SEPTEMBER 30, 2008
RYDEX SERIES FUNDS SEMI-ANNUAL REPORT
ESSENTIAL PORTFOLIOS
ESSENTIAL PORTFOLIO CONSERVATIVE FUND
ESSENTIAL PORTFOLIO MODERATE FUND
ESSENTIAL PORTFOLIO AGGRESSIVE FUND
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TABLE OF CONTENTS
LETTER TO OUR SHAREHOLDERS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
ABOUT SHAREHOLDERS’ FUND EXPENSES
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
FUND PROFILES
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5
SCHEDULES OF INVESTMENTS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
STATEMENTS OF ASSETS AND LIABILITIES
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
STATEMENTS OF OPERATIONS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11
STATEMENTS OF CHANGES IN NET ASSETS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12
FINANCIAL HIGHLIGHTS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14
NOTES TO FINANCIAL STATEMENTS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15
OTHER INFORMATION
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23
THE RYDEX SERIES FUNDS SEMI-ANNUAL REPORT
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1
LETTER TO OUR SHAREHOLDERS
DEAR SHAREHOLDER:
Most economic and market surveys tend to focus on more recent events because those that occurred earlier
seem distant and less important. That dynamic was never so evident as in the April-to-September period,
when events of just the previous three weeks completely overwhelmed everything that came before. In an
incredibly short period of time, the entire global financial system seized up as the lubricant of any
economy—bank lending—came to a complete halt. The resulting crash in global stock markets that began in
September continued well into October.
In less than a month, the shape of the entire financial system was changed forever. The Wall Street model of
large, aggressive, risk-taking investment banks was completely swept aside, as financial titans such as Merrill
Lynch, Morgan Stanley, Goldman Sachs and Lehman Brothers collapsed, merged with, or were reborn as
commercial banks. It’s clear now that the decision by the U.S. Government to let Lehman Brothers fail was the
catalytic event, as the dramatic failure of an institution that weathered the Great Depression and two world
wars, laid bare the failings of the traditional investment banking model. Financial dominos tumbled as a wave of
commercial bank failures—the most since the savings and loan crisis of the 1990s—unfolded in the third
quarter, culminating with the collapse of Washington Mutual, the largest bank failure in U.S. history.
The other huge and profound shift was the nationalization of the global financial system. Several events point
to a nearly total takeover of the global financial system: the takeover of Fannie Mae and Freddie Mac, AIG
and Washington Mutual; the seizure of IndyMac; the forced merger of Wachovia; and the massive capital
infusion and government guarantee of nearly every financial instrument available (both here and in Europe).
In this history-making period, government at all levels moved with unprecedented speed, scope and
coordination to save the financial system, and with it, the global economy. In the United States, this
culminated with the U.S. Treasury’s $700 billion bail-out plan that will essentially buy up all the bad
mortgage assets clogging the financial system.
Rejection of that plan by the House of Representatives in late September sent the markets into a tailspin, with
the Dow suffering its largest point drop in history, while sending the index to three-year lows. Over the past six
months, the Dow Jones IndustrialSM Average and the S&P 500® Index each lost more than 10% of their value,
with virtually all of those declines coming in the last two weeks of September. T-Bill yields fell to near zero and
interest rates on longer-dated Treasuries fell to decade lows in the market’s massive flight to safety.
It’s not all doom and gloom, however. This volatile market environment has burst the commodity bubble and
has resulted in a huge slowdown in global inflation. This helps the emerging markets whose economies have
been pummeled by the rise in food and energy costs. Slowing inflation has also ushered in a period of
unprecedented dollar strength, which gives the Federal Reserve additional room to ease. Interest rates could
hardly be lower and stocks are cheaper than they have been in some time. With the massive amounts of
liquidity pumped into the system, stocks could rally sharply in the months ahead.
Having gone through multiple false bottoms so far this year, the question that still remains is: Can any rally
be sustained? The answer to that question is fairly straightforward. First, the allocation of credit in bond and
money markets needs to resume. Simply put: A stock market recovery is not possible without it. As I write
this, there is definite improvement on that front, but it remains slow and sporadic. Also, the process of
de-leveraging (that is, selling assets accumulated during boom times) will be with us for a while. All of this
is occurring during a period where global economic growth is downshifting rapidly. While this does not
preclude any stock market rallies, it may make them temporary. Astute stock selection, the use of rotational
strategies, exposure to currency movements, the implementation of long/short strategies and a focus on
quality—above all else—are the keys to investment success in difficult and uncharted terrain.
We appreciate the trust you have placed in our firm’s quality and integrity by investing with Rydex Investments.
Sincerely,
David C. Reilly, CFA
Director of Portfolio Strategy
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THE RYDEX SERIES FUNDS SEMI-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, or other distributions;
redemption fees; 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 March 31, 2008 and ending September 30, 2008.
The following tables illustrate a Fund’s 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
fourth 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.
Certain retirement plans such as IRA, SEP, Roth IRA and 403(b) accounts are charged an annual $15
maintenance fee. Upon liquidating a retirement account, a $15 account-closing fee will be taken from the
proceeds of the redemption.
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.
Note that the expenses shown in the table are meant to highlight and help compare ongoing costs only
and do not reflect any transactional costs which may be incurred by a Fund.
More information about a Fund’s expenses, including annual expense ratios for the past five years, 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 SERIES FUNDS SEMI-ANNUAL REPORT
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3
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited) (concluded)
Beginning
Ending
Expenses
Expense
Account Value
Account Value
Paid During
Ratio†
March 31, 2008
September 30, 2008
Period*
Table 1. Based on actual Fund return
Essential Portfolio Conservative Fund
A-Class
0.00%
$1,000.00
$
923.70
$
—
C-Class
0.75%
1,000.00
919.81
3.61
H-Class
0.00%
1,000.00
923.72
—
Essential Portfolio Moderate Fund
A-Class
0.00%
1,000.00
922.40
—
C-Class
0.75%
1,000.00
919.40
3.61
H-Class
0.00%
1,000.00
922.40
—
Essential Portfolio Aggressive Fund
A-Class
0.03%
1,000.00
927.76
0.14
C-Class
0.78%
1,000.00
924.69
3.76
H-Class
0.03%
1,000.00
928.79
0.15
Table 2. Based on hypothetical 5% return
Essential Portfolio Conservative Fund
A-Class
0.00%
1,000.00
1,025.07
—
C-Class
0.75%
1,000.00
1,021.31
3.80
H-Class
0.00%
1,000.00
1,025.07
—
Essential Portfolio Moderate Fund
A-Class
0.00%
1,000.00
1,025.07
—
C-Class
0.75%
1,000.00
1,021.31
3.80
H-Class
0.00%
1,000.00
1,025.07
—
Essential Portfolio Aggressive Fund
A-Class
0.03%
1,000.00
1,024.92
0.15
C-Class
0.78%
1,000.00
1,021.16
3.95
H-Class
0.03%
1,000.00
1,024.92
0.15
* Expenses are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by the number
of days in the most recent fiscal half-year, then divided by 365.
† Annualized and excludes expenses of the underlying funds in which the Funds invest.
4
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THE RYDEX SERIES FUNDS SEMI-ANNUAL REPORT
FUND PROFILES (Unaudited)
ESSENTIAL PORTFOLIO CONSERVATIVE FUND
OBJECTIVE: To primarily seek preservation of capital and, secondarily, to seek long-term growth of capital.
