 45.5% | ||||||||
J.P. Morgan Securities LLC | 390,171 | 390,171 | ||||||
Barclays Capital, Inc. | 125,809 | 125,809 | ||||||
BofA Securities, Inc. | 125,809 | 125,809 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $641,789) | 641,789 | |||||||
Total Investments - 102.1% | ||||||||
(Cost $1,440,574) | $ | 1,441,373 | ||||||
Other Assets & Liabilities, net - (2.1)% | (29,268 | ) | ||||||
Total Net Assets - 100.0% | $ | 1,412,105 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Currency Futures Contracts Purchased† | ||||||||||||||||
U.S. Dollar Index Futures Contracts | 22 | Mar 2020 | $ | 2,115,190 | $ | (10,320 | ) |
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 | 03/18/20 | 7,415 | $ | 713,278 | $ | (3,843 | ) |
** | 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, 2019. 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 | All or a portion of this security is pledged as futures collateral at December 31, 2019. |
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 currency index swap collateral at December 31, 2019. |
See Sector Classification in Other Information section. |
70 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
STRENGTHENING DOLLAR 2x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 645,662 | $ | — | $ | — | $ | 645,662 | ||||||||
Federal Agency Notes | — | 100,000 | — | 100,000 | ||||||||||||
U.S. Treasury Bills | — | 53,922 | — | 53,922 | ||||||||||||
Repurchase Agreements | — | 641,789 | — | 641,789 | ||||||||||||
Total Assets | $ | 645,662 | $ | 795,711 | $ | — | $ | 1,441,373 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Currency Futures Contracts** | $ | 10,320 | $ | — | $ | — | $ | 10,320 | ||||||||
Currency Index Swap Agreements** | — | 3,843 | — | 3,843 | ||||||||||||
Total Liabilities | $ | 10,320 | $ | 3,843 | $ | — | $ | 14,163 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
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 “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, 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/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 1,112,218 | $ | 704,045 | $ | (1,490,000 | ) | $ | (3,972 | ) | $ | 1,352 | $ | 323,643 | 13,082 | $ | 24,159 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 941,620 | 921,220 | (1,540,000 | ) | (2,239 | ) | 1,418 | 322,019 | 32,364 | 21,302 | ||||||||||||||||||||||
$ | 2,053,838 | $ | 1,625,265 | $ | (3,030,000 | ) | $ | (6,211 | ) | $ | 2,770 | $ | 645,662 | $ | 45,461 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 71 |
STRENGTHENING DOLLAR 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $153,923) | $ | 153,922 | ||
Investments in affiliated issuers, at value (cost $644,862) | 645,662 | |||
Repurchase agreements, at value (cost $641,789) | 641,789 | |||
Receivables: | ||||
Dividends | 2,027 | |||
Fund shares sold | 196 | |||
Interest | 176 | |||
Total assets | 1,443,772 | |||
Liabilities: | ||||
Unrealized depreciation on OTC swap agreements | 3,843 | |||
Payable for: | ||||
Licensing fees | 5,945 | |||
Variation margin on futures contracts | 5,764 | |||
Swap settlement | 4,859 | |||
Professional fees | 3,990 | |||
Securities purchased | 2,060 | |||
Management fees | 1,420 | |||
Transfer agent and administrative fees | 429 | |||
Investor service fees | 429 | |||
Portfolio accounting fees | 171 | |||
Fund shares redeemed | 82 | |||
Trustees’ fees* | 46 | |||
Miscellaneous | 2,629 | |||
Total liabilities | 31,667 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 1,412,105 | ||
Net assets consist of: | ||||
Paid in capital | $ | 2,356,735 | ||
Total distributable earnings (loss) | (944,630 | ) | ||
Net assets | $ | 1,412,105 | ||
Capital shares outstanding | 34,263 | |||
Net asset value per share | $ | 41.21 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 45,461 | ||
Interest | 23,753 | |||
Total investment income | 69,214 | |||
Expenses: | ||||
Management fees | 24,723 | |||
Investor service fees | 6,867 | |||
Transfer agent and administrative fees | 6,867 | |||
Licensing fees | 6,170 | |||
Professional fees | 4,708 | |||
Portfolio accounting fees | 2,747 | |||
Trustees’ fees* | 676 | |||
Custodian fees | 497 | |||
Miscellaneous | 4,245 | |||
Total expenses | 57,500 | |||
Less: | ||||
Expenses waived by Adviser | (2,097 | ) | ||
Net expenses | 55,403 | |||
Net investment income | 13,811 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 13 | |||
Investments in affiliated issuers | (6,211 | ) | ||
Swap agreements | (36,145 | ) | ||
Futures contracts | 68,818 | |||
Net realized gain | 26,475 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 32 | |||
Investments in affiliated issuers | 2,770 | |||
Swap agreements | 5,833 | |||
Futures contracts | 31,978 | |||
Net change in unrealized appreciation (depreciation) | 40,613 | |||
Net realized and unrealized gain | 67,088 | |||
Net increase in net assets resulting from operations | $ | 80,899 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
72 | 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 | $ | 13,811 | $ | 21,820 | ||||
Net realized gain on investments | 26,475 | 290,467 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 40,613 | (25,591 | ) | |||||
Net increase in net assets resulting from operations | 80,899 | 286,696 | ||||||
Distributions to shareholders | (21,820 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 43,014,728 | 22,522,330 | ||||||
Distributions reinvested | 21,820 | — | ||||||
Cost of shares redeemed | (45,103,803 | ) | (21,125,360 | ) | ||||
Net increase (decrease) from capital share transactions | (2,067,255 | ) | 1,396,970 | |||||
Net increase (decrease) in net assets | (2,008,176 | ) | 1,683,666 | |||||
Net assets: | ||||||||
Beginning of year | 3,420,281 | 1,736,615 | ||||||
End of year | $ | 1,412,105 | $ | 3,420,281 | ||||
Capital share activity: | ||||||||
Shares sold | 1,024,231 | 599,981 | ||||||
Shares issued from reinvestment of distributions | 523 | — | ||||||
Shares redeemed | (1,076,580 | ) | (562,774 | ) | ||||
Net increase (decrease) in shares | (51,826 | ) | 37,207 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 73 |
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 | $ | 39.73 | $ | 35.53 | $ | 43.90 | $ | 43.45 | $ | 42.19 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .21 | .27 | (.04 | ) | (.23 | ) | (.55 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | 1.63 | 3.93 | (7.67 | ) | 2.96 | 6.09 | ||||||||||||||
Total from investment operations | 1.84 | 4.20 | (7.71 | ) | 2.73 | 5.54 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.36 | ) | — | — | — | — | ||||||||||||||
Net realized gains | — | — | (.66 | ) | (2.28 | ) | (4.28 | ) | ||||||||||||
Total distributions | (.36 | ) | — | (.66 | ) | (2.28 | ) | (4.28 | ) | |||||||||||
Net asset value, end of period | $ | 41.21 | $ | 39.73 | $ | 35.53 | $ | 43.90 | $ | 43.45 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 4.61 | % | 11.82 | % | (17.65 | %) | 7.00 | % | 13.35 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 1,412 | $ | 3,420 | $ | 1,737 | $ | 5,644 | $ | 3,303 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.50 | % | 0.73 | % | (0.10 | %) | (0.57 | %) | (1.21 | %) | ||||||||||
Total expensesc | 2.09 | % | 1.83 | % | 1.80 | % | 1.76 | % | 1.70 | % | ||||||||||
Net expensesd | 2.02 | % | 1.82 | % | 1.80 | % | 1.76 | % | 1.70 | % | ||||||||||
Portfolio turnover rate | 102 | % | 241 | % | 88 | % | 190 | % | 177 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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. |
74 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
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, 2019, 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 -4.85%, compared with a return of 0.23% for its benchmark, the underlying index.
Contributing the most to performance of the underlying index for the year were the British Pound, Canadian Dollar, and Japanese Yen. The Euro, Swedish Krona, and Swiss Franc 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. The results of derivatives use during the period were within our expectations and were a factor in the Fund’s negative performance.
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.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration Fund, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but that fee is waived by the respective investee fund. For the one year period ended December 31, 2019, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 75 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
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: September 30, 2005 |
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 — Institutional Class | 26.0% |
Guggenheim Strategy Fund II | 21.7% |
Total | 47.7% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Weakening Dollar 2x Strategy Fund | (4.85%) | (5.30%) | (6.16%) |
U.S. Dollar Index | 0.23% | 1.32% | 2.16% |
* | 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 U.S. Dollar Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
76 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
WEAKENING DOLLAR 2x STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 47.7% | ||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 15,308 | $ | 152,315 | |||||
Guggenheim Strategy Fund II1 | 5,155 | 127,529 | ||||||
Total Mutual Funds | ||||||||
(Cost $279,098) | 279,844 | |||||||
Face | ||||||||
FEDERAL AGENCY NOTES†† - 8.5% | ||||||||
Farmer Mac | ||||||||
1.73% (U.S. Prime Rate - 3.02%, Rate Floor: 0.00%) due 09/01/202 | $ | 50,000 | 50,000 | |||||
Total Federal Agency Notes | ||||||||
(Cost $50,000) | 50,000 | |||||||
U.S. TREASURY BILLS†† - 2.9% | ||||||||
U.S. Treasury Bills | ||||||||
1.47% due 02/04/203,4 | 17,000 | 16,976 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $16,976) | 16,976 |
REPURCHASE AGREEMENTS††,5 - 41.5% | ||||||||
J.P. Morgan Securities LLC | 148,153 | 148,153 | ||||||
Barclays Capital, Inc. | 47,771 | 47,771 | ||||||
BofA Securities, Inc. | 47,771 | 47,771 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $243,695) | 243,695 | |||||||
Total Investments - 100.6% | ||||||||
(Cost $589,769) | $ | 590,515 | ||||||
Other Assets & Liabilities, net - (0.6)% | (3,479 | ) | ||||||
Total Net Assets - 100.0% | $ | 587,036 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Currency Futures Contracts Sold Short† | ||||||||||||||||
U.S. Dollar Index Futures Contracts | 10 | Mar 2020 | $ | 961,450 | $ | 7,425 |
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 | 03/18/20 | 2,242 | $ | 215,684 | $ | 2,434 |
** | 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, 2019. 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 | All or a portion of this security is pledged as futures collateral at December 31, 2019. |
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. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 77 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
WEAKENING DOLLAR 2x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 279,844 | $ | — | $ | — | $ | 279,844 | ||||||||
Federal Agency Notes | — | 50,000 | — | 50,000 | ||||||||||||
U.S. Treasury Bills | — | 16,976 | — | 16,976 | ||||||||||||
Repurchase Agreements | — | 243,695 | — | 243,695 | ||||||||||||
Currency Futures Contracts** | 7,425 | — | — | 7,425 | ||||||||||||
Currency Index Swap Agreements** | — | 2,434 | — | 2,434 | ||||||||||||
Total Assets | $ | 287,269 | $ | 313,105 | $ | — | $ | 600,374 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
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 “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, 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/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 212,172 | $ | 285,877 | $ | (370,000 | ) | $ | 114 | $ | (634 | ) | $ | 127,529 | 5,155 | $ | 5,396 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 132,622 | 374,791 | (355,000 | ) | 85 | (183 | ) | 152,315 | 15,308 | 4,798 | ||||||||||||||||||||||
$ | 344,794 | $ | 660,668 | $ | (725,000 | ) | $ | 199 | $ | (817 | ) | $ | 279,844 | $ | 10,194 |
78 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
WEAKENING DOLLAR 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $66,976) | $ | 66,976 | ||
Investments in affiliated issuers, at value (cost $279,098) | 279,844 | |||
Repurchase agreements, at value (cost $243,695) | 243,695 | |||
Unrealized appreciation on OTC swap agreements | 2,434 | |||
Receivables: | ||||
Variation margin on futures contracts | 2,620 | |||
Dividends | 619 | |||
Swap settlement | 388 | |||
Interest | 84 | |||
Total assets | 596,660 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 5,746 | |||
Licensing fees | 1,117 | |||
Securities purchased | 633 | |||
Management fees | 369 | |||
Transfer agent and administrative fees | 114 | |||
Investor service fees | 114 | |||
Portfolio accounting fees | 45 | |||
Trustees’ fees* | 10 | |||
Miscellaneous | 1,476 | |||
Total liabilities | 9,624 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 587,036 | ||
Net assets consist of: | ||||
Paid in capital | $ | 1,996,877 | ||
Total distributable earnings (loss) | (1,409,841 | ) | ||
Net assets | $ | 587,036 | ||
Capital shares outstanding | 10,451 | |||
Net asset value per share | $ | 56.17 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 10,194 | ||
Interest | 4,846 | |||
Total investment income | 15,040 | |||
Expenses: | ||||
Management fees | 5,400 | |||
Investor service fees | 1,500 | |||
Transfer agent and administrative fees | 1,500 | |||
Licensing fees | 1,289 | |||
Professional fees | 1,023 | |||
Portfolio accounting fees | 600 | |||
Trustees’ fees* | 154 | |||
Custodian fees | 115 | |||
Miscellaneous | 920 | |||
Total expenses | 12,501 | |||
Less: | ||||
Expenses waived by Adviser | (476 | ) | ||
Net expenses | 12,025 | |||
Net investment income | 3,015 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 2 | |||
Investments in affiliated issuers | 199 | |||
Swap agreements | (4,535 | ) | ||
Futures contracts | (862 | ) | ||
Net realized loss | (5,196 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 10 | |||
Investments in affiliated issuers | (817 | ) | ||
Swap agreements | (1,604 | ) | ||
Futures contracts | 1,879 | |||
Net change in unrealized appreciation (depreciation) | (532 | ) | ||
Net realized and unrealized loss | (5,728 | ) | ||
Net decrease in net assets resulting from operations | $ | (2,713 | ) |
* | 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 | 79 |
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 | $ | 3,015 | $ | 4,772 | ||||
Net realized loss on investments | (5,196 | ) | (120,142 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | (532 | ) | (10,579 | ) | ||||
Net decrease in net assets resulting from operations | (2,713 | ) | (125,949 | ) | ||||
Distributions to shareholders | (4,772 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 15,676,550 | 5,364,653 | ||||||
Distributions reinvested | 4,772 | — | ||||||
Cost of shares redeemed | (15,668,672 | ) | (5,435,766 | ) | ||||
Net increase (decrease) from capital share transactions | 12,650 | (71,113 | ) | |||||
Net increase (decrease) in net assets | 5,165 | (197,062 | ) | |||||
Net assets: | ||||||||
Beginning of year | 581,871 | 778,933 | ||||||
End of year | $ | 587,036 | $ | 581,871 | ||||
Capital share activity: | ||||||||
Shares sold | 284,024 | 83,147 | ||||||
Shares issued from reinvestment of distributions | 86 | — | ||||||
Shares redeemed | (283,428 | ) | (84,935 | ) | ||||
Net increase (decrease) in shares | 682 | (1,788 | ) |
80 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
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 | $ | 59.56 | $ | 67.40 | $ | 56.49 | $ | 61.90 | $ | 74.41 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .28 | .40 | (.14 | ) | (.11 | ) | (.80 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | (3.17 | ) | (8.24 | ) | 11.05 | (5.30 | ) | (11.71 | ) | |||||||||||