Industry Diversification (Market Exposure as % of Net Assets)
Inception Dates:
A-Class
June 30, 2006
100%
C-Class
June 30, 2006
Money Market Fund
H-Class
June 30, 2006
80%
Domestic Equity Funds
Ten Largest Holdings (Sum of % of Net Assets)
Rydex Series Funds — Government Long
60%
Bond 1.2x Strategy Fund
16.5%
Fixed-Income Funds
Rydex Series Funds — High Yield
Strategy Fund
15.0%
40%
Rydex Series Funds — Absolute Return
Strategies Fund
13.4%
Rydex Series Funds — Managed Futures
20%
Alternative Investment Funds
Strategy Fund
13.0%
Rydex Series Funds — S&P 500 Fund
11.9%
Rydex Series Funds — U.S. Government
0%
Money Market Fund
10.0%
Essential Portfolio Conservative Fund
Rydex Series Funds — International
Rotation Fund
7.7%
Rydex Series Funds — Sector Rotation Fund
6.2%
“Industry Diversification (Market Exposure as % of Net Assets)”
Rydex Series Funds — Real Estate Fund
2.1%
excludes any temporary cash investments.
Rydex Series Funds — Hedged Equity Fund
1.6%
Top Ten Total
97.4%
“Ten Largest Holdings” exclude any temporary
cash or derivative investments.
ESSENTIAL PORTFOLIO MODERATE FUND
OBJECTIVE: To primarily seek growth of capital and, secondarily, to seek preservation of capital.
Industry Diversification (Market Exposure as % of Net Assets)
Inception Dates:
A-Class
June 30, 2006
100%
Money Market Fund
C-Class
June 30, 2006
H-Class
June 30, 2006
80%
Domestic Equity Funds
Ten Largest Holdings (Sum of % of Net Assets)
Rydex Series Funds — Managed Futures
60%
Strategy Fund
16.9%
Fixed-Income Funds
Rydex Series Funds — Sector Rotation Fund
14.9%
Rydex Series Funds — Absolute Return
40%
Strategies Fund
13.5%
Rydex Series Funds — International
Rotation Fund
11.5%
20%
Alternative Investment Funds
Rydex Series Funds — Government Long
Bond 1.2x Strategy Fund
10.8%
0%
Rydex Series Funds — High Yield
Strategy Fund
10.1%
Essential Portfolio Moderate Fund
Rydex Series Funds — S&P 500 Fund
8.3%
Rydex Series Funds — U.S. Government
Money Market Fund
5.0%
“Industry Diversification (Market Exposure as % of Net Assets)” excludes
Rydex Series Funds — Russell 2000® Fund
4.0%
any temporary cash investments.
Rydex Series Funds — Real Estate Fund
2.3%
Top Ten Total
97.3%
“Ten Largest Holdings” exclude any temporary
cash or derivative investments.
THE RYDEX SERIES FUNDS SEMI-ANNUAL REPORT
|
5
FUND PROFILES (Unaudited) (concluded)
ESSENTIAL PORTFOLIO AGGRESSIVE FUND
OBJECTIVE: To primarily seek growth of capital.
Industry Diversification (Market Exposure as % of Net Assets)
Inception Dates:
A-Class
June 30, 2006
100%
Fixed-Income Funds
C-Class
June 30, 2006
H-Class
June 30, 2006
80%
Ten Largest Holdings (Sum of % of Net Assets)
Domestic Equity Funds
Rydex Series Funds — Managed Futures
60%
Strategy Fund
18.2%
Rydex Series Funds — Sector Rotation Fund
16.8%
Rydex Series Funds — International
40%
Rotation Fund
15.6%
Rydex Series Funds — Absolute Return
Alternative Investment Funds
Strategies Fund
12.2%
20%
Rydex Series Funds — S&P 500 Fund
10.5%
Rydex Series Funds — Russell 2000® Fund
7.5%
0%
Rydex Series Funds — High Yield
Essential Portfolio Aggressive Fund
Strategy Fund
4.9%
Rydex Series Funds — Real Estate Fund
4.8%
Rydex Series Funds — Hedged Equity Fund
4.7%
“Industry Diversification (Market Exposure as % of Net Assets)” excludes
Rydex Series Funds — Government Long
any temporary cash investments.
Bond 1.2x Strategy Fund
4.2%
Top Ten Total
99.4%
“Ten Largest Holdings” exclude any temporary
cash or derivative investments.
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THE RYDEX SERIES FUNDS SEMI-ANNUAL REPORT
SCHEDULE OF INVESTMENTS (Unaudited)
September 30, 2008
ESSENTIAL PORTFOLIO CONSERVATIVE FUND
MARKET
FACE
MARKET
SHARES
VALUE
AMOUNT
VALUE
MUTUAL FUNDS† 99.0%
REPURCHASE AGREEMENT 1.0%
Rydex Series Funds —
Repurchase Agreement (Note 5)
Government Long Bond
Credit Suisse Group
1.2x Strategy Fund
179,496
$
2,107,279
issued 09/30/08 at 0.25%
Rydex Series Funds —
due 10/01/08
$130,473
$
130,473
High Yield Strategy Fund
79,315
1,916,240
Total Repurchase Agreement
Rydex Series Funds —
(Cost $130,473)
130,473
Absolute Return
Total Investments 100.0%
Strategies Fund
71,987
1,712,563
(Cost $13,002,910)
$12,739,428
Rydex Series Funds —
Managed Futures
Liabilities in Excess of
Strategy Fund
61,711
1,656,931
Other Assets – 0.0%
$
(3,140)
Rydex Series Funds —
Net Assets – 100.0%
$12,736,288
S&P 500 Fund
65,651
1,513,912
Rydex Series Funds —
U.S. Government
Money Market Fund
1,273,588
1,273,588
Rydex Series Funds —
International Rotation Fund
51,913
974,399
Rydex Series Funds —
Sector Rotation Fund
65,812
795,010
Rydex Series Funds —
Real Estate Fund
8,471
266,161
Rydex Series Funds —
Hedged Equity Fund
9,448
206,248
Rydex Series Funds —
Russell 2000® Fund
8,055
186,624
Total Mutual Funds
(Cost $12,872,437)
12,608,955
† A-Class shares of Affiliated Funds
See Notes to Financial Statements.
THE RYDEX SERIES FUNDS SEMI-ANNUAL REPORT
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7
SCHEDULE OF INVESTMENTS (Unaudited)
September 30, 2008
ESSENTIAL PORTFOLIO MODERATE FUND
MARKET
FACE
MARKET
SHARES
VALUE
AMOUNT
VALUE
MUTUAL FUNDS† 99.5%
REPURCHASE AGREEMENT 1.0%
Rydex Series Funds —
Repurchase Agreement (Note 5)
Managed Futures
Credit Suisse Group
Strategy Fund
275,381
$
7,393,989
issued 09/30/08 at 0.25%
Rydex Series Funds —
due 10/01/08
$443,986
$
443,986
Sector Rotation Fund
539,203
6,513,571
Total Repurchase Agreement
Rydex Series Funds —
(Cost $443,986)
443,986
Absolute Return
Total Investments 100.5%
Strategies Fund
248,121
5,902,792
(Cost $47,193,874)
$44,088,201
Rydex Series Funds —
International Rotation Fund
268,204
5,034,192
Liabilities in Excess of
Rydex Series Funds —
Other Assets – (0.5)%
$
(225,854)
Government Long Bond
Net Assets – 100.0%
$43,862,347
1.2x Strategy Fund
403,902
4,741,812
Rydex Series Funds —
High Yield Strategy Fund
184,086
4,447,508
Rydex Series Funds —
S&P 500 Fund
157,207
3,625,204
Rydex Series Funds —
U.S. Government
Money Market Fund
2,177,495
2,177,495
Rydex Series Funds —
Russell 2000® Fund
75,596
1,751,563
Rydex Series Funds —
Real Estate Fund
32,760
1,029,322
Rydex Series Funds —
Hedged Equity Fund
47,035
1,026,767
Total Mutual Funds
(Cost $46,749,888)
43,644,215
† A-Class shares of Affiliated Funds
8
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THE RYDEX SERIES FUNDS SEMI-ANNUAL REPORT
See Notes to Financial Statements.