Total from investment operations | (2.89 | ) | (7.84 | ) | 10.91 | (5.41 | ) | (12.51 | ) | |||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.50 | ) | — | — | — | — | ||||||||||||||
Total distributions | (.50 | ) | — | — | — | — | ||||||||||||||
Net asset value, end of period | $ | 56.17 | $ | 59.56 | $ | 67.40 | $ | 56.49 | $ | 61.90 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (4.85 | %) | (11.63 | %) | 19.31 | % | (8.71 | %) | (16.83 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 587 | $ | 582 | $ | 779 | $ | 687 | $ | 1,297 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.50 | % | 0.61 | % | (0.22 | %) | (0.63 | %) | (1.22 | %) | ||||||||||
Total expensesc | 2.08 | % | 1.82 | % | 1.80 | % | 1.76 | % | 1.71 | % | ||||||||||
Net expensesd | 2.00 | % | 1.81 | % | 1.80 | % | 1.76 | % | 1.71 | % | ||||||||||
Portfolio turnover rate | 187 | % | 213 | % | 367 | % | 250 | % | 232 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
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. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 81 |
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 (each, a “Fund”). The Trust is authorized to issue an unlimited number of no par value shares. The Trust accounts for the assets of each Fund separately. At December 31, 2019, 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 following funds (collectively, the “Funds”):
Fund Name | Investment |
S&P 500® Pure Growth Fund | Non-diversified |
S&P 500® Pure Value Fund | Non-diversified |
S&P MidCap 400® Pure Growth Fund | Non-diversified |
S&P MidCap 400® Pure Value Fund | Non-diversified |
S&P SmallCap 600® Pure Growth Fund | Non-diversified |
S&P SmallCap 600® Pure Value Fund | Non-diversified |
Europe 1.25x Strategy Fund | Non-diversified |
Japan 2x Strategy Fund | Non-diversified |
Strengthening Dollar 2x Strategy Fund | Non-diversified |
Weakening Dollar 2x Strategy Fund | Non-diversified |
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 and other assets 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 or traded on a recognized U.S. securities exchange or the National Association of Securities Dealers Automated Quotations (“NASDAQ”) National Market System shall generally be valued on the basis of the last sale price on the primary U.S. exchange or market on which the security is listed or traded; provided, however, that securities listed on NASDAQ will be valued at the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If there is no sale on the valuation date, exchange-traded U.S. equity securities will be valued on the basis of the last bid price.
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.
82 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
U.S. Government securities are valued by 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.
Repurchase agreements are generally 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
THE RYDEX FUNDS ANNUAL REPORT | 83 |
NOTES TO FINANCIAL STATEMENTS (continued) |
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 appreciation and 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.
(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 Statements 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, 2019, 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 a reduction to cost if the securities are still held and as realized gains if no longer held 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 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 U.S. federal income tax regulations which may differ from U.S. GAAP.
(i) Cash
The Funds may leave cash overnight in their cash account with the custodian. Periodically, a Fund may have cash due to the custodian bank as an overdraft balance. A fee is incurred on this overdraft, calculated by multiplying the overdraft by a rate based on the federal funds rate, which was 1.55% at December 31, 2019.
(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 – 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 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.
84 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
The Funds may utilize 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 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 Contracts
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 monthly basis:
Average Notional Amount | |||||||||
Fund | Use | Long | Short | ||||||
Europe 1.25x Strategy Fund | Index exposure, Leverage, Liquidity | $ | 10,678,981 | $ | — | ||||
Japan 2x Strategy Fund | Index exposure, Leverage, Liquidity | 7,445,180 | — | ||||||
Strengthening Dollar 2x Strategy Fund | Index exposure, Leverage, Liquidity | 4,394,586 | — | ||||||
Weakening Dollar 2x Strategy Fund | Index exposure, Leverage, Liquidity | — | 931,143 |
Swap Agreements
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. When utilizing over-the-counter (“OTC”) swaps, 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 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 centrally cleared swaps, the exchange bears the risk of loss resulting from a counterparty not being able to pay. 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 RYDEX FUNDS ANNUAL REPORT | 85 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The following table represents the Funds’ use and volume of currency swaps on a monthly basis:
Average Notional Amount | |||||||||
Fund | Use | Long | Short | ||||||
Strengthening Dollar 2x Strategy Fund | Index exposure, Leverage, Liquidity | $ | 569,691 | $ | — | ||||
Weakening Dollar 2x Strategy Fund | Index exposure, Leverage, Liquidity | — | 184,829 |
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, 2019:
Derivative Investment Type | Asset Derivatives | Liability Derivatives |
Equity/Currency contracts | Variation margin on futures contracts | Variation margin on futures contracts |
Currency contracts | Unrealized appreciation on OTC swap agreements | Unrealized depreciation on OTC swap agreements |
The following table sets forth the fair value of the Funds’ derivative investments categorized by primary risk exposure at December 31, 2019:
Asset Derivative Investments Value | ||||||||||||||||
Fund | Futures | Futures | Swaps | Total Value at | ||||||||||||
Europe 1.25x Strategy Fund | $ | 15,520 | $ | 40,024 | $ | — | $ | 55,544 | ||||||||
Japan 2x Strategy Fund | 19,107 | — | — | 19,107 | ||||||||||||
Weakening Dollar 2x Strategy Fund | — | 7,425 | 2,434 | 9,859 |
Liability Derivative Investments Value | ||||||||||||||||
Fund | Futures | Futures | Swaps | Total Value at | ||||||||||||
Japan 2x Strategy Fund | $ | — | $ | 11,218 | $ | — | $ | 11,218 | ||||||||
Strengthening Dollar 2x Strategy Fund | — | 10,320 | 3,843 | 14,163 |
* | Includes cumulative appreciation (depreciation) of futures contracts as reported on the Schedules of Investments. For exchange-traded and centrally cleared derivatives, 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, 2019:
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 |
Currency contracts | Net realized gain (loss) on swap agreements |
| Net change in unrealized appreciation (depreciation) on swap agreements |
86 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
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, 2019:
Realized Gain (Loss) on Derivative Investments Recognized on the Statements of Operations | ||||||||||||||||
Fund | Futures | Futures | Swaps | Total | ||||||||||||
Europe 1.25x Strategy Fund | $ | 913,672 | $ | (281,221 | ) | $ | — | $ | 632,451 | |||||||
Japan 2x Strategy Fund | 422,473 | 49,950 | — | 472,423 | ||||||||||||
Strengthening Dollar 2x Strategy Fund | — | 68,818 | (36,145 | ) | 32,673 | |||||||||||
Weakening Dollar 2x Strategy Fund | — | (862 | ) | (4,535 | ) | (5,397 | ) |
Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized on the Statements of Operations | ||||||||||||||||
Fund | Futures | Futures | Swaps | Total | ||||||||||||
Europe 1.25x Strategy Fund | $ | 34,421 | $ | 27,253 | $ | — | $ | 61,674 | ||||||||
Japan 2x Strategy Fund | 179,863 | (101,445 | ) | — | 78,418 | |||||||||||
Strengthening Dollar 2x Strategy Fund | — | 31,978 | 5,833 | 37,811 | ||||||||||||
Weakening Dollar 2x Strategy Fund | — | 1,879 | (1,604 | ) | 275 |
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 as collateral.