SCHEDULE OF INVESTMENTS (Unaudited)
September 30, 2008
ESSENTIAL PORTFOLIO AGGRESSIVE FUND
MARKET
FACE
MARKET
SHARES
VALUE
AMOUNT
VALUE
MUTUAL FUNDS† 99.4%
REPURCHASE AGREEMENT 0.4%
Rydex Series Funds —
Repurchase Agreement (Note 5)
Managed Futures
Credit Suisse Group
Strategy Fund
118,580
$
3,183,861
issued 09/30/08 at 0.25%
Rydex Series Funds —
due 10/01/08
$76,478
$
76,478
Sector Rotation Fund
242,614
2,930,779
Total Repurchase Agreement
Rydex Series Funds —
(Cost $76,478)
76,478
International Rotation Fund
145,083
2,723,205
Total Investments 99.8%
Rydex Series Funds —
(Cost $18,895,449)
$17,405,324
Absolute Return
Strategies Fund
89,072
2,119,023
Other Assets in Excess
Rydex Series Funds —
of Liabilities – 0.2%
$
33,581
S&P 500 Fund
79,148
1,825,148
Net Assets – 100.0%
$17,438,905
Rydex Series Funds —
Russell 2000® Fund
56,370
1,306,099
Rydex Series Funds —
High Yield Strategy Fund
35,677
861,948
Rydex Series Funds —
Real Estate Fund
26,471
831,732
Rydex Series Funds —
Hedged Equity Fund
37,165
811,313
Rydex Series Funds —
Government Long Bond
1.2x Strategy Fund
62,669
735,738
Total Mutual Funds
(Cost $18,818,971)
17,328,846
† A-Class shares of Affiliated Funds
See Notes to Financial Statements.
THE RYDEX SERIES FUNDS SEMI-ANNUAL REPORT
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9
STATEMENTS OF ASSETS AND LIABILITIES (Unaudited)
September 30, 2008
Essential
Essential
Essential
Portfolio
Portfolio
Portfolio
Conservative
Moderate
Aggressive
Fund
Fund
Fund
ASSETS
Investment Securities
$12,608,955
$43,644,215
$17,328,846
Repurchase Agreements
130,473
443,986
76,478
Total Investments
12,739,428
44,088,201
17,405,324
Receivable for Securities Sold
—
—
100,000
Receivable for Fund Shares Sold
—
27,440
7,152
Investment Income Receivable
6,088
13,380
1,802
Total Assets
12,745,516
44,129,021
17,514,278
LIABILITIES
Payable for Securities Purchased
6,458
13,733
1,860
Payable for Fund Shares Redeemed
—
236,580
69,913
Distribution and Service Fees Payable
2,748
16,332
3,600
Custody Fees Payable
22
29
—
Total Liabilities
9,228
266,674
75,373
NET ASSETS
$12,736,288
$43,862,347
$17,438,905
NET ASSETS CONSIST OF
Paid-In Capital
$13,995,828
$49,870,582
$20,506,796
Undistributed Net Investment Income
86,239
87,862
406,424
Accumulated Net Realized Loss on Investments
(1,082,297)
(2,990,424)
(1,984,190)
Net Unrealized Depreciation on Investments
(263,482)
(3,105,673)
(1,490,125)
NET ASSETS
$12,736,288
$43,862,347
$17,438,905
A-Class
$
3,913,032
$
8,053,590
$
7,995,216
C-Class
4,114,253
26,421,378
5,743,884
H-Class
4,709,003
9,387,379
3,699,805
SHARES OUTSTANDING
A-Class
394,411
857,433
888,890
C-Class
421,777
2,860,788
649,868
H-Class
474,035
999,389
411,298
NET ASSET VALUES
A-Class
$
9.92
$9.39
$8.99
A-Class Maximum Offering Price*
10.41
9.86
9.44
C-Class
9.75
9.24
8.84
H-Class
9.93
9.39
9.00
Cost of Investments
$13,002,910
$47,193,874
$18,895,449
* Net asset value adjusted for the maximum sales charge of 4.75% of offering price, calculated NAV/(1-4.75%).
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THE RYDEX SERIES FUNDS SEMI-ANNUAL REPORT
See Notes to Financial Statements.
STATEMENTS OF OPERATIONS (Unaudited)
Period Ended September 30, 2008
Essential
Essential
Essential
Portfolio
Portfolio
Portfolio
Conservative
Moderate
Aggressive
Fund
Fund
Fund
INVESTMENT INCOME
Interest
$
1,706
$
4,274
$
1,704
Dividends from Affiliated Funds
60,690
104,397
18,919
Total Income
62,396
108,671
20,623
EXPENSES
Distribution & Service Fees:
C-Class
19,910
112,064
24,390
Tax Expense
—
—
2,706
Custody Fees
277
92
11
Total Expenses
20,187
112,156
27,107
Net Investment Income (Loss)
42,209
(3,485)
(6,484)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net Realized Gain (Loss) on:
Affiliated Investment Securities
(843,387)
(2,443,335)
(769,637)
Total Net Realized Loss
(843,387)
(2,443,335)
(769,637)
Net Change in Unrealized Appreciation (Depreciation) on:
Investment Securities
(392,501)
(1,494,906)
(687,677)
Net Change in Unrealized Appreciation (Depreciation)
(392,501)
(1,494,906)
(687,677)
Net Loss on Investments
(1,235,888)
(3,938,241)
(1,457,314)
Net Decrease in Net Assets from Operations
$(1,193,679)
$(3,941,726)
$(1,463,798)
See Notes to Financial Statements.
THE RYDEX SERIES FUNDS SEMI-ANNUAL REPORT
|
11
STATEMENTS OF CHANGES IN NET ASSETS
Essential Portfolio
Essential Portfolio
Conservative Fund
Moderate Fund
Period
Year
Period
Year
Ended
Ended
Ended
Ended
September 30,
March 31,
September 30,
March 31,
2008†
2008
2008†
2008
FROM OPERATIONS
Net Investment Income (Loss)
$
42,209
$
219,873
$
(3,485)
$
537,734
Net Realized Gain (Loss) on Investments
(843,387)
43,082
(2,443,335)
802,204
Net Change in Unrealized Appreciation (Depreciation)
on Investments
(392,501)
(22,730)
(1,494,906)
(2,171,265)
Net Increase (Decrease) in Net Assets from Operations
(1,193,679)
240,225
(3,941,726)
(831,327)
Distributions to Shareholders from:*
Net Investment Income
A-Class
—
(47,300)
—
(125,284)
C-Class
—
(85,100)
—
(310,460)
H-Class
—
(104,141)
—
(101,990)
Realized Gain on Investments
A-Class
—
(28,001)
—
(204,413)
C-Class
—
(50,378)
—
(506,546)
H-Class
—
(61,650)
—
(166,406)
Total Distributions to Shareholders
—
(376,570)
—
(1,415,099)
SHARE TRANSACTIONS
Proceeds from Shares Purchased
A-Class
1,473,467
3,994,722
1,541,530
6,330,674
C-Class
2,606,618
5,682,278
3,899,018
20,118,009
H-Class
2,597,032
8,551,489
4,656,566
13,258,002
Redemption Fees Collected
A-Class
707
3,856
1,990
1,253
C-Class
820
7,073
6,471
2,938
H-Class
1,104
8,303
2,869
1,229
Value of Shares Purchased through Dividend Reinvestment
A-Class
—
57,742
—
299,996
C-Class
—
119,384
—
744,996
H-Class
—
156,752
—
248,187
Cost of Shares Redeemed
A-Class
(1,621,818)
(389,163)
(3,080,598)
(5,688,827)
C-Class
(3,161,333)
(3,474,923)
(5,418,513)
(7,644,269)
H-Class
(4,485,755)
(5,282,222)
(5,660,408)
(10,463,848)
Net Increase (Decrease) in Net Assets From
Share Transactions
(2,589,158)
9,435,291
(4,051,075)
17,208,340
Net Increase (Decrease) in Net Assets
(3,782,837)
9,298,946
(7,992,801)
14,961,914
NET ASSETS—BEGINNING OF PERIOD
16,519,125
7,220,179
51,855,148
36,893,234
NET ASSETS—END OF PERIOD
$12,736,288
$16,519,125
$ 43,862,347
$51,855,148
Undistributed Net Investment Income—End of Period
$
86,239
$
44,030
$
87,862
$
91,347
* For financial reporting purposes, certain distributions from net investment income for federal income tax purposes have been reclassified to
distributions from realized gains.
† Unaudited
12
|
THE RYDEX SERIES FUNDS SEMI-ANNUAL REPORT
See Notes to Financial Statements.
Essential Portfolio
Aggressive Fund
Period
Year
Ended
Ended
September 30,
March 31,
2008†
2008
$
(6,484)
$
223,684
(769,637)
92,520
(687,677)
(952,545)
(1,463,798)
(636,341)
—
(54,939)
—
(39,975)
—
(24,441)
—
(158,306)
—
(115,188)
—
(70,426)
—
(463,275)
1,007,718
4,810,125
915,422
4,081,423
1,580,630
5,559,805
1,586
4,539
1,179
2,410
821
2,140
—
104,716
—
147,234
—
93,263
(973,071)
(9,752,150)
(839,326)
(4,072,572)
(2,012,682)
(7,538,079)
(317,723)
(6,557,146)
(1,781,521)
(7,656,762)
19,220,426
26,877,188
$17,438,905
$19,220,426
$
406,424
$
412,908
See Notes to Financial Statements.
THE RYDEX SERIES FUNDS SEMI-ANNUAL REPORT
|
13
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.
RATIOS TO
AVERAGE NET ASSETS:
Net Realized
Net Increase
Net
NET ASSET
Net
and
(Decrease)
Distributions
Distributions
Increase
NET ASSET
Net
Net Assets,
VALUE,
Investment
Unrealized
in Net Asset
from Net
from Net
Redemption
(Decrease)
VALUE,
Total
Investment
Portfolio
End of
BEGINNING
Income
Gains (Losses)
Value Resulting
Investment
Realized
Total
Fees
in Net Asset
END OF
Investment
Total
Income
Turnover
Period (000’s
Period Ended
OF PERIOD
(Loss)†
on Investments
from Operations
Income***
Gains***
Distributions
Collected
Value
PERIOD
Return†††
Expenses††
(Loss)
Rate
omitted)
Essential Portfolio Conservative Fund A-Class
September 30, 2008D
$10.74
$
.04
$
(.86)
$
(.82)
$
—
$
—
$
—
$
—§
$
(.82)
$
9.92
(7.63)%
0.00%**
0.76%**
115%
$
3,913
March 31, 2008
10.70
.26
.12
.38
(.22)
(.14)
(.36)
.02
.04
10.74
3.70%
0.01%
2.39%
119%
4,431
March 31, 2007*
10.00
.20
.56
.76
(.09)
—
(.09)
.03
.70
10.70
7.94%
0.01%**
2.47%**
105%
782
Essential Portfolio Conservative Fund C-Class
September 30, 2008D
10.60
—§
(.85)
(.85)
—
—
—
—§
(.85)
9.75
(8.02)%
0.75%**
0.02%**
115%
4,114
March 31, 2008
10.65
.17
.12
.29
(.22)
(.14)
(.36)
.02
(.05)
10.60
2.86%
0.75%
1.53%
119%
5,074
March 31, 2007*
10.00
.08
.63
.71
(.09)
—
(.09)
.03
.65
10.65
7.44%
0.76%**
1.05%**
105%
2,804
Essential Portfolio Conservative Fund H-Class
September 30, 2008D
10.75
.04
(.86)
(.82)
—
—
—
—§
(.82)
9.93
(7.63)%
0.00%**
0.78%**
115%
4,709
March 31, 2008
10.71
.25
.13
.38
(.22)
(.14)
(.36)
.02
.04
10.75
3.69%
0.01%
2.28%
119%
7,014
March 31, 2007*
10.00
.15
.62
.77
(.09)
—
(.09)
.03
.71
10.71
8.04%
0.01%**
1.93%**
105%
3,634
Essential Portfolio Moderate Fund A-Class
September 30, 2008D
10.18
.02
(.81)
(.79)
—
—
—
—§
(.79)
9.39
(7.76)%
0.00%**
0.42%**
96%
8,054
March 31, 2008
10.56
.17
(.24)
(.07)
(.12)
(.19)
(.31)
—§
(.38)
10.18
(0.75)%
0.01%
1.58%
125%
10,214
March 31, 2007*
10.00
.18
.79
.97
(.10)
(.32)
(.42)
.01
.56
10.56
9.90%
0.00%**
2.26%**
66%
9,719
Essential Portfolio Moderate Fund C-Class
September 30, 2008D
10.05
(.02)
(.79)
(.81)
—
—
—
—§
(.81)
9.24
(8.06)%
0.75%**
(0.33)%**
96%
26,421
March 31, 2008
10.50
.10
(.24)
(.14)
(.12)
(.19)
(.31)
—§
(.45)
10.05
(1.43)%
0.76%
0.90%
125%
30,282
March 31, 2007*
10.00
.11
.80
.91
(.10)
(.32)
(.42)
.01
.50
10.50
9.29%
0.75%**
1.34%**
66%
18,551
Essential Portfolio Moderate Fund H-Class
September 30, 2008D
10.18
.02
(.81)
(.79)
—
—
—
—§
(.79)
9.39
(7.76)%
0.00%**
0.42%**
96%
9,387
March 31, 2008
10.56
.13
(.20)
(.07)
(.12)
(.19)
(.31)
—§
(.38)
10.18
(0.75)%
0.01%
1.22%
125%
11,359
March 31, 2007*
10.00
.18
.79
.97
(.10)
(.32)
(.42)
.01
.56
10.56
9.90%
0.00%**
2.32%**
66%
8,623
Essential Portfolio Aggressive Fund A-Class
September 30, 2008D
9.69
.01
(.71)
(.70)
—
—
—
—§
(.70)
8.99
(7.22)%
0.03%**
0.18%**
132%
7,995
March 31, 2008
10.28
.11
(.48)
(.37)
(.06)
(.16)
(.22)
—§
(.59)
9.69
(3.77)%
0.01%
1.01%
120%
8,596
March 31, 2007*
10.00
.24
.77
1.01
(.10)
(.64)
(.74)
.01
.28
10.28
10.37%
0.00%**
3.11%**
92%
13,854
Essential Portfolio Aggressive Fund C-Class
September 30, 2008D
9.56
(.03)
(.69)
(.72)
—
—
—
—§
(.72)
8.84
(7.53)%
0.78%**
(0.57)%**
132%
5,744
March 31, 2008
10.22
.06
(.50)
(.44)
(.06)
(.16)
(.22)
—§
(.66)
9.56
(4.48)%
0.76%
0.60%
120%
6,178
March 31, 2007*
10.00
(.03)
.98
.95
(.10)
(.64)
(.74)
.01
.22
10.22
9.76%
0.75%**
(0.34)%**
92%
6,537
Essential Portfolio Aggressive Fund H-Class
September 30, 2008D
9.69
.01
(.70)
(.69)
—
—
—
—§
(.69)
9.00
(7.12)%
0.03%**
0.18%**
132%
3,700
March 31, 2008
10.29
.08
(.46)
(.38)
(.06)
(.16)
(.22)
—§
(.60)
9.69
(3.87)%
0.01%
0.80%
120%
4,447
March 31, 2007*
10.00
.15
.87
1.02
(.10)
(.64)
(.74)
.01
.29
10.29
10.48%
0.00%**
1.94%**
92%
6,486
* Since the commencement of operations: June 30, 2006.