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
THE RYDEX FUNDS ANNUAL REPORT | 87 |
NOTES TO FINANCIAL STATEMENTS (continued) |
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:
Gross Amounts Not Offset | |||||||||||||||||||||||||
Fund | Instrument | Gross | Gross | Net Amount | Financial | Cash | Net | ||||||||||||||||||
Weakening Dollar 2x Strategy Fund | Swap currency contracts | $ | 2,434 | $ | — | $ | 2,434 | $ | — | $ | — | $ | 2,434 |
Gross Amounts Not Offset | |||||||||||||||||||||||||
Fund | Instrument | Gross | Gross | Net Amount | Financial | Cash | Net | ||||||||||||||||||
Strengthening Dollar 2x Strategy Fund | Swap currency contracts | $ | 3,843 | $ | — | $ | 3,843 | $ | (3,843 | ) | $ | — | $ | — |
1 | Exchange-traded or centrally-cleared derivatives are excluded from these reported amounts. |
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.
88 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
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 pays operating expenses on behalf of the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, among others, on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.
The Board 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 in effect for the investing Fund. Fees waived under this arrangement are not subject to reimbursement to GI. For the year ended December 31, 2019, the following Funds waived fees related to investments in affiliated funds:
Fund | Amount Waived | |||
Europe 1.25x Strategy Fund | $ | 3,713 | ||
Japan 2x Strategy Fund | 1,449 | |||
Strengthening Dollar 2x Strategy Fund | 2,097 | |||
Weakening Dollar 2x Strategy Fund | 476 |
Certain trustees and 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 maintains 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.
THE RYDEX FUNDS ANNUAL REPORT | 89 |
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, 2019, the repurchase agreements in the joint account were as follows:
Counterparty and | Face Value | Repurchase Price |
| Collateral | Par Value | Fair Value | ||||||||||||
J.P. Morgan Securities LLC | U.S. Treasury Inflation Indexed Bonds | |||||||||||||||||
1.53% | 0.38% - 3.38% | |||||||||||||||||
Due 01/02/20 | $ | 52,221,118 | $ | 52,225,557 | 07/15/25 - 04/15/32 | $ | 29,508,166 | $ | 30,293,286 | |||||||||
U.S. Treasury Notes | ||||||||||||||||||
1.38% - 2.50% | ||||||||||||||||||
02/28/21 - 10/31/26 | 16,685,500 | 17,041,602 | ||||||||||||||||
U.S. Treasury Bond | ||||||||||||||||||
6.25% | ||||||||||||||||||
08/15/23 | 3,032,900 | 3,592,802 | ||||||||||||||||
U.S. Treasury Floating Rate Note | ||||||||||||||||||
1.61% | ||||||||||||||||||
10/31/20 | 2,332,000 | 2,337,154 | ||||||||||||||||
U.S. Treasury Bills | ||||||||||||||||||
0.00% | ||||||||||||||||||
01/02/20 - 08/13/20 | 700 | 697 | ||||||||||||||||
51,559,266 | 53,265,541 | |||||||||||||||||
BofA Securities, Inc. | U.S. Treasury Note | |||||||||||||||||
1.50% | 2.00% | |||||||||||||||||
Due 01/02/20 | 16,838,493 | 16,839,896 | 10/31/22 | 16,936,000 | 17,175,334 | |||||||||||||
Barclays Capital, Inc. | U.S. Treasury Inflation Indexed Bond | |||||||||||||||||
1.40% | 0.13% | |||||||||||||||||
Due 01/02/20 | 16,838,493 | 16,839,803 | 10/15/24 | 17,030,300 | 17,175,300 |
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 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
90 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
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, 2019, 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 | $ | 159,612 | $ | (159,612 | ) | $ | — | $ | 162,748 | $ | — | $ | 162,748 | ||||||||||||
S&P MidCap 400® Pure Value Fund | 566,223 | (566,223 | ) | — | 613,614 | — | 613,614 | ||||||||||||||||||
S&P SmallCap 600® Pure Growth Fund | 93,851 | (92,775 | ) | 1,076 | 92,775 | * | — | 92,775 | |||||||||||||||||
S&P SmallCap 600® Pure Value Fund | 198,513 | (198,513 | ) | — | 214,684 | — | 214,684 | ||||||||||||||||||
Europe 1.25x Strategy Fund | 64,611 | (64,611 | ) | — | 66,065 | — | 66,065 |
(a) | Actual collateral received by the Fund is greater than the amount shown due to overcollateralization. |
* | Subsequent to December 31, 2019, additional collateral was received. |
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 U.S. 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’ U.S. federal income tax returns are subject to examination by the Internal Revenue Service (“IRS”) for a period of three years after they are filed.
The tax character of distributions paid during the year ended December 31, 2019 was as follows:
Fund | Ordinary | Long-Term | Total | |||||||||
S&P 500® Pure Growth Fund | $ | — | $ | 893,743 | $ | 893,743 | ||||||
S&P 500® Pure Value Fund | 269,858 | 404,516 | 674,374 | |||||||||
S&P SmallCap 600® Pure Value Fund | 22,849 | — | 22,849 | |||||||||
Europe 1.25x Strategy Fund | 73,007 | — | 73,007 | |||||||||
Japan 2x Strategy Fund | 25,936 | — | 25,936 | |||||||||
Strengthening Dollar 2x Strategy Fund | 21,820 | — | 21,820 | |||||||||
Weakening Dollar 2x Strategy Fund | 4,772 | — | 4,772 |
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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 | |||||||||
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 |
Note: For U.S. federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
The tax components of distributable earnings/(loss) as of December 31, 2019 were as follows:
Fund | Undistributed | Undistributed | Net Unrealized | Accumulated | Total | |||||||||||||||
S&P 500® Pure Growth Fund | $ | 4,642,186 | $ | 2,223,099 | $ | 5,397,256 | $ | — | $ | 12,262,541 | ||||||||||
S&P 500® Pure Value Fund | 1,770,962 | — | 2,498,749 | — | 4,269,711 | |||||||||||||||
S&P MidCap 400® Pure Growth Fund | — | 554,226 | 924,061 | — | 1,478,287 | |||||||||||||||
S&P MidCap 400® Pure Value Fund | 307,784 | — | 657,605 | — | 965,389 | |||||||||||||||
S&P SmallCap 600® Pure Growth Fund | — | 442,827 | 754,676 | — | 1,197,503 | |||||||||||||||
S&P SmallCap 600® Pure Value Fund | — | — | (136,529 | ) | (1,937,628 | ) | (2,074,157 | ) | ||||||||||||
Europe 1.25x Strategy Fund | 34,978 | — | 65,475 | (874,859 | ) | (774,406 | ) | |||||||||||||
Japan 2x Strategy Fund | 16,959 | — | (660 | ) | (1,592,606 | ) | (1,576,307 | ) | ||||||||||||
Strengthening Dollar 2x Strategy Fund | 13,811 | — | (597 | ) | (957,844 | ) | (944,630 | ) | ||||||||||||
Weakening Dollar 2x Strategy Fund | 3,015 | — | 555 | (1,413,411 | ) | (1,409,841 | ) |
For U.S. 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, 2019, capital loss carryforwards for the Funds were as follows:
Unlimited | Total | |||||||||||
Fund | Short-Term | Long-Term | Carryforward | |||||||||
S&P SmallCap 600® Pure Value Fund | $ | (886,582 | ) | $ | (1,051,046 | ) | $ | (1,937,628 | ) | |||
Europe 1.25x Strategy Fund | (687,407 | ) | (187,452 | ) | (874,859 | ) | ||||||
Japan 2x Strategy Fund | (633,880 | ) | (958,726 | ) | (1,592,606 | ) | ||||||
Strengthening Dollar 2x Strategy Fund | (386,156 | ) | (571,688 | ) | (957,844 | ) | ||||||
Weakening Dollar 2x Strategy Fund | (583,201 | ) | (830,210 | ) | (1,413,411 | ) |
For the year ended December 31, 2019, the following capital loss carryforward amounts were utilized:
Fund | Utilized | |||
S&P MidCap 400® Pure Growth Fund | $ | 967,905 | ||
S&P MidCap 400® Pure Value Fund | 485,755 | |||
S&P SmallCap 600® Pure Growth Fund | 1,655,681 | |||
S&P SmallCap 600® Pure Value Fund | 256,518 | |||
Europe 1.25x Strategy Fund | 639,245 | |||
Japan 2x Strategy Fund | 562,023 | |||
Strengthening Dollar 2x Strategy Fund | 59,529 |
92 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
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. 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, 2019 for permanent book/tax differences:
Fund | Paid In | Total | ||||||
S&P 500® Pure Growth Fund | $ | 1,549,895 | $ | (1,549,895 | ) | |||
S&P 500® Pure Value Fund | 182,162 | (182,162 | ) | |||||
S&P MidCap 400® Pure Growth Fund | (57,377 | ) | 57,377 | |||||
S&P MidCap 400® Pure Value Fund | 44,587 | (44,587 | ) | |||||
S&P SmallCap 600® Pure Growth Fund | (37,218 | ) | 37,218 | |||||
S&P SmallCap 600® Pure Value Fund | (14,831 | ) | 14,831 |
At December 31, 2019, the cost of investments for U.S. federal income tax purposes, the aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost and the aggregate gross unrealized depreciation for all investments 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 | $ | 36,836,143 | $ | 5,600,768 | $ | (203,512 | ) | $ | 5,397,256 | |||||||
S&P 500® Pure Value Fund | 30,122,118 | 2,618,162 | (119,413 | ) | 2,498,749 | |||||||||||
S&P MidCap 400® Pure Growth Fund | 11,941,021 | 1,021,072 | (97,011 | ) | 924,061 | |||||||||||
S&P MidCap 400® Pure Value Fund | 9,337,023 | 842,525 | (184,920 | ) | 657,605 | |||||||||||
S&P SmallCap 600® Pure Growth Fund | 11,653,052 | 861,060 | (106,384 | ) | 754,676 | |||||||||||
S&P SmallCap 600® Pure Value Fund | 9,445,867 | — | (136,529 | ) | (136,529 | ) | ||||||||||
Europe 1.25x Strategy Fund | 3,965,414 | 70,412 | (5,026 | ) | 65,386 | |||||||||||
Japan 2x Strategy Fund | 2,028,608 | 14,892 | (15,552 | ) | (660 | ) | ||||||||||
Strengthening Dollar 2x Strategy Fund | 1,441,970 | — | (597 | ) | (597 | ) | ||||||||||
Weakening Dollar 2x Strategy Fund | 589,960 | 555 | — | 555 |
Note 9 – Securities Transactions
For the year ended December 31, 2019, 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 | $ | 79,036,210 | $ | 88,728,876 | ||||
S&P 500® Pure Value Fund | 48,380,176 | 55,562,825 | ||||||
S&P MidCap 400® Pure Growth Fund | 24,889,465 | 28,351,214 | ||||||
S&P MidCap 400® Pure Value Fund | 18,639,936 | 20,161,027 | ||||||
S&P SmallCap 600® Pure Growth Fund | 22,952,470 | 29,230,219 | ||||||
S&P SmallCap 600® Pure Value Fund | 21,264,608 | 22,262,338 | ||||||
Europe 1.25x Strategy Fund | 14,954,208 | 14,715,435 | ||||||
Japan 2x Strategy Fund | 1,792,378 | 1,960,000 | ||||||
Strengthening Dollar 2x Strategy Fund | 1,625,265 | 3,030,000 | ||||||
Weakening Dollar 2x Strategy Fund | 660,668 | 725,000 |
THE RYDEX FUNDS ANNUAL REPORT | 93 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The Funds are permitted to purchase or sell securities from or to certain affiliated funds under specified conditions outlined in procedures adopted by the Board. 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, 2019, the Funds engaged in purchases and sales of securities, pursuant to Rule 17a-7 of the 1940 Act, as follows:
Fund | Purchases | Sales | Realized Gain | |||||||||
S&P 500® Pure Growth Fund | $ | 19,214,568 | $ | 16,120,991 | $ | 418,190 | ||||||
S&P 500® Pure Value Fund | 10,941,473 | 8,683,907 | 512,630 | |||||||||
S&P MidCap 400 Pure Growth Fund | 3,861,678 | 2,570,231 | 100,869 | |||||||||
S&P MidCap 400 Pure Value Fund | 1,954,500 | 4,582,766 | 403,051 | |||||||||
S&P SmallCap 600 Pure Growth Fund | 2,630,112 | 2,942,097 | 291,787 | |||||||||
S&P SmallCap 600 Pure Value Fund | 1,939,707 | 4,129,013 | 357,900 | |||||||||
Europe 1.25x Strategy Fund | 1,287,298 | 1,868,810 | 98,532 |
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 8, 2020. 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 3.28% for the year ended December 31, 2019. The Funds did not have any borrowings outstanding under this agreement at December 31, 2019.