** Annualized
*** For financial reporting purposes, certain distributions from net investment income for federal income tax purposes have been reclassified to distributions from realized gains.
† Calculated using the average daily shares outstanding for the period.
†† Does not include expenses of the underlying funds in which the Funds invest.
††† Total investment return does not reflect the impact of any applicable sales charges and has not been annualized.
§ Less than $.01 per share.
D Unaudited
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1.
Organization and Significant Accounting Policies
A. The underlying funds are valued at their Net Asset
Organization
Value (“NAV”) as of the close of business, usually 4:00
The Rydex Series Funds (the “Trust”) is registered with
p.m. on the valuation date. Exchange Traded Funds
the SEC under the Investment Company Act of 1940
(“ETFs”) and closed-end investments companies are
(the “1940 Act”) as a non-diversified, open-ended
valued at the last quoted sales price.
investment company. The Trust offers five separate
B. Securities transactions are recorded on the trade
classes of shares, Investor Class Shares, Advisor Class
date for financial reporting purposes. Realized gains
Shares, A-Class Shares, C-Class Shares, and H-Class
and losses from securities transactions are recorded
Shares. C-Class Shares have a 1% contingent deferred
using the identified cost basis. Dividend income is
sales charge (“CDSC”) if shares are redeemed within
recorded on the ex-dividend date, net of applicable
12 months of purchase. Sales of shares of each Class
taxes withheld by foreign countries. Interest income,
are made without a sales charge at the net asset value
including amortization of premiums and accretion of
per share, with the exception of A-Class Shares. A-Class
discount, is accrued on a daily basis.
Shares are sold at net asset value, plus the applicable
C. Interest and dividend income, most expenses, all
front-end sales charge, except for U.S. Government
realized gains and losses, and all unrealized gains and
Money Market Fund. The sales charge varies depending
losses are allocated to the Classes based upon the
on the amount purchased, but will not exceed 4.75%.
value of the outstanding shares in each Class. Certain
A-Class Share purchases of $1 million or more are
costs, such as distribution and service fees related to
exempt from the front-end sales charge but have a
C-Class Shares, are charged directly to such class. In
1% CDSC if shares are redeemed within 18 months
addition, certain expenses have been allocated to the
of purchase.
individual Funds in the Trust on a pro rata basis upon
At September 30, 2008, the Trust consisted of fifty-four
the respective aggregate net assets of each Fund
separate Funds: twenty-two Benchmark Funds, one
included in the Trust.
Money Market Fund, seventeen Sector Funds, eleven
D. Distributions of net investment income and net real-
Alternative Strategy Funds, and three Essential
ized capital gains, if any, are declared and paid at least
Portfolio Funds. This report covers the Essential
annually. Distributions are recorded on the ex-dividend
Portfolio Funds (the “Funds”), while the Benchmark
date and are determined in accordance with income
Funds, the Money Market Fund, the Sector Funds, and
tax regulations which may differ from U.S. generally
the Alternative Strategy Funds are contained in sepa-
accepted accounting principles.
rate reports.
E. The Funds may also purchase American Depository
Each Essential Portfolio Fund is a “fund of funds,” which
Receipts, U.S. Government securities, and enter into
means that each Fund seeks to achieve its investment
repurchase agreements.
objective by investing primarily in other Rydex mutual
funds (the “underlying funds”) instead of individual
F. The preparation of financial statements in conformity
securities. At September 30, 2008, only A-Class, C-Class
with U.S. generally accepted accounting principles
and H-Class Shares had been issued by the Funds. All
requires management to make estimates and assump-
share classes of the Funds are subject to a 1% redemp-
tions that affect the reported amount of assets and lia-
tion fee if redeemed within 30 days of purchase.
bilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported
Rydex Investments provides advisory, transfer agent
amounts of revenues and expenses during the report-
and administrative services, and accounting services to
ing period. Actual results could differ from these esti-
the Trust. Rydex Distributors, Inc. (the “Distributor”)
mates.
acts as principal underwriter for the Trust. Both Rydex
Investments and the Distributor are affiliated entities.
G. Throughout the normal course of business, the
underlying funds enter into contracts that contain a
Significant Accounting Policies
variety of representations and warranties which provide
The following significant accounting policies are in con-
general indemnifications. The underlying funds’ maxi-
formity with U.S. generally accepted accounting princi-
mum exposure under these arrangements is unknown,
ples and are consistently followed by the Trust. All time
as this would involve future claims that may be made
references are based on Eastern Time.
against the underlying funds and/or their affiliates that
have not yet occurred. However, based on experience,
the underlying funds expect the risk of loss to be remote.
THE RYDEX SERIES FUNDS SEMI-ANNUAL REPORT
|
15
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
2.
Financial Instruments
obligation. Although the Trust will not invest in any
As part of their investment strategies, the underlying
structured notes unless Rydex Investments believes that
funds may utilize short sales and a variety of derivative
the issuer is creditworthy, an underlying fund does bear
instruments including, options, futures, options on
the risk of loss of the amount expected to be received
futures, structured notes and swap agreements. These
in the event of the default or bankruptcy of the issuer.
investments involve, to varying degrees, elements of
There are several risks associated with the use of swap
market risk and risks in excess of the amounts reflected
agreements that are different from those associated
in the underlying funds’ NAVs.
with ordinary portfolio securities transactions. Swap
Short sales are transactions in which an underlying fund
agreements may be considered to be illiquid. Although
sells an equity or fixed income security it does not own.
the Trust will not enter into any swap agreement unless
If the security sold short goes down in price between
Rydex Investments believes that the other party to the
the time the underlying fund sells the security and
transaction is creditworthy, the underlying funds bear
closes its short position, that underlying fund will realize
the risk of loss of the amount expected to be received
a gain on the transaction. Conversely, if the security
under a swap agreement in the event of the default or
goes up in price during the period, that underlying
bankruptcy of the agreement counterparty.
fund will realize a loss on the transaction. The risk of
There are several risks associated with credit default
such price increases is the principal risk of engaging in
swaps. Credit default swaps involve the exchange of a
short sales.
fixed-rate premium for protection against the loss in
The risk associated with purchasing options is limited to
value of an underlying debt instrument in the event of
the premium originally paid. The risk in writing a covered
a defined credit event (such as payment default or
call option is that an underlying fund may forego the
bankruptcy). Under the terms of the swap, one party
opportunity for profit if the market price of the underly-
acts as a “guarantor,” receiving a periodic payment
ing security increases and the option is exercised. The
that is a fixed percentage applied to a notional princi-
risk in writing a covered put option is that an underly-
pal amount. In return, the party agrees to purchase the
ing fund may incur a loss if the market price of the
notional amount of the underlying instrument, at par, if
underlying security decreases and the option is exer-
a credit event occurs during the term of the swap. An
cised. In addition, there is the risk that an underlying
underlying fund may enter into credit default swaps in
fund may not be able to enter into a closing transaction
which that underlying fund or its counterparty act as
because of an illiquid secondary market or, for over-
guarantors. By acting as the guarantor of a swap, that
the-counter options, because of the counterparty’s
underlying fund assumes the market and credit risk of
inability to perform.
the underlying instrument, including liquidity and loss
of value.
There are several risks in connection with the use of
futures contracts. Risks may be caused by an imperfect
In conjunction with the use of short sales, options,
correlation between movements in the price of the
futures, options on futures, structured notes and swap
instruments and the price of the underlying securities.
agreements, the underlying funds are required to main-
In addition, there is the risk that an underlying fund
tain collateral in various forms. The underlying funds use,
may not be able to enter into a closing transaction
where appropriate, depending on the financial instrument
because of an illiquid secondary market.
utilized and the broker involved, margin deposits at the
broker, cash and/or securities segregated at the custo-
There are several risks associated with the use of struc-
dian bank, discount notes, or the repurchase agreements
tured notes. Structured securities are leveraged, thereby
allocated to each underlying fund.
providing an exposure to the underlying benchmark
greater than the face amount and increasing the volatility
The risks inherent in the use of short sales, options,
of each note relative to the change in the underlying
futures contracts, options on futures contracts, structured
linked financial instrument. A highly liquid secondary
notes and swap agreements include i) adverse changes
market may not exist for the structured notes an under-
in the value of such instruments; ii) imperfect correlation
lying fund invests in which may make it difficult for that
between the price of the instruments and movements in
underlying fund to sell the structured notes it holds at
the price of the underlying securities, indices, or futures
an acceptable price or to accurately value them. In addi-
contracts; iii) the possible absence of a liquid secondary
tion, structured notes are subject to the risk that the
market for any particular instrument at any time; and iv)
counterparty to the instrument, or issuer, might not pay
the potential of counterparty default.
interest when due or repay principal at maturity of the
16
|
THE RYDEX SERIES FUNDS SEMI-ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The Trust has established strict counterparty credit
The Funds have adopted a Distribution and Shareholder
guidelines and enters into transactions only with finan-
Services Plan applicable to its C-Class Shares that allows
cial institutions of investment grade or better.
the Funds to pay annual distribution and service fees of
3.
Fees And Other Transactions With Affiliates
0.75% of the Funds’ C-Class Shares average daily net
assets. The annual 0.25% service fee compensates the
Rydex Investments manages the investment and
shareholder’s financial advisor for providing on-going
reinvestment of the assets of each of the Funds in
services to the shareholder. The annual 0.50% distribu-
accordance with the investment objectives, policies,
tion fee reimburses the Distributor for paying the share-
and limitations of each Fund, however, the Funds do
holder’s financial advisor an ongoing sales commission.
not pay Rydex Investments a management fee. As part
The Distributor advances the first year’s service and
of its agreement with the Trust, Rydex Investments will
distribution fees to the financial advisor. The Distributor
pay all expenses of the Funds, including the cost of
retains the service and distribution fees on accounts
transfer agency, fund administration, audit and other
with no authorized dealer of record.
services, excluding interest expense, taxes (expected
to be de minimis), brokerage commissions and other
During the period ended September 30, 2008,
expenses connected with the execution of portfolio
the Distributor retained sales charges of $557,030,
transactions, short dividend expenses, and extraordi-
relating to sales of A-Class Shares of the Trust.
nary expenses.
Certain officers and trustees of the Trust are also officers
Each Fund indirectly bears a proportionate share of the
of Rydex Investments and the Distributor.
total operating expenses (including investment man-
4.
Federal Income Tax Information
agement, shareholder servicing, custody, transfer
The Funds intend to comply with the provisions of
agency, audit and other expenses) of the underlying
Subchapter M of the Internal Revenue Code applicable
funds in which the Fund invests. In addition, some
to regulated investment companies and will distribute
underlying funds charge redemption fees if a share-
substantially all net investment income and capital
holder, including a Fund, redeems shares before the
gains to shareholders. Therefore, no Federal income
end of the funds’ requisite holding period. Therefore, if
tax provision has been recorded.
a Fund sells shares of an underlying fund that is subject
to a redemption fee, that Fund will be responsible for
The Funds adopted Financial Accounting Standards
paying the redemption fee to the underlying fund.
Board (FASB) Interpretation No. 48 “Accounting for
Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides
Rydex Investments provides transfer agent, accounting
guidance for how uncertain tax positions should be
services and administrative services to the Funds.
recognized, measured, presented and disclosed in the
However, the related fees are paid by Rydex Investments,
financial statements. FIN 48 requires the evaluation
as noted above.
of tax positions taken or expected to be taken in the
The Funds have not adopted a Distribution Plan or a
course of preparing the Fund’s tax returns to determine
Shareholder Services Plan with respect to A-Class
whether the tax positions are “more-likely-than-not”
Shares and H-Class Shares. Instead, the Funds invest in
of being sustained by the applicable tax authority. Tax
underlying funds that have a distribution plan that
positions not deemed to meet the more-likely-than-not
allows the underlying funds to pay distribution fees to
threshold would be recorded as a tax benefit or expense
the Distributor and other firms that provide distribution
in the current year. Management has analyzed the Funds’
services (“Service Providers”). The underlying funds will
tax positions taken on federal income tax returns for all
pay distribution fees to the Distributor at an annual rate
open tax years for purposes of complying with FIN 48,
not to exceed 0.25% of average daily net assets, pur-
and has concluded that no provision for income tax was
suant to Rule 12b-1 under the 1940 Act, as amended. If
required in the Funds’ financial statements.
a Service Provider provides distribution or shareholder
The Funds file U.S. federal income tax returns and returns
services, the Distributor will, in turn, pay the Service
in various foreign jurisdictions in which they invest. While
Provider for the services it provides at an annual rate
the statute of limitations remains open to examine the
not to exceed 0.25% of the average daily net assets of
Funds’ U.S. federal income tax returns filed for the fiscal
a Fund.
years 2004 to 2007, no examinations are in progress or
anticipated at this time.
THE RYDEX SERIES FUNDS SEMI-ANNUAL REPORT
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17
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Income and capital gain distributions are determined in accordance with Federal income tax regulations, which may dif-
fer from U.S. generally accepted accounting principles. These differences are primarily due to differing treatments for
losses deferred due to wash sales, losses deferred due to post-October losses, and excise tax regulations.