The average daily balances borrowed for the year ended December 31, 2019, were as follows:
Fund | Average Daily Balance | |||
S&P 500® Pure Growth Fund | $ | 1,984 | ||
S&P 500® Pure Value Fund | 622 | |||
S&P MidCap 400® Pure Growth Fund | 600 | |||
S&P MidCap 400® Pure Value Fund | 734 | |||
S&P SmallCap 600® Pure Growth Fund | 425 | |||
S&P SmallCap 600® Pure Value Fund | 332 | |||
Europe 1.25x Strategy Fund | 288 | |||
Japan 2x Strategy Fund | 225 |
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 “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. Early adoption is permitted. As of December 31, 2019, the Funds have fully adopted the provisions of the 2018 ASU, 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 – 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
94 | THE RYDEX FUNDS ANNUAL REPORT |
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-2296 (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 December 19, 2019, the Second Circuit issued an amended opinion that again affirmed the district court’s ruling on the basis that plaintiffs’ claims were preempted by Section 546(e) of the Bankruptcy Code. Plaintiffs filed a motion for rehearing and rehearing en banc on January 2, 2020.
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 intended to permit an interlocutory appeal of the dismissal order, but would wait to do so until it has resolved outstanding motions to dismiss filed by other defendants.
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.
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NOTES TO FINANCIAL STATEMENTS (concluded) |
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 mediation did not result in a settlement of the claims against the shareholder defendants.
On April 4, 2019, plaintiff filed a motion to amend the Fifth Amended Complaint to assert a federal constructive fraudulent transfer claim against certain shareholder defendants. On April 10, 2019, the shareholder defendants filed a brief in opposition to plaintiff’s motion to amend. On April 12, 2019, the plaintiff filed a reply brief. On April 23, 2019, the court denied the plaintiff’s motion to amend. On June 13, 2019, the court entered judgment pursuant to Rule 54(b). On July 12, 2019, the Plaintiff filed a notice of appeal with respect to the dismissal of his claims and the District Court’s denial of his motion for leave to amend. Plaintiff filed an appellate brief on January 7, 2020. The shareholder defendants’ brief is currently due April 6, 2020.
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 13 – Subsequent Events
The Funds evaluated subsequent events through the date the financial statements were available for issue and determined there were no material events that would require adjustment to or disclosure in the Funds’ financial statements.
96 | THE RYDEX FUNDS ANNUAL REPORT |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Shareholders of S&P 500® Pure Growth Fund, S&P 500® Pure Value Fund, S&P MidCap 400® Pure Growth Fund, S&P MidCap 400® Pure Value Fund, S&P SmallCap 600® Pure Growth Fund, S&P SmallCap 600® Pure Value Fund, Europe 1.25x Strategy Fund, Japan 2x Strategy Fund, Strengthening Dollar 2x Strategy Fund and Weakening Dollar 2x Strategy Fund and the Board of Trustees of Rydex Variable Trust
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of S&P 500® Pure Growth Fund, S&P 500® Pure Value Fund, S&P MidCap 400® Pure Growth Fund, S&P MidCap 400® Pure Value Fund, S&P SmallCap 600® Pure Growth Fund, S&P SmallCap 600® Pure Value Fund, Europe 1.25x Strategy Fund, Japan 2x Strategy Fund, Strengthening Dollar 2x Strategy Fund and Weakening Dollar 2x Strategy Fund (collectively referred to as the “Funds”), (ten of the funds constituting Rydex Variable Trust (the “Trust”)), including the schedules of investments, as of December 31, 2019, 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, 2019, 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, 2019, 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 27, 2020
THE RYDEX FUNDS ANNUAL REPORT | 97 |
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 2020, 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 2019.
The Funds’ investment income (dividend income plus short-term capital gains, if any) qualifies as follows:
Of the taxable ordinary income distributions paid during the fiscal year ending December 31, 2019, the following Funds had the corresponding percentages qualify for the dividends received deduction for corporations.
Fund | Dividend | |||
S&P 500® Pure Value Fund | 100.00 | % | ||
S&P SmallCap 600® Pure Value Fund | 100.00 | % |
With respect to the taxable year ended December 31, 2019, 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 | $ | 893,743 | $ | 1,534,299 | ||||
S&P 500® Pure Value Fund | 404,516 | — | ||||||
S&P MidCap 400® Pure Growth Fund | — | 52,511 | ||||||
S&P MidCap 400® Pure Value Fund | — | 11,691 | ||||||
S&P SmallCap 600® Pure Growth Fund | — | 45,261 |
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.
98 | THE RYDEX FUNDS ANNUAL REPORT |
OTHER INFORMATION (Unaudited)(concluded) |
Special Meeting of Shareholders — Voting Results
A joint special meeting of shareholders of the Trust was held on October 24, 2019 to elect the following ten nominees to the Board of Trustees of the Trust: Randall C. Barnes, Angela Brock-Kyle, Donald A. Chubb, Jr., Jerry B. Farley, Roman Friedrich III, Thomas F. Lydon, Jr., Ronald A. Nyberg, Sandra G. Sponem, Ronald E. Toupin, Jr. and Amy J. Lee. At the meeting, the following votes were recorded:
Nominee | Shares For | Shares Withheld | ||||||
Randall C. Barnes | 80,976,563 | 3,278,383 | ||||||
Angela Brock-Kyle | 80,976,448 | 3,278,498 | ||||||
Donald A. Chubb, Jr. | 80,889,189 | 3,365,757 | ||||||
Jerry B. Farley | 80,698,759 | 3,556,187 | ||||||
Roman Friedrich III | 80,706,634 | 3,548,312 | ||||||
Thomas F. Lydon, Jr. | 80,699,239 | 3,555,707 | ||||||
Ronald A. Nyberg | 80,694,478 | 3,560,468 | ||||||
Sandra G. Sponem | 80,774,487 | 3,480,459 | ||||||
Ronald E. Toupin, Jr. | 80,771,319 | 3,483,627 | ||||||
Amy J. Lee | 80,977,346 | 3,277,600 |
Corey A. Colehour and J. Kenneth Dalton resigned from the Board of Trustees of the Trust effective as of the conclusion of the quarterly meeting of the Board of Trustees of the Trust held on November 11, 2019.
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 as an exhibit to its reports on Form N-PORT, and for reporting periods ended prior to March 31, 2019, filed such information on Form N-Q. The Funds’ Forms N-PORT and N-Q are available on the SEC’s website at https://www.sec.gov. The Funds’ Forms N-PORT and 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* | Position(s) Held | Term of Office | Principal Occupation(s) | Number of | Other Directorships |
INDEPENDENT TRUSTEES | |||||
Randall C. Barnes (1951) | Trustee | Since 2019 | Current: Private Investor (2001-present).
Former: Senior Vice President and Treasurer, PepsiCo, Inc. (1993-1997); President, Pizza Hut International (1991-1993); Senior Vice President, Strategic Planning and New Business Development, PepsiCo, Inc. (1987-1990). | 157 | Current: Purpose Investments Funds (2013-present).
Former: Managed Duration Investment Grade Municipal Fund (2003-2016). |
Angela Brock-Kyle (1959) | Trustee | Since 2016 | Current: Founder and Chief Executive Officer, B.O.A.R.D.S. (2013-present).
Former: Senior Leader, TIAA (1987-2012). | 156 | Current: Hunt Companies, Inc. (2019-present).
Former: Infinity Property & Casualty Corp. (2014-2018). |
Donald A. Chubb, Jr. (1946) | Trustee and Chairman of the Valuation Oversight Committee | Since 2019 | Current: Retired
Former: Business broker and manager of commercial real estate, Griffith & Blair, Inc. (1997-2017). | 156 | Former: Midland Care, Inc. (2011-2016). |
Jerry B. Farley (1946) | Trustee | Since 2019 | Current: President, Washburn University (1997-present). | 156 | Current: CoreFirst Bank & Trust (2000-present).
Former: Westar Energy, Inc. (2004-2018). |
Roman Friedrich III (1946) | Trustee and Chairman of the Contracts Review Committee | Since 2019 | Current: Founder and Managing Partner, Roman Friedrich & Company (1998-present). | 156 | Former: Zincore Metals, Inc. (2009-2019). |
Thomas F. Lydon, Jr. (1960) | Trustee and Vice Chairman of the Contracts Review Committee | Since 2005 (Trustee) Since 2019 (Vice Chairman of the Contracts Review Committee) | Current: President, Global Trends Investments (1996-present); Co-Chief Executive Officer, ETF Flows, LLC (2019-present); Chief Executive Officer, Lydon Media (2016-present). | 156 | Current: US Global Investors (GROW) (1995-present).
Former: Harvest Volatility Edge Trust (3) (2017-2019). |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) Held | Term of Office | Principal Occupation(s) | Number of | Other Directorships |
INDEPENDENT TRUSTEES - concluded | |||||
Ronald A. Nyberg (1953) | Trustee and Chairman of the Nominating and Governance Committee | Since 2019 | Current: Partner, Momkus LLC (2016-present).
Former: Partner, Nyberg & Cassioppi, LLC (2000-2016); Executive Vice President, General Counsel, and Corporate Secretary, Van Kampen Investments (1982-1999). | 157 | Current: PPM Funds (9) (2018 - present); Edward-Elmhurst Healthcare System (2012-present); Western Asset Inflation-Linked Opportunities & Income Fund (2004-present); Western Asset Inflation-Linked Income Fund (2003-present).
Former: Managed Duration Investment Grade Municipal Fund (2003-2016). |
Sandra G. Sponem (1958) | Trustee and Chair of the Audit Committee | Since 2016 (Trustee) Since 2019 (Chair of the Audit Committee) | Current: Retired.
Former: Senior Vice President and Chief Financial Officer, M.A. Mortenson-Companies, Inc. (2007-2017). | 156 | Current: SPDR Series Trust (78) (2018-present); SPDR Index Shares Funds (31) (2018-present); SSGA Active Trust (12) (2018-present); and SSGA Master Trust (1) (2018-present). |
Ronald E. Toupin, Jr. (1958) | Trustee and Chairman of the Board and Chairman of the Executive Committee | Since 2019 | Current: Portfolio Consultant (2010-present); Member, Governing Council, Independent Directors Council (2013-present); Governor, Board of Governors, Investment Company Institute (2018-present).
Former: Member, Executive Committee, Independent Directors Council (2016-2018); Vice President, Manager and Portfolio Manager, Nuveen Asset Management (1998-1999); Vice President, Nuveen Investment Advisory Corp. (1992-1999); Vice President and Manager, Nuveen Unit Investment Trusts (1991-1999); and Assistant Vice President and Portfolio Manager, Nuveen Unit Investment Trusts (1988-1999), each of John Nuveen & Co., Inc. (1982-1999). | 156 | Current: Western Asset Inflation-Linked Opportunities & Income Fund (2004-present); Western Asset Inflation-Linked Income Fund (2003-present).
Former: Managed Duration Investment Grade Municipal Fund (2003-2016). |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) Held | Term of Office | Principal Occupation(s) | Number of | Other Directorships |
INTERESTED TRUSTEE | |||||
Amy J. Lee*** (1961) | Trustee, Vice President and Chief Legal Officer | Since 2018 (Trustee) Since 2019 (Vice President and Chief Legal Officer) | Current: Interested Trustee, certain other funds in the Fund Complex (2018-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: President and Chief Executive Officer, certain other funds in the Fund Complex (2017-2019); Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004-2012). | 156 | None. |
* | The business address of each Trustee is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each Trustee serves an indefinite term, until his or her successor is elected and qualified. Time served includes time served in the respective position for the Predecessor Corporation. |
*** | This Trustee is deemed to be an “interested person” of the Funds under the 1940 Act by reason of her position with the Funds’ Investment Manager and/or the parent of the Investment Manager. |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) Held | Term of Office | Principal Occupation(s) |
OFFICERS | |||
Brian E. Binder (1972) | President and Chief Executive Officer | Since 2019 | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2018-present); President, Chief Executive Officer and Chairman of the Board of Managers, Guggenheim Funds Investment Advisors, LLC (2018-present); President and Chief Executive Officer, Security Investors, LLC (2018-present); Board Member of Guggenheim Partners Fund Management (Europe) Limited (2018-present); Senior Managing Director and Chief Administrative Officer, Guggenheim Investments (2018-present).
Former: Managing Director and President, Deutsche Funds, and Head of US Product, Trading and Fund Administration, Deutsche Asset Management (2013-2018); Managing Director, Head of Business Management and Consulting, Invesco Ltd. (2010-2012). |
James M. Howley (1972) | Assistant Treasurer | Since 2016 | 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). |
Mark E. Mathiasen (1978) | Secretary | Since 2017 | Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present). |
Glenn McWhinnie (1969) | Assistant Treasurer | Since 2016 | Current: Vice President, Guggenheim Investments (2009-present); Assistant Treasurer, certain other funds in the Fund Complex (2016-present). |
Michael P. Megaris (1984) | Assistant Secretary | Since 2018 | Current: Assistant Secretary, certain other funds in the Fund Complex (2014-present); Director, Guggenheim Investments (2012-present). |
Elisabeth Miller (1968) | Chief Compliance Officer | Since 2012 | Current: Chief Compliance Officer, certain other funds in the Fund Complex (2012-present); Senior Managing Director, Guggenheim Investments (2012-present). Vice President, Guggenheim Funds Distributors, LLC (2014-present).
Former: Chief Compliance Officer, Security Investors, LLC and 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 | Since 2017 | 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). |
William Rehder (1967) | Assistant Vice President | Since 2018 | Current: Managing Director, Guggenheim Investments (2002-present). |
THE RYDEX FUNDS ANNUAL REPORT | 103 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(concluded) |
Name, Address* | Position(s) Held | Term of Office | Principal Occupation(s) |
OFFICERS - concluded | |||
Kimberly J. Scott (1974) | Assistant Treasurer | Since 2016 | 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). |
Bryan Stone (1979) | Vice President | Since 2019 | Current: Vice President, certain other funds in the Fund Complex (2014-present); Managing Director, Guggenheim Investments (2013-present).