Permanent book and tax basis differences, if any, will result in reclassifications. This includes net operating losses not uti-
lized during the current period, and capital loss carry-forward expired, and the utilization of earnings and profits distrib-
uted to the shareholders on redemption of shares as part of the dividends paid deduction for income tax purposes.
These reclassifications have no effect on net assets or net asset values per share. Any undistributed ordinary income or
long-term capital gain remaining at fiscal year end is distributed in the following year.
The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the
statement of operations. During the period, the Funds did not incur any interest or penalties.
At September 30, 2008, the cost of securities for Federal income tax purposes, the aggregate gross unrealized gain for
all securities for which there was an excess of value over tax cost and the aggregate gross unrealized loss for all securi-
ties for which there was an excess of tax cost over value, were as follows:
Tax
Tax
Net
Tax
Unrealized
Unrealized
Unrealized
Fund
Cost
Gain
Loss
Loss
Essential Portfolio Conservative Fund
$13,002,910
$311,525
$
(575,007)
$
(263,482)
Essential Portfolio Moderate Fund
47,193,874
763,810
(3,869,483)
(3,105,673)
Essential Portfolio Aggressive Fund
18,895,449
139,165
(1,629,290)
(1,490,125)
5.
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/or U.S. Government Agencies.
The collateral is in the possession of the Funds’ custodian and is evaluated to ensure that its market value exceeds by, 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.
The repurchase agreements executed by the joint account and outstanding as of September 30, 2008, were as follows:
Counterparty
Terms of Agreement
Face Value
Market Value
Repurchase Price
Credit Suisse Group
0.25% due 10/01/08
$50,881,212
$50,881,212
$50,881,565
$50,881,212
$50,881,565
As of September 30, 2008, the collateral for the repurchase agreements in the joint account was as follows:
Security Type
Maturity Date
Rate
Par Value
Market Value
U.S. Treasury Bond
08/15/27
6.375%
$40,425,000
$51,905,245
$51,905,245
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 its 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 its rights. The Funds’ investment advisor, acting under the supervision of the Board of
Trustees, reviews the value of the collateral and the credit worthiness of those banks and dealers with which the Funds
enter into repurchase agreements to evaluate potential risks.
18
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THE RYDEX SERIES FUNDS SEMI-ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
6.
Fair Value Measurement
The Funds adopted Statement of Financial Accounting Standard No. 157 (“FAS 157”) Fair Value Measurement which
provided enhanced guidance for using fair value to measure assets and liabilities. The standard requires companies to
provide expanded information about the assets and liabilities measured at fair value and the potential effect of these
fair valuations on an entity’s financial performance. The standard does not expand the use of fair value in any new cir-
cumstances, but provides clarification on acceptable fair valuation methods and applications.
Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three
broad levels:
Level 1 — quoted prices in active markets for identical securities.
Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment
speeds, credit risk, etc.).
Level 3 — significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of
investments).
The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with
investing in those securities.
The following table summarizes the inputs used to value the Funds’ net assets as of September 30, 2008:
Level 1
Level 1
Level 2
Level 2
Level 3
Level 3
Investments
Other Financial
Investments
Other Financial
Investments
Other Financial
Fund
In Securities
Instruments
In Securities
Instruments
In Securities
Instruments
Total
Assets
Essential Portfolio
Conservative Fund
$12,739,428
$
—
$
—
$
—
$
—
$
—
$12,739,428
Essential Portfolio
Moderate Fund
44,088,201
—
—
—
—
—
44,088,201
Essential Portfolio
Aggressive Fund
17,405,324
—
—
—
—
—
17,405,324
7.
Securities Transactions
During the period ended September 30, 2008, the cost of purchases and proceeds from sales of investment securities,
excluding short-term and temporary cash investments, were:
Essential Portfolio
Essential Portfolio
Essential Portfolio
Conservative Fund
Moderate Fund
Aggressive Fund
Purchases
$18,089,220
$48,272,507
$25,704,977
Sales
$20,519,511
$52,058,338
$25,838,999
THE RYDEX SERIES FUNDS SEMI-ANNUAL REPORT
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19
NOTES TO FINANCIAL STATEMENTS (continued)
8.
Share Transactions
The Trust is authorized to issue an unlimited number of shares (no par value). Transactions in shares for the periods presented were:
Purchased through
Net Shares
Shares Purchased
Dividend Reinvestment
Shares Redeemed
Purchased (Redeemed)
Period Ended
Year Ended
Period Ended
Year Ended
Period Ended
Year Ended
Period Ended
Year Ended
September 30,
March 31,
September 30,
March 31,
September 30,
March 31,
September 30,
March 31,
2008†
2008
2008†
2008
2008†
2008
2008†
2008
Essential Portfolio Conservative Fund
A-Class
137,479
369,840
—
5,356
(155,583)
(35,755)
(18,104)
339,441
C-Class
249,041
529,764
—
11,189
(305,914)
(325,681)
(56,873)
215,272
H-Class
242,141
786,204
—
14,514
(420,307)
(487,803)
(178,166)
312,915
Essential Portfolio Moderate Fund
A-Class
153,538
588,146
—
28,409
(299,699)
(533,666)
(146,161)
82,889
C-Class
384,734
1,900,579
—
71,291
(538,446)
(724,002)
(153,712)
1,247,868
H-Class
441,742
1,244,646
—
23,503
(558,406)
(968,734)
(116,664)
299,415
Essential Portfolio Aggressive Fund
A-Class
101,144
452,957
—
10,079
(99,221)
(923,091)
1,923
(460,055)
C-Class
91,831
390,478
—
14,336
(88,190)
(397,980)
3,641
6,834
H-Class
158,260
534,927
—
8,976
(205,740)
(715,671)
(47,480)
(171,768)
† Unaudited
NOTES TO FINANCIAL STATEMENTS (Unaudited) (concluded)
9.
New Accounting Pronouncements
In March 2008, the FASB issued FAS 161, “Disclosures about Derivative Instruments and Hedging Activities.” The new
requirement is intended to improve disclosures around an entity’s derivatives activity and help investors understand how
entities use derivatives, how they are accounted for and how they affect the financial position and operations of that
entity. FAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008.
THE RYDEX SERIES FUNDS SEMI-ANNUAL REPORT
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21
OTHER INFORMATION (Unaudited)
Proxy Voting Information
A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to securities
held in the Funds’ portfolios is available, without charge and upon request, by calling 1-800-820-0888. This information
is also available from the EDGAR database on the SEC’s website at http://www.sec.gov.
Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month
period ended June 30 is available without charge, upon request, by calling 1-800-820-0888. This information is also
available from the EDGAR database on the SEC’s website at http://www.sec.gov.
Quarterly Portfolio Schedules Information
The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year
on Form N-Q; which are available on the SEC’s website at http://www.sec.gov. The Funds’ Forms N-Q may be reviewed
and copied at the SEC’s Public Reference Room in Washington, DC, and that information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330. Copies of the portfolio holdings are also available to
shareholders, without charge and upon request, by calling 1-800-820-0888.
Rydex Investments Board Review and Approval of the Investment Advisory Agreement
The Advisory Agreements dated January 18, 2008 between Rydex Series Funds, on behalf of the Funds, and PADCO
Advisors, Inc. were last approved by shareholders at Special Meetings held on October 4, 2007, November 1, 2007,
January 31, 2008 and February 12, 2008. Subject to the terms and conditions provided for in the Advisory Agreements,
each Advisory Agreement remains in effect for an initial two year term from the date of the Agreement and remains in
effect for periods of one year thereafter subject to Board approval. Therefore, the Advisory Agreements are next sched-
uled to be approved by the Board of Trustees at the Trust’s August 2009 Meeting.
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THE RYDEX SERIES FUNDS SEMI-ANNUAL REPORT
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)
A Board of Trustees oversees all Rydex Investments, in which its members have no stated term of service, and continue to serve
after election until resignation. The Statement of Additional Information includes further information about Fund Trustees and
Officers, and can be obtained without charge by calling 1-800-820-0888.
All Trustees and Officers may be reached c/o Rydex Investments, 9601 Blackwell Rd., Suite 500, Rockville, MD 20850.
TRUSTEES AND OFFICERS
Length of Service
Name, Position and
As Trustee
Number of
–––––––––––––––––––––
Year of Birth
––––––––––––––––––––––––––––
(Year Began)
––––––––––——––––––
Funds Overseen
Carl G. Verboncoeur*
Rydex Series Funds – 2004
158
Trustee, President (1952)
Rydex Variable Trust – 2004
Rydex Dynamic Funds – 2004
Rydex ETF Trust – 2004
Principal Occupations During Past Five Years: Treasurer of Rydex Specialized Products, LLC (2005 to present) Chief Executive
Officer of Rydex Specialized Products, LLC (2005 to 2008); Chief Executive Officer of Rydex Investments and Rydex Distributors,
Inc. (2003 to present); Executive Vice President of Rydex Investments (2000 to 2003)
Michael P. Byrum*
Rydex Series Funds – 2005
150
Trustee, Vice President
Rydex Variable Trust – 2005
(1970)
Rydex Dynamic Funds – 2005
Rydex ETF Trust – 2005
Principal Occupations During Past Five Years: Chief Investment Officer of Rydex Investments (2003 to present); Secretary of
Rydex Specialized Products, LLC (2005 to 2008); Vice President of Rydex Series Funds (1997 to present); Vice President of Rydex
Variable Trust (1998 to present); Vice President of Rydex Dynamic Funds (1999 to present); Vice President of Rydex ETF Trust
(2002 to present); President and Trustee of Rydex Capital Partners SPhinX Fund (2003 to 2006); President of Rydex Investments
(2004 to present); Chief Operating Officer of Rydex Investments and Rydex Distributors, Inc. (2003 to 2004)
INDEPENDENT TRUSTEES
Length of Service
Name, Position and
As Trustee
Number of
–––––––––––––––––––––––––
Year of Birth
––––––––––––––––––––––––––––
(Year Began)
––––––––––——––––––
Funds Overseen
John O. Demaret
Rydex Series Funds – 1997
150
Trustee, Chairman of the
Rydex Variable Trust – 1998
Board (1940)
Rydex Dynamic Funds – 1999
Rydex ETF Trust – 2003
Principal Occupations During Past Five Years: Retired
Corey A. Colehour
Rydex Series Funds – 1993
150
Trustee (1945)
Rydex Variable Trust – 1998
Rydex Dynamic Funds – 1999
Rydex ETF Trust – 2003
Principal Occupations During Past Five Years: Retired (2006 to present); Owner and President of Schield Management
Company, registered investment adviser (2005 to 2006); Senior Vice President of Marketing and Co-Owner of Schield
Management Company, registered investment adviser (1985 to 2005)
J. Kenneth Dalton
Rydex Series Funds – 1995
150
Trustee (1941)
Rydex Variable Trust – 1998
Rydex Dynamic Funds – 1999
Rydex ETF Trust – 2003
Principal Occupations During Past Five Years: Mortgage Banking Consultant and Investor, The Dalton Group
THE RYDEX SERIES FUNDS SEMI-ANNUAL REPORT
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23
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) (concluded)
Name, Position and
Length of Service As Trustee
Number of
–––––––––––––––––––––
Year of Birth
––––––––––––––––––––––––––––
(Year Began)
––––––––––——––––––
Funds Overseen
Werner E. Keller
Rydex Series Funds - 2005
150
Trustee (1940)
Rydex Variable Trust - 2005
Rydex Dynamic Funds - 2005
Rydex ETF Trust - 2005
Principal Occupations During Past Five Years: Retired (2001 to present); Chairman, Centurion Capital Management (1991 to 2001)
Thomas F. Lydon, Jr.
Rydex Series Funds – 2005
150
Trustee (1960)
Rydex Variable Trust - 2005
Rydex Dynamic Funds - 2005
Rydex ETF Trust - 2005
Principal Occupations During Past Five Years: President, Global Trends Investments
Patrick T. McCarville
Rydex Series Funds – 1997
150
Trustee (1942)
Rydex Variable Trust – 1998
Rydex Dynamic Funds – 1999
Rydex ETF Trust – 2003
Principal Occupations During Past Five Years: Founder and Chief Executive Officer, Par Industries, Inc.
Roger Somers
Rydex Series Funds – 1993
150
Trustee (1944)
Rydex Variable Trust – 1998
Rydex Dynamic Funds – 1999
Rydex ETF Trust – 2003
Principal Occupations During Past Five Years: Owner, Arrow Limousine
EXECUTIVE OFFICERS
Name, Position and
Principal Occupations
––––––––––––––––––––––––––
Year of Birth
–––––––––––––––––––––
During Past Five Years
Nick Bonos*
Chief Financial Officer of Rydex Specialized Products, LLC (2005
Vice President and Treasurer (1963)
to present); Vice President and Treasurer of Rydex Series Funds,
Rydex Variable Trust, Rydex Dynamic Funds, and Rydex ETF Trust
(2003 to present); Senior Vice President of Rydex Investments
(2003 to present); Vice President and Treasurer of Rydex Capital
Partners SPhinX Fund (2003 to 2006)
Joanna M. Haigney*
Chief Compliance Officer of Rydex Series Funds, Rydex Variable
Chief Compliance Officer and
Trust, and Rydex Dynamic Funds (2004 to present); Secretary of
Secretary (1966)
Rydex Series Funds, Rydex Variable Trust, and Rydex Dynamic
Funds (2000 to present); Secretary of Rydex ETF Trust (2002 to
present); Vice President of Compliance of Rydex Investments
(2000 to present); Secretary of Rydex Capital Partners SPhinX
Fund (2003 to 2006)
Joseph Arruda*
Assistant Treasurer of Rydex Series Funds, Rydex Variable Trust,
Assistant Treasurer (1966)
Rydex Dynamic Funds, Rydex ETF Trust (2006 to present); Senior
Vice President of Rydex Investments (2008 to present); Vice President
of Rydex Investments (2004 to 2008); Director of Accounting of
Rydex Investments (2003 to 2004)
Paula Billos*
Controller of Rydex Series Funds, Rydex Variable Trust, Rydex
Controller (1974)
Dynamic Funds, Rydex ETF Trust (2006 to present); Director of
Fund Administration of Rydex Investments (2001 to present)
* Officers of the Funds are deemed to be “interested persons” of the Trust, within the meaning of Section 2(a)(19) of the 1940 Act, inasmuch as
this person is affiliated with Rydex Investments.
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THE RYDEX SERIES FUNDS SEMI-ANNUAL REPORT
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THE RYDEX SERIES FUNDS SEMI-ANNUAL REPORT
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25
9601 Blackwell Road, Suite 500
Rockville, MD 20850
www.rydexinvestments.com
800-820-0888
RSEP-SEMI-0908x0309