Former: Senior Vice President, Neuberger Berman Group LLC (2009-2013); Vice President, Morgan Stanley (2002-2009). |
John L. Sullivan (1955) | Chief Financial Officer, Chief Accounting Officer and Treasurer | Since 2016 | 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 | Since 2017 | 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). |
* | The business address of each officer is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each officer serves an indefinite term, until his or her successor is duly elected and qualified. |
104 | THE RYDEX FUNDS ANNUAL REPORT |
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. |
THE RYDEX FUNDS ANNUAL REPORT | 105 |
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.
106 | THE RYDEX FUNDS ANNUAL REPORT |
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.
THE RYDEX FUNDS ANNUAL REPORT | 107 |
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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 she 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, 2019 and December 31, 2018 were $895,431, and $873,067, 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, 2019 and December 31, 2019 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, 2019 and December 31, 2018 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, 2019 and December 31, 2018 were $298,531 and $304,132, 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, 2019 and December 31, 2018 were $0 and $0, respectively.
(e)Audit Committee Pre-Approval Policies and Procedures.
(1) The registrant’s audit committee reviews, and in its sole discretion, pre-approves, pursuant to written pre-approval procedures (A) all engagements for audit and non-audit services to be provided by the principal accountant to the registrant and (B) all engagements for non-audit services to be provided by the principal accountant (1) to the registrant’s investment adviser (not including a sub-adviser whose role is primarily portfolio management and is subcontracted or overseen by another investment adviser) and (2) to any entity controlling, controlled by or under common control with the registrant’s investment adviser that provides ongoing services to the registrant; but in the case of the services described in subsection (B)(1) or (2), only if the engagement relates directly to the operations and financial reporting of the registrant; provided that such pre-approval need not be obtained in circumstances in which the preapproval requirement is waived under rules promulgated by the Securities and Exchange Commission or New York Stock Exchange listing standards. Sections V.B.2 and V.B.3 of the registrant’s audit committee’s Audit Committee Charter contain the Audit Committee’s Pre-Approval Policies and Procedures and such sections are included below.
V.B.2.Pre-approve any engagement of the independent auditors to provide any non-prohibited services to the Fund, including the fees and other compensation to be paid to the independent auditors (unless an exception is available under Rule 2-01 of Regulation S-X).
(a) The categories of services to be reviewed and considered for pre-approval include the following (collectively, “Identified Services”):
Audit Services
• Annual financial statement audits
• Seed audits (related to new product filings, as required)
• SEC and regulatory filings and consents
Audit-Related Services
• Accounting consultations
• Fund merger/reorganization support services
• Other accounting related matters
• Agreed upon procedures reports
• Attestation reports
• Other internal control reports
Tax Services
• Recurring tax services:
o Preparation of Federal and state income tax returns, including extensions
o Preparation of calculations of taxable income, including fiscal year tax designations
o Preparation of annual Federal excise tax returns (if applicable)
o Preparation of calendar year excise distribution calculations
o Calculation of tax equalization on an as-needed basis
o Preparation of the estimated excise distribution calculations on an as-needed basis
o Preparation of quarterly Federal, state and local and franchise tax estimated tax payments on an as-needed basis
o Preparation of state apportionment calculations to properly allocate Fund taxable income among the states for state tax filing
purposes
o Provision of tax compliance services in India for Funds with direct investments in India
o Assistance with management’s identification of passive foreign investment companies (PFICs) for tax purposes
• Permissible non-recurring tax services upon request:
o Assistance with determining ownership changes which impact a Fund’s utilization of loss carryforwards
o Assistance with calendar year shareholder reporting designations on Form 1099
o Assistance with corporate actions and tax treatment of complex securities and structured products
o Assistance with IRS ruling requests and calculation of deficiency dividends
o Conduct training sessions for the Adviser’s internal tax resources
o Assistance with Federal, state, local and international tax planning and advice regarding the tax consequences of proposed or actual transactions
o Tax services related to amendments to Federal, state and local returns and sales and use tax compliance
o RIC qualification reviews
o Tax distribution analysis and planning
o Tax authority examination services
o Tax appeals support services
o Tax accounting methods studies
o Fund merger, reorganization and liquidation support services
o Tax compliance, planning and advice services and related projects
(b) The Committee has pre-approved Identified Services for which the estimated fees are less than $25,000.
(c) For Identified Services with estimated fees of $25,000 or more, but less than $50,000, the Chair or any member of the Committee designated by the Chair is hereby authorized to pre-approve such services on behalf of the Committee.
(d) For Identified Services with estimated fees of $50,000 or more, such services require pre-approval by the Committee.
(e) All requests for Identified Services to be provided by the independent auditor that were pre-approved by the Committee shall be submitted to the Chief Accounting Officer (“CAO”) of the Trust by the independent auditor using the pre-approval request form attached as Appendix C to the Audit Committee Charter. The Trust’s CAO will determine whether such services are included within the list of services that have received the general preapproval of the Committee.
(f) The independent auditors or the CAO of the Trust (or an officer of the Trust who reports to the CAO) shall report to the Committee at each of its regular quarterly meetings all audit, audit-related and permissible non-audit services initiated since the last such report (unless the services were contained in the initial audit plan, as previously presented to, and approved by, the Committee). The report shall include a general description of the services and projected fees, and the means by which such services were approved by the Committee (including the particular category of Identified Services under which pre-approval was obtained).
V.B.3. Pre-approve any engagement of the independent auditors, including the fees and other compensation to be paid to the independent auditors, to provide any non-audit services to the Adviser (or any “control affiliate” of the Adviser providing ongoing services to the Trust), if the engagement relates directly to the operations and financial reporting of the Trust (unless an exception is available under Rule 2-01 of Regulation S-X).
(a) The Chair or any member of the Committee designated by the Chair may grant the pre-approval for non-audit services to the Adviser (or any “control affiliate” of the Adviser providing ongoing services to the Trust) relating directly to the operations and financial reporting of the Trust for which the estimated fees are less than $25,000. All such delegated pre-approvals shall be presented to the Committee no later than the next Committee meeting.
(b) For non-audit services to the Adviser (or any “control affiliate” of the Adviser providing ongoing services to the Trust) relating directly to the operations and financial reporting of the Trust for which the estimated fees are $25,000 or more, such services require pre-approval by the Committee.
(2) None of the services described in each of Items 4(b) through (d) were approved by the Audit Committee 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 $298,531, and $304,132, respectively.
(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 (as defined in Rule 30a-3(c) under the Investment Company Act) as of a date within 90 days of this filing and have concluded that based on such evaluation as required by Rule 30a-3(b) under the Investment Company Act, 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 within the time periods specified in the Securities and Exchange Commission’s rules and forms.
(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that occurred during the period covered by this report that have materially affected, or are 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/ Brian E. Binder | |
Brian E. Binder, President and Chief Executive Officer | ||
Date | March 6, 2020 | |
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/ Brian E. Binder | |
Brian E. Binder, President and Chief Executive Officer | ||
Date | March 6, 2020 | |
By (Signature and Title)* | /s/ John L. Sullivan | |
John L. Sullivan, Chief Financial Officer and Treasurer | ||
Date | March 6, 2020 |
* | Print the name and title of each signing officer under his or her signature. |